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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest
event reported):
October 16, 1997
COMPOSITECH LTD.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation)
0-20701 11-2710467
(Commissioner File Number) (IRS Employer Identification Number)
120 Ricefield Lane
Hauppauge, New York 11788
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (516) 436-5200
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Item 5. Other Events.
On October 16, 1997, Compositech Ltd. (the "Company") closed a
transaction with four Quebec institutional investors (collectively, the "Quebec
Investors") to form a 50/50 joint venture for the establishment of a plant in
the greater Montreal area to manufacture Compositech's laminates. The investor
group is comprised of four institutional investors: Societe Generale de
Financement du Quebec, Fonds de solidarite des travailleurs du Quebec (F.T.Q.),
Societe Innovatech du Grand Montreal and Fonds regional de solidarite Ile de
Montreal. The project cost is estimated to be approximately $24.5 million with
an initial capitalization by the parties of approximately $11 million with the
balance to be in debt financing for which firm commitments have been obtained
from the National Bank of Canada and governmental agencies. The Company's
approximately $5.4 million capital investment in the joint venture was funded by
the Quebec Investors purchasing 1,066,192 shares of the Company's Common Stock
at $5.09 per share (representing the weighted average closing price for the 60
day trading period ending two days before the closing). The Quebec Investors
will have an option to sell their 50% interest in the joint venture to the
Company for a like number of shares and, under certain circumstances, the
Company has an option to purchase the interest for the same number of shares.
The plant is planned to start production late in 1998.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(c) Exhibits. The following exhibits accompany this Report:
Exhibit
Number Exhibit Description
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10.1 Technology Licensing Agreement dated October 16, 1997, by and
between Compositech Ltd. and Lamines CTEK Inc.
10.2 Subscription Agreement dated October 16, 1997, by and among: Societe
Innovatech du Grand Montreal, Industries Devma Inc.*, Fonds de
Solidarite des Travailleurs du Quebec (F.T.Q.), Fonds Regional de
Solidarite Ile de Montreal and Compositech Ltd.
10.3 Registration Rights Agreement dated October 16, 1997, by and among:
Societe Innovatech du Grand Montreal, Industries Devma Inc.*, Fonds
de Solidarite des Travailleurs du Quebec (F.T.Q.), Fonds Regional de
Solidarite Ile de Montreal and Compositech Ltd.
10.4 Subscription Agreement dated October 16, 1997, by and between
Compositech Ltd. and Lamines CTEK Inc.
10.5 Shareholders Agreement dated October 16, 1997, among the
Shareholders of Lamines CTEK Inc.
10.6 Stock Exchange Agreement dated October 16, 1997, by and among:
Societe Innovatech du Grand Montreal, Industries Devma Inc.*, Fonds
de Solidarite des Travailleurs du Quebec (F.T.Q.), Fonds Regional de
Solidarite Ile de Montreal and Compositech Ltd.
10.7 Sales Agency and Marketing Agreement dated October 16, 1997, by and
between Lamines CTEK Inc. and Compositech Ltd.
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10.8 Agreement with respect to electing a nominee of the Quebec Investors
to the Board of Directors of Compositech Ltd. dated October 16,
1997, by and among: Societe Innovatech du Grand Montreal, Industries
Devma Inc.*, Fonds de Solidarite des Travailleurs du Quebec
(F.T.Q.), Fonds Regional de Solidarite Ile de Montreal and
Compositech Ltd. and certain of its principal shareholders.
99.1 News Release dated October 17, 1997, announcing that on October 16,
1997 the Company closed its previously announced transaction with
the Quebec Investors.
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* Industries Devma Inc. is a subsidiary of Societe Generale de
Financement du Quebec.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
COMPOSITECH LTD.
By: /s/ Samuel S. Gross
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Samuel S. Gross
Executive Vice President and
Treasurer
Date: October 27, 1997
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Index to Exhibits
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Exhibit Sequentially
Number Description of Exhibit Numbered Page
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10.1 Technology Licensing Agreement dated October 16,
1997, by and between Compositech Ltd. and Lamines
CTEK Inc.
10.2 Subscription Agreement dated October 16, 1997, by and
among: Societe Innovatech du Grand Montreal,
Industries Devma Inc.*, Fonds de Solidarite des
Travailleurs du Quebec (F.T.Q.), Fonds Regional de
Solidarite Ile de Montreal and Compositech Ltd.
10.3 Registration Rights Agreement dated October 16, 1997,
by and among: Societe Innovatech du Grand Montreal,
Industries Devma Inc.*, Fonds de Solidarite des
Travailleurs du Quebec (F.T.Q.), Fonds Regional de
Solidarite Ile de Montreal and Compositech Ltd.
10.4 Subscription Agreement dated October 16, 1997, by and
between Compositech Ltd. and Lamines CTEK Inc.
10.5 Shareholders Agreement dated October 16, 1997, among
the Shareholders of Lamines CTEK Inc.
10.6 Stock Exchange Agreement dated October 16, 1997, by
and among: Societe Innovatech du Grand Montreal,
Industries Devma Inc.*, Fonds de Solidarite des
Travailleurs du Quebec (F.T.Q.), Fonds Regional de
Solidarite Ile de Montreal and Compositech Ltd.
10.7 Sales Agency and Marketing Agreement dated October
16, 1997, by and between Lamines CTEK Inc. and
Compositech Ltd.
10.8 Agreement with respect to electing a nominee of the
Quebec Investors to the Board of Directors of
Compositech Ltd. dated October 16, 1997, by and
among: Societe Innovatech du Grand Montreal,
Industries Devma Inc.*, Fonds de Solidarite des
Travailleurs du Quebec (F.T.Q.), Fonds Regional de
Solidarite Ile de Montreal and Compositech Ltd. and
certain of its principal shareholders.
99.1 News Release dated October 17, 1997, announcing that
on October 16, 1997 the Company closed its previously
announced transaction with the Quebec Investors.
TECHNOLOGY LICENSING AGREEMENT MADE AND ENTERED INTO IN THE CITY AND DISTRICT OF
MONTREAL, ON THE 16TH DAY OF OCTOBER, 1997
BY AND BETWEEN: COMPOSITECH LTD., a body politic and corporate, duly
incorporated according to the laws of the State of Delaware,
having its head office and principal place of business in the
City of Hauppauge, State of New York,
(hereinafter referred to as the "Licensor")
PARTY OF THE FIRST PART
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 "Licensee")
PARTY OF THE SECOND PART
SECTION 1 - PREAMBLE
1.1 WHEREAS the Licensee wishes to build the Plant (as hereinafter defined) in
order to manufacture and sell Products (as hereinafter defined);
1.2 WHEREAS Licensor is the owner of the Patents (as hereinafter defined),
Copyrights (as hereinafter defined) and Technology (as hereinafter defined)
required to manufacture Equipment (as hereinafter defined) and to manufacture
and sell Products;
1.3 WHEREAS Licensor has agreed to grant to Licensee and Licensee wishes to
acquire from Licensor the right and license to use the Patents, Copyrights and
Technology to manufacture Products and to have manufactured, for its own use and
to assemble Equipment;
1.4 WHEREAS Licensor has also agreed to grant to Licensee and Licensee wishes to
acquire from Licensor the right and license to market, promote, advertise, sell,
distribute and merchandise Products in association with the Trade Marks (as
hereinafter defined).
NOW, THEREFORE, THE PARTIES HERETO AGREE AS FOLLOWS:
SECTION 2 - DEFINITIONS
2.1 Definitions. In this Agreement:
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2.1.1 "Affiliate" has the meaning ascribed thereto in the Canada Business
Corporations Act;
2.1.2 "Approval" has the meaning ascribed thereto in paragraph 4.3;
2.1.3 "Art" has the meaning ascribed thereto in paragraph 8.3.4;
2.1.4 "Asset Sale" has the meaning ascribed thereto in subsection 6.4;
2.1.5 "Confidential Information" of a Disclosing Party means (a) all concepts,
methods, procedures, inventions, know-how, secrets, data and other
information of the Disclosing Party, whether in written, printed,
electronic, unrecorded or any other form whatsoever, and whether known
now or developed during the Term of this Agreement, useful in the
development or exploitation of the Products or the Equipment, including
all documentation thereof, and (b) all business plans of the Disclosing
Party relating to the manufacturing, marketing or selling of the
Products, except for information that the Receiving Party can reasonably
demonstrate:
2.1.5.1 has become generally known to those in the printed wiring board
field other than through unauthorized disclosure by the Receiving Party;
2.1.5.2 is known to the Receiving Party prior to disclosure by the
Disclosing Party; or
2.1.5.3 has become available to the Receiving Party on a
non-confidential basis from a source other than the Disclosing Party.
2.1.6 "Copyrights" means in respect of the Technology, all the copyrights and
industrial designs and registrations thereof and applications therefor
and all renewals, modifications, developments and extensions thereto, as
well as all other copyrights and industrial designs in respect of the
Technology which may hereafter be issued to or acquired by Licensor or
for which the Licensor may have the right to grant licenses;
2.1.7 "Disclosing Party" has the meaning ascribed thereto at subsection 9.1;
2.1.8 "Equipment" means any machinery or equipment developed or patented by
the Licensor for the purpose of manufacturing the Products;
2.1.9 "Event of Default" has the meaning ascribed thereto at subsection 6.3;
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2.1.10 "Fairness Committee" has the meaning ascribed thereto in subsection
15.1;
2.1.11 "Fee Adjustment" has the meaning ascribed thereto in subsection 4.3;
2.1.12 "Intellectual Property" means the Patents, the Copyrights and the Trade
Marks;
2.1.13 "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 conductive surface 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;
2.1.14 "Investors" means Societe Innovatech du Grand Montreal, Industries Devma
Inc., Fonds de Solidarite des Travailleurs du Quebec (F.T.Q.) and Fonds
Regional de Solidarite Ile de Montreal;
2.1.15 "Joint Ventures" means any entity in which Licensor or any of its
Affiliates has an equity interest of at least 33 1/3%; however, the
parties shall not be deemed to be in a "Joint Venture" relationship with
one another for the purposes of this Agreement;
2.1.16 "Knowledge" - an individual will be deemed to have "Knowledge" of a
particular fact or other matter if:
2.1.16.1 such individual is actually aware of such fact or other
matter, or
2.1.16.2 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
"Knowledge" of a particular fact or other matter if any
individual who is serving as an officer of such Person has, or
at any prior time had, Knowledge of such fact or other matter;
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2.1.17 "Licensee Determination" has the meaning ascribed thereto at subsection
4.3;
2.1.18 "Licensee Fee Adjustment" has the meaning ascribed thereto at subsection
4.3;
2.1.19 "Licensee's Improvements" has the meaning ascribed thereto at subsection
5.2;
2.1.20 "Licensor Approval" has the meaning ascribed thereto at subsection 4.3;
2.1.21 "Licensor Determination" has the meaning ascribed thereto at subsection
4.3;
2.1.22 "Licensor Improvements" has the meaning ascribed thereto at subsection
5.1 hereof;
2.1.23 "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;
2.1.24 "Normal Capacity" means the Plant both manufacturing and shipping
2,475,000 square feet of Products during the same period of three (3)
consecutive months in response to firm orders received by the Licensee
in the normal course of business justifying the manufacturing of such
quantity of Products;
2.1.25 "North America" means Canada, the United States of America, Mexico and
the Caribbean Islands, including the Antilles and the Bahamas;
2.1.26 "Patents" means all the patents and patent applications relating to,
used in or useful in the development, manufacturing, marketing or
distribution of Products or relating to the Equipment, patents and
patent applications covering Licensor Improvements, any patents and
patent applications covering improvements, modifications, developments,
additions and alterations to the Technology, Equipment or Products by
any licensee of Licensor for which Licensor may have the right to grant
licenses to Licensee during the Term, as well as all other patents
relating to the Technology, Equipment or Products which may hereafter be
issued to or acquired by Licensor or for which Licensor may have the
right to grant licenses, provided that the "Patents" shall not include
the subject matter of (i) any claims of any patents or applications,
present or future, to the extent that they relate to Multi Layer Printed
Circuit Boards or Integral Circuits, and (ii) any patents or patent
applications or claims thereof which may be filed or issued in the
future, directed to subject matter different from that included in the
Patents;
2.1.27 "Person" means an individual, partnership, joint venture, trustee,
trust, corporation, division of a corporation, unincorporated
organization or other entity or a government, state or agency or
political subdivision thereof, and pronouns when they refer to a
Person have a similarly extended meaning;
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2.1.28 "Plant" means the manufacturing plant of Licensee to be situated in the
Montreal region;
2.1.29 "Products" means laminates for printed wiring boards and for all other
uses manufactured using the Patents, Copyrights and the Technology,
provided, however, that Multi Layer Printed Circuit Boards and Integral
Circuits shall not be deemed Products within the purview of this
Agreement;
2.1.30 "Proportion" means for North America for the first two twelve (12) month
periods commencing on the date hereof, a fraction, the numerator of
which shall be the annual planned Product manufacturing capacity of the
Plant and the denominator of which shall be the aggregate annual planned
Product manufacturing capacity of all plants (including the Plant) owned
or operated by Licensor or its Affiliates or any other Person licensed
(including Licensee) or otherwise authorized by Licensor or its
Affiliates to use the Intellectual Property and Technology and/or
manufacture or sell Products in North America;
2.1.31 "Purchaser" has the meaning ascribed thereto in subsection 6.4;
2.1.32 "Receiving Party" has the meaning ascribed thereto at paragraph 9.1.2;
2.1.33 "Representatives" has the meaning ascribed thereto at subsection 9.2;
2.1.34 "Sales Agency and Marketing Agreement" means the sales agency and
marketing agreement entered into between the parties hereto on the date
hereof;
2.1.35 "Sales Proportion" means (i) for North America commencing with the
twenty-fifth (25th) month following the date hereof and ending December
31, 2000 and in each fiscal year of Licensee thereafter, a fraction, the
numerator of which shall be the sales of Products in North America from
the Plant for the period in question, and the denominator of which shall
be the aggregate annual sales of Products in North America for the
period in question from all plants (including the Plant) and in the
event that a plant in North America has not made any sales, the planned
Product manufacturing capacity of such plant for the period in question,
owned or operated by Licensor or its Affiliates or any other Person
licensed (including Licensee) or otherwise authorized by Licensor or its
Affiliates to use the Intellectual Property and Technology and/or
manufacture or sell Products in North America from such plant in North
America multiplied by the weighted average selling price of all Products
sold in North America for the period in question ("North American Sales
Proportion") and (ii) for each country outside of North America in each
fiscal year, a fraction, the numerator of which shall be the annual
sales of Products in such country
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from the Plant and the denominator of which shall be the aggregate
annual sales of Products in such country from all plants (including the
Plant) and in the event that a plant in such country has not made any
sales, the annual planned Product manufacturing capacity of such plant,
owned or operated by Licensor or its Affiliates or any other Person
licensed (including Licensee) or otherwise authorized to use the
Intellectual Property and Technology and/or to manufacture or sell
Products in such country from such plant in such country multiplied by
the weighted average selling price of all Products sold in such country
for the period in question (the "Country Sales Proportion"). For the
purposes of subsection 11.2 hereof only, Sales Proportion, North
American Sales Proportion and Country Sales Proportion shall be based on
the twelve (12) month period following the issuance or registration of
the Patent, Copyrights or Trade Mark. For the purposes of this
definition, sales shall be calculated on an "Ex-Works" basis net of any
tariff, customs duties and penalties, sales and value added taxes, user
fees, service fees, packaging costs, freight costs and transportation
insurance costs, transloading costs and all other costs associated with
deliveries, damage allowances, rebates, returns and volume incentives
and any other costs, duties and fees which should be excluded to allow
the sales to be calculated on an "Ex-Works" basis as provided in the
1990 Incoterms of the International Chamber of Commerce;
2.1.36 "Shareholders Agreement" means the shareholders agreement entered into
on the date hereof among all the holders of shares of Licensee;
2.1.37 "Share Sale" has the meaning ascribed thereto in subsection 6.4;
2.1.38 "Technical Services Agreement" means the services agreement entered into
on the date hereof between Licensor and Licensee;
2.1.39 "Technology" means information, technical knowledge, know-how,
processes, procedures, devices, jigs, fixtures, machines, methods,
inventions, software and trade secrets now known and which may become
known to Licensor during the Term (except technology that may be
disclosed to Licensor in the future by another licensee of Licensor
which Licensor is legally prohibited from disclosing to Licensee) (i)
relating to, used in or useful in the development, manufacture,
marketing or distribution of Products or (ii) relating to the Equipment;
2.1.40 "Term" has the meaning ascribed thereto in subsection 6.1 hereof;
2.1.41 "Territory" means the world;
2.1.42 "Trade Marks" means all trade marks, whether or not registered, that
Licensor may own or have the right to use anywhere in the Territory in
relation to Products.
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SECTION 3 - GRANT OF LICENSE
3.1 Grant of License. Subject to the terms and conditions hereof, Licensor
hereby grants to Licensee, the latter hereby accepting,
3.1.1 the right and license to manufacture Products at the Plant using the
Patents, Copyrights and Technology,
3.1.2 subject to subsection 3.3, the non-exclusive right and license to have
Equipment manufactured (and to assemble such Equipment) solely for its
own use in the Plant, for the manufacture of Products, using the
Patents, Copyrights and Technology,
3.1.3 subject to subsection 3.4, until the Plant operates at Normal Capacity,
the right and license, exclusive except as to Licensor, to manufacture,
market, promote, advertise, sell, distribute and merchandise Products in
North America, and the non-exclusive right and license to market,
promote, advertise, sell, distribute and merchandise Products
manufactured pursuant to paragraph 3.1.1 throughout the Territory,
3.1.4 subject to subsection 3.4, once the Plant shall have operated at Normal
Capacity, the non-exclusive right and licence to market, promote,
advertise, sell, distribute and merchandise Products throughout the
Territory, provided, however, that (i) Licensor shall not have any right
to grant to any Person any license which impairs the rights granted to
Licensee and; (ii) if the Plant ceases to operate at Normal Capacity at
any time, Licensor's right to grant to any Person any non- exclusive
right or license to market, promote, advertise, sell, distribute or
merchandise Products in North America is subject to Licensor maintaining
the Plant at a capacity no lower than any other plant in North America
owned by Licensor, any of its Affiliates or any entity in which the
Licensor or any of its Affiliates has an equity interest of at least
33 1/3%,
3.1.5 the right and license, subject to Licensee fulfilling its obligations
set forth in Section 8 hereof, to market, promote, advertise, sell,
distribute and merchandise Products in association with the Trade Marks
throughout the Territory, provided that as long as the Sales Agency and
Marketing Agreement is in force, Licensor shall be entitled to designate
the Trade Marks which Licensee may use in respect of the Products.
3.2 Sublicenses. Licensee shall not have any right to grant sublicenses
hereunder.
3.3 Equipment Manufacturing. In connection with the rights granted to the
Licensee pursuant to paragraph 3.1.2 hereof, Licensee shall be entitled to
contract with any responsible and reputable suppliers and/or manufacturers, in
connection with the manufacture of Equipment,
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which Equipment shall be delivered to and used solely by Licensee at Licensee's
Plant. Licensee shall prior to so contracting notify Licensor in writing of the
name of such supplier and/or manufacturer. In the event that Licensor does not
advise Licensee within twenty (20) days of receipt of Licensee's notice that it
believes, acting reasonably, that such supplier and/or manufacturer is not
responsible or reputable, then Licensor shall be deemed to have accepted such
supplier and/or manufacturer. Licensee shall consult with Licensor in order to
establish such procedures as the parties will agree upon, acting reasonably, as
will assure that the Technology is adequately protected against misappropriation
or misuse by any such supplier or manufacturer. If Licensor notifies Licensee
within the twenty (20) day period that it believes, acting reasonably, that such
supplier and/or manufacturer is not responsible or reputable, then Licensee
shall either (i) not contract with such supplier and/or manufacturer without
again following the procedure set forth in this subsection 3.3, or (ii) contest
the determination of Licensor and submit the matter to the Fairness Committee
and Arbitration, if necessary, who shall make the determination.
3.4 Importation of Products into North America. Licensor hereby agrees that
neither it nor its Affiliates or Joint Ventures shall, anywhere in North
America, market, promote, advertise, sell, distribute or merchandise, directly
or indirectly, products manufactured outside North America and which are the
same or similar to the Products manufactured at the Plant, and Licensor and its
Affiliates and Joint Ventures hereby further agree that they shall include in
any license or sub-license granted to any Person a provision prohibiting such
licensee or sub-licensee from marketing, promoting, advertising, selling,
distributing or merchandising anywhere in North America, products manufactured
outside North America and which are the same or similar to the Products
manufactured at the Plant (and enforce such provision in the event of any breach
thereof by any such licensee or sublicensee, to the extent reasonable), except
if (i) such marketing, promotion, advertising, sale, distribution or
merchandising is directly effected through the Licensor, acting as agent or
principal; and (ii) a customer of Licensor, its Affiliates or Joint Ventures or
such licensee or sub-licensee has expressly requested that such products be
manufactured by a specific plant situated outside North America, after such
customer has been informed by Licensor, its Affiliates or Joint Ventures or such
licensee or sublicensee, that Licensee is an authorized supplier of such
products in North America, and Licensee has a reciprocal right to market,
promote, advertise, sell, distribute and merchandise Products from the Plant in
such territory or territories outside North America from where the Person who
owns such specific plant is authorized to market, promote, advertise, sell,
distribute and merchandise products which are the same or similar to the
Products manufactured at the Plant.
3.5 Immunity. The rights and licenses granted to Licensee pursuant to this
Section 3 shall include the right to pass on immunity under the Patents to any
user or purchaser of Products manufactured or sold by Licensee in accordance
with this Agreement, as to all reasonably intended uses of the Products.
3.6 Multi Layer Printed Circuit Boards or Integral Circuits. In the event that
Licensor wishes to grant any licenses in respect of Multi Layer Printed Circuit
Boards or Integral Circuits in the Territory, it shall negotiate in good faith
with Licensee for the granting of such
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licenses to Licensee, it being understood that Licensor shall be entitled to
negotiate with others at the same time.
3.7 Rights of Licensor Outside of North America. Licensee hereby acknowledges
and confirms that insofar as the license rights granted to it pursuant to
subsection 3.1 hereof are concerned, its Territory shall exclude (i) the
exclusive territory contemplated in the license agreement between HT Troplast AG
(successor of Huls Troisdorf AG) and Licensor dated June 22, 1990 and (ii) any
other territory outside of North America for which Licensor grants any exclusive
license rights in connection with the Patents and the Technology, the whole
subject to any reciprocal rights, if any, granted to Licensee pursuant to
paragraph (ii) of subsection 3.4 hereof;
SECTION 4 - LICENSOR'S OBLIGATIONS
4.1 Licensor's Initial Obligations. Concurrently with the execution of this
Agreement, Licensor shall disclose to Licensee the Technology and provide
Licensee with copies of the documents set forth in Schedule annexed hereto.
Thereafter, Licensor shall from time to time upon the request of Licensee
promptly provide Licensee with copies of all other existing documents, records,
drawings, plans and writings in connection with the Technology. Such Technology
and the services to be furnished by Licensor pursuant to the Technical Services
Agreement shall enable Licensee to benefit fully from the rights and licenses
granted to it pursuant to this Agreement.
4.2 Technical Services Agreement. In addition to the obligations of Licensor set
forth herein, Licensor shall furnish to Licensee certain services in accordance
with the Technical Services Agreement.
4.3 Planned Manufacturing Capacity. Licensor shall be obliged to promptly inform
Licensee in writing of the planned manufacturing capacity in square feet of
Products in all plants owned or operated by Licensor or its Affiliates or any
other Person licensed or otherwise authorized by Licensor or its Affiliates to
use the Intellectual Property and the Technology and/or manufacture or sell
Products in North America or outside of North America, if applicable, and of any
change thereto (the "Licensor Determination"). The board of directors of
Licensee shall then decide whether or not to approve such Licensor
Determination. In the event that such board of directors approves of same in
writing within 10 days of being informed by Licensor thereof (the "Approval"),
then the parties shall determine any adjustment to the fees and costs provided
in Section 11 hereof already paid by Licensee for the period in question and the
manner in which same is to be acquitted (the "Fee Adjustment"). In the event
that the parties cannot agree on the Fee Adjustment within 10 days of the
Approval, then the parties shall submit this matter to the Fairness Committee
pursuant to Section 15 hereof. However, in the event that such board of
directors does not approve of the Licensor Determination within 10 days of being
informed by Licensor thereof, then the parties shall submit the Licensor
Determination as well as the Fee Adjustment to the Fairness Committee pursuant
to Section 15 hereof.
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The board of directors of Licensee shall be obliged to promptly inform
Licensor in writing of the planned manufacturing capacity in square feet of
Products in the Plant and of any change thereto (the "Licensee Determination").
Licensor shall then decide whether or not to approve such Licensee
Determination. In the event that Licensor approves of same in writing within 10
days of being informed by Licensee thereof (the "Licensor Approval"), then the
parties shall determine any adjustment to the fees and costs provided in Section
11 hereof already paid by Licensee for the period in question and the manner in
which same is to be acquitted (the "Licensee Fee Adjustment"). In the event that
(i) the parties cannot agree on the Licensee Fee Adjustment within 10 days of
the Licensor Approval, or (ii) the board of directors of Licensee cannot advise
Licensor in writing of the Licensee Determination within ten (10) days of being
requested in writing to do so by Licensor, then the parties shall submit this
matter to the Fairness Committee pursuant to Section 15 hereof. However, in the
event that Licensor does not approve of the Licensee Determination within 10
days of being informed by the board of directors of Licensee thereof, then the
parties shall submit the determination of the Licensee Determination as well as
the Licensee Fee Adjustment to the Fairness Committee pursuant to Section 15
hereof.
For the first two twelve (12) month periods following the date hereof, the
parties hereby agree that the estimated planned manufacturing capacity of the
Plant is 9 900 000 square feet of Products per twelve (12) month period and the
estimated planned manufacturing capacity of the Licensor's plant situated in
Long Island, New York is 4 950 000 square feet of Products per twelve (12) month
period, the whole subject to the provisions of the first two paragraphs of this
subsection 4.3.
SECTION 5 - DEVELOPMENTS AND IMPROVEMENTS
5.1 Improvements by Licensor. The parties hereby agree that should any
improvements, modifications, developments, additions and alterations be made to
the Technology, Equipment or Products by or on behalf of Licensor, its agents,
employees, consultants or representatives at any time (the "Licensor
Improvements"), then the legal rights therein shall be the exclusive property of
Licensor. Licensor shall promptly furnish Licensee with details of all Licensor
Improvements and upon the request of Licensee promptly provide Licensee with
copies of all documents, records, drawings, plans and writings in connection
with the Licensor Improvements which exist at that time. Such Licensor
Improvements together with the services to be furnished by Licensor pursuant to
the Technical Services Agreement shall enable Licensee to make use of them for
the purposes provided for in this Agreement. All Licensor Improvements shall be
deemed licensed to Licensee hereunder for the purposes set forth in this
Agreement without any compensation therefor and shall be deemed to form part of
the Intellectual Property or Technology for the purposes of this Agreement.
5.2 Improvements by Licensee. The parties hereby agree that the legal rights
with respect to any improvements, modifications, developments, additions and
alterations made to the Technology, Equipment or Products by or on behalf of
Licensee, its agents, employees, consultants or representatives at any time
shall be the exclusive property of Licensee (the
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"Licensee's Improvements"). Licensee shall promptly furnish Licensor with
details of all Licensee's Improvements and upon the request of Licensor promptly
provide Licensor with copies of all documents, records, drawings, plans and
writings in connection with Licensee's Improvements which exist at that time.
Licensee shall furnish to Licensor, on substantially the same terms and
conditions (including price) as the services furnished by Licensor to Licensee
pursuant to the Technical Services Agreement, such services as will enable
Licensor to make use of Licensee's Improvements to the same extent as Licensee
and, subject to subsection 5.3 hereof, to sublicense its use to Licensor's other
licensees. All Licensee's Improvements shall be deemed exclusively licensed to
Licensor for the Territory without any compensation therefor, subject to the
rights of Licensee to make use of Licensee's Improvements in the same manner as
provided in Section 3 hereof. Licensor shall cooperate fully with and assist
Licensee in obtaining, at Licensee's expense, patents, copyrights, industrial
designs, trademarks and other intellectual property registration with respect to
Licensee's Improvements. Licensor shall reimburse Licensee for a portion of such
expenses and for that purpose the provisions of subsections 11.1 and 11.2 hereof
in respect of the reimbursement by Licensee shall apply mutatis mutandis to
Licensor. In the event Licensee declines for any reason to seek patent
protection for any of Licensee's Improvements, or declines to seek such
protection in all jurisdictions, or decides to cease maintaining any patent in
force, then it shall promptly notify Licensor to afford Licensor the opportunity
to seek or maintain patent protection therefor and in such event the rights
therein shall belong to Licensor, subject to a license to Licensee as set forth
in Section 3 hereof and subject to cost sharing in accordance with subsections
11.1 and 11.2 hereof.
5.3 Limitation on Rights of Licensor to Licensee's Improvements. Notwithstanding
subsection 5.2 hereof, Licensor shall not be entitled to make Licensee's
Improvements available to any licensee of Licensor unless such licensee has
permitted its improvements to the Technology, Equipment and Products to be made
available to Licensee without any compensation therefor payable by Licensee.
SECTION 6 - TERM AND EVENT OF DEFAULT
6.1 Term. Subject to the terms and conditions hereof, the term of this Agreement
is ninety-nine (99) years (the "Term") commencing on the date first mentioned
hereinabove.
6.2 Termination of Agreement. If an Event of Default occurs with respect to
either party, the non-defaulting party shall have the right to terminate this
Agreement immediately upon written notice to the defaulting party.
6.3 Definition of Event of Default. As used herein, "Event of Default" means,
with respect to either party, the occurrence of any of the following events:
6.3.1 such party commits an act of bankruptcy, makes an assignment for the
benefit of its creditors or otherwise takes advantage of or shelter
under any legislation for the protection of debtors; or
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6.3.2 such party is declared bankrupt or a receiver is appointed in respect of
such party or a substantial portion of its property; or
6.3.3 such party is dissolved, liquidated or wound-up; or
6.3.4 such party fails to perform any of its material obligations under the
provisions of this Agreement and such failure is not remedied within
thirty (30) days of receipt of a written notice to that effect received
from the other party.
6.4 Sale of Assets or Shares of Licensee. Notwithstanding any provision of this
Agreement, in the event that (a) Licensee sells all or substantially all of its
assets to any Person (the "Purchaser") (the "Asset Sale"), or (b) seventy-five
percent (75%) or more of the issued and outstanding voting shares of Licensee
are sold to any Person other than any of the Investors (the "Share Sale"),
Licensor may terminate this Agreement only if the Licensor provides the
Purchaser or Licensee (in the event of a Share Sale) at the time of such Asset
Sale or Share Sale, subject to the Purchaser's or Licensee's acceptance, a new
technology licensing agreement identical in all material respects to this
Agreement, with the exceptions that such new agreement shall provide (i) that
any improvements, modifications, developments, additions and alterations to be
made to the Intellectual Property, Technology, Equipment or Products by the
Purchaser or by Licensee (in the event of a Share Sale) shall be promptly
disclosed to and shall be the exclusive property of Licensor, and shall form
part of the Intellectual Property and Technology licensed to Purchaser or
Licensee (in the event of a Share Sale); (ii) that Licensee's Improvements
assigned to Licensor pursuant to subsection 6.5 hereof, shall form part of the
Intellectual Property and Technology licensed to Purchaser or Licensee (in the
event of a Share Sale); (iii) for the payment to Licensor of royalties on gross
sales of Products at a reasonable royalty, such royalty to be determined in
accordance with the then applicable rules of law under which a United States
court would determine a reasonable royalty pursuant to 35 U.S. Code ss. 284 or
any applicable successor provision; and (iv) for a term equal to the unexpired
portion of the Term. In the event that Licensor does not offer to the Purchaser
or Licensee (in the event of a Share Sale) such new agreement as provided for
herein, then this Agreement shall continue in full force and effect in favour of
the Purchaser or Licensee (in the event of a Share Sale).
6.5 Assignment of Licensee's Improvements. In the event that this Agreement is
terminated following the Asset Sale or Share Sale or at the end of the Term or
for any other reason whatsoever, without exception, the Licensee shall assign
all its rights to the Licensee's Improvements to Licensor for an aggregate price
of one dollar (1$) and shall forthwith furnish to Licensor a detailed
description of all such Licensee Improvements and the underlying Technology that
has not previously been disclosed to Licensor. Licensee agrees at Licensor's
expense to sign all documents and do all things as may be necessary in the
opinion of Licensor's counsel to give effect to such assignment.
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SECTION 7 - EFFECT OF TERMINATION OR EXPIRATION OF THE TERM
7.1 Effect of Termination. Upon the termination of this Agreement for any reason
whatsoever or the expiration of the term of this Agreement:
7.1.1 all rights of the parties hereunder shall cease immediately;
7.1.2 all amounts owing by one party to the other shall immediately become due
and payable;
7.1.3 subject to paragraph 7.1.4 hereof, Licensee shall forthwith deliver to
Licensor all forms, documents and materials relating to Products or
Equipment which are the property of Licensor without retaining any copy
thereof, as well as all promotional and advertising materials,
instruction sheets, documents and other items bearing any of the Trade
Marks, unless a new technology licensing agreement is entered into as
provided for in subsection 6.4 hereof;
7.1.4 Licensee shall have the right to distribute and sell its remaining
inventory of Products and raw materials, in the ordinary course of
business and pursuant to instructions received from Licensor, unless a
new technology licensing agreement is entered into as provided for in
subsection 6.4 hereof;
7.1.5 Licensor shall be entitled, at its option exercisable by written
notice given to Licensee within thirty (30) days following such
termination or expiration, to purchase all or any of the Equipment
owned by Licensee, at a price equal to Licensee's depreciated cost
therefor, unless a new technology licensing agreement is entered into
as provided for in subsection 6.4 hereof. Upon exercise of such
option, Licensee shall, within ten (10) days of its receipt of such
notice, deliver the purchased Equipment to Licensor and Licensor shall
pay the purchase price therefor upon receipt of same. Should Licensor
not purchase all of Licensee's Equipment, Licensee shall have the
right to sell same to any Person.
The parties agree to sign all documents and do all things as may be
necessary to give effect to the foregoing provisions. Licensor shall be
entitled to set off all amounts owing to it by Licensee against the
purchase price for the Equipment under paragraph 7.1.5 hereof.
7.2 Surviving provisions. Termination of this Agreement for any reason
whatsoever or the expiration of the term of this Agreement shall not release any
party from any of its obligations which remain unfulfilled at such time or
release any party from those obligations which survive such termination or
expiration, including, but not limited to, the obligations set forth in Section
9.
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SECTION 8 - TRADE MARKS AND QUALITY CONTROL
8.1 Rights and Ownership in Trade Marks. Neither this Agreement nor the
operations of Licensee hereunder shall in any way give or be deemed to give
Licensee any interest in the Trade Marks, except for its right and license to
use the Trade Marks in accordance with the terms hereof. Licensee agrees that
each of the Trade Marks and the goodwill symbolized thereby is the sole and
exclusive property of Licensor and nothing in this Agreement shall prohibit or
curtail in any manner Licensor's right to use, directly or indirectly the Trade
Marks. All goodwill resulting from Licensee's use of the Trade Marks shall inure
solely to the benefit of Licensor.
8.2 No action by Licensee. Licensee agrees that it has no power or right to and
shall not during the term of this Agreement or thereafter take any action which
might invalidate the Trade Marks or impair any rights of Licensor therein or
create any rights adverse to those of Licensor therein or attempt to register
the Trade Marks anywhere in the Territory.
8.3 Use of Trade Marks
8.3.1 As long as the Sales Agency and Marketing Agreement is in force,
Licensee shall not use any Trade Marks on any Products other than those
Trade Marks designated by Licensor;
8.3.2 Licensee agrees that it will use the Trade Marks only in connection with
the Products and will label, package and advertise the Products only in
such manner as to preserve at all times all rights of Licensor in the
Trade Marks;
8.3.3 Licensor shall provide to Licensee from time to time information
regarding the use of the Trade Marks, including the typeface,
configuration and orientation of the Trade Marks, specifications and
restrictions on the size, colour and backgrounds for the Trade Marks,
and Licensee shall use the Trade Marks only in the manner so specified;
8.3.4 Licensee shall submit all original mechanical art (the "Art") for all
labels, packaging, advertisements, promotional materials and other
materials used in connection with the sale of the Products which bear
any Trade Mark to Licensor for approval prior to the use of the Art,
which approval shall not be unreasonably withheld or unduly delayed. In
the event that Licensor does not notify Licensee in writing of its
disapproval of same within thirty (30) days of its receipt of the Art,
the Art shall be deemed to be approved by Licensor;
8.3.5 Licensee shall not change or modify any part of the Art without the
written approval of Licensor, which approval shall not be unreasonably
withheld or unduly delayed. In the event that Licensor does not advise
Licensee in writing that it
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disapproves of such change or modification within ten (10) days of
receipt thereof, Licensor shall be deemed to have accepted such change
or modification;
8.3.6 Licensee shall forward to Licensor, at Licensee's expense, such
representative samples of the labels, packaging, advertisements and
promotional and other materials used in connection with the sale of the
Products in which any of the Trade Marks appear once a year or at such
other times as Licensor may reasonably request, in order to verify that
the Trade Marks are being used in accordance with the terms of this
Agreement;
8.3.7 Each label, package, advertisement, item or promotional or other
material used in connection with the sale of the Products which bears
any Trade Mark shall contain the following legend:
"[the particular Trade Marks
used]"(R) are Trade Marks of
Compositech Ltd. and are used by
[Licensee's Name] under License."
or such other legend, inscriptions and markings thereon as Licensor may
request;
8.3.8 Licensee shall not use the Trade Marks or any similar mark, name or logo
to identify its business or any product (other than Products) that
Licensee manufactures or sells;
8.3.9 Licensee shall use the Trade Marks, only as depicted in their respective
registrations or applications for registration or as prescribed by
Licensor.
8.4 Quality Control
8.4.1 Licensee shall submit a sufficient number of specimens of each Product
(as shall be agreed upon between Licensor and Licensee) which
incorporates or is to be sold under any of the Trade Marks to Licensor
for approval prior to the introduction into the market and use of such
Product, which approval shall not be unreasonably withheld or unduly
delayed. In the event that Licensor does not advise Licensee in writing
that it disapproves of such Product which incorporates or is to be sold
under any of the Trade Marks within thirty (30) days of its receipt
thereof, Licensor shall be deemed to have accepted same;
8.4.2 Licensee shall maintain the quality of each of the Products which
incorporates any of the Trade Marks in strict conformity with the
standards and specifications for the Product furnished by Licensor from
time to time and the specimens of the Product submitted to Licensor, as
provided in paragraph 8.4.1 above, and shall not make any alteration or
modification thereof without the written consent of
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Licensor, which consent shall not be unreasonably withheld or unduly
delayed, except to comply with changes required by applicable law. In
the event that Licensor does not advise Licensee in writing that it
disapproves of such alterations or modifications within ten (10) days of
receipt thereof, Licensor shall be deemed to have accepted such
alteration or modification;
8.4.3 Licensee shall forward to Licensor, at Licensee's expense, such
representative samples of the Products which incorporate or are to be
sold under any of the Trade Marks as Licensor may reasonably request
from time to time in order to verify that the Products which incorporate
or are to be sold under any of the Trade Marks are being made according
to the then-applicable standards and specifications furnished to
Licensee by Licensor. Licensor shall have the right to conduct such
inspections as to the quality of the Products which incorporate or are
sold under any of the Trade Marks, at Licensee's Plant, as it may deem
reasonably necessary from time to time and upon reasonable notice to
Licensee.
8.5 Non-Respect of Use of Trade Marks and Quality Control. Notwithstanding any
provision of this Agreement, in the event that Licensee uses any of the Trade
Marks in contravention of subsections 8.3 hereof or does not respect the quality
control provisions set forth in subsection 8.4 hereof, the only recourse
available to Licensor shall be to prohibit Licensee from using such Trade Mark.
Licensor shall furnish to Licensee and Licensee shall put in use any reasonable
systems necessary to control the quality of the Products which incorporate or
are to be sold under any of the Trade Marks.
8.6 Delivery of Documents. Licensee shall execute and deliver such documents,
applications and other writings and do such things as may be requested by
Licensor in order to confirm Licensor's ownership of the Trade Marks, maintain
the validity of same and obtain, maintain or renew any registration thereof. The
expenses to confirm Licensor's ownership of the Trade Marks shall be borne by
Licensor. The expenses to maintain the validity of the Trade Marks and to
obtain, maintain or renew any registration thereof shall be borne in the manner
provided for in subsections 11.1 and 11.2 hereof. Failure to obtain or maintain
registration of any of the Trade Marks, anywhere in the Territory shall not
constitute a breach of the terms hereof by Licensor.
SECTION 9 - CONFIDENTIAL INFORMATION
9.1 Confidential Information. Each party hereby acknowledges that it may receive
Confidential Information from the other party (the "Disclosing Party"). Each
party hereby acknowledges, accepts and agrees that:
9.1.1 the Confidential Information designated as such in the manner provided
for in this Section 9 is non-public and confidential and shall at all
times remain the property of the Disclosing Party;
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9.1.2 the disclosure by the Disclosing Party of the Confidential Information
to the other party (the "Receiving Party") is for the sole purpose of
enabling it to carry out its obligations under the terms of this
Agreement; and
9.1.3 the Receiving Party shall not assert, directly or indirectly, any right
with respect to the Confidential Information which may impair or be
adverse to the Disclosing Party's ownership thereof.
9.2 Obligations of parties. Each party shall keep the Confidential Information,
and the fact that the Confidential Information has been provided, confidential
at all times (regardless of the extent or duration of the relationship of the
parties and regardless of whether such Confidential Information was disclosed
before or after the date of this Agreement) and shall not disclose such
Confidential Information, in whole or in part, to any person other than to its
agents, employees, suppliers and/or manufacturers of Equipment and other
authorized representatives (collectively herein referred to as the
"Representatives") who need to know such information in connection with the
performance of its obligations under the terms of this Agreement, without the
prior written consent of the Disclosing Party. Each party shall inform its
Representatives of the confidential nature of the Confidential Information and
shall require such Representatives to keep such information confidential by
legally binding means. Each party shall be fully responsible for any breach of
this Agreement by its Representatives and shall, at its expense, promptly take
appropriate legal action to stop or minimize improper disclosures by any of its
employees or ex-employees or other Representatives. Each party shall exercise
careful judgment to minimize the number of its Representatives who have access
to the other party's Confidential Information and to limit them to individuals
reasonably known to be trustworthy and of sound judgment. Areas of a party's
facilities where processes are carried out involving Confidential Information of
the other party shall be off limits to visitors to such facilities and shall be
accessible only to those having a need to know the information in order to carry
out a specific task for the party and who have signed a written legally binding
agreement effective to maintain the information in confidence and to authorized
Canadian or Quebec government personnel who it believes, upon reasonable
inquiry, are obligated by law to maintain such information in confidence. Each
party shall maintain a written log of all persons other than its Representatives
who are given access to the other party's Confidential Information. Nothing
herein shall be deemed to impair Licensor's right to disclose the Confidential
Information of Licensee to its other licensees, subject to appropriate
safeguards and to the said licensees signing confidentiality agreements, and
provided further that Licensor has the right to disclose comparable confidential
information of such other licensees to Licensee.
9.3 Property Rights In Confidential Information. Any Confidential Information
disclosed by the Disclosing Party shall remain the sole and exclusive property
of the Disclosing Party.
9.4 Information disclosed prior to this Agreement. Any Confidential Information
supplied to the Receiving Party by the Disclosing Party prior to the execution
of this Agreement shall be considered confidential in the same manner and
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shall be subject to the same treatment and obligations as the Confidential
Information made available after the execution of this Agreement.
9.5 Breach of Confidentiality. In the event of a material breach of the
undertakings of either party under this Section 9, the parties agree that money
damages may be inadequate and the Disclosing Party shall be entitled to seek
injunctive relief and specific performance. Such remedy shall not be deemed to
be the exclusive remedy for any such breach but shall be in addition to all
other remedies available at law. The Disclosing Party shall be entitled to
reasonable legal fees (including reasonable attorney's fees and expenses) and
other costs reasonably incurred to remedy any and all material breaches by the
Receiving Party of this Agreement.
9.6 Transfer of Confidential Information. All Confidential Information furnished
hereunder by either party to the other, whether orally, in writing or by
demonstration or otherwise, shall be maintained as confidential unless the
Disclosing Party notifies the Receiving Party to the contrary in writing.
9.7 Proprietary Information. Neither party hereto shall disclose any of its
proprietary information which may reveal incidentally or otherwise Confidential
Information originating with the Disclosing Party.
9.8 Confidential Information of any Person. Notwithstanding the provisions of
subsection 4.3, Licensor shall not be obliged to disclose to Licensee the
planned manufacturing capacity or sales of any Person, other than Affiliates or
Joint Ventures, licensed or otherwise authorized by Licensor or its Affiliates
to use the Intellectual Property and Technology and/or manufacture or sell
Products in North America or outside of North America, if applicable. However,
Licensor shall be obliged to disclose to an independent auditor appointed by
Licensee and acceptable to Licensor, acting reasonably, such planned
manufacturing capacity or sales in order to ensure the accuracy of the
calculation of Sales Proportion. Such independent auditor shall be bound by
confidentiality obligations similar to the provisions of Section 9 hereof.
SECTION 10 - REPRESENTATIONS, WARRANTIES AND COVENANTS
10.1 Representations of Licensor. Licensor hereby represents, warrants and
covenants:
10.1.1 that it is duly incorporated, validly existing and in good standing
under the laws of its jurisdiction of incorporation;
10.1.2 that it has the necessary corporate power and authority to execute this
Agreement and to perform its obligations hereunder. The execution of
this Agreement by Licensor and the performance by Licensor of its
obligations hereunder have been duly authorized by all necessary action
on its part and do not require any action, consent or approval of, any
registration with, or notification to any Person, or any action or
consent under any laws to which Licensor is subject;
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10.1.3 that Schedule 10.1.3 annexed hereto contains a true and complete list
and copy of all Patents, Copyrights and Trade Marks and a true and
complete list in all material respects of the Technology, none of the
applications and registrations in respect of such Patents, Copyrights
and Trade Marks have been opposed or held unenforceable except as set
forth in Schedule 10.1.3 annexed hereto and each of which is in full
force and effect. Licensor is the absolute owner of the applications and
registrations in respect of the Intellectual Property except as set
forth in Schedule 10.1.3;
10.1.4 except as set forth in Schedule 10.1.4 annexed hereto, to the Knowledge
of Licensor, it is the sole owner of and has the right to exclude others
from infringing or misappropriating the Patents, Copyrights, Trade Marks
and Technology. The Patents, Copyrights and Technology are sufficient to
enable Licensee to manufacture and sell the Products and to have
manufactured and to assemble the Equipment;
10.1.5 that the Intellectual Property set forth on Schedule 10.1.3 has been
duly registered with, filed in or issued by, as the case may be, the
appropriate authorities in the jurisdictions listed in such Schedule and
such registrations, filings and issuances remain in full force and
effect, except as set forth in Schedule 10.1.3 annexed hereto;
10.1.6 that, on the date hereof each of the Intellectual Property and the
Technology is free and clear of any hypothecs, charges, liens or
encumbrances, except for the liens on the Intellectual Property
described in Schedule 10.1.6 annexed hereto, all of the holders of such
liens having taken cognizance of and consented to this Agreement and
agreed to be subject to the provisions hereof insofar as the secured
Intellectual Property is concerned and to respect all of the obligations
of Licensor in favour of Licensee set out in this Agreement in the event
that any of them realizes on its security insofar as the secured
Intellectual Property is concerned;
10.1.7 that it has not granted any options, licenses or other rights to the
Intellectual Property and/or the Technology to any Person except as set
forth in Schedule 10.1.7 annexed hereto and HT Troplast AG has taken
cognizance of and consented to this Agreement and agreed in the event
that it purchases any of the Intellectual Property and/or Technology to
be subject to the provisions hereof as far as such purchased
Intellectual Property and/or Technology is concerned and to respect all
of the obligations of Licensor in favour of Licensee in this Agreement
insofar as such purchased Intellectual Property and/or Technology is
concerned;
10.1.8 that the execution, delivery and performance of this Agreement, the
granting of the rights and license provided herein and the consummation
of the transactions contemplated hereby will not breach, violate or
conflict with any instrument, agreement or undertaking, written or oral,
governing the Intellectual Property and/or the Technology and will not
cause the forfeiture or termination or give rise to a right of
forfeiture or termination of Licensor's rights to the Intellectual
Property and/or the Technology or in any way impair the right
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of Licensor to bring any action for the infringement of the Intellectual
Property and/or the Technology or any part thereof;
10.1.9 that on the date hereof, the manufacture of the Products and the
Equipment does not, to the Knowledge of Licensor, infringe any rights of
any Person;
10.1.10 that there are no pending or threatened proceedings, litigation or other
adverse claims affecting, or with respect to, the Intellectual Property
and/or the Technology or any part thereof except as set forth in
Schedule 10.1.10 annexed hereto and, to the Licensor's Knowledge, no
Person is infringing or threatening to infringe the Intellectual
Property and/or the Technology or is in possession of or using the
Technology, except as set forth in Schedule 10.1.10;
10.1.11 that it has not disclosed the Technology or its confidential information
to any Person except (i) pursuant to the License Agreement between
Licensor and HT Troplast AG (successor of Huls Troisdorf AG) dated June
22, 1990, (ii) to Licensor's Representatives and officers and to other
Persons pursuant to written obligation of confidentiality, (iii) to
Licensor's directors whom it believes, upon reasonable inquiry, are
obligated by law to maintain such information in confidence; (iv) to
governmental inspectors and authorities whom it believes are obligated
by law or regulation to maintain the information in confidence, and (v)
in the course of its business to attorneys, accountants and comparable
professionals who have ethical obligations to maintain such information
in confidence;
10.1.12 that all its Representatives, officers and directors other than those
Representatives who are not privy to any of Licensor's confidential
information are bound by confidentiality and assignment of intellectual
property and technology agreements (and non-competition agreements only
insofar as the directors of Licensor who are also employees of Licensor
and who are privy to Licensor's confidential information are concerned),
and such agreements and obligations do not confer on any such Person any
rights to the Intellectual Property and/or the Technology;
10.1.13 that it has not received any offer which remains open for acceptance
from any Person for the purchase of all or substantially all of its
assets, and to its Knowledge, the shareholders of Licensor who are
executive officers of Licensor have not received any offer which remains
open for acceptance from any Person for the purchase of their shares of
Licensor;
10.1.14 that, to its Knowledge, there are no other facts or circumstances which,
if known by Licensee, would reasonably dissuade Licensee from entering
into this Agreement or any other agreements entered into between
Licensor and Licensee on the date hereof.
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10.2 Representations of Licensee. Licensee hereby represents and warrants:
10.2.1 that it has all the rights and power to enter into this Agreement;
10.2.2 that the undersigned officer has full authority to execute this
Agreement; and
10.2.3 that this Agreement does not violate the terms of any other agreement to
which Licensee is subject or to which Licensee is bound.
10.3 Covenants of Licensor. Licensor hereby covenants that it shall not
hypothecate, charge, encumber or grant any security interest in the Intellectual
Property and/or the Technology or any part thereof in favour of any Person
unless such Person has first, in writing, taken cognizance of this Agreement and
agreed to be subject to the provisions hereof and to respect all of the
obligations of Licensor in favour of Licensee in this Agreement in the event
that it exercises any of its rights in respect of the Intellectual Property
and/or the Technology.
10.4 Covenants of Licensee. Licensee hereby covenants that it shall not sell or
convey any of the Equipment to any Person without the prior consent of Licensor,
which consent shall not be unreasonably withheld or unduly delayed. By way of
example only, Licensor shall not be entitled to unreasonably withhold or unduly
delay its consent if the Equipment being sold or conveyed is no longer fit for
the purpose for which it was intended, is obsolete or damaged beyond reasonable
repair, and is sold or conveyed in such a manner so as not to reveal any of the
trade secrets forming part of the Technology. Notwithstanding the foregoing,
Licensor's consent shall not be required to sell or convey any of the Equipment
i) if Licensee sells all or substantially all of its assets, or ii) in the
circumstances provided for in paragraph 7.1.5 hereof.
SECTION 11 - COSTS, VALIDITY AND INFRINGEMENT OF INTELLECTUAL PROPERTY
11.1 Validity of Patents, Copyrights and Trade Marks. Licensor will maintain the
validity of the existing and future Patents, Copyrights and Trade Marks by
paying all required fees and other costs associated with maintaining the
Patents, Copyrights and Trade Marks in force in those jurisdictions within the
Territory where they are presently and will in the future be registered.
Licensor may, however, upon notice to but subject to reasonable objection by
Licensee, abandon any such Patents, Copyrights or Trade Marks as it deems of no
further practical use. For the purposes hereof, a reasonable objection of
Licensee shall include, without limitation, that the Licensee sells or
reasonably intends within the next twelve (12) months to sell Products in such
jurisdiction within the Territory. Notwithstanding the foregoing, Licensor shall
not be entitled to abandon any existing Patents, Copyrights or Trade Marks in
the manner provided for herein prior to the twenty-fifth (25th) month following
the date hereof. For North America, for the first two twelve (12) month periods
commencing on the date hereof, Licensee shall reimburse Licensor, within thirty
(30) days of receipt of evidence of any such payment by Licensor, for its
Proportion of such maintenance fees and other costs for North America. For
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North America commencing with the twenty-fifth (25th) month following the date
hereof and ending December 31, 2000 and for each fiscal year of Licensee
thereafter, and for each country outside of North America in each fiscal year,
Licensee shall reimburse Licensor, within thirty (30) days of the determination
of the Sales Proportion for the period in question and upon receipt of evidence
of such payments by Licensor, for its North American Sales Proportion of such
maintenance fees and other costs for North America and its Country Sales
Proportion of such maintenance fees and other costs for such country, for the
period in question.
11.2 Costs of Registration of Patents, Copyrights and Trade Marks. Licensor
shall pay all required fees and other costs associated with the registration of
new Patents, Copyrights and Trade Marks or associated with the registration of
the Patents, Copyrights and Trade Marks in North America, and in any country
where such Patents, Copyrights and Trade Marks are not presently registered and
where such registration would in Licensor's or Licensee's reasonable business
judgment be advisable. For the purposes hereof, it shall be advisable in either
parties reasonable business judgment to register such Patents, Copyrights and
Trade Marks in a country other than North America where it sells or reasonably
intends within the next twelve (12) months to sell Products, provided that
registration is reasonably available and achievable in such countries. For North
America, for the first two twelve (12) month periods commencing on the date
hereof, Licensee shall reimburse Licensor, within thirty (30) days of receipt of
evidence of any such payment by Licensor, its Proportion of such registration
fees and other costs for North America. For North America commencing with the
twenty-fifth (25th) month following the date hereof and ending December 31, 2000
and for each fiscal year of Licensee thereafter, and for each country outside of
North America in each fiscal year, Licensee shall reimburse Licensor, within
thirty (30) days of the determination of the Sales Proportion for the twelve
(12) month period in question and upon receipt of evidence of such payments by
Licensor, for its North American Sales Proportion of such registration fees and
other costs for North America and its Country Sales Proportion of such
registration fees and other costs for such country, for the twelve (12) month
period in question.
11.3 Notice of infringement. Each party shall promptly notify the other party in
writing of any infringement or threatened infringement by a third party of the
Intellectual Property and/or the Technology or the Licensee's Improvements, as
well as any action to invalidate or revoke or otherwise adversely affect the
Intellectual Property and/or the Technology or the Licensee's Improvements which
may come to its attention, including without limitation, any actual or intended
common law passing-off, or any third party claim that any of the Trade Marks
causes deception or confusion with or infringes upon its trade marks, service
marks or other property rights in any manner.
11.4 Proceedings. The parties shall consult with one another with respect to
each infringement or violation of the Intellectual Property and/or Technology or
the Licensee's Improvements. Whenever the owner of the Intellectual Property
and/or Technology or the Licensee's Improvements concludes that proceedings
should be taken with respect to any such infringement or violation of its
rights, the owner of such intellectual property and/or technology
<PAGE>
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shall promptly and diligently prosecute same at its cost and expense and shall
be entitled to all recoveries and awards therefrom. If such owner advises the
other party that it does not intend to participate in any such proceedings, then
unless such owner concludes upon reasonable grounds that no action should be
taken, the other party shall be free to prosecute same and shall pay all costs
and expenses related thereto and be entitled to all recoveries and awards
therefrom. The parties shall at all times fully cooperate in the prosecution of
all such proceedings.
11.5 One party institutes proceedings. It is understood that the party that did
not institute suit or action shall render all reasonable assistance to the party
that did institute suit or action, including, but not limited to, executing all
documents as may be reasonably requested by the party that did institute such
suit or action, and providing all necessary documentation evidencing the
infringement that such party has in its possession or may acquire thereafter.
11.6 Licensee's proceedings. In the event that Licensee initiates any lawsuits
involving or relating to the Intellectual Property and/or the Technology, it
shall do so in good faith and to the best of its ability.
11.7 Licensor's proceedings. In the event that Licensor initiates any lawsuits
involving or relating to the Licensee's Improvements, it shall do so in good
faith and to the best of its ability.
11.8 Ownership of Intellectual Property and/or Technology. Licensee shall not
contest the ownership or validity of the Intellectual Property and/or
Technology, whether directly or indirectly, at any time during the term of this
Agreement or at any time thereafter, except to the extent permitted by law in
any applicable jurisdiction.
11.9 Ownership of Licensee's Improvements. Licensor shall not contest the
ownership or validity of the Licensee's Improvements, whether directly or
indirectly, at any time during the term of this Agreement or at any time
thereafter, except to the extent permitted by law in any applicable
jurisdiction.
SECTION 12 - INDEMNIFICATION
12.1 Indemnification of Licensee. Licensor shall indemnify and save and hold
Licensee harmless from and against any debts, liabilities, claims, actions,
causes of action, suits, damages, losses, costs and expenses, including damage
to property and reasonable attorneys' fees and expenses, which Licensee is or
may become liable for or be compelled to pay as a result or by reason of any
violation, contravention or breach of any covenant, agreement or obligation or
any breach of any representation or warranty made by Licensor or its directors,
officers, servants, agents or employees under, pursuant to or in this Agreement.
12.2 Indemnification of Licensor. Licensee shall indemnify and save and hold
Licensor harmless from and against any debts, liabilities, claims, actions,
causes of action, suits,
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damages, losses, costs and expenses, including damage to property and reasonable
attorneys' fees and expenses, which Licensor is or may become liable for or be
compelled to pay as a result or by reason of any violation, contravention or
breach of any covenant, agreement or obligation or any breach of any
representation or warranty made by Licensee or its directors, officers,
servants, agents or employees under, pursuant to or in this Agreement.
SECTION 13 - GOVERNMENT APPROVAL
13.1 Government approval. Licensee undertakes, at its sole cost and expense, to
obtain any required approval, registration, notification or authorization of
this Agreement from any governmental authority in any country comprised in the
Territory where Licensee sells or intends to sell Products and where such
approval, registration, notification or authorization is necessary.
SECTION 14 - SALE OF INTELLECTUAL PROPERTY AND/OR TECHNOLOGY
14.1 Sale of Intellectual Property and/or Technology. Licensor hereby agrees and
undertakes not to assign, sell or alienate to any Person all or any part of the
Intellectual Property and/or Technology in any manner unless such Person first
agrees in writing to be subject to the provisions of this Agreement and to
respect all of the obligations of Licensor in favour of Licensee set out in this
Agreement. In the event that such Person purchases or becomes owner of a part
and not all of the Intellectual Property and Technology, such Person shall be
subject to the provisions of this Agreement only insofar as such part of the
Intellectual Property and/or Technology is concerned and shall respect all of
the obligations of Licensor in favour of Licensee set out in this Agreement only
insofar as such part of the Intellectual Property and/or Technology is
concerned.
SECTION 15 - FAIRNESS COMMITTEE AND ARBITRATION
15.1 Nomination of a Fairness Committee. Promptly after the date hereof, the
parties hereby agree to appoint a fairness committee (the "Fairness Committee")
comprised of one (1) representative of each of Licensor and Licensee (provided
that the representative of Licensee shall be chosen by the Investors only). Each
of the Licensor and the Licensee (acting through the Investors only) shall be
entitled to replace the representative appointed by it upon giving the other
party three (3) days prior written notice of the names of the individual being
replaced and replacing him.
15.2 Fairness Committee. In the event of any dispute, controversy or
disagreement between the parties arising out of or in relation to the validity,
interpretation or performance of the provisions of this Agreement, the parties
shall first meet and try in good faith to resolve their differences. In the
event they are unable to meet within ten (10) days of either party requesting a
meeting or are unable to resolve their differences within ten (10) days of their
meeting, then the Fairness Committee shall meet in an effort to resolve the
differences between the parties. All decisions of the Fairness Committee shall
be made unanimously by its members.
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15.3 Arbitration. In the event that the Fairness Committee is unable to meet
within ten (10) days of either party requesting same or the Fairness Committee
is unable to resolve any dispute through negotiation as set forth in subsection
15.2 within ten (10) days of its meeting, then such dispute 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 jurisdiction, and until
a final decision is rendered, this Agreement shall continue in effect as if the
dispute, controversy or decision did not exist. Any arbitration proceeding
required pursuant to the terms thereof shall take place in Montreal, Quebec 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.
SECTION 16 - MISCELLANEOUS PROVISIONS
16.1 Registration. Licensee shall have the right, at its cost, to cause a
summary of this Agreement to be registered or recorded against the Patents in
all patent offices where such registration or recording mechanism is available.
Any summary of this Agreement shall be prepared by Licensor at its expense and
shall be satisfactory to the Licensee.
16.2 Patent Marking. Licensee shall mark all Products with the numbers of all
applicable Patents in accordance with the laws of all jurisdictions where they
may be sold. Such markings shall be in such form as may be directed by Licensor
from time to time in order to assure compliance with such laws.
16.3 Notices. All notices, requests, 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 the Licensee: LAMINES CTEK INC.
600 de la Gauchetiere Street West
Suite 1700
Montreal, Quebec
H3B 4L8
Attention: Chairman and President
Telecopier: (514) 395-8055
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if to the Licensor: 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: INDUSTRIES DEVMA INC.
600, de la Gauchetiere Street West
Suite 1700
Montreal, Quebec
H3B 4L8
Attention: President
Telecopier: (514) 395-8055
SOCIETE INNOVATECH DU GRAND MONTREAL
2020 University Avenue
Suite 1527
Montreal, Quebec
H3A 2A5
Attention: President and Chief Executive Officer
Telecopier: (514) 864-4220
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
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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
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
or at such other address as each party may have previously indicated to the
other party 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.
16.4 Further Documents. Each party upon the request of the other, 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.
16.5 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.
16.6 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.
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- 28 -
16.7 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.
16.8 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, between
the parties.
16.9 Amendments. No amendment of this Agreement shall be binding unless
otherwise expressly provided in an instrument duly executed by each party
hereto.
16.10 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.
16.11 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.
16.12 Preamble. The preamble hereof shall form an integral part of this
Agreement.
16.13 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.
16.14 Separate entities. This is an agreement between separate entities and
neither is the agent or servant of or possesses the power to obligate the other.
This Agreement shall not be construed so as to constitute Licensor and Licensee
partners or joint venturers or so as to create any other form of legal
association which imposes liability upon either party for the acts or omissions
of the other party.
16.15 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. Except as otherwise provided for in this
Agreement, neither party shall assign, encumber or hypothecate any of its
rights, title and interest in and to this Agreement without the other party's
prior written consent. Notwithstanding the foregoing, the Licensee may assign,
encumber and/or hypothecate its right, title and interest in and to this
Agreement to its lenders.
<PAGE>
- 29 -
16.16 Currency and conversion rate. All payments contemplated herein shall be
effected in the lawful currency of the United States of America, at the address
designated by either party from time to time. For the purpose of calculating the
Sales Proportion, the sales that are not made in United States dollars will be
converted into United States dollars based on the average monthly closing rate
for the period of the sales as reported by the Chase Manhattan Bank for the
conversion of such foreign currencies into United States dollars. In addition,
all amounts payable by Licensor to a third party in currency other than United
States dollars shall be converted into United States dollars based on the noon
rate as reported by the Chase Manhattan Bank for the conversion of such foreign
currencies into United States dollars on the date such amount is paid by
Licensor.
16.17 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.
16.18 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.
COMPOSITECH LTD. LAMINES CTEK INC.
Per: ___________________________ Per: ___________________________
Jonas Medney Louis Riopel
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
<PAGE>
- 2 -
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
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
SECTION 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:
SECTION 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.
<PAGE>
- 3 -
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;
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;
<PAGE>
- 4 -
Z2.1.9 "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.;
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;
<PAGE>
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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;
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;
<PAGE>
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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;
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 conductive surface 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,
2.1.33.1.5 all Trade Secrets and proprietary and
confidential information,
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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 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;
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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 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
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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;
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;
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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 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.
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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.
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.
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SECTION 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.
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.
<PAGE>
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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.
SECTION 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 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
<PAGE>
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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;
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:
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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 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
<PAGE>
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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.
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,
<PAGE>
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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 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,
<PAGE>
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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,
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.
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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 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
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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 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
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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 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;
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4.2.21 Employees and Labour Relations.
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,
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
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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;
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
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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 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
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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 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,
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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
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,
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indemnification, assumption or endorsement or any like commitment with
respect to the liabilities (whether accrued, absolute, contingent or
otherwise) or obligations of any Person;
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,
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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 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;
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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.
SECTION 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.
SECTION 6 - INDEMNIFICATION
6.1 Definitions. As used in this Section :
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,
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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:
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
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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 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.
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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:
00 (n+1)
AI = (SUM) 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 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:
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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
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.
<PAGE>
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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 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);
<PAGE>
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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.
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
<PAGE>
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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.
SECTION 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
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)
<PAGE>
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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.
SECTION 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 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.
<PAGE>
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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
if to Innovatech: SOCIETE INNOVATECH DU GRAND MONTREAL
2020 University Avenue
Suite 1527
Montreal, Quebec
H3A 2A5
Attention: President
Telecopier: (514) 864-4220
<PAGE>
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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:
------------------------
Per:
------------------------
SOCIETE INNOVATECH DU GRAND MONTREAL
Per:
------------------------
Hubert Manseau
FONDS DE SOLIDARITE DES TRAVAILLEURS DU QUEBEC (F.T.Q.)
Per:
------------------------
FONDS REGIONAL DE SOLIDARITE DE MONTREAL, limited partnership,
by its general partner, Gestion du Fonds Regional de Solidarite Ile de Montreal
Inc.
Per:
------------------------
Danielle Blanchard
COMPOSITECH LTD.
Per: /s/Jonas Medney
------------------------
Jonas Medney
REGISTRATION RIGHTS AGREEMENT MADE AND ENTERED INTO AS OF 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" or "Compositech")
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,
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,
(herein after referred to as "DEVMA")
PARTY OF THE THIRD PART
AND: FONDS DE SOLIDARITE DES TRAVAILLEURS DU
QUEBEC (F.T.Q.), a body politic, 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")
<PAGE>
PARTY OF THE FOURTH 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 refereed to as "FR")
PARTY OF THE FIFTH PART
SECTION 1. - PREAMBLE
1.1 WHEREAS, concurrently with the execution of this Agreement,
Innovatech, Devma, Fonds and FR have subscribed for shares of the common stock
of the Company, par value $.01 per share ("Company Shares");
1.2 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 CTEK Laminates Inc., a Canadian corporation ("CTEK"), and
whereas each of the Investors may from time to time subscribe for additional
common shares in the capital stock of CTEK (the common shares in the capital
stock of CTEK being hereinafter referred to as the "CTEK Shares");
1.3 WHEREAS the Company has agreed to grant to each of Innovatech, Devma,
Fonds and FR the right to exchange its CTEK Shares for shares of the Common
Stock of the Company (the "Exchange Shares") on the terms and conditions set out
in the Stock Exchange Agreement;
1.4 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
CTEK Shares for Exchange Shares on the terms and conditions set out in the Stock
Exchange Agreement;
1.5 WHEREAS the Company has agreed to provide for the registration of the
Company Shares and the Exchange Shares on the terms and conditions hereinafter
set forth;
NOW, THEREFORE, THIS AGREEMENT WITNESSETH:
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<PAGE>
SECTION 2. - DEFINITIONS
2.1 Definitions. In this Agreement:
2.1.1 Capitalized terms used but not otherwise defined herein shall have
the meanings ascribed thereto in that certain Shareholders Agreement of even
date hereof by and among the parties hereto and CTEK.
2.1.2 "Investors" shall mean, collectively, Innovatech, Devma, Fonds and
FR.
2.1.3 "Management Lock-ups" shall mean all those certain agreements
entered into by Jonas Medney, Fred E. Klimpl, Willard T. Jackson, Samuel S.
Gross, John F. Gahran, and James Taylor, the forms of which agreements was filed
as Exhibit 10.21 to Compositech's Registration Statement on Form SB-2 File No.
333-3564-NY.
2.1.4 "Other Securities" shall have the meaning set forth in Section 4.4
below.
2.1.5 "Registering Investors" shall have the meaning set forth in Section
5.1(a)(ii) below.
2.1.6 "Registrable Securities" shall mean the Company Shares and the
Exchange Shares and any securities of Compositech distributed with respect to
such shares.
2.1.7 "Registration Expenses" shall mean all expenses incident to the
Company's performance of or compliance with the registration and other
requirements set forth in this Agreement including, without limitation, the
following: (i) the fees, disbursements and expenses of all counsel to the
Company and all accountants in connection with the registration statement, any
preliminary prospectus or final prospectus, any other offering documents and
amendments and supplements thereto and the mailing and delivery of copies
thereof to underwriters and dealers; (ii) all expenses in connection with the
preparation, printing and filing of the registration statement, any preliminary
prospectus or final prospectus, any other offering document and amendments and
supplements thereto and the mailing and delivery of copies thereof to
underwriters and dealers; (iii) the cost of printing or producing any agreements
among underwriters, underwriting agreements, and blue sky or legal investment
memoranda, any selling agreements and any other documents in connection with the
offering, sale or delivery of the Registrable Securities to be disposed of; (iv)
all expenses in connection with the qualification of the Registrable Securities
to be disposed of for offering and sale under state securities laws, including
the fees and disbursements of counsel for the underwriters in connection with
such qualification and in connection with any blue sky and legal investment
surveys; (v) fees, including, without limitation, any filing fees, incident to
securing any required review by the National Association of Securities Dealers,
Inc. of the terms of the sale of the Registrable Securities to be disposed of
(or any similar review required by any other market or exchange on which the
Registrable Securities then trade); (vi) the cost and charges of any transfer
agent or registrar in connection with the registration of exchange or transfer
of the Registrable Securities to be disposed of; (vii) the fees of any
nationally recognized rating agency for rating the Registrable Securities to be
disposed of; and (viii) all stock exchange listing fees; provided, however,
that,
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<PAGE>
notwithstanding any of the above, under no circumstances shall Registration
Expenses include fees, disbursements or expenses of counsel to the Registering
Investors.
2.1.8 "SA Person" shall have the meaning set forth in Section 4.2 below.
2.1.9 "SEC" shall have the meaning set forth in Section 4.1 below.
2.1.10 "Total Number of Includible Securities" shall have the meaning set
forth in Section 4.4(b) below.
SECTION 3. - EFFECTIVENESS
3.1 Effectiveness of Registration Rights. The registration rights pursuant
to Section 4 hereof shall become effective on July 2, 1998, or such earlier date
that any of the Management Lock-ups expire, as the case may be (the "Effective
Date"), and terminate (a) in the case of the Company Shares, two (2) years from
the date hereof, and (b) in the case of each Exchange Share, two (2) years after
its issuance pursuant to the Stock Exchange Agreement (it being understood that
the Exchange Shares may be issued from time to time for so long as any CTEK
Shares remain outstanding).
3.2 Registration Not Required. The Company shall not be obligated to
effect any registration pursuant to Section 4 hereof if the intended method or
methods of disposition of the Registrable Securities by the Investors may be
effected without registration under the Securities Act of 1993, as amended (the
"Securities Act"), and any certificate evidencing the Registrable Securities so
to be disposed need not bear the restrictive legend with respect thereto set
forth in the Subscription Agreement among the Investors and the Company dated
the date hereof (the "U.S. Subscription Agreement") and/or the Stock Exchange
Agreement, as the case may be, and the Company agrees to promptly take all
customary actions necessary to permit such disposition, including, without
limitation, providing the Company's transfer agent with all necessary
instructions, and, to the extent necessary, causing counsel to the Company to
deliver an opinion that the Registrable Securities may be reissued without such
legend.
SECTION 4. - REGISTRATION
4.1 Demand Registration. Upon written notice from time to time by any of
the Investor(s) (the "Registering Investors") given no earlier than 90 days
prior to the Effective Date requesting that the Company effect the registration
under the Securities Act of all or part of the Registrable Securities owned
beneficially and of record by the Registering Investors, which notice shall
specify the intended method or methods of disposition of such Registrable
Securities, and be simultaneously copied to any Investor not included in said
Registering Investors (the "Request Notification"), the Company shall be obliged
to file with the U.S. Securities and Exchange Commission (the "SEC") a
registration statement within 60 days of the Request Notification and use its
commercially reasonable best efforts to cause such registration statement to be
declared effective (as promptly as reasonably practicable, but in no event prior
to the Effective Date), under the Securities Act, for disposition of such
Registrable Securities and the Registrable Securities of any other Investor(s)
requesting to include all or part of the Registrable Securities
-4-
<PAGE>
owned beneficially and of record by it in such registration within 10 days of
receipt of the Request Notification (such Investor(s) upon such request, shall
also be "Registering Investors"), in accordance with the intended method or
methods of disposition stated in such request notification; provided that:
(a) if the Company shall have previously effected a registration with
respect to Registrable Securities pursuant to this Section 4.1 or Section
4.4 below (and, in the case of registration pursuant to Section 4.4 below,
provided that, subject to Section 4.4(b), the Company has registered all
Registrable Securities requested by the Investors pursuant to Section 4.4)
the Company shall not be required to effect a registration pursuant to this
Section 4.1 until a period of 120 days shall have elapsed from the
effective date of the most recent such previous registration;
(b) if, in the reasonable judgment of the Company, a registration at
the time and on the terms requested would adversely affect any financing by
the Company that had been planned by the Company prior to the Request
Notification, the Company shall not be required to file any registration
statement pursuant to this Section 4.1 until 120 days after completion or
abandonment of such financing, provided that the Company may not defer the
filing of a registration statement pursuant to this clause (b) or clause
(d) below for more than 120 days in the aggregate in any 12-month period;
(c) the Company shall not be required to file a registration statement
if, as a result, the Company would be required to include in such
registration statement (i) audited financial statements as of any date
other than a fiscal year end or any other date as of which the Company
shall have audited financial statements or (ii) pro forma financial
statements pursuant to Regulation S-X under the Securities Act if such pro
forma statements cannot be reasonably prepared in a timely fashion, until
such audited financial statements or such pro forma financial statements
have been prepared; provided that the Company shall use its best efforts to
prepare within 90 days from the Request Notification any audited financial
statements or pro forma financial statements required to be included;
(d) if the Company determines in good faith that the filing of a
registration statement would require the disclosure of material information
which the Company has a good faith business purpose for preserving as
confidential or the Company is unable to comply with the SEC requirements,
the Company shall not be required to file any registration statement
pursuant to this Section 4.1 until the earlier of (i) the date upon which
such material information is disclosed to the public (it being understood
that nothing herein shall require such disclosure) or ceases to be material
or (ii) 90 days after the Company makes such good faith determination,
provided that the Company may not defer the filing of a registration
statement pursuant to this clause (d) or clause (b) above for more than 120
days in the aggregate in any 12-month period; and
(e) any Investor which is not included among the Registering Investors
in a given demand and who had not notified the Company within 10 days of
receipt of a copy of the Request Notification that it wished to include all
or part of the Registrable Securities owned beneficially and of record by
it shall be deemed for all purposes to have
-5-
<PAGE>
waived, and be precluded from exercising, any registration rights in the
applicable registration pursuant to this Section 4.1; and
(f) if, in any case, the Company shall under any of foregoing clauses
(a) through (d) postpone the filing of a registration statement requested
by the Registering Investors, it shall be a condition to such postponement
that no executive officer or director of the Company sell any shares owned
beneficially or of record by him during the period of such postponement,
and the Registering Investors shall have the right for 30 days after
receipt of the notice of postponement to withdraw the request for
registration by giving written notice to the Company, and, in the event of
such withdrawal, such request for registration shall not be counted as one
of the three (3) registrations contemplated under Section 4.3(b) below.
4.2 Third Person Shares. The Company shall have the right to cause the
registration of securities for sale for the account of any Person within the
meaning of the Securities Act (an "SA Person") in any registration of
Registrable Securities requested pursuant to this Section 4.
4.3 Registration Expenses.
(a) Subject to the limitations set forth under Section 4.3(b) below,
the Company shall pay any and all Registration Expenses with respect to any
such registration; provided the Registering Investors shall bear (i) any
and all transfer taxes applicable to their respective Registrable
Securities registered thereunder, and (ii) their respective shares (pro
rata in accordance with their respective numbers of Registrable Securities
relative to all securities included in such registration) of any and all
commissions, discounts or other compensation payable to any underwriters
(including fees and expenses of underwriters' counsel) in respect of such
Registrable Securities and the fees and expenses of their own counsel;
provided, however, that in no event shall the Investors be required to pay
any internal costs of the Company or shall the Company be required to pay
any internal costs of the Investors.
(b) Notwithstanding anything to the contrary herein, the Company (i)
shall only be required to pay Registration Expenses in respect of three (3)
registrations pursuant to Section 4.1, and (ii) shall be required to pay
all the Registering Investors' Registration Expenses in respect of any
registration pursuant to Section 4.4 if the Company receives the Piggyback
Request (as such term is defined below) in respect of such registration on
a date prior to the date that it receives the Request Notification in
respect of the third registration pursuant to Section 4.1 (such date, the
"Third Notification Date"). Accordingly, if the Company (x) shall be
required to effect more than three (3) registrations pursuant to Section
4.1, or (y) shall be required to effect a registration pursuant to Section
4.4 pursuant to a Piggyback Request made on or after Third Notification
Date, each Registering Investor agrees to pay its portion of the expenses
of any such additional registration pro rata in proportion that its
Registrable Securities included in such registration statement bear to the
whole number of securities included in such registration statement.
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4.4 Piggyback Registration. If the Company proposes to register any of its
voting securities ("Other Securities") for public sale under the Securities Act,
on a form and in a manner which would permit registration of Registrable
Securities for sale to the public under the Securities Act, it will give prompt
written notice to each of the Investors of its intention to do so, and upon the
written request (which request shall specify the Registrable Securities intended
to be disposed of by such Investor and the intended method of disposition
thereof) of any Investor delivered to the Company within 10 days after the
giving of any such notice (the "Piggyback Request") the Company will use its
reasonable efforts to effect, in connection with the registration of the Other
Securities, the registration under the Securities Act of all Registrable
Securities which the Company has been so requested to register by the Investors,
to the extent required to permit the disposition (in accordance with the
intended method or methods thereof as aforesaid) of the Registrable Securities
so to be registered; provided that:
(a) If, at any time after giving such written notice of its intention
to register any Other Securities and prior to the effective date of the
registration statement filed in connection with such registration, the
Company shall determine for any reason not to register the Other
Securities, the Company may, at its election, give written notice of such
determination to the Investors and thereupon the Company shall be relieved
of its obligations to register such Registrable Securities in connection
with the registration of such Other Securities (but not from its obligation
to pay Registration Expenses to the extent incurred in connection therewith
as provided in Section 4.3), without prejudice, however, to the rights of
the Investors, to request that such registration be effected as a
registration under Section 4.1.
(b) The Company will not be required to effect any registration of
Registrable Securities under this Section 4.4 if, and to the extent that,
the underwriters (or any managing underwriter) shall advise the Company in
writing that, in their reasonable opinion, inclusion of such number of
shares of Registrable Securities (after excluding from such registration
any Registrable Securities proposed to be included by any executive officer
or director of the Company) will adversely affect the price or distribution
of the securities to be offered solely for the account of the Company. Such
advice shall include a statement as to the underwriters' (or any managing
underwriter's) opinion as to the number of shares which may be included
without adversely affecting the price or distribution of the securities
solely for the account of the Company (such total number of shares which
such advice states may be so included being the "Total Number of Includible
Securities"). The Company shall promptly furnish the Investors with a copy
of such written advice. In the event that the number of shares requested to
be included by Investors together with the number of other shares requested
to be included by any selling securityholders (after excluding from such
registration any Registrable Securities proposed to be included by any
executive officer or director of the Company) requesting inclusion of such
securityholders' securities pursuant to registration rights granted by the
Company exceeds the Total Number of Includible Securities, the aggregate
number of shares of Registrable Securities held by any Investors entitled
to be included in the public sale shall be the product of (i) a fraction,
the numerator of which is the total number of such shares of Registrable
Securities held by such Investors requested to be included in such public
sale and the denominator of which is the total number of such Investor's
shares of
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Registrable Securities requested to be included in such public sale plus
the number of other shares requested to be included by other
securityholders (including, but not limited to other Investors, if
applicable (after excluding from such registration any Registrable
Securities proposed to be included by any executive officer or director of
the Company)) pursuant to registration rights granted by the Company and
(ii) the Total Number of Includible Securities.
(c) The Company shall not be required to effect any registration of
Registrable Securities under this Section 4.4 incidental to the
registration of any of its securities in connection with mergers,
acquisitions, exchange offers, subscription offers, dividend reinvestment
plans or stock option or other employee benefit plans.
(d) No registration of Registrable Securities effected under this
Section 4.4 shall relieve the Company of its obligation to effect
registrations of Registrable Securities pursuant to Section 4.1.
SECTION 5. - REGISTRATION PROCEDURES.
5.1 Registration and Qualification.
(a) If and whenever the Company is required to undertake to effect the
registration of any Registrable Securities under the Securities Act as
provided hereunder, the Company will as promptly as is reasonably
practicable:
(i) prepare, file and cause to become effective a registration
statement under the Securities Act for such Registrable Securities in
accordance with the applicable time periods and other conditions set
forth in the relevant provision hereof;
(ii) prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration
statement effective and to comply with the provisions of the
Securities Act with respect to the disposition of all Registrable
Securities until the earlier of such time as all of such Registrable
Securities have been disposed of in accordance with the intended
methods of disposition by the Investor(s) included in such
registration (as the case may be, the "Registering Investors") set
forth in such registration statement or the expiration of 365 days
after such registration statement becomes effective;
(iii) furnish to the Registering Investors and to any underwriter
of such Registrable Securities such number of conformed copies of such
registration statement and of each such amendment and supplement
thereto (in the case of the Registering Investors or any managing
underwriter, including all exhibits), such number of copies of the
prospectus included in such registration statement (including each
preliminary prospectus and any summary prospectus) or filed under the
Securities Act, in conformity with the requirements of the Securities
Act, such
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documents as may be incorporated by reference in such registration
statement or prospectus, and such other documents, as the Registering
Investors or such underwriter may reasonably request;
(iv) undertake to register or qualify all Registrable Securities
covered by such registration statement under such other securities or
blue sky laws of such jurisdictions as the Registering Investors or
any underwriter of such Registrable Securities shall reasonably
request, and do any and all other acts and things which may be
necessary or reasonably advisable to enable the Registering Investors
or any underwriter to consummate the disposition in such jurisdictions
of the Registering Investors' Registrable Securities covered by such
registration statement, except that the Company shall not for any such
purpose be required to qualify generally to do business as a foreign
corporation in any jurisdiction wherein it is not so qualified, or to
subject itself to taxation in any such jurisdiction, or to consent to
general service of process in any such jurisdiction;
(v) in the case of any underwritten offering, cause to be
furnished to the Registering Investors and the underwriters, addressed
to them, (A) an opinion of counsel for the Company, dated the date of
the closing under the underwriting agreement relating to any
underwritten offering, and (B) a "comfort" letter signed by the
independent accountants who have reported the Company's financial
statements included in such registration statement, covering
substantially the same matters with respect to such registration
statement (and the prospectus included therein) and, in the case of
such accountants' letter, with respect to events subsequent to the
date of such financial statements, as are customarily covered in
opinions of issuer's counsel and in accountants' letters,
respectively, delivered to underwriters in underwritten public
offerings of securities;
(vi) immediately notify the Registering Investors at any time
when a prospectus relating to a registration hereunder is or was
required to be delivered under the Securities Act, of the happening of
any event as a result of which the prospectus included in such
registration statement, as then in effect, includes or included an
untrue statement of a material fact or omits or omitted to state any
material fact required to be stated therein or necessary, in the light
of the circumstances then existing, to make the statements therein not
misleading, and promptly prepare and furnish to the Registering
Investors a reasonable number of copies of a supplement to or an
amendment of such prospectus as may be necessary so that, as
thereafter delivered to the purchasers of such Registrable Securities,
such prospectus shall not include an untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary, in light of the circumstances then existing, to make the
statements therein not misleading; and
(vii) use reasonable efforts to do any and all other acts the
Registering Investors may reasonably request and which are customary
for a registration of equity securities.
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(b) The Company may require the Registering Investors to furnish such
information regarding the Registering Investors and the distribution of
such securities as the Company may from time to time reasonably request in
writing and as shall be required by law or by the SEC in connection with
any registration.
(c) Each of the Registering Investors agrees that, upon receipt of any
notice from the Company of the happening of any event of the kind described
in Section 5.1(a)(vi) hereof, such Registering Investor shall use its best
efforts to discontinue forthwith disposition of Registrable Securities
pursuant to the registration statement covering such Registrable Securities
until the Registering Investor's receipt of the copies of the supplemented
or amended prospectus contemplated by Section 5.1(a)(vi) hereof.
5.2 Underwriting.
(a) If requested by the managing underwriter for any underwritten
offering of Registrable Securities pursuant to a registration requested
hereunder, the Company will enter into an underwriting agreement with the
underwriters for such offering, such agreement to contain such
representations and warranties by the Company and such other terms and
provisions as are customarily contained in underwriting agreements with
respect to secondary distributions, including, without limitation,
indemnities and contribution to the effect provided in Section 7 hereof and
the provision of opinions of counsel and accountants' letters to the effect
provided in Section 5.1(a)(v) hereof. The Registering Investors shall be a
party to any such underwriting agreement and the representations and
warranties by, and the other agreements on the part of, the Company to and
for the benefit of such underwriters, shall also be made to and for the
benefit of the Registering Investors.
(b) In the event that any registration pursuant to Section 4.4 shall
involve, in whole or in part, an underwritten offering, the Company may
require the Registrable Securities to be included in such underwriting on
the same terms and conditions as shall be applicable to the Other
Securities being sold through underwriters under such registration. In any
such case, the Registering Investors shall be party to any such
underwriting agreement, such agreement shall contain such representations,
warranties and covenants by the Registering Investors and such other terms
and provisions as are customarily contained in underwriting agreements with
respect to secondary distributions, including, without limitation,
indemnities and contribution to the effect provided in Section 7 hereof.
The representations and warranties in such underwriting agreement by, and
the other agreements on the part of, the Company to and for the benefit of
such underwriters, shall also be made to and for the benefit of the
Registering Investors.
SECTION 6. - PREPARATION; REASONABLE INVESTIGATION.
In connection with the preparation and filing of each registration
statement hereunder registering Registrable Securities under the Securities Act,
the Company will give the Registering Investors and the underwriters, if any,
and their respective counsel and accountants (collectively, the "Inspectors"),
such reasonable and customary access to its books and records
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(collectively, the "Records") and such opportunities to discuss the business of
the Company with its officers and the independent accountants who have its
financial statements as shall be necessary, in the opinion of the Registering
Investors and such underwriters or their respective counsel, to conduct a
reasonable investigation within the meaning of the Securities Act. Records which
the Company reasonably determines to be confidential and which it notifies the
Inspectors in writing are confidential shall not be disclosed by the Inspectors.
Each of the Investors agrees that it will, upon learning that disclosure of such
Records is sought in a court of competent jurisdiction, give notice to the
Company.
SECTION 7. - INDEMNIFICATION AND CONTRIBUTION.
(a) Indemnification by the Company. The Company agrees to indemnify
and hold harmless each SA Person who participates as an underwriter, each
of the Registering Investors, each of their respective officers and
directors and each SA Person, if any, who controls any such underwriter or
the Registering Investors within the meaning of Section 15 of the
Securities Act as follows:
(i) against any and all loss, claim, damage and expense
whatsoever, as incurred, arising out of or caused by any untrue
statement or alleged untrue statement of a material fact contained in
any registration statement (or any amendment thereto) pursuant to
which Registrable Securities were registered under the Securities Act,
including all documents incorporated therein by reference, or the
omission or alleged omission therefrom of a material fact required to
be stated therein or necessary to make the statements therein not
misleading or arising out of any untrue statement or alleged untrue
statement or a material fact contained in any prospectus (or any
amendment or supplement thereto) or the omission or alleged omission
therefrom of a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made,
not misleading;
(ii) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, to the extent of the aggregate amount
paid in settlement of any litigation, or investigation or proceeding
by any governmental agency or body, commenced or threatened, or of any
claim whatsoever based upon any such untrue statement or omission, or
any such alleged untrue statement or omission, if such settlement is
effected with the written consent of the Company; and
(iii) against any and all expense whatsoever, as incurred
(including fees and disbursements of one (1) counsel only chosen
collectively by the Registering Investors or by any underwriter),
reasonably incurred in investigating, preparing or defending against
any litigation, or investigation or proceeding by any governmental
agency or body, commenced or threatened, or any claim whatsoever based
upon any such untrue statement or omission, or any such alleged untrue
statement or omission, to the extent that any such expense is not paid
under clause (i) or (ii) above; provided, however, that this indemnity
agreement does not apply to any loss, liability, claim, damage or
expense to the extent arising out of or
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<PAGE>
caused by any untrue statement or omission or alleged untrue statement
or omission made in reliance upon and in conformity with written
information furnished to the Company by the Registering Investors or
any underwriter expressly for use in a registration statement (or any
amendment thereto) or any prospectus (or any amendment or supplement
thereto); and provided further that this indemnity agreement does not
apply to any loss, liability, claim, damage or expense arising out of
or caused by the Registering Investor's continued circulation,
subsequent to the Registering Investor's receipt of the notice
described in Section 5.1(a)(vi) hereof, of a prospectus including the
untrue statement of a material fact or omission of a material fact as
to which such notice was provided.
(b) Indemnification by the Investors. Each of the Registering
Investors agrees to indemnify and hold harmless the Company and any
underwriter, and each of their respective directors and officers (including
each officer of the Company who signed the registration statement), and
each SA Person, if any, who controls the Company or any underwriter within
the meaning of Section 15 of the Securities Act, against any and all loss,
liability, claim, damage and expense described in the indemnity contained
in Section 7a) hereof, as incurred, with respect to untrue statements or
omissions, or alleged untrue statements or omissions, made in the
registration statement (or any amendment thereto) or any prospectus (or any
amendment or supplement thereto) in reliance upon and in conformity with
written information furnished to the Company by such Registering Investor
expressly for use in the registration statement (or any amendment thereto)
or such prospectus (or any amendment or supplement thereto).
(c) Indemnification by Underwriter. Anything in Section 7(a) to the
contrary notwithstanding, the Company's obligation to indemnify any
underwriter pursuant to Section 7(a) in an underwritten offering (or any SA
Person controlling such underwriter within the meaning of Section 15 of the
Securities Act) shall be conditioned upon the underwriting agreement with
such underwriter containing an agreement by such underwriter to indemnify
and hold harmless the Company and the Registering Investors, and each of
their respective directors and officers (including each officer of the
Company who signed the registration statement), and each SA Person if any,
who controls the Company, or the Registering Investors within the meaning
of Section 15 of the Securities Act, against any and all loss, liability,
claim, damage and expense described in the indemnity contained in Section
7(a) hereof, as incurred, with respect to untrue statements or omissions,
or alleged untrue statements or omissions, made in the registration
statement (or any amendment thereto) or any prospectus (or any amendment or
supplement thereto) in reliance upon and in conformity with written
information furnished to the Company by such underwriter expressly for use
in the registration statement (or any amendment thereto) or such prospectus
(or any amendment or supplement thereto).
(d) Conduct of Indemnification Proceedings. Each indemnified party
shall give prompt notice to each indemnifying party of any action commenced
against it in respect of which indemnity may be sought hereunder, but
failure so to notify an indemnifying party shall not relieve it from any
liability which it may have otherwise than on account of this indemnity
agreement. An indemnifying party may, at its own expense, participate in
and
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<PAGE>
direct the defense of such action. In no event shall the indemnifying
parties be liable for the fees and expenses of more than one counsel for
all indemnified parties in connection with any one action or separate but
similar or related actions in the same jurisdiction arising out of the same
general allegations or circumstances.
(e) Contribution. In order to provide for just and equitable
contribution in circumstances in which the indemnity agreement provided for
in this Section 7 is for any reason held to be unenforceable although
applicable in accordance with its terms, the Company, the Registering
Investors and any underwriter shall contribute to the aggregate losses,
liabilities, claims, damages and expenses of the nature contemplated by
such indemnity agreement incurred by the Company, the Registering Investors
and any underwriter, in such proportions that the underwriters are
responsible for that portion represented by the percentage that the
underwriting discount appearing on the cover page of the prospectus bears
to the initial public offering price appearing thereon and the Company and
the Registering Investors are responsible for the balance; provided,
however, that no SA Person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any SA Person who was not guilty of such fraudulent
misrepresentation, and provided further that as between the Company and the
respective Registering Investors, such parties shall contribute to the
aggregate losses, liabilities, claims, damages and expenses of the nature
contemplated by such indemnity agreement in such proportion as shall be
appropriate to reflect (i) the relative benefits received by the Company,
on the one hand, and the respective Registering Investors on the other
hand, from the offering of the Registrable Securities and any other
securities included in such offering, and (ii) the relative fault of the
Company, on the one hand, and the respective Registering Investors, on the
other, with respect to the statements or omissions which resulted in such
loss, liability, claim, damage or expense, or action in respect thereof, as
well as any other relevant equitable considerations. The relative benefits
received by the Company, on the one hand, and the respective Registering
Investors on the other, with respect to such offering shall be deemed to be
in the same proportion as the sum of the total purchase price paid to the
Company by the Registering Investors in respect of the Registrable
Securities plus the total net proceeds from the offering of any securities
included in such offering (before deducting expenses) received by the
Company bears to the amount by which the total net proceeds from the
offering of Registrable Securities (before deducting expenses) received by
the Investors with respect to such offering exceeds the purchase price paid
to the Company in respect of the Registrable Securities, and in each case
the net proceeds received from such offering shall be determined as set
forth on the table to the cover page of the prospectus. The relative fault
shall be determined by reference to, among other things, whether the untrue
or alleged untrue statement of a material fact or omission or alleged
omission to state a material fact relates to information supplied by the
Company or the Registering Investors, the intent of the parties and their
relative knowledge, access to information and opportunity to correct or
prevent such statement or omission. Each of the Company and the Investors
agrees that it would not be just and equitable if contribution pursuant to
this Section 7 were to be determined by pro rata allocation or by any other
method of allocation which does not take into account the equitable
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<PAGE>
considerations referred herein. For purposes of this Section 7, each SA
Person, if any, who controls Registering Investors or an underwriter within
the meaning of Section 15 of the Securities Act shall have the same rights
to contribution as Registering Investors or such underwriter, and each
director of the Company, each officer of the Company who signed the
registration statement, and each Person, if any, who controls the Company
within the meaning of Section 15 of the Securities Act shall have the same
rights to contribution as the Company.
SECTION 8. - PERMITTED ASSIGNMENT.
An Investor may assign rights hereunder in connection with any sale of
Company Shares, CTEK Shares and/or Exchange Shares which is consistent with the
restrictions and representations contained in the U.S. Subscription Agreement,
the Stock Exchange Agreement and the Shareholders Agreement, provided that such
assignee shall have agreed in writing, satisfactory in form and substance to the
Company and its counsel, to be bound hereby. From and after any such assignment
pursuant to this Section 8, reference herein to the Investors shall include such
permitted assignee or assignee.
SECTION 9. - MISCELLANEOUS.
9.1 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.
9.2 Further Assurances. 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.
9.3 Successors and Assigns. The provisions hereof shall inure to the
benefit of and be binding upon the parties hereto and their respective
successors, assigns, heirs, executors and administrators. The parties hereto
hereby confirm that each transferee of any CTEK Shares shall benefit from the
Registration Rights contemplated in this Agreement provided that the transfer of
such CTEK Shares was made in conformity with the Shareholders Agreement and this
Agreement.
9.4 Arbitration. All disputes or controversies between the parties in
respect of the validity, interpretation or performance of the provisions of this
Agreement shall be definitive 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.
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.
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<PAGE>
9.5 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 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
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) 383-2505
with a copy to: Senior Vice President, Investments
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<PAGE>
if to FR: FONDS REGIONAL DE SOLIDARITE ILE DE MONTREAL
255 St. Jacques Street West
3rd Floor
Montreal, Quebec
H2Y 1M6
Attention:
Telecopier:
if to the Company: COMPOSITECH LTD.
120 Ricefield Lane
Hauppauge, New York 11788-2008
Attention: Executive Vice President & Treasurer
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. Claude Bergeron
Telecopier: (517) 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
others 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 my telecopier shall be forwarded to the other parties by
registered mail, receipt return requested.
9.6 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.
9.7 Entire Agreement: Amendment. This Agreement and the other documents
delivered pursuant hereto constitutes the full and entire understanding and
agreement between the parties with regard to the subjects hereof, 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 as
otherwise provided for herein. Except as expressly provided herein, neither this
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Agreement nor any term hereof may be amended, other than by a written instrument
signed by all the parties hereto.
9.8 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.
9.9 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.
9.10 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 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.
9.11 Preamble. The preamble hereof shall form an integral part of this
Agreement.
9.12 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.
9.13 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.
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: Per: /s/Richard Bourget
------------------------------ ------------------------------
Richard Bourget,
Senior Vice President, Investments
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SOCIETE INNOVATECH DU GRAND FONDS REGIONAL DE SOLIDARITE
MONTREAL ILE DE MONTREAL, by its general
partner, Gestion du Fonds Regional
de Solidarite Ile de Montreal Inc.
Per: Per:
------------------------------ ------------------------------
COMPOSITECH LTD.
Per:
------------------------------
Name:
Title:
SUBSCRIPTION AGREEMENT MADE AND ENTERED INTO IN THE CITY AND DISTRICT OF
MONTREAL, ON THE 16TH DAY OF OCTOBER, 1997
BY AND BETWEEN: 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
"Compositech")
PARTY OF THE FIRST PART
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 SECOND PART
SECTION 1 - PREAMBLE
1.1 WHEREAS Compositech 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, the Investors
entered into a Subscription Agreement with the Corporation (the "Investors'
Subscription Agreement") providing for the subscription by the Investors for
shares from the treasury of the Corporation.
NOW, THEREFORE, THIS AGREEMENT WITNESSETH:
SECTION 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",
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"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;
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 Shares" shall have the meaning ascribed thereto in
subsection 3.1;
2.1.6 "dollar", "dollars" and the sign "$" shall, unless otherwise indicated,
each mean lawful money of Canada;
2.1.7 "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;
2.1.8 "Investors" shall mean Societe Innovatech du Grand Montreal, Industries
Devma Inc., Fonds de Solidarite des Travailleurs du Quebec (F.T.Q.) and
Fonds Regional de Solidarite Ile de Montreal collectively and "Investor"
shall mean any of them;
2.1.9 "Investors' Subscription Agreement" shall have the meaning ascribed
thereto in subsection 1.2;
2.1.10 "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;
2.1.11 "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
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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;
2.1.12 "Shareholders Agreement" shall mean the Shareholders Agreement of even
date among the parties hereto and the Investors, setting forth the terms
and conditions which will govern the relationship of Compositech and the
Investors as shareholders of the Corporation.
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.
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.
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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.
SECTION 3 - SUBSCRIPTIONS
3.1 Compositech subscription. Compositech hereby subscribes for one million
sixty-six thousand one hundred ninety two (1,066,192) Class B Common Shares
(collectively the "Compositech Shares") of the Corporation's share capital at
the aggregate subscription price of seven million five hundred thousand dollars
($ 7,500,000). The Corporation hereby accepts the subscription of Compositech
for the Compositech Shares subject to the terms and conditions contained herein.
3.2 Payment and Issue of Compositech Shares. Compositech 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 the aggregate
subscription price set forth in subsection 3.1, issue the Compositech Shares to
Compositech and deliver share certificates representing same.
SECTION 4 - REPRESENTATIONS AND WARRANTIES
4.1 Representations and Warranties of Compositech. Compositech hereby represents
and warrants to the Corporation and acknowledges and confirms that the
Corporation is 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 Compositech is duly incorporated, validly existing and in good standing
under the laws of its jurisdiction of incorporation;
4.1.2 Compositech has the necessary corporate power and authority to execute
this Agreement and to perform its obligations hereunder. The execution
of this Agreement by Compositech and the performance by Compositech 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 Compositech is subject;
4.1.3 the execution of this Agreement, the consummation of the transactions
contemplated herein, the performance by Compositech 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 or by-laws of Compositech;
4.1.3.2 violate, contravene or breach, or constitute a default under any
contract, agreement, indenture, instruments, or commitment to which
Compositech 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 Compositech is
subject;
4.1.4 neither Compositech 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 Compositech and acknowledges and confirms
that Compositech is 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:
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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 Investors'
Subscription Agreement and the repurchase of one (1) Class B Common
Share held by Compositech and one (1) Class B Common Share held by Fonds
de Solidarite des Travailleurs du Quebec (F.T.Q.), the only shares of
the Corporation which will be issued and outstanding will be the Devma
Shares, the Innovatech Shares, the FSTQ Shares and the Fonds Shares (as
such terms are defined in the Investor's Subscription Agreement) and the
Compositech Shares 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 Investors' 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 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, under or pursuant to this Agreement
or any other document or certificate delivered in connection therewith shall
survive the date hereof.
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SECTION 5 - INDEMNIFICATION
5.1 Definitions. As used in this Section 5:
5.1.1 "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 5.2 or 5.3
hereof;
5.1.2 "Direct Claim" means any Claim by an Indemnified Party against an
Indemnifying Party which does not result from a Third Party Claim;
5.1.3 "Indemnifying Party" means any party obligated to provide
indemnification under this Agreement;
5.1.4 "Indemnified Party" means any party entitled to indemnification under
this Agreement;
5.1.5 "Indemnity Payment" means the aggregate amount of each Loss required to
be paid pursuant to subsection 5.2 or the amount of each Loss required
to be paid pursuant to subsection 5.3 hereof;
5.1.6 "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
5.1.7 "Third Party Claim" means any Claim asserted against an Indemnified
Party by any Person who is not a party to this Agreement.
5.2 Indemnification by the Corporation. The Corporation hereby agrees to
indemnify and save and hold harmless Compositech from and against any Loss
suffered or incurred, directly or indirectly, by Compositech as a result of,
arising out of or relating to:
5.2.1 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 Compositech 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
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5.2.2 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 Compositech 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.
5.3 Indemnification by Compositech. Compositech hereby agrees to 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:
5.3.1 any violation, contravention or breach of any covenant, agreement or
obligation of Compositech under or pursuant to this Agreement or any
other document or certificate delivered to the Corporation by or on
behalf of Compositech in connection therewith, as well as any Claim by
any Person containing allegations which, if true, would constitute such
an event; and
5.3.2 any incorrectness in, or breach of, any representation or warranty made
by Compositech 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 Compositech in connection therewith, as well as any
Claim by any Person containing allegations which, if true, would
constitute such an event.
5.4 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.
5.5 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 5, 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 5.
5.6 Defense of Third Party Claims. The Indemnifying Party shall have the right,
after receipt of the Indemnified Party's notice under subsection 5.5 hereof with
respect to a Third
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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:
5.6.1 the Indemnified Party shall at all times have the right to fully
participate in the defense at its own expense;
5.6.2 the Third Party Claim seeks only monetary damages and does not seek any
injunctive or other relief against the Indemnified Party;
5.6.3 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;
5.6.4 legal counsel chosen by the Indemnifying Party is satisfactory to the
Indemnified Party, acting reasonably; and
5.6.5 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.
5.7 Waiver of Right to Defend Third Party Claims. If the Indemnifying Party
fails:
5.7.1 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 5.6 hereof, or
5.7.2 to comply at any time with any of subsections 5.6.1 through 5.6.5
(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.
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5.8 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 5.5 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.
5.9 Right of Offset. Without in any way limiting the terms of this Section 5,
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.
5.10 Cumulative Rights. The rights, recourses and remedies provided to an
Indemnified Party under this Section 5 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.
SECTION 6 - GENERAL PROVISIONS
6.1 Further documents. Each party upon the request of the other, 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.
6.2 Default Interest. Subject to the provisions of subsection 5.4 hereof, if any
party fails to pay to the 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.
6.3 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.
6.4 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
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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 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 the arbitration shall be borne
in the manner provided for in the arbitration award.
6.5 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 Compositech: COMPOSITECH LTD.
120 Ricefield Lane
Hauppauge, New York
11788-2008, U.S.A.
Attention: the President
Telecopier: (516) 436-5203
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
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
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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 a party may have previously indicated to the other
party 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.
6.6 Time of the essence. Time shall be of the essence in this Agreement.
6.7 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.
6.8 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.
COMPOSITECH LTD. LAMINES CTEK INC.
Per: /s/Jonas Medney Per: /s/Louis Riopel
----------------------- ---------------------
Jonas Medney Louis Riopel
SHAREHOLDERS AGREEMENT
ENTERED INTO ON OCTOBER 16, 1997
AMONG THE SHAREHOLDERS OF LAMINES CTEK INC.
<PAGE>
TABLE OF CONTENTS
SECTION PAGE
SECTION 1 - PREAMBLE........................................................ 2
SECTION 2 - INTERPRETATION.................................................. 3
2.1 Definitions.................................................. 3
2.2 Fonds........................................................ 12
2.3 Gender....................................................... 13
2.4 Headings..................................................... 13
2.5 Severability................................................. 13
2.6 Entire Agreement............................................. 13
2.7 Amendments................................................... 13
2.8 Waiver....................................................... 13
2.9 Delays....................................................... 13
2.10 Conflict..................................................... 13
2.11 Preamble..................................................... 13
2.12 Governing Law................................................ 13
SECTION 3 - COMMISSIONS, FEES, ETC.......................................... 14
3.1 Commissions.................................................. 14
SECTION 4 - OPERATIONS OF THE CORPORATION................................... 14
4.1 Business of the Corporation.................................. 14
SECTION 5 - BOOKS OF ACCOUNT................................................ 14
5.1 Books of account............................................. 14
SECTION 6 - DIRECTORS....................................................... 14
6.1 Board and Quorum............................................. 14
6.2 Changes in the Board and Quorum.............................. 14
6.3 Further changes in the Board and Quorum...................... 15
6.4 Designation of nominees...................................... 15
6.5 Absence of quorum............................................ 15
6.6 Replacement of a director.................................... 16
6.7 Voting by nominees........................................... 16
6.8 Directors and Officers Insurance............................. 16
6.9 Meeting of the Board......................................... 16
6.10 Matrix....................................................... 16
6.11 Executive Committee.......................................... 16
6.12 Dividends.................................................... 17
6.13 Fiscal Year.................................................. 17
6.14 Proceeding instituted against the Corporation................ 17
6.15 Conflict of Interest......................................... 17
SECTION 7 - OFFICERS........................................................ 18
7.1 Officers..................................................... 18
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SECTION 8 - ADOPTION OF BY-LAWS............................................. 18
8.1 Adoption of a By-law......................................... 18
8.2 Casting vote................................................. 18
8.3 Unanimous Shareholders Approval.............................. 18
8.4 Matters Requiring Unanimous Shareholders Approval............ 18
8.5 Matter Requiring Investors Approval.......................... 20
8.6 Transfer of principal office of the Corporation.............. 20
8.7 Board or Shareholders unable to reach a decision............. 20
SECTION 9 - BANKERS AND BANKING ARRANGEMENTS................................ 21
9.1 Bankers...................................................... 21
9.2 Signatories.................................................. 21
9.3 Guarantees................................................... 21
SECTION 10 - AUDITORS OF THE CORPORATION.................................... 21
10.1 Auditors..................................................... 21
SECTION 11 - ADDITIONAL FUNDS TO COMPLETE PROJECT........................... 21
11.1 Issuance of Common Shares.................................... 21
11.2 Notice to Shareholders....................................... 21
11.3 Non-Subscribing Investors.................................... 22
11.4 Failure to notify............................................ 22
11.5 Option deemed exercised...................................... 22
11.6 Additional right............................................. 23
11.7 Compositech's option......................................... 23
11.8 Failure to notify............................................ 23
11.9 Compositech Non-Subscribing Shareholder...................... 23
11.10 Failure to notify............................................ 24
11.11 Option deemed exercised...................................... 24
11.12 Additional right............................................. 24
11.13 Sale to any Person........................................... 24
11.14 Proportion among Investors................................... 25
11.15 Closing...................................................... 26
11.16 Rights attached to the Common Shares......................... 26
SECTION 12 - ADDITIONAL FUNDS TO CONTINUE THE OPERATIONS.................... 26
12.1 Additional Investment........................................ 26
12.2 Notice to Shareholders....................................... 27
12.3 Non-Contributing Investors................................... 27
12.4 Non-Contributing Investor.................................... 27
12.5 Shareholders Rights.......................................... 28
12.6 Notice for the Remaining Additional Investment Funds......... 28
12.7 Sale to any Person........................................... 28
12.8 Special Circumstance......................................... 29
12.9 Conversion of Additional Investment.......................... 29
12.10 Proportion among Investors................................... 30
12.11 Closing...................................................... 30
12.12 Rights attached to the Class B Common Shares................. 30
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SECTION 13 - PREEMPTIVE RIGHT............................................... 30
13.1 Issuance of Common Shares.................................... 30
13.2 Notice to Shareholders....................................... 31
13.3 Declining Investors.......................................... 31
13.4 Declining Investor........................................... 31
13.5 Shareholders Rights.......................................... 32
13.6 Notice for Unaccepted Additional Shares...................... 32
13.7 Sale to any Person........................................... 33
13.8 Closing...................................................... 33
13.9 Proportion among Investors................................... 34
13.10 Rights attached to the Additional Shares..................... 34
SECTION 14 - ALIENATION OF SHARES........................................... 34
14.1 Alienation prohibited........................................ 34
14.2 Transfer to Permitted Transferee by Compositech.............. 34
14.3 Transfers between Investors and to Permitted Transferee...... 35
SECTION 15 - RIGHTS OF FIRST REFUSAL AND PIGGY BACK......................... 35
15.1 Exchange by Investors........................................ 35
15.2 Investors receiving an offer................................. 36
15.3 Investors making an offer.................................... 37
15.4 Compositech receiving an offer............................... 38
15.5 Compositech making an offer.................................. 39
15.6 Procedure for Offers......................................... 40
15.7 Validity of Offer and Closing provisions..................... 41
15.8 Piggy Back - Investors....................................... 44
15.9 Corporation's obligations.................................... 45
15.10 Offers irrevocable........................................... 45
15.11 Share Certificates........................................... 45
SECTION 16 - EXCHANGE RIGHTS................................................ 45
16.1 Exchange rights.............................................. 45
SECTION 17 - OPTION TO SELL................................................. 45
17.1 Termination of License Agreement or Sales Agency and
Marketing Agreement.......................................... 45
17.2 Notice to Compositech........................................ 45
17.3 Closing...................................................... 46
SECTION 18 - FORCED SALE OF THE CORPORATION................................. 46
18.1 Termination of Sales Agency and Marketing Agreement.......... 46
18.2 Delays for the forced sale................................... 46
18.3 Closing...................................................... 47
18.4 Validity of Offer............................................ 47
SECTION 19 - REIMBURSEMENT OF LOANS......................................... 47
19.1 Reimbursement of loans....................................... 47
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SECTION 20 - FORCED LIQUIDATION............................................. 47
20.1 Unusual Event................................................ 47
20.2 Right to Liquidate........................................... 49
20.3 Additional Right to Liquidate................................ 49
20.4 Sale of shares of Compositech Common Stock................... 49
20.5 Failure of Investors to notify............................... 50
20.6 Deemed Consent............................................... 50
SECTION 21 - CONFIDENTIALITY................................................ 51
21.1 Confidentiality.............................................. 51
21.2 Disclosure required.......................................... 51
21.3 Reasonableness of Covenants.................................. 51
SECTION 22 - FINANCIAL INFORMATION AND COVENANTS OF THE
CORPORATION.................................................... 52
22.1 Financial Information........................................ 52
22.2 Inspection by Shareholders................................... 53
22.3 Compliance by Corporation.................................... 53
22.4 Insurance.................................................... 53
SECTION 23 - NOTICES........................................................ 53
23.1 Notices...................................................... 53
SECTION 24 - ARBITRATION.................................................... 56
24.1 Arbitration.................................................. 56
SECTION 25 - MISCELLANEOUS PROVISIONS....................................... 56
25.1 Press release................................................ 56
25.2 Further documents............................................ 56
25.3 Successors and assigns....................................... 56
25.4 Transfer contrary to this Agreement.......................... 56
25.5 Time of the essence.......................................... 56
25.6 Counterpart.................................................. 56
25.7 Originals.................................................... 57
25.8 Termination of Agreement..................................... 57
25.9 Language..................................................... 57
SCHEDULE 6.10 - MATRIX
SCHEDULE 25.6 - COUNTERPART
<PAGE>
SHAREHOLDERS 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 "Compositech")
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 "FSTQ")
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 "Fonds Regional")
PARTY OF THE FIFTH PART
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 SIXTH PART
SECTION 1 - PREAMBLE
1.1 WHEREAS the Corporation was incorporated pursuant to the CBCA by Certificate
and Articles of Incorporation dated February 18, 1997 which were amended on
October 15, 1997 in order to establish and operate a plant in the Montreal area
for the production of laminates (which are patented by Compositech) for printed
wiring boards and other uses, based on a process patented by Compositech and
using equipment patented by Compositech and in order to manufacture at such
plant and market such laminates and all improvements thereon throughout the
world, with a particular focus on the North American market, subject to the
terms of the License Agreement (as hereinafter defined);
1.2 WHEREAS contemporaneously with the signing of this Agreement, other
agreements related to this Agreement have been signed by some or all of the
parties hereto;
1.3 WHEREAS the Corporation will be based in the Montreal area;
1.4 WHEREAS the Corporation's activities will be conducted in the Montreal area;
1.5 WHEREAS pursuant to the Subscription Agreement and the Compositech
Subscription Agreement, each of the Shareholders holds the following number and
class of Shares as of the date hereof:
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Shareholder Number and Class
----------- ----------------
Compositech 1 066 192 Class B Common Shares
Innovatech 177 700 Class A Common Shares
Devma 177 700 Class A Common Shares
FSTQ 639 714 Class A Common Shares
Fonds Regional 71 078 Class A Common Shares
1.6 WHEREAS the parties hereto wish to determine their respective rights, duties
and obligations in and to the Corporation and towards one another.
NOW, THEREFORE, THIS AGREEMENT WITNESSETH:
SECTION 2 - INTERPRETATION
2.1 Definitions. In this Agreement:
2.1.1 "Accepting Investor" has the meaning ascribed thereto at subsection
13.3;
2.1.2 "Accepting Investors" has the meaning ascribed thereto at subsection
13.4;
2.1.3 "Accepting Offeree Shareholders" has the meaning ascribed thereto at
subsection 15.6.2;
2.1.4 "Additional Common Shares" has the meaning ascribed thereto at
subsection 11.1;
2.1.5 "Additional Investment" has the meaning ascribed thereto at
subsection 12.1;
2.1.6 "Additional Offer" has the meaning ascribed thereto at subsection
15.6.2;
2.1.7 "Additional Shares" has the meaning ascribed thereto at subsection
13.1;
2.1.8 "Affiliate" or "Affiliated" has the meaning ascribed thereto in the
CBCA;
2.1.9 "Agreement" shall mean this Shareholders 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;
2.1.10 "Arm's Length" shall mean, in respect of any Person, a relationship
between such Person and any particular Person which would be an arm's
length
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relationship between such Person and the particular Person within the
meaning of the Income Tax Act (Canada);
2.1.11 "Articles of Incorporation" shall mean the Articles of Incorporation
of the Corporation dated February 18, 1997, as amended by Certificate
of Amendment dated October 15, 1997;
2.1.12 "Auditors" shall mean such firm of chartered accountants as may be
agreed upon from time to time by the Shareholders to act as auditors
for the Corporation;
2.1.13 "Board" shall mean the Board of Directors of the Corporation;
2.1.14 "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;
2.1.15 "Buyer" has the meaning ascribed thereto at subsection 18.1.1;
2.1.16 "By-Law" has the meaning ascribed thereto at subsection 8.1;
2.1.17 "CBCA" shall mean the Canadian Business Corporations Act;
2.1.18 "Class A Common Shares" shall mean the voting and participating class
A common shares in the capital stock of the Corporation;
2.1.19 "Class B Common Shares" shall mean the voting and participating class
B common shares in the capital stock of the Corporation;
2.1.20 "Closing" shall mean the sale of the Offered Shares by the Offering
Shareholder pursuant to subsection 15.7;
2.1.21 "Closing Date" shall mean, pursuant to subsections 15.2, 15.3, 15.4
and 15.5 the date which is ninety (90) days, and pursuant to
subsection 15.1, the date which is fifteen (15) days, after the expiry
of the last offer period described therein in which the Purchaser
agrees to purchase the Offered Shares, provided, however, that if on
the Closing Date all Governmental Body and third party approvals,
consents, notifications and assurances (including, without limitation,
approvals under the Investment Canada Act) necessary to permit the
consummation of the transactions contemplated by the Closing have been
<PAGE>
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applied for but not yet received by the Purchaser, then the Closing
Date shall be postponed to the thirtieth (30th) day after the receipt
by the Purchaser of the last of the aforesaid approvals, consents,
notifications and assurances; notwithstanding the foregoing, the
Closing shall not be extended more than one hundred and eighty (180)
days after the date which was supposed to have been the original
Closing Date herein;
2.1.22 "Common Shares" shall mean Class A Common Shares and Class B Common
Shares collectively;
2.1.23 "Compositech Common Stock" shall mean shares of the common stock of
Compositech;
2.1.24 "Compositech Initial Subscription Price" shall mean $7.03438 per share
of Compositech Common Stock;
2.1.25 "Compositech Offer" has the meaning ascribed thereto at subsection
15.5;
2.1.26 "Compositech Subscription Agreement" shall mean the subscription
agreement dated the date hereof between the Corporation and
Compositech setting forth inter alia the rights and obligations of
Compositech with respect to its subscription for Class B Common
Shares;
2.1.27 "Confidential Information" shall mean all information howsoever
received or obtained by the Shareholder from or through the
Corporation before or after the date hereof which the Corporation
identifies in writing as being confidential or proprietary at the time
of disclosure or within ten (10) days thereafter; provided, however,
that the phrase "Confidential Information" shall not include
information which:
2.1.27.1 is in the public domain through no fault of the
Shareholder or any of its former or current directors,
officers or employees,
2.1.27.2 is properly within the legitimate possession of the
Shareholder prior to its disclosure hereunder and without
any obligation of confidence,
2.1.27.3 after disclosure, is lawfully received by the
Shareholder from another Person who is lawfully in
possession of such Confidential Information and such other
Person was not restricted from disclosing the information to
the Shareholder,
2.1.27.4 is independently developed by the Shareholder
through Persons who have not had access to, or knowledge of,
the Confidential Information, or
2.1.27.5 is approved by the Corporation in writing for
disclosure prior to its disclosure;
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2.1.28 "Contesting Notice" has the meaning ascribed thereto at subsection
20.2 or 20.3, as the case may be;
2.1.29 "Contributing Investor" has the meaning ascribed thereto at subsection
12.3;
2.1.30 "Contributing Investors" has the meaning ascribed thereto at
subsection 12.4;
2.1.31 "Declining Investor" has the meaning ascribed thereto at subsection
13.4;
2.1.32 "Declining Investors" has the meaning ascribed thereto at subsection
13.3;
2.1.33 "Declining Investor's Shares" has the meaning ascribed thereto at
subsection 13.4;
2.1.34 "Declining Investors' Shares" has the meaning ascribed thereto at
subsection 13.3;
2.1.35 "Deemed Proportion" shall mean a fraction, the numerator of which shall
be 355 397 Class A Shares plus the number of Common Shares issued after
the date hereof to the particular Investor to whom reference is made
and the denominator of which shall be the total of the Common Shares
owned by all the Shareholders;
2.1.36 "Dispute" shall mean, for the purposes of subsections 6.14 and 6.15
hereof, any dispute or controversy between the Corporation and any
Shareholder relating to any matter arising out of or connected with
the rights and obligations of any Shareholders vis-a-vis the
Corporation or the Corporation vis-a-vis any Shareholder under any
Material Agreement;
2.1.37 "Entity" shall mean either the Investors collectively (the Investors
being considered as one party) or Compositech and "Entities" shall
mean both of them;
2.1.38 "Exchange Offer" has the meaning ascribed thereto at subsection 15.1;
2.1.39 "Exercising Subscribing Investor" has the meaning ascribed thereto at
subsection 11.6;
2.1.40 "Exercising Subscribing Investor's" has the meaning ascribed thereto
at subsection 11.12;
2.1.41 "Fair Market Value" shall mean the fair market value per Common Share
agreed upon by the Shareholders as of the date specified for each
circumstance. If no such value has been agreed upon in writing among
the Shareholders within ten (10) days after the date specified for
each circumstance, any Shareholder may appoint the Auditors to
determine the fair market value per Common Share as of the date
specified for each circumstance, being understood that the Auditors
shall appoint a certified evaluator from within its firm. The
determination of value by the Auditors shall be final and binding on
all
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the Shareholders and the Corporation without right of appeal and they
shall make such determination within ten (10) days of their
appointment by a Shareholder. In determining the fair market value per
Common Share, the fact that the Common Shares to be evaluated may
represent a majority or minority interest in the Corporation will not
be taken into consideration by the Auditors. The fees and expenses of
the Auditors and any counsel or expert retained shall be borne by the
Corporation;
2.1.42 "Final Accepting Investor" has the meaning ascribed thereto at
subsection 13.4;
2.1.43 "Final Contributing Investor" has the meaning ascribed thereto at
subsection 12.4;
2.1.44 "Final Declining Investor" has the meaning ascribed thereto at
subsection 13.4;
2.1.45 "Final Declining Investor's Shares" has the meaning ascribed thereto
at subsection 13.4;
2.1.46 "Final Non-Contributing Investor" has the meaning ascribed thereto at
subsection 12.4;
2.1.47 "Final Non-Contributing Investor's Proportion" has the meaning
ascribed thereto at subsection 12.4;
2.1.48 "Financing" shall mean any financing on substantially the same terms
and conditions as set forth in the bank term letter dated April 4,
1997 from Banque Nationale du Canada which term was extended and in
the Entente Auxiliaire Canada-Quebec sur le developpement industriel
(1991) pursuant to a letter agreement dated April 22, 1997 and
accepted by the Corporation on May 19, 1997;
2.1.49 "First Offer" has the meaning ascribed thereto at subsection 15.6.1;
2.1.50 "Fonds" shall mean FSTQ and Fonds Regional collectively;
2.1.51 "Force Majeure" shall mean inevitable accidents, perils of navigation,
floods, fire, storms, epidemics, acts of God, earthquake, explosion,
hostilities, civil commotion, war (declared or undeclared), orders,
requisitions, regulations or acts of any government or governmental
authority, whether de jure or de facto or any official purporting to
act under the authority of any such government, illegality arising
from domestic or foreign laws or regulations, insurrections, failure
or slowdown of public utilities or common carriers, inability to
procure raw materials or other circumstances or conditions of a
similar nature, quarantine or custom restrictions, strikes, lockouts
or any other labour difficulty from staff or other members of
personnel of a party and/or its suppliers of goods and/or raw
materials;
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2.1.52 "Governmental Body" shall mean (i) any domestic or foreign national,
federal, provincial, state 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;
2.1.53 "Initial Subscription Price" shall mean $7.03438 per Common Share;
2.1.54 "Intellectual Property" has the meaning ascribed thereto in the
License Agreement;
2.1.55 "Investor Offer" has the meaning ascribed thereto at subsection 15.3;
2.1.56 "Investors" shall mean Innovatech, Devma and Fonds (FSTQ and Fonds
Regional collectively) and all transferees of Shares of Innovatech,
Devma or Fonds (FSTQ and Fonds Regional collectively) and all
transferees of Shares of such transferees, and "Investor" shall mean
any one of them;
2.1.57 "Involved Party" shall mean the Shareholder(s) involved in a Dispute
and in the event of a transfer to a Permitted Transferee, such
Permitted Transferee and the transferor shall be an Involved Party;
2.1.58 "License Agreement" shall mean that certain technology licensing
agreement entered into between Compositech and the Corporation on the
date hereof by which Compositech licenses and/or sub-licenses to the
Corporation the Intellectual Property and the Technology;
2.1.59 "Limited Partnership" has the meaning ascribed thereto at subsection
14.3;
2.1.60 "Liquidating Entity" has the meaning ascribed thereto at subsection
20.3;
2.1.61 "Material Agreement" shall mean this Agreement and any other agreement
creating obligations between the Corporation and any Shareholder;
2.1.62 "Neutral Party" shall mean the Shareholder(s) who is/are not an
Involved Party;
2.1.63 "New Meeting" has the meaning ascribed thereto at subsection 6.5;
2.1.64 "Non-Contributing Investor" has the meaning ascribed thereto at
subsection 12.4;
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2.1.65 "Non-Contributing Investor's Proportion" has the meaning ascribed
thereto at subsection 12.4;
2.1.66 "Non-Contributing Investors" has the meaning ascribed thereto at
subsection 12.3;
2.1.67 "Non-Contributing Investors' Proportion" has the meaning ascribed
thereto at subsection 12.3;
2.1.68 "Non-Exercising Subscribing Investor" has the meaning ascribed thereto
at subsection 11.6;
2.1.69 "Non-Exercising Subscribing Investor(s)" has the meaning ascribed
thereto at subsection 11.12;
2.1.70 "Non-Liquidating Entity" has the meaning ascribed thereto at
subsection 20.3;
2.1.71 "Non-Subscribing Investor(s)" has the meaning ascribed thereto at
subsection 11.3;
2.1.72 "Non-Subscribing Investor(s) Shares" has the meaning ascribed thereto
at subsection 11.3.1;
2.1.73 "Offer" shall mean for purposes of (i) subsections 15.1, 15.2 and
15.3, each of the offers made by an Investor; and (ii) subsections
15.4 and 15.5 each of the offers made by Compositech;
2.1.74 "Offer to Purchase" has the meaning ascribed thereto at subsection
18.1.1;
2.1.75 "Offered Shares" has the meaning ascribed thereto at subsections
15.1.1, 15.2.1, 15.3.1, 15.4 or 15.5, as the case may be;
2.1.76 "Offeree Shareholders" has the meaning ascribed thereto at subsection
15.6;
2.1.77 "Offering Investor" has the meaning ascribed thereto at subsection
15.1, 15.2 or 15.3, as the case may be;
2.1.78 "Offering Shareholder" has the meaning ascribed thereto at subsection
15.6;
2.1.79 "Other Investors" has the meaning ascribed thereto at subsection
15.1.1, 15.2.1 or 15.3.1 , as the case may be;
2.1.80 "Other Entity" has the meaning ascribed thereto at subsection 18.1.1;
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2.1.81 "Other Shareholders" has the meaning ascribed thereto at subsections
15.2.4, 15.3.4, 15.4.1 or 15.5.1, as the case may be;
2.1.82 "Permitted Transferee" shall, in respect of a Shareholder, mean a
corporation, all of the shares of which are owned by such Shareholder,
both as registered owner and as beneficial owner;
2.1.83 "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;
2.1.84 "Person's Common Shares" has the meaning ascribed thereto at
subsection 12.7;
2.1.85 "Plant" has the meaning ascribed thereto at subsection 4.1;
2.1.86 "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 rate, as adjusted from time to time, on the basis of
the Prime Rate in effect on the first day of each month;
2.1.87 "Prior Offers" has the meaning ascribed thereto at subsection 15.6.2;
2.1.88 "Project" shall mean the construction of a plant in the Montreal
region for the production of laminates for printed wiring boards and
other uses using the Intellectual Property and the Technology and
rendering such plant operational, the whole in accordance with a
budget approved by the Board before the commencing of construction;
2.1.89 "Project Funds" has the meaning ascribed thereto at subsection 11.1;
2.1.90 "Proportion" shall mean a fraction, the numerator of which shall be
the number of Common Shares owned by the particular Shareholder to
whom reference is made and the denominator of which shall be the total
of the Common Shares owned by all the Shareholders;
2.1.91 "Proportionate Amount" shall mean for the purposes of subsection
20.4.2, an amount equal to (a) the lesser of (i) seven million five
hundred thousand canadian dollars ($7,500,000) or (ii) the amount
Compositech should receive upon the distribution of the assets of the
Corporation, times (b) a fraction, the numerator of which is the
number of shares of Compositech Common Stock held by a particular
Investor and the denominator of which is the total amount of shares of
Compositech Common Stock held by all the Investors;
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2.1.92 "Proportionate Share" shall mean for purposes of subsection 15.6, the
amount of the Offered Shares determined by multiplying the number of
Shares offered times a fraction, the numerator of which is the number
of Common Shares held by a particular Offeree Shareholder or Accepting
Offeree Shareholder, as the case may be, entitled to accept an offer
and the denominator of which is the total number of Common Shares held
by all Offeree Shareholders or all Accepting Offeree Shareholders, as
the case may be, entitled to accept the same offer;
2.1.93 "Purchaser" has the meaning ascribed thereto at subsection 15.7.6.1;
2.1.94 "Receiving Entity" has the meaning ascribed thereto at subsection
18.1.1;
2.1.95 "Related" shall mean related as that term is used in the Income Tax
Act (Canada);
2.1.96 "Remaining Additional Investment Funds" has the meaning ascribed
thereto at subsection 12.5;
2.1.97 "Remaining Offered Shares" has the meaning ascribed thereto at
subsection 15.6.2;
2.1.98 "Sales Agency and Marketing Agreement" shall mean the sales agency and
marketing agreement dated the date hereof between the Corporation and
Compositech, as amended from time to time;
2.1.99 "Selling Investor" has the meaning ascribed thereto at subsection
17.1;
2.1.100 "Share(s)" shall mean any share(s) of any class, series or category in
the capital stock of the Corporation;
2.1.101 "Shareholder" shall mean any of the Shareholders;
2.1.102 "Shareholders" shall initially mean Compositech, Innovatech, Devma and
Fonds (FSTQ and Fonds Regional collectively) and the definition shall
be deemed to be modified from time to time to (i) delete Persons who
cease to hold Shares in accordance with the terms of this Agreement,
and (ii) add all Persons who, from time to time, become holders of
Shares and who undertake in writing to be bound by the provisions of
this Agreement;
2.1.103 "Special Circumstance" has the meaning ascribed thereto at subsection
12.8 ;
2.1.104 "Stock Exchange Agreement" shall mean the stock exchange agreement
dated the date hereof among the Investors and Compositech, providing
inter alia for the
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exchange by the Investors of the Shares held by them for Compositech
Common Stock;
2.1.105 "Subscribing Investor(s)" has the meaning ascribed thereto at
subsection 11.3;
2.1.106 "Subscribing Shareholder(s)" has the meaning ascribed thereto at
subsection 11.3;
2.1.107 "Subscription Agreement" shall mean the subscription agreement dated
the date hereof among the Corporation and the Investors setting forth
inter alia the rights and obligations of each of the Investors with
respect to its subscription for Common Shares;
2.1.108 "TP Offer" has the meaning ascribed thereto at subsection 15.2 or
15.4, as the case may be;
2.1.109 "TP Offeror" has the meaning ascribed thereto at subsection 15.2 or
15.4, as the case may be;
2.1.110 "Technical Services Agreement" shall mean the technical services
agreement dated the date hereof between the Corporation and
Compositech;
2.1.111 "Technology" has the meaning ascribed thereto in the License
Agreement;
2.1.112 "Third Party" has the meaning ascribed thereto at subsection 15.3.4 or
15.5.3, as the case may be;
2.1.113 "Unaccepted Additional Shares" has the meaning ascribed thereto at
subsection 13.5;
2.1.114 "Unaccepted Additional Common Shares" has the meaning ascribed thereto
at subsection 11.13;
2.1.115 "Unaccepted Offered Shares" has the meaning ascribed thereto at
subsection 15.2.2 or 15.3.2, as the case may be;
2.1.116 "Unusual Event" has the meaning ascribed thereto at subsection 20.1;
2.2 Fonds. For the purposes of this Agreement, FSTQ and Fonds Regional shall be
considered as one Investor and all rights attached to the Shares held by FSTQ
and Fonds Regional shall be exercised collectively by FSTQ and Fonds Regional as
if one Investor held such Shares. FSTQ shall, at all times, act on behalf of
Fonds Regional and Fonds Regional hereby grants to FSTQ the power of attorney to
vote and sign any resolution and send any notice on its behalf. For purposes of
clarity only and without limiting the foregoing, all notices sent by FSTQ on its
behalf shall also be sent for and on behalf of Fonds Regional and any option
exercised by FSTQ shall also be exercised by Fonds Regional.
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2.3 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.
2.4 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.
2.5 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.
2.6 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.
2.7 Amendments. No amendment of this Agreement shall be binding unless otherwise
expressly provided in an instrument duly executed by the Shareholders and the
Corporation.
2.8 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.
2.9 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.
2.10 Conflict. This Agreement shall override the Schedules annexed hereto to the
extent of any inconsistency. If any conflict should appear between this
Agreement and the Articles, by-laws or resolutions of the Corporation, then the
provisions of this Agreement shall prevail.
2.11 Preamble. The preamble hereof shall form an integral part of this
Agreement.
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2.12 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.
SECTION 3 - COMMISSIONS, FEES, ETC.
3.1 Commissions. No fee, rebate, commission or gain of whatsoever nature shall
be earned by any of the Shareholders as a result of that Shareholder obtaining
financing for or on behalf of the Corporation.
SECTION 4 - OPERATIONS OF THE CORPORATION
4.1 Business of the Corporation. The Corporation shall not carry on any business
other than the establishing and operating of a plant (the "Plant") in the
Montreal area for the production of laminates for printed wiring boards and
other uses, using the Intellectual Property and the Technology and all
improvements thereon and marketing such laminates throughout the world, subject
to the provisions of the other relevant agreements entered into on the date
hereof among all or some of the parties hereto (including the License
Agreement), including all matters necessary or ancillary thereto.
SECTION 5 - BOOKS OF ACCOUNT
5.1 Books of account. Proper and correct books of account and such other books
as may be necessary for the business of the Corporation shall be kept, in which
shall be entered all such transactions as are usually entered and written in
books of account kept by persons engaged in businesses of a similar nature, and
the Shareholders or a chartered accountant appointed by any of them shall have
free access at all times to inspect, examine and copy same.
SECTION 6 - DIRECTORS
6.1 Board and Quorum. So long as each Entity owns fifty percent (50%) of the
issued and outstanding Common Shares, the Shareholders agree to vote their
Shares each and every year at the annual meetings of Shareholders or at any
other meeting of Shareholders at which directors shall be elected or appointed
so as to cause six (6) directors to be elected to the Board, three (3) of which
shall be nominees of Compositech and three (3) of which shall be nominees of the
Investors. The number of nominees that each Investor is entitled to appoint to
the Board shall be determined among the Investors. In such circumstances, a
quorum of a meeting of directors shall be a majority of the elected directors
provided that two (2) directors appointed by Compositech and two (2) directors
appointed by the Investors form part of such quorum, all decisions of the Board
shall require the unanimous approval of all the directors present at a meeting
of the Board at which a quorum was present and all decisions having the object
or purposes set forth in subsection shall be submitted to the Shareholders
pursuant to subsection hereof. In the
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event that the Board is unable to reach a unanimous decision on any matter, such
matter shall be submitted to the Shareholders.
6.2 Changes in the Board and Quorum. At such time as an Entity owns more than
fifty percent (50%) of the issued and outstanding Common Shares and the other
Entity owns less than fifty percent (50%) but at least thirty-three and
one-third percent (33 1/3%) of the issued and outstanding Common Shares, the
Shareholders agree to vote their Shares at a special meeting of the Shareholders
duly convened and to continue to do so each and every year at the annual
meetings of Shareholders or at any other meeting of Shareholders at which
directors shall be elected or appointed so as to cause six (6) directors to be
elected to the Board, four (4) of which shall be nominees of the Entity who owns
more than fifty percent (50%) of the issued and outstanding Common Shares and
two (2) of which shall be nominees of the Entity who owns less than fifty
percent (50%) of the issued and outstanding Common Shares. The number of
nominees that each Investor is entitled to appoint to the Board shall be
determined among the Investors. In such circumstances, a quorum of a meeting of
directors shall be a majority of the elected directors provided that one (1)
director appointed by Compositech and one (1) director appointed by the
Investors form part of such quorum, all decisions of the Board shall require the
approval of a majority of the directors present at a meeting of the Board at
which a quorum was present and all decisions having the object or purposes set
forth in subsection shall be submitted to the Shareholders pursuant to
subsection hereof.
6.3 Further changes in the Board and Quorum. At such time as an Entity owns more
than fifty percent (50%) of the issued and outstanding Common Shares and the
other Entity owns less than thirty-three and one-third percent (33 1/3%) but
owns at least sixteen and two thirds percent (16 2/3%) of the issued and
outstanding Common Shares, the Shareholders agree to vote their Shares at a
special meeting of the Shareholders duly convened and to continue to do so each
and every year at the annual meetings of Shareholders or at any other meeting of
Shareholders at which directors shall be elected or appointed so as to cause six
(6) directors to be elected to the Board, five (5) of which shall be nominees of
the Entity who owns more than fifty percent (50%) of the issued and outstanding
Common Shares and one (1) of which shall be a nominee of the Entity who owns
less than fifty percent (50%) of the issued and outstanding Common Shares. The
number of nominees that each Investor is entitled to appoint to the Board shall
be determined among the Investors. In such circumstances, a quorum of a meeting
of directors shall be a majority of the elected directors provided that one (1)
director appointed by Compositech and one (1) director appointed by the
Investors form part of such quorum and all decisions of the Board shall require
the approval of a majority of the directors present at a meeting of the Board at
which a quorum was present. At such time as one Entity ceases to own at least
sixteen and two thirds percent (16 2/3%) of the Common Shares issued and
outstanding, such Entity shall cease to be entitled to the election of any of
its nominee to the Board.
6.4 Designation of nominees. Each Entity shall advise the other Entity and the
Corporation in writing of the names of the individuals such Entity has
designated as its nominee to the Board as soon as practicable before each
meeting of Shareholders. In the event that any of
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the nominees to the Board of an Investor is not an employee of such Investor or
that any nominees to the Board of Compositech is not an employee of Compositech,
the Corporation shall pay to such nominee a fee and travelling costs for his
attendance at each meeting of the Board. The fees payable to such nominees shall
be determined by the Board.
6.5 Absence of quorum. In the event that a meeting of the Board cannot be held
because quorum was not obtained, a new board meeting may be convened for the
same purposes (the "New Meeting"), upon notice of at least seven (7) Business
Days. The quorum at the New Meeting shall still be the majority of the elected
directors but there shall be no requirement that any directors appointed by any
Shareholder be present at the New Meeting. This exception shall, however, only
be valid for the New Meeting.
6.6 Replacement of a director. In the event that a director(s) nominated by a
Shareholder dies or resigns or a Shareholder wishes to replace its nominee
director(s) on the Board, the Shareholders agree to vote their Shares at a
special meeting of Shareholders duly convened, or to sign any written
resolution, to remove and/or elect such new nominee director(s) as is(are)
designated by the Shareholder whose nominee died, resigned or was replaced. Such
Shareholder shall advise the other Shareholders and the Corporation in writing
of the name(s) of the individual(s) such Shareholder has designated as its new
nominee(s) to the Board as soon as practicable before the meeting of
Shareholders called for such purpose.
6.7 Voting by nominees. Each Shareholder shall at all times carry out and use
its best efforts to cause the Corporation and its nominees on the Board to carry
out the provisions of this Agreement, subject to the fiduciary obligations of
the directors. Each Shareholder shall duly and punctually do, or cause to be
done, all such things, including, without limitation, voting or causing to be
voted all the Shares held by the Shareholder as shall be necessary or desirable
to give effect to this Agreement. In the event any of the directors does not
vote at meetings of the Board in a manner consistent with this Agreement, all of
the Shareholders shall cause a meeting of Shareholders to be held and agree to
vote their Shares either to remove and/or replace such directors or take such
other actions as shall be necessary or desirable to give effect to this
Agreement.
6.8 Directors and Officers Insurance. The Corporation shall as soon as
reasonably practicable but not later than thirty (30) days from the date hereof
take out and thereafter maintain in full force at all times insurance covering
directors and officers liability.
6.9 Meeting of the Board. The parties hereto acknowledge and confirm that there
shall be a minimum of four (4) meetings of the Board in each fiscal year of the
Corporation.
6.10 Matrix. On the date hereof, the parties have agreed on the manner in which
the duties and responsibilities and the decision making process will be
allocated among the Shareholders, the Board, the executive committee, the
President, the general manager and the finance & administration director, all of
which is set forth in the matrix attached hereto as
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Schedule "6.10". However, the provisions of this Agreement shall at all times
supersede the provisions of such matrix in the event of any discrepancies
between this Agreement and the matrix.
6.11 Executive Committee. The Board shall establish an executive committee
consisting of the Chairman and the President. The executive committee will
advise the Board on the matters set forth in the matrix attached hereto as
Schedule "6.10" or shall be responsible for such matters as provided in such
matrix. Members of the executive committee shall be entitled to the
reimbursement of their reasonable travel expenses related thereto.
6.12 Dividends. No dividends shall be declared or paid by the Corporation prior
to the second anniversary of this Agreement. Thereafter, the Board shall declare
and pay dividends only in accordance with a dividend policy to be adopted and
which shall provide that the Corporation's earnings shall be distributed to the
Shareholders each year after having provided for anticipated working capital and
expenditure requirements and after ensuring that any required financial
covenants are met.
6.13 Fiscal Year. The fiscal year of the Corporation shall terminate on December
31 of each year.
6.14 Proceeding instituted against the Corporation. In the event that a
Shareholder institutes an action against the Corporation in connection with a
Dispute, the Neutral Party shall be entitled to cause the Corporation to respond
to and defend such action which it alone, without the Involved Party, determines
is appropriate, and such determination by the Neutral Party will be valid and
binding upon the Corporation notwithstanding any provision herein to the
contrary.
6.15 Conflict of Interest. Notwithstanding any provision of this Agreement, any
decision, action or resolution of the Board to be taken vis-a-vis a Shareholder
relating to (i) an alleged material breach of a Material Agreement including,
without limitation, the sending of a default notice or a letter of demand, the
referral of the matter to a fairness committee or arbitration or the early
termination of such Material Agreement as a consequence of such alleged material
breach, (ii) the renewal or non-renewal of a Material Agreement, or (iii) the
compensation payable by the Corporation to Compositech pursuant to subsection
9.4 of the Sales Agency and Marketing Agreement, shall be taken by the nominees
on the Board appointed by the Shareholders who are not a party to such Material
Agreement. However, in the event that, following such decision, action or
resolution by the Board pursuant to this subsection, the other party to such
Material Agreement submits any Dispute to arbitration pursuant to the
arbitration provisions of such Material Agreement, the Material Agreement in
question shall continue in effect as if the Dispute did not exist and any
consequences of such decision, action or resolution shall be suspended until a
final decision on the merits is rendered by the arbitrator(s). Also, until such
final decision is rendered, the nominees of the Board who took such decision,
action or resolution shall not be entitled to disclose such decision, action or
resolution or any information pertaining thereto to any Person other than to
those who need to know same for purposes of the
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arbitration. A quorum at a meeting of the Board called for such purpose shall be
a majority of the directors of the Board entitled to vote on such decision,
action or resolution as aforesaid and any such decision, action or resolution of
the Board shall be valid provided that it is approved by a majority of the
directors present at such a meeting at which a quorum was present. Without
limiting the generality of the foregoing, for purposes of clarity only, in no
circumstances and notwithstanding any provision hereof, no such decision, action
or resolution shall be made by the Shareholders or be subject to ratification or
approval of the Shareholders.
SECTION 7 - OFFICERS
7.1 Officers. The initial officers of the Corporation shall include a Chairman,
a President and a Secretary, and such other officers as the Board may determine
from time to time. The President of the Corporation shall be its chief executive
officer and shall be responsible for the day-to-day management and operations of
the Corporation in a manner consistent with this Agreement, the Articles of
Incorporation, the by-laws of the Corporation and the operating and capital
budgets, subject, however, to overall supervision of the Board. As long as
Compositech owns at least thirty-three and one-third percent (33 1/3%) of the
issued and outstanding Common Shares, the President shall be a nominee of
Compositech. The Board shall also appoint a Chairman. As long as the Investors
collectively own at least thirty-three and one-third percent (33 1/3%) of the
issued and outstanding Common Shares, the Chairman of the Board shall be a
nominee of the Investors which nominee shall be determined among the Investors.
SECTION 8 - ADOPTION OF BY-LAWS
8.1 Adoption of a By-law. The Shareholders undertake to take whatever steps that
may be necessary to adopt a by-law of the Corporation (the "By-Law") consistent
with this Section and they furthermore undertake that, as long as each Entity
owns at least thirty-three and one-third percent (33 1/3%) of the issued and
outstanding Common Shares, they will not vote their Shares or exercise any
voting rights or otherwise make any decision or take any action in any manner or
capacity whatsoever, for the purpose of amending or repealing such a by-law,
once adopted, unless they do so unanimously. This by-law, once adopted, shall
override, supersede and amend all previous by-laws, resolutions, decisions or
acts of the Corporation inconsistent therewith.
8.2 Casting vote. This by-law shall provide that at no time and at no meeting
whatsoever shall the Chairman or President of the Corporation have any
additional vote or any vote whatsoever in addition to his ordinary vote as
Shareholder or as director, and that, more particularly, neither the Chairman
nor President shall have a casting vote in case of a tie.
8.3 Unanimous Shareholders Approval. The By-Law shall also provide that, as long
as each Entity owns fifty percent (50%) of the issued and outstanding Common
Shares, all resolutions and decisions of the Board and of the Shareholders shall
require unanimity.
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8.4 Matters Requiring Unanimous Shareholders Approval. Without limiting the
generality of the foregoing, the By-Law shall also provide that, as long as each
Entity owns at least thirty-three and one-third percent (33 1/3%) of the issued
and outstanding Common Shares, there shall be no by-law, resolution or act of
the Shareholders, the Board or officers of the Corporation having any of the
following objects or purposes unless favourably voted upon by the Shareholders
unanimously:
8.4.1 an increase or decrease in the number of directors of the Corporation
and members of the executive committee, except as provided for in this
Agreement;
8.4.2 the filing of Articles of Amendment by the Corporation for any purpose
including, without limitation, an increase or decrease or alteration
in the share capital of the Corporation or the filing of Articles of
Amalgamation by the Corporation;
8.4.3 granting or repayment of any loan to any Person, including, without
limitation, Shareholders, directors or officers of the Corporation or
Persons Related or Affiliated to Shareholders, directors or officers
of the Corporation or investing any amount in any such Person;
8.4.4 guaranteeing any obligations of any Person, including, without
limitation, of Shareholders, directors or officers of the Corporation
or Persons Related or Affiliated to Shareholders, directors or
officers of the Corporation;
8.4.5 the sale, issue or allotment of Shares from the treasury of the
Corporation, or the granting of options allowing for the subscription
thereof, except as provided in this Agreement;
8.4.6 the acquisition or disposal by the Corporation of any immoveable
property having, at the time of acquisition, a value of $50,000 or
more or which is material to the business or operations of the
Corporation or of any intellectual property which is material to the
business or operations of the Corporation;
8.4.7 an assignment under the Bankruptcy and Insolvency Act (Canada) or a
proposal made thereunder, or recourse to any other measure designed
for the protection of insolvent debtors pursuant to any other
legislation in connection with insolvency or the judicial or voluntary
winding-up of the Corporation or the liquidation of the business or
assets of the Corporation, except as provided in this Agreement;
8.4.8 the entering into of any loan agreement by the Corporation, or the
granting of any security by the Corporation on any of its movable or
immovable property, except as provided in this Agreement;
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8.4.9 the sale of the whole or a substantial part of the assets of the
Corporation or the granting of an option for same or the merger or
consolidation of the Corporation with or into another entity, except
as provided for in this Agreement;
8.4.10 the conclusion of any partnership or joint venture agreement or the
creation of a subsidiary or acquisition of all or any part of another
business;
8.4.11 the declaration of dividends on any class of Shares by the
Corporation;
8.4.12 the adoption, amendment or repeal of any by-law of the Corporation;
8.4.13 the change in the powers of the directors or members of the executive
committee in general or any one of them in particular or the abolition
of the executive committee as well as any amendment of the matrix
attached hereto as Schedule "6.10";
8.4.14 the approval of the annual operating budget of the Corporation and the
annual capital budget of the Corporation, and any amendments thereto.
Should the Shareholders refuse to approve the operating budget or the
capital budget for a given fiscal year, the Corporation must conduct
its business in conformity with the budgets of the preceding fiscal
year and the Corporation may not incur capital expenses for the fiscal
year then in progress unless the above-mentioned budgets have been
approved in accordance with the present provisions;
8.4.15 the appointment and termination of the President, the Chairman and the
general manager of the Corporation subject to the provisions of this
Agreement, and any decision related to their job description and
changes thereto;
8.4.16 the approval of any requisition for goods or services not included in
the relevant budget or exceeding the relevant budget item by $50,000
or more per occurrence or by $250,000 on a cumulative basis;
8.4.17 the removal or nomination of the Auditors.
8.5 Matter Requiring Investors Approval. Without limiting the generality of the
foregoing, the By-Law shall also provide that, as long as an Investor owns any
Common Shares, there shall be no by-law, resolution or act of the Shareholders,
the Board or officers of the Corporation having the following object or purpose
unless favourably voted upon by all the Investors:
8.5.1 the filing of Articles of Amendment by the Corporation which would
affect the rights of holders of Class A Common Shares in a manner
provided in section 176(1) of the CBCA.
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8.6 Transfer of principal office of the Corporation. Notwithstanding any
provision of this Agreement, so long as one of Innovatech, Fonds Regional or
FSTQ is a Shareholder, any by-law, resolution or act of the Shareholders,
directors or officers of the Corporation having as an objet or purpose the
change or transfer of the principal office of the Corporation outside the island
of Montreal or transfer of all or any part of the business of the Corporation
outside of the island of Montreal shall only be valid if favourably voted upon
at a meeting of the Board, and ratified and confirmed by a resolution of the
holders of all the issued and outstanding Common Shares.
8.7 Board or Shareholders unable to reach a decision. If the Board or the
Shareholders are unable to reach a decision within their respective areas of
competence, the Corporation shall continue to conduct its business and affairs
in accordance with the most recent resolutions of the Board and the Shareholders
and/or the most recent approved annual budget. If the Board or the Shareholders
are unable to reach a decision relating to the annual marketing plan pursuant to
the Sales Agency and Marketing Agreement, the prior year's annual marketing plan
shall be renewed mutatis mutandis.
SECTION 9 - BANKERS AND BANKING ARRANGEMENTS
9.1 Bankers. The bankers of the Corporation shall be such bank or banks as may
be agreed upon from time to time by the Board.
9.2 Signatories. All drafts, cheques and bills of exchange for or on behalf of
the Corporation's bank accounts shall require the signatures of such individuals
as may be agreed upon from time to time by the Board.
9.3 Guarantees. In the event that any lender of the Corporation shall require
the guarantee of the Shareholders, such guarantee shall be provided on a joint
basis and not on a solidary basis, each Shareholder being responsible for his
Proportion.
SECTION 10 - AUDITORS OF THE CORPORATION
10.1 Auditors. The auditors of the Corporation shall be the Auditors.
SECTION 11 - ADDITIONAL FUNDS TO COMPLETE PROJECT
11.1 Issuance of Common Shares. Should the Corporation require additional funds
to complete the Project (the "Project Funds") and should the Corporation be
unable to obtain such funds from its bankers on commercially reasonable terms,
the Shareholders hereby agree to cause the Corporation to raise such funds by
issuing Class B Common Shares (the "Additional Common Shares") from treasury to
the Shareholders in accordance with this Section 11. Such Additional Common
Shares shall be issued at a value per share equal to the lower of i) the Initial
Subscription Price, or ii) the Fair Market Value determined on the date of
receipt by the Shareholders of the notice from the Corporation given pursuant to
subsection 11.2. Each
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Shareholder shall have the right to subscribe for its Proportion of the
Additional Common Shares in accordance with this Section 11.
11.2 Notice to Shareholders. If the Corporation decides to issue any Additional
Common Shares pursuant to subsection 11.1, the Corporation shall give detailed
notice thereof to each Shareholder. Each Investor may assign to the other
Investors all or a portion of its right to subscribe for its Proportion of the
Additional Common Shares. Each Shareholder shall have forty-five (45) days from
the receipt of such notice within which to notify the Corporation and the other
Shareholders of its intent to exercise its right under subsections 11.1 and 11.2
in connection with such issue of Additional Common Shares. If a Shareholder
fails to so notify the Corporation or any other Shareholder within the
prescribed delay, then such Shareholder shall be conclusively deemed to have
waived its right in connection with such issue of Additional Common Shares.
11.3 Non-Subscribing Investors. If one or more Investor(s) has/have, or is/are
deemed to have declined to exercise its/their right under subsections 11.1 and
11.2 hereof to subscribe for its/their Proportion of the Additional Common
Shares (the "Non-Subscribing Investor(s)") and one or more Investor(s) has/have
agreed to exercise such right (the "Subscribing Investor(s)"), each Subscribing
Investor shall have the right, within thirty (30) days of the end of the above
forty-five (45) day period, to exercise by written notice to the Corporation and
the other Shareholders who have accepted to exercise their right under
subsections 11.1 and 11.2 (the "Subscribing Shareholder(s)") one of the
following options:
11.3.1 subscribe for its proportion (which shall be equal to the number of
Common Shares held by such Subscribing Investor in relation to the
total number of Common Shares held by all Subscribing Investors,
unless otherwise agreed to between themselves) of the Additional
Common Shares which could have been subscribed for by the
Non-Subscribing Investor(s) (the "Non-Subscribing Investor(s)
Shares");
11.3.2 lend its proportion (which shall be equal to the number of Common
Shares held by such Subscribing Investor in relation to the total
number of Common Shares held by all Subscribing Investors, unless
otherwise agreed to between themselves) of the Non-Subscribing
Investor(s)' Proportion of the Project Funds to the Non- Subscribing
Investor(s) on terms and conditions to be agreed upon at the time of
the loan, and the Non-Subscribing Investor(s) shall then subscribe for
all or part, as the case may be, of its/their Proportion of the
Additional Common Shares;
11.3.3 lend its proportion (which shall be equal to the number of Common
Shares held by such Subscribing Investor in relation to the total
number of Common Shares held by all Subscribing Investors, unless
otherwise agreed to between themselves) of the Non-Subscribing
Investor(s)' Proportion of the Project Funds to the Corporation on
terms and conditions to be agreed upon at the time of the loan. The
Subscribing Investor shall, by written notice to that effect sent to
the Corporation and the other Shareholders, be entitled
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to convert such loan into Class B Common Shares within three (3) years
of such loan at the Fair Market Value determined on the date of
receipt by the Corporation of such notice.
11.4 Failure to notify. If any of the Subscribing Investors fails to notify the
Corporation and the other Subscribing Shareholders of its intent to exercise one
of the options set forth in subsection 11.3, such Subscribing Investor shall be
deemed to have waived its right in connection with such options.
11.5 Option deemed exercised. In the event that there are two Subscribing
Investors and both exercise different options pursuant to subsection 11.3, both
Subscribing Investors shall be deemed to have exercised the option provided in
subsection 11.3.1 notwithstanding any notice to the contrary sent to the
Corporation or the other Subscribing Shareholders.
11.6 Additional right. In the event that there are two Subscribing Investors and
one Subscribing Investor has or is deemed to have waived its right to exercise
one of the options set forth in subsection 11.3 (the "Non-Exercising Subscribing
Investor"), the Subscribing Investor who has exercised one of such options (the
"Exercising Subscribing Investor") shall have the additional right to exercise,
within thirty (30) days of the end of the thirty (30) day period set forth in
subsection 11.3, by written notice to the Corporation and the other Subscribing
Shareholders, the same option as exercised pursuant to subsection 11.3 for the
remaining Non- Subscribing Investor(s) Shares or the remaining Non-Subscribing
Investors Proportion of the Project Funds, as the case may be which was
originally available to the Non-Exercising Subscribing Investor.
11.7 Compositech's option. If after the exercise or waiver by the Investors of
all rights provided in subsections 11.1 to 11.6 inclusively, any Investors'
Proportion of the Project Funds are not received by the Corporation either
through the subscription of Additional Common Shares or loans to the Corporation
and if Compositech is a Subscribing Shareholder, Compositech shall then have the
right, within thirty (30) days of the end of the last thirty (30) day period
provided for in subsection 11.3 or 11.6 hereof, as the case may be, to exercise
by written notice to the Corporation and the other Subscribing Shareholders, one
of the following options:
11.7.1 subscribe for all the remaining Non-Subscribing Investor(s) Shares;
11.7.2 lend all the Non-Subscribing Investor(s) remaining proportion of the
Project Funds to such Non-Subscribing Investor(s) on terms and
conditions agreed upon at the time of the loan and such Non-Subscribing
Investor(s) shall then subscribe for its/their proportion of the
remaining Additional Common Shares;
11.7.3 lend all the remaining Non-Subscribing Investor(s) Proportion of the
Project Funds to the Corporation on terms and conditions to be agreed
upon at the time of the loan. Compositech shall, by written notice to
that effect sent to the Corporation and the other Shareholders, be
entitled to convert such loan into Class B Common Shares within three
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(3) years of such loan at the Fair Market Value determined on the date
of receipt by the Corporation of such notice.
11.8 Failure to notify. If Compositech fails to notify the Corporation or any
other Subscribing Shareholders of its intent to exercise one of the
above-mentioned options, Compositech shall be deemed to have waived its right in
connection with such options.
11.9 Compositech Non-Subscribing Shareholder. In the event that Compositech has,
or is deemed to have declined to exercise its right under subsections 11.1 and
11.2 hereof to subscribe for its Proportion of the Additional Common Shares and
there are one or more Subscribing Investor(s), each Subscribing Investor shall,
within thirty (30) days of the end of the forty-five (45) day period set forth
in subsection 11.2, have the right to exercise by written notice to the
Corporation and the other Subscribing Investor(s) one of the following options:
11.9.1 if the amount of the Project Funds is equal to or lesser than
$2,000,000, each Subscribing Investor shall have the right to
subscribe for its proportion (calculated among all Subscribing
Investors) of a number of shares of Compositech Common Stock equal to
the amount of Compositech's Proportion of the Project Funds expressed
in US dollars divided by the price per share of Compositech Common
Stock which shall be equal to the weighted average closing market
price per share of the Compositech Common Stock during the 60 trading
days immediately preceding such subscription, and Compositech shall
use such subscription funds to purchase all or a part, as the case may
be, of its Proportion of the Additional Common Shares; or
11.9.2 if the amount of Project Funds is greater than $2,000,000, in addition
to the option provided for in subsection 11.9.1, each Subscribing
Investor shall have the options provided in subsection 11.3 hereof and
the provisions of subsection 11.3 shall apply mutatis mutandis.
11.10 Failure to notify. If any of the Subscribing Investors fails to notify the
Corporation and the other Subscribing Investors of its intent to exercise one of
the options set forth in subsection 11.9, such Subscribing Investor shall be
deemed to have waived its right in connection with such options.
11.11 Option deemed exercised. In the event that there is more than one
Subscribing Investor and that subsection 11.9.2 applies, if all Subscribing
Investors do not exercise the same option pursuant to such subsection, all
Subscribing Investors shall be deemed to have exercised the option provided in
subsection 11.3.1 notwithstanding any notice to the contrary sent to the
Corporation or other Subscribing Investors.
11.12 Additional right. In the event that there is more than one Subscribing
Investor and that one or more of the Subscribing Investors has/have or is/are
deemed to have waived its right to exercise one of the options set forth in
subsection 11.9.1 or 11.9.2, as the case may be, (the
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"Non-Exercising Subscribing Investor(s)"), each Subscribing Investor who has
exercised one of such options (the "Exercising Subscribing Investor(s)") shall
have the additional right to exercise, within thirty (30) days of the end of the
thirty (30) day period set forth in subsection 11.9 , by written notice to the
Corporation and the other Subscribing Investors, the same option as it exercised
pursuant to subsection 11.9 for the Compositech's remaining Proportion of the
Additional Common Shares or of the Project Funds, as the case may be which was
originally available to the Non-Exercising Subscribing Investor.
11.13 Sale to any Person. The procedures set forth in this Section 11 shall be
repeated, mutatis mutandis, with respect to any Additional Common Shares which
have not been subscribed for by a Shareholder or any portion of the Project
Funds which has not been loaned to the Corporation until (i) all Shareholders
who have been made the most recent additional offer shall have or be deemed to
have declined it, or (ii) the total amount of the Project Funds shall have been
received by the Corporation either by way of loan or issuance of Additional
Common Shares. If upon completion of the above procedures the Corporation has
not received the total amount of the Project Funds either by way of loan or
issuance of Additional Common Shares, the Corporation shall be free for a period
of ninety (90) days thereafter to issue and sell such Additional Common Shares
which will not be purchased by a Shareholder (the "Unaccepted Additional Common
Shares") for an aggregate subscription price equal to the amount of Project
Funds that the Corporation has not receive, to any Person not Affiliated or
Related to any Shareholder, on terms not more favourable than those provided in
the original offer of the Corporation to issue Additional Common Shares,
provided, however, that it shall be a condition precedent to such sale that such
Person has executed a counterpart of this Agreement in accordance with
subsection 25.6 and has agreed to be bound by the terms and conditions of this
Agreement. However, if such Person is a competitor of the Corporation, the
Corporation shall send a written notice to that effect to Compositech and the
issuance and sale of the Unaccepted Additional Common Shares to such competitor
shall be subject to the written approval of Compositech, which approval shall
not be unreasonably withheld, and such approval shall be sent to the Corporation
within thirty (30) days of the receipt by Compositech of the above mentioned
notice. If the Corporation has not received such written approval within the
prescribed delays, the sale of any Unaccepted Additional Common Shares to such
competitor shall be deemed approved. The purchase by one (1) or more
Shareholders of any Additional Common Shares and/or shares of Compositech Common
Stock and/or the granting by one (1) of more Shareholders of any loan to a
Non-Subscribing Investor, to Compositech or to the Corporation, shall be
suspended until the day of the sale by the Corporation to such Person of the
Unaccepted Additional Common Shares. If the Corporation is unable to sell such
Unaccepted Additional Common Shares to a Person as provided for in this
subsection 11.13, then the Corporation shall forthwith advise the Shareholders
of same in writing and any Subscribing Shareholder shall have the right to
decide not to purchase any Additional Common Shares or shares of Compositech
Common Stock and/or not to grant any loan to a Non- Subscribing Investor, to
Compositech or to the Corporation by notifying the Corporation and the other
Shareholders in writing thereof within five (5) days of having been advised by
the Corporation that the Corporation was unable to sell such Unaccepted
Additional Common Shares to such Person.
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11.14 Proportion among Investors. Notwithstanding any provision of this Section
11, the number of Additional Common Shares issuable by the Corporation to each
Subscribing Investor or the amount of Project Funds loaned by each Subscribing
Investor shall be determined among the Subscribing Investor(s) and the
Subscribing Investor(s) shall send a written notice to that effect, signed by
all of them, to the Corporation at the same time as any notice sent by such
Subscribing Investor(s) to the Corporation to notify same of its/their intent to
exercise its/their right under this Section 11. Furthermore, the number of
shares of Compositech Common Stock issuable by Compositech to each Subscribing
Investor(s) in the event of application of subsection 11.9.1, shall be
determined among the Exercising Subscribing Investor(s) and the Exercising
Subscribing Investor(s) shall send a written notice to that effect, signed by
all of them, to Compositech at the same time as any notice send by such
Subscribing Investor(s) to the Corporation to notify same of its/their intent to
exercise its/their right under subsection 11.9.1.
11.15 Closing. The closing in connection with the issuance of Additional Common
Shares or shares of Compositech Common Stock to any Shareholder or the loan of
any Proportion of the Project Funds to a Non-Subscribing Investor, to
Compositech or to the Corporation pursuant to this Section shall be held at the
principal offices of the Corporation at 10:00 a.m. on the date which is thirty
(30) days after the expiry of the applicable period under this Section 11 or at
such other place, at such other time or on such other date as the parties
thereto may agree. The loan of any Proportion of the Project Funds to a
Non-Subscribing Investor, to Compositech or to the Corporation and the payment
for the Additional Common Shares or shares of Compositech Common Stock being
issued shall be made in full at such closing. All payments shall be made by way
of bank draft or electronic fund transfer to the Corporation's account, to
Compositech's account and/or to the Non-Subscribing Investor's account, as the
case may be.
11.16 Rights attached to the Common Shares. All Class B Common Shares issued to
an Investor pursuant to the provisions of this Section 11, including any Class B
Common Shares issued following a conversion pursuant to the provisions of
subsection 11.3.3, shall form part of the shares entitled to be exchanged
pursuant to the Stock Exchange Agreement at the exchange rate set forth in the
Stock Exchange Agreement.
SECTION 12 - ADDITIONAL FUNDS TO CONTINUE THE OPERATIONS
12.1 Additional Investment. After the completion of the Project, where an
additional investment is required due to the advent of any Special Circumstance,
the Shareholders agree to use their best efforts to obtain the maximum amount of
such required additional investment through financing from a recognized
financial institution. Should it be impossible to obtain such financing on
conditions reasonably acceptable to all the Shareholders, each Shareholder shall
have the option, but not the obligation, to advance its Proportion of the
minimum amount of funds which is necessary to eliminate this Special
Circumstance (the "Additional Investment") and the Corporation shall be obliged
to accept such advance. For the purposes of this Section 12, the Proportion of
each Investor shall be the Deemed Proportion. Unless all Shareholders otherwise
agree, any amount of Additional Investment shall be repaid by the Corporation to
each of the
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Shareholders, in and by way of thirty-six (36) equal consecutive, monthly
instalments, payable on the first day of each month and bear interest at two
percent (2%) above the Prime Rate, calculated from the date of its advance,
which interest shall be payable at the same time as each instalment of capital
is paid. Any amount of the Additional Investment may, at the option of each
Shareholder, be secured by collateral hypothec on all of the property of the
Corporation, subject to the provisions of existing credit agreements. The first
instalment shall be paid on the first day of the month following the month in
which the Additional Investment was disbursed.
12.2 Notice to Shareholders. The Corporation shall notify each Shareholder of
its request for an Additional Investment. Each Investor may assign to the other
Investors all or a portion of its right to make advances to the Corporation for
its Proportion of the Additional Investment. Each Shareholder shall have
fourteen (14) days from the receipt of such notice within which to notify the
Corporation and the other Shareholders of its intent to advance its Proportion
of the Additional Investment. If a Shareholder fails to so notify the
Corporation or the other Shareholders within the prescribed delay, then such
Shareholder shall be conclusively deemed to have refused to advance its
Proportion of the Additional Investment.
12.3 Non-Contributing Investors. If only one of the Investors has agreed to
exercise its option under subsections 12.1 and 12.2 hereof to advance its
Proportion of the Additional Investment (the "Contributing Investor") and the
other Investors have, or are deemed to have, declined to exercise such option
(the "Non-Contributing Investors"), the Corporation shall, within five (5) days
of the end of the above fourteen (14) day period, be required to offer by
written notice to the Contributing Investor the option to advance the
Non-Contributing Investors' Proportion of the Additional Investment (the
"Non-Contributing Investors' Proportion") before Compositech is offered pursuant
to subsection 12.5 the option to advance such Non-Contributing Investors'
Proportion. The Contributing Investor shall have seven (7) days from the receipt
of the notice mentioned above to notify the Corporation of its intent to
exercise its option to advance the Non-Contributing Investors' Proportion,
failing which the Contributing Investor shall be deemed to have waived its
option in connection with the advance of the NonContributing Investors'
Proportion.
12.4 Non-Contributing Investor. If more than one of the Investors have agreed to
exercise their option under subsections 12.1 and 12.2 hereof to advance their
respective Proportion of the Additional Investment (the "Contributing
Investors") and the other Investor has, or is deemed to have, declined to
exercise such option (the "Non-Contributing Investor"), the Corporation shall,
within five (5) days of the end of the above fourteen (14) day period, be
required to offer by written notice to the Contributing Investors the option to
advance the NonContributing Investor's Proportion of the Additional Investment
(the "Non-Contributing Investor's Proportion") before Compositech is offered
pursuant to subsection 12.5 the option to advance such Non-Contributing
Investor's Proportion. The Contributing Investors shall, unless otherwise agreed
to between themselves, be entitled to advance that proportion of the
Non-Contributing Investor's Proportion which is equal to the number of Common
Shares held by each of the Contributing Investors in relation to the total
number of Common Shares held by both
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Contributing Investors. Each of the Contributing Investors shall have seven (7)
days from the receipt of the notice mentioned above to notify the Corporation of
its intent to exercise its option to advance its proportion of the
Non-Contributing Investor's Proportion, failing which it shall be deemed to have
waived its preemptive right in connection with the advance of its proportion of
the Non-Contributing Investor's Proportion. If only one of the Contributing
Investors (the "Final Contributing Investor") agrees to advance its proportion
of the NonContributing Investor's Proportion in accordance with this subsection
12.4 and the other Contributing Investor (the "Final Non-Contributing Investor")
has declined or is deemed to have declined its right to advance its proportion
of the Non-Contributing Investor's Proportion (the "Final Non-Contributing
Investor's Proportion") in accordance with this subsection 12.4, then the
Corporation shall within five (5) days of the end of the above seven (7) day
period, be required to offer by written notice to the Final Contributing
Investor the option to advance the Final Non-Contributing Investor's Proportion
before Compositech is offered pursuant to subsection 12.5 the option to advance
such Final Non-Contributing Investor's Proportion. The Final Contributing
Investor shall have seven (7) days from the receipt of the notice mentioned
above to notify the Corporation of its intent to exercise its option to advance
the Final NonContributing Investor's Proportion, failing which the Final
Contributing Investor shall be deemed to have waived its option to advance the
Final Non-Contributing Investor's Proportion.
12.5 Shareholders Rights. If (i) one (1) or more Shareholders has or is deemed
to have declined its option to advance its Proportion of the Additional
Investment, and, (a) in the event the Contributing Investor was offered the
option to advance the Non-Contributing Investors' Proportion pursuant to
subsection 12.3 and the Contributing Investor has or is deemed to have declined
to exercise such option, or (b) in the event the Contributing Investors were
offered the option to advance the Non-Contributing Investor's Proportion
pursuant to subsection 12.4 and the Contributing Investors have or are deemed to
have declined to exercise such option or the Final Contributing Investor has or
is deemed to have declined to exercise its option to advance the Final
Non-Contributing Investor's Proportion, or (ii) if one (1) or more Shareholders
has or is deemed to have declined its option to advance its Proportion of the
Additional Investment and subsections 12.3 and 12.4 are not applicable, then the
Corporation, within five (5) days of the end of the above fourteen (14) day
period provided for in subsection 12.2 or within five (5) days of the end of the
last seven (7) day period provided for in subsection 12.3 or 12.4 hereof, as the
case may be, shall be required to offer by written notice to the Shareholder(s)
who agreed to exercise its or their option under subsections 12.1 and 12.2, the
option, in addition to any portion of the Additional Investment such
Shareholder(s) has agreed to advance, to advance its or their pro rata share of
the Additional Investment for which any other Shareholder(s) has, or is deemed
to have, waived its or their option hereunder (collectively the "Remaining
Additional Investment Funds"). For the purposes of the preceding, each such
Shareholder's pro rata share of the Remaining Additional Investment Funds shall
be equal to the proportion that the number of Common Shares held by such
Shareholder is to the aggregate of all Common Shares held by all Shareholders
who agreed to exercise their option under subsections 12.1 and 12.2 and shall
take into account the advances made pursuant to subsections 12.2, 12.3 and 12.4.
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12.6 Notice for the Remaining Additional Investment Funds. Each Shareholder who
has been offered the option to advance the Remaining Additional Investment Funds
by the Corporation pursuant to subsection 12.5 shall have seven (7) days from
the receipt of the notice mentioned therein to notify the Corporation of its
intent to exercise its option to advance its pro rata share of the Remaining
Additional Investment Funds, failing which such Shareholder shall be deemed to
have waived its option in connection with the advance of such Remaining
Additional Investment Funds.
12.7 Sale to any Person. The procedures set forth in subsections 12.5 and 12.6
shall be repeated, mutatis mutandis, with respect to any Remaining Additional
Investment Funds which have not been advanced by a Shareholder until (i) all
Shareholders who have been made the most recent additional offer shall have or
be deemed to have declined it, or (ii) all the Remaining Additional Investment
Funds shall have been advanced by some or all of the Shareholders. If upon
completion of the above procedures some or all of the Remaining Additional
Investment Funds will not have been advanced by the Shareholders pursuant to the
exercise of their options, the Corporation shall be entitled, notwithstanding
any provision hereof, for a period of thirty (30) days thereafter to issue and
sell such number of Class B Common Shares (the "Person's Common Shares"), to any
Person not Affiliated or Related to any Shareholder, at a price per Class B
Common Share equal to the Fair Market Value determined on the date of receipt of
the first notice of the Corporation pursuant to subsection 12.2, having an
aggregate subscription price equal to the amount of Remaining Additional
Investment Funds not advanced, provided, however, that it shall be a condition
precedent to such sale that such Person has executed a counterpart of this
Agreement in accordance with subsection 25.6 and has agreed to be bound by the
terms and conditions of this Agreement. However, if such Person is a competitor
of the Corporation, the Corporation shall send a written notice to that effect
to Compositech and the issuance and sale of the Person's Common Shares to such
competitor shall be subject to the written approval of Compositech, which
approval shall not be unreasonably withheld, and such approval shall be sent to
the Corporation within thirty (30) days of the receipt by Compositech of the
above mentioned notice. If the Corporation has not received such written
approval within the prescribed delays, the sale of any Person's Common Shares to
such competitor shall be deemed approved. The advance of any portion of the
Additional Investment by one (1) or more Shareholders, shall be suspended until
the day of the sale by the Corporation to such Person of the Person's Common
Shares. If the Corporation is unable to sell such Person's Common Shares, to a
Person as provided for in this subsection 12.7, then the Corporation shall
forthwith advise the Shareholders of same in writing and any Shareholder who has
agreed to advance any portion of the Additional Investment shall have the right
to decide not to advance such portion of the Additional Investment by notifying
the Corporation in writing thereof within five (5) days of having been advised
by the Corporation that the Corporation was unable to sell such Person's Common
Shares to such Person.
12.8 Special Circumstance. For the purposes of this Section 12, the expression
"Special Circumstance" shall mean any circumstance which would result in the
imminent bankruptcy of the Corporation or closing down of its manufacturing
operations including, without limitation, any
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obligation imposed by any environmental laws or other laws, but excluding any
labour problems. Should there be a disagreement between the Shareholders on the
existence of any such Special Circumstance or on the amount of the Additional
Investment required, then the Shareholders shall have recourse to the
arbitration provisions in accordance with Section 24 hereof.
12.9 Conversion of Additional Investment. Any Shareholder who, pursuant to the
provisions of this Section 12, has advanced more than his Proportion of the
Additional Investment or any Investor who, pursuant to the provisions of this
Section 12, has advanced more than his Deemed Proportion of the Additional
Investment, shall be entitled to convert any advance it has made and any
interest accrued thereon, or any part thereof, into Class B Common Shares within
three (3) years of such advance, at the Fair Market Value determined on the date
of receipt of the first notice of the Corporation pursuant to subsection 12.2,
by written notice to that effect sent to the Corporation and the other
Shareholders and the Corporation shall issue such Class B Common Shares.
12.10 Proportion among Investors. The proportion of the Additional Investment to
be advanced by each Contributing Investor shall be determined among the
Contributing Investors and the Contributing Investors shall send a written
notice to that effect, signed by them, to the Corporation at the same time as
any notice sent by such Contributing Investors to the Corporation to notify same
of its/their intent to exercise its/their right under this Section 12. In the
event of a conversion by the Contributing Investor(s) of its/their advances into
Class B Common Shares, the number of Class B Common Shares issuable by the
Corporation to each Contributing Investor pursuant to subsection 12.9 shall be
determined among the Contributing Investor(s) and the Contributing Investor(s)
shall send a written notice to that effect, signed by it/them, to the
Corporation at the same time as each of them exercises its right to convert any
portion of the Additional Investment its has advanced to the Corporation.
12.11 Closing. The closing in connection with the conversion of any portion of
the Additional Investment into Class B Common Shares by any Shareholder pursuant
to subsection 12.9 shall be held at the principal offices of the Corporation at
10:00 a.m. on the date which is thirty (30) days after the exercise by a
Shareholder of its right to convert any portion of the Additional Investment
advanced to the Corporation, or at such other place, at such other time or on
such other date as the parties thereto may agree.
12.12 Rights attached to the Class B Common Shares. All Class B Common Shares
issued to an Investor following a conversion pursuant to the provisions of this
Section 12, shall form part of the shares entitled to be exchanged pursuant to
the Stock Exchange Agreement at the exchange rate set forth in the Stock
Exchange Agreement.
SECTION 13 - PREEMPTIVE RIGHT
13.1 Issuance of Common Shares. Should the Board decide that the Corporation
requires additional funds (other than for reasons provided in Section 11 or
Section 12) and is
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unable to obtain such funds from its bankers on commercially reasonable terms,
then the Shareholders hereby agree to cause the Corporation to raise such funds
by issuing Common Shares from treasury in accordance with this Section 13. Such
Common Shares shall be issued at a value per share equal to the Fair Market
Value determined at the time of the receipt of the notice from the Corporation
given pursuant to subsection 13.2 hereof. Each Shareholder shall have preemptive
rights with respect to the issue of such additional Common Shares (the
"Additional Shares"), such that the Corporation shall not issue any Additional
Shares without offering to each Shareholder the right to subscribe for its
Proportion of the Additional Shares to be issued by the Corporation.
13.2 Notice to Shareholders. If the Corporation decides to issue any Additional
Shares, then the Corporation shall give detailed notice thereof to each
Shareholder. Each Investor may assign to the other Investors all or a portion of
its right to subscribe for its Proportion of the Additional Shares. Each
Shareholder shall have forty-five (45) days from the receipt of such notice
within which to notify the Corporation of its intent to exercise its right under
subsections 13.1 and 13.2 in connection with such issue of Additional Shares. If
a Shareholder fails to so notify the Corporation within the prescribed delay,
then such Shareholder shall be conclusively deemed to have waived its preemptive
right in connection with such issue of Additional Shares. If all of the
Shareholders waive or are deemed to have waived their preemptive rights in
connection with such issue of Additional Shares, then the Corporation shall be
free for a period of ninety (90) days thereafter to sell such Additional Shares
to any Person not Affiliated or Related to any Shareholder, on terms not more
favourable than those provided in the original offer of the Corporation to issue
Additional Shares, provided, however, that it is a condition precedent to such
sale that such Person has executed a counterpart of this Agreement in accordance
with subsection 25.6 and has agreed to be bound by the terms and conditions of
this Agreement and any other agreement executed by the parties in connection
with this Agreement.
13.3 Declining Investors. If only one of the Investors has agreed to exercise
its right under subsections 13.1 and 13.2 hereof to subscribe for its Proportion
of the Additional Shares (the "Accepting Investor") and the other Investors
have, or are deemed to have, declined to exercise such preemptive right (the
"Declining Investors"), the Corporation shall, within seven (7) days of the end
of the above forty-five (45) day period, be required to offer by written notice
to the Accepting Investor all of the Additional Shares which could have been
subscribed for by the Declining Investors (the "Declining Investors' Shares")
before Compositech is offered pursuant to subsection 13.5 its pro rata share of
such Declining Investors' Shares. The Accepting Investor shall have thirty (30)
days from the receipt of the notice mentioned above to notify the Corporation of
its intent to exercise its right to subscribe for the Declining Investors'
Shares, failing which the Accepting Investor shall be deemed to have waived its
preemptive right in connection with the issue of the Declining Investors'
Shares.
13.4 Declining Investor. If more than one of the Investors have agreed to
exercise their rights under subsections 13.1 and 13.2 hereof to subscribe for
their respective Proportion of the Additional Shares (the "Accepting Investors")
and the other Investor has, or is deemed to have,
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declined to exercise such preemptive right (the "Declining Investor"), the
Corporation shall, within seven (7) days of the end of the above forty-five (45)
day period, be required to offer by written notice to the Accepting Investors
all of the Additional Shares which could have been subscribed for by the
Declining Investor (the "Declining Investor's Shares") before Compositech is
offered pursuant to subsection 13.5 its pro rata share of such Declining
Investor's Shares. The Accepting Investors shall, unless otherwise agreed to
between themselves, be entitled to subscribe for that proportion of the
Declining Investor's Shares which is equal to the number of Common Shares held
by each of the Accepting Investors in relation to the total number of Common
Shares held by both Accepting Investors. Each of the Accepting Investors shall
have thirty (30) days from the receipt of the notice mentioned above to notify
the Corporation of its intent to exercise its right to subscribe for its
proportion of the Declining Investor's Shares, failing which it shall be deemed
to have waived its preemptive right in connection with the issue of its
proportion of the Declining Investor's Shares. If only one of the Accepting
Investors (the "Final Accepting Investor") agrees to subscribe for its
proportion of the Declining Investor's Shares in accordance with this subsection
13.4 and the other Accepting Investor (the "Final Declining Investor") has
declined or is deemed to have declined its right to subscribe for its proportion
of the Declining Investor's Shares (the "Final Declining Investor's Shares") in
accordance with this subsection 13.4, then the Corporation shall within seven
(7) days of the end of the above thirty (30) day period, be required to offer by
written notice to the Final Accepting Investor all of the Final Declining
Investor's Shares before Compositech is offered pursuant to subsection 13.5 its
pro rata share of such Final Declining Investor's Shares. The Final Accepting
Investor shall have thirty (30) days from the receipt of the notice mentioned
above to notify the Corporation of its intent to exercise its right to subscribe
for the Final Declining Investor's Shares, failing which the Final Accepting
Investor shall be deemed to have waived its preemptive right in connection with
the issue of the Final Declining Investor's Shares.
13.5 Shareholders Rights. If (i) one (1) or more Shareholders has or is deemed
to have declined its right to subscribe for its Proportion of the Additional
Shares, and, (a) in the event such Additional Shares were offered to the
Accepting Investor pursuant to subsection 13.3 and the Accepting Investor has or
is deemed to have declined to exercise its right to acquire all of the Declining
Investors' Shares, or (b) in the event such Additional Shares were offered to
the Accepting Investors pursuant to subsection 13.4 and the Accepting Investors
have or are deemed to have declined to exercise their rights to acquire all of
the Declining Investor's Shares or the Final Accepting Investor has or is deemed
to have declined to exercise its rights to acquire all of the Final Declining
Investor's Shares, or (ii) if one (1) or more Shareholders has or is deemed to
have declined its right to subscribe for its Proportion of the Additional Shares
and subsections 13.3 and 13.4 are not applicable, then the Corporation, within
five (5) days of the end of the above forty-five (45) day period provided for in
subsection 13.2 or within seven (7) days of the end of the last seven (7) day
period provided for in subsection 13.3 or 13.4 hereof, as the case may be, shall
be required to offer by written notice to the Shareholder(s) who agreed to
exercise its or their right under subsections 13.1 and 13.2 in connection with
the initial issue of Additional Shares, to issue to such Shareholder(s), in
addition to any Additional Shares such Shareholder(s) agreed to subscribe for,
its or their pro rata share of the Additional Shares for
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which any other Shareholder(s) has, or is deemed to have, waived its or their
preemptive right hereunder (collectively the "Unaccepted Additional Shares").
For the purposes of the preceding, each such Shareholder's pro rata share of the
Unaccepted Additional Shares shall, unless otherwise agreed to amongst
themselves, be equal to the proportion that the number of Common Shares held by
such Shareholder is to the aggregate of all Common Shares held by all
Shareholders who agreed to exercise their right under subsections 13.1 and 13.2
and shall take into account the Additional Shares subscribed for pursuant to
subsections 13.2, 13.3 and 13.4.
13.6 Notice for Unaccepted Additional Shares. Each Shareholder who has been
offered to subscribe for Unaccepted Additional Shares by the Corporation
pursuant to subsection 13.5 shall have thirty (30) days from the receipt of the
notice mentioned therein to notify the Corporation of its intent to exercise its
right to subscribe for its pro rata share of such Unaccepted Additional Shares,
failing which such Shareholder shall be deemed to have waived its preemptive
right in connection with the issue of such Unaccepted Additional Shares.
13.7 Sale to any Person. The procedures set forth in subsections 13.5 and 13.6
shall be repeated, mutatis mutandis, with respect to any Unaccepted Additional
Shares which have not been subscribed for by a Shareholder until (i) all
Shareholders who have been made the most recent additional offer shall have or
be deemed to have declined it, or (ii) all Additional Shares (including
Unaccepted Additional Shares) which have been offered by the Corporation
pursuant to this Section 13 shall have been subscribed for by some or all of the
Shareholders. If upon completion of the above procedures some or all of the
Additional Shares which the Corporation intended to issue will not be purchased
by the Shareholders pursuant to the exercise of their preemptive rights, the
Corporation shall be free for a period of ninety (90) days thereafter to sell
such Additional Shares, which will not be purchased by a Shareholder, to any
Person not Affiliated or Related to any Shareholder, on terms not more
favourable than those provided in the original offer of the Corporation to issue
Additional Shares, provided, however, that it shall be a condition precedent to
such sale that such Person has executed a counterpart of this Agreement in
accordance with subsection 25.6 and has agreed to be bound by the terms and
conditions of this Agreement. However, if such Person is a competitor of the
Corporation, the Corporation shall send a written notice to that effect to
Compositech and the issuance and sale of such Additional Shares to such
competitor shall be subject to the written approval of Compositech, which
approval shall not be unreasonably withheld, and such approval shall be sent to
the Corporation within thirty (30) days of the receipt by Compositech of the
above mentioned notice. If the Corporation has not received such written
approval within the prescribed delays, the sale of any Additional Shares to such
competitor shall be deemed approved. The purchase of Additional Shares
(including Unaccepted Additional Shares) by one (1) or more Shareholders, shall
be suspended until the day of the sale by the Corporation to such Person of the
Additional Shares (including Unaccepted Additional Shares) which have not been
subscribed for by a Shareholder. If the Corporation is unable to sell such
Additional Shares which have not been subscribed for by a Shareholder, to a
Person as provided for in this subsection 13.7, then the Corporation shall
forthwith advise the Shareholders of same in writing and any Shareholder who has
agreed to subscribe for Additional Shares (including Unaccepted Additional
Shares) shall have the right to
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decide not to purchase such Additional Shares by notifying the Corporation in
writing thereof within five (5) days of having been advised by the Corporation
that the Corporation was unable to sell such Additional Shares to such Person.
13.8 Closing. Subject to subsection 13.7, the closing in connection with the
issuance of Additional Shares to any Shareholder or Person pursuant to
subsections 13.1 to 13.7 shall be held at the principal offices of the
Corporation at 10:00 a.m. on the date which is thirty (30) days after the expiry
of the applicable period under subsections 13.2 to 13.7, as the case may be, or
at such other place, at such other time or on such other date as the parties
thereto may agree. Payment for the Additional Shares being issued shall be made
in full at such closing. All payments shall be made by way of bank draft or
electronic fund transfer to the Corporation's account.
13.9 Proportion among Investors. The proportion of the Additional Shares to be
subscribed for by each Investor shall be determined among the Investors and the
Investors shall send a written notice to that effect, signed by them, to the
Corporation at the same time as any notice sent by such Investors to the
Corporation to notify same of its/their intent to exercise its/their right under
this Section 13.
13.10 Rights attached to the Additional Shares. All Additional Shares issued to
an Investor pursuant to the provisions of this Section 13 shall form part of the
shares entitled to be exchanged pursuant to the Stock Exchange Agreement at the
exchange rate set forth in the Stock Exchange Agreement.
SECTION 14 - ALIENATION OF SHARES
14.1 Alienation prohibited. Unless otherwise provided for in accordance with the
terms hereof or the Stock Exchange Agreement, no Shareholder shall transfer,
assign, cede, pledge, mortgage, hypothecate, charge or otherwise encumber,
alienate or dispose of in any manner whatsoever the whole or any part of its
Shares without first obtaining the written consent of the other Shareholders.
14.2 Transfer to Permitted Transferee by Compositech. Notwithstanding subsection
14.1 and Section 15, Compositech may transfer all (but not less than all) of its
Shares to a Permitted Transferee, provided that:
14.2.1 the Permitted Transferee has undertaken in writing to be bound by the
provisions hereof;
14.2.2 the Permitted Transferee has agreed, in form and terms satisfactory to
the legal counsel of the Corporation, acting reasonably, that as long
as it shall hold such Shares it shall (i) remain a corporation or a
limited liability company, (ii) have no assets other than the Shares
(iii) not conduct any business other than that of holding the Shares,
and (iv) be
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bound by the terms and conditions of this Agreement as if the
Permitted Transferee had been an original party to this Agreement; and
14.2.3 Compositech has agreed prior to such assignment, in form and terms
satisfactory to the legal counsel of the Corporation, acting
reasonably, that as long as the Permitted Transferee holds such
Shares, Compositech shall (i) not transfer to any Person the ownership
(either registered, beneficial, in trust or otherwise) of any issued
and outstanding share, equity security or ownership, participatory or
profit interest in the Permitted Transferee or otherwise transfer the
control of the Permitted Transferee by any mechanism whatsoever, (ii)
not be relieved of its obligations hereunder and continue to be
solidarily bound with the Permitted Transferee (each waiving the
benefit of division and discussion) by this Agreement as if it
continued to be a Shareholder, (iii) represent the Permitted
Transferee in all of the Permitted Transferee's dealings with the
Corporation and the other Shareholders, and (iv) solidarily with the
Permitted Transferee (each waiving the benefit of division and
discussion) be liable to the other parties for the obligations of the
Permitted Transferee under this Agreement.
If the Permitted Transferee fails to perform or fulfil any of its
obligations hereunder, then any party may require by notice to Compositech that
the Permitted Transferee be forthwith liquidated and its assets (including,
without limitation, the Shares held by the Permitted Transferee) distributed to
Compositech.
In the event of a transfer by Compositech of its Shares to a Permitted
Transferee, Compositech shall remain bound by the Stock Exchange Agreement, the
Compositech Subscription Agreement, the License Agreement, the Sales Agency and
Marketing Agreement and the Technical Services Agreement.
14.3 Transfers between Investors and to Permitted Transferee. Notwithstanding
any provision of this Agreement, any of the Investors may transfer all or part
of its Shares to any other Investor(s), to a Permitted Transferee, to any
Governmental Body of or controlled by the Government of Quebec or to 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 such
Governmental Body of or controlled by the Government of Quebec holds the
majority of the limited partnership units (the "Limited Partnership"), at any
time and from time to time without being subject to the other terms and
conditions in this Section 14 or in Section 15; provided however, none of the
Investors shall be permitted to transfer its Shares to a Permitted Transferee,
any Governmental Body of or controlled by the Government of Quebec or to a
Limited Partnership unless such Permitted Transferee, Governmental Body or
Limited Partnership shall have first (i) executed a counterpart of this
Agreement in accordance with subsection 25.6, and (ii) have agreed, in form and
terms satisfactory to the legal counsel of the Corporation, acting reasonably,
that as long as it shall hold such Shares it shall be bound by the terms and
conditions of this Agreement, as if the Permitted Transferee, the Governmental
Body or the Limited Partnership had been an original party to this Agreement as
a Shareholder and an Investor.
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SECTION 15 - RIGHTS OF FIRST REFUSAL AND PIGGY BACK
15.1 Exchange by Investors. Notwithstanding subsection 14.1, if, at any time
after the third anniversary of the date hereof, one or more Investors (the
"Offering Investor") wishes to exchange all or a portion of its Shares for
shares of Compositech Common Stock as provided in the Stock Exchange Agreement,
the Offering Investor shall make an irrevocable offer (the "Exchange Offer") in
accordance with the procedures set forth hereinafter:
15.1.1 The Offering Investor shall first offer to the other Investors (the
"Other Investors") the option to purchase such Shares (the "Offered
Shares") at the purchase price provided in subsection 15.1.3 and in
accordance with subsection 15.6. Should one or more of the Other
Investors exercise such option to purchase all of the Offered Shares,
the Offering Investor shall sell to such Other Investor(s) the Offered
Shares, for which it has delivered notice(s) of exercise, in
accordance with this Agreement and the terms and conditions of the
Exchange Offer.
15.1.2 Unless the Other Investor(s) have elected within the time required to
exercise their option pursuant to subsection 15.1.1 such that all of
the Offered Shares shall be purchased by the Other Investor(s), the
option of the Other Investors shall expire, neither of the Other
Investors shall be eligible to purchase the Offered Shares, and the
Offering Investor shall be free for a period of sixty (60) days from
the end of the expiration of the last offer period, to exchange all
(but not less than all) of the Offered Shares pursuant to the Stock
Exchange Agreement. If no exchange takes place within the sixty (60)
day period referred to in this subsection, then the Offering Investor
shall not exchange the Offered Shares without again following and
being subject to this Section 15.
15.1.3 The purchase price per Offered Share of an Offering Investor wishing
to exchange its Shares for shares of Compositech Common Stock shall be
the greater of: (i) the weighted average closing market price per
share of Compositech Common Stock during the thirty (30) trading days
immediately preceding the Exchange Offer, or (ii) the weighted average
closing market price per share of Compositech Common Stock during the
period between the date of the Exchange Offer and the date of receipt
of the first notice from either of the Other Investors indicating its
exercise of the option to purchase the Offered Shares, multiplied by
the number of shares of Compositech Common Stock the Offering Investor
would have received if it had exchanged the Offered Shares as provided
in the Stock Exchange Agreement (such product to be expressed in
Canadian dollars), the whole divided by the number of Offered Shares.
15.2 Investors receiving an offer. Notwithstanding subsection 14.1, if, at any
time on or after the third anniversary of the date hereof, one or more Investors
(the "Offering Investor") receives an irrevocable offer (the "TP Offer") from a
Person acting at Arm's Length to the Offering Investor (the "TP Offeror") to
purchase for cash (all of which is payable at closing) all
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(but not less than all) of the Shares held by the Offering Investor, which TP
Offer the Offering Investor wishes to accept, the following procedures shall
apply:
15.2.1 The Offering Investor shall first offer to the other Investors (the
"Other Investors") options to purchase such Shares (the "Offered
Shares") in accordance with subsection 15.6. Should one or more of the
Other Investors exercise such options so as to purchase all of the
Offered Shares, the Offering Investor shall sell to each of such Other
Investors the Offered Shares, for which it has delivered notice(s) of
exercise, in accordance with this Agreement and the terms and
conditions of the TP Offer.
15.2.2 Unless one or more of the Other Investors elects within the time
required to exercise options pursuant to subsection 15.2.1 such that
all of the Offered Shares shall be purchased by the Other Investors,
then the Offering Investor shall offer the Offered Shares which were
unaccepted by the Other Investors (the "Unaccepted Offered Shares") to
Compositech in accordance with the procedures set forth in subsection
15.6.
15.2.3 Should Compositech exercise its option pursuant to subsection 15.2.2
so as to purchase all of the Unaccepted Offered Shares, the Offering
Investor shall sell to the other Investors the Offered Shares for
which they have delivered notice of exercise and to Compositech the
Unaccepted Offered Shares for which it has delivered notice of
exercise, in accordance with this Agreement and the terms and
conditions of the TP Offer.
15.2.4 Unless the Other Investors and/or Compositech (the "Other
Shareholders") have elected within the time required to exercise their
options pursuant to subsections 15.2.1 and/or 15.2.2 such that all of
the Offered Shares shall be purchased by the Other Shareholders, the
option of the Other Shareholders shall expire, none of the Other
Shareholders shall be eligible to purchase the Offered Shares, and the
Offering Investor shall be free for a period of ninety (90) days from
the end of the expiration of the last offer period to sell all (but
not less than all) of the Offered Shares to the TP Offeror on the
terms and conditions provided in the TP Offer, provided, however, that
it shall be a condition precedent to the right of the Offering
Investor to sell the Offered Shares that the TP Offeror has executed a
counterpart of this Agreement in accordance with subsection 25.6 and
has agreed to be bound by the terms and conditions of this Agreement,
as if the TP Offeror had been an original party to such agreement in
place of the Offering Investor. If no sale takes place within the
ninety (90) day period referred to in this subsection, then the
Offering Investor shall not transfer the Offered Shares without again
following and being subject to this Section 15.
15.3 Investors making an offer. Notwithstanding subsection 14.1, if, at any time
on or after the third anniversary of the date hereof, one or more Investors (the
"Offering Investor") wishes to sell all (but not less than all) of the Shares
held by the Offering Investor, the Offering Investor shall make an irrevocable
offer (the "Investor Offer") in accordance with the procedures set forth
hereinafter:
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15.3.1 The Offering Investor shall first offer to the other Investors (the
"Other Investors") options to purchase such Shares (the "Offered
Shares") in accordance with subsection 15.6. Should one or more of the
Other Investors exercise such options so as to purchase all of the
Offered Shares, the Offering Investor shall sell to each of such Other
Investors the Offered Shares, for which it has delivered notice(s) of
exercise, in accordance with this Agreement and the terms and
conditions of the Investor Offer.
15.3.2 Unless one or more of the Other Investors elects within the time
required to exercise options pursuant to subsection 15.3.1 such that
all of the Offered Shares shall be purchased by the Other Investors,
then the Offering Investor shall offer the Offered Shares which were
unaccepted by the Other Investors (the "Unaccepted Offered Shares") to
Compositech in accordance with the procedures set forth in subsection
15.6.
15.3.3 Should Compositech exercise its option pursuant to subsection 15.3.2
so as to purchase all of the Unaccepted Offered Shares, the Offering
Investor shall sell to the other Investors the Offered Shares for
which they have delivered notice of exercise and to Compositech the
Unaccepted Offered Shares for which it has delivered notice of
exercise, in accordance with this Agreement and the terms and
conditions of the Investor Offer.
15.3.4 Unless the Other Investors and/or Compositech (the "Other
Shareholders") have elected within the time required to exercise their
options pursuant to subsections 15.3.1 and/or 15.3.2 such that all of
the Offered Shares shall be purchased by the Other Shareholders, the
option of the Other Shareholders shall expire, none of the Other
Shareholders shall be eligible to purchase the Offered Shares, and the
Offering Investor shall be free for a period of ninety (90) days from
the end of the expiration of the last offer period to sell all (but
not less than all) of the Offered Shares to a Person acting at Arm's
Length to the Offering Investor (the "Third Party") on the terms and
conditions provided in the Investor Offer, provided, however, that it
shall be a condition precedent to the right of the Offering Investor
to sell the Offered Shares that the Third Party has executed a
counterpart of this Agreement in accordance with subsection 25.6 and
has agreed to be bound by the terms and conditions of this Agreement,
as if the Third Party Offeror had been an original party to such
agreement in place of the Offering Investor. If no sale takes place
within the ninety (90) day period referred to in this subsection, then
the Offering Investor shall not transfer the Offered Shares without
again following and being subject to this Section 15.
15.4 Compositech receiving an offer. Notwithstanding subsection 14.1, if, at any
time on or after the third anniversary of the date hereof, Compositech receives
an irrevocable offer (the "TP Offer") from a Person acting at Arm's Length to
Compositech (the "TP Offeror") to purchase for cash (all of which is payable at
closing) all (but not less than all) of the Shares held by Compositech (the
"Offered Shares"), which Compositech wishes to accept, the following procedures
shall apply:
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15.4.1 Compositech shall offer the Offered Shares to the Investors (together
the "Other Shareholders") in accordance with the procedures set forth
in subsection 15.6.
15.4.2 Should one or more of the Other Shareholders exercise options pursuant
to subsection 15.4.1 so as to purchase all of the Offered Shares,
Compositech shall sell to each such Other Shareholder the Offered
Shares for which it has delivered notice(s) of exercise, in accordance
with this Agreement and the terms and conditions of the TP Offer.
15.4.3 Unless one or more Other Shareholders elects within the time required
to exercise its options pursuant to subsection 15.4.1 such that all of
the Offered Shares shall be purchased by the Other Shareholders, the
option of the Other Shareholders shall expire, none of the Other
Shareholders shall be eligible to purchase the Offered Shares, and
Compositech shall be free for a period of ninety (90) days from the
end of the expiration of the last offer period, to sell all (but not
less than all) of the Offered Shares to the TP Offeror on the terms
and conditions provided in the TP Offer, provided, however, that it
shall be a condition precedent to the right of Compositech to sell the
Offered Shares that the TP Offeror has executed a counterpart of this
Agreement in accordance with subsection 25.6 and has agreed to be
bound by the terms and conditions of this Agreement, as if the TP
Offeror had been an original party to such agreement in place of
Compositech. If no sale takes place within the ninety (90) day period
referred to in this subsection, then Compositech shall not transfer
the Offered Shares without again following and being subject to this
Section 15.
15.4.4 In the event of a sale by Compositech of its Offered Shares pursuant
to this subsection 15.4, Compositech shall remain bound by the Stock
Exchange Agreement and by the Compositech Subscription.
15.5 Compositech making an offer. Notwithstanding subsection 14.1, if, at any
time on or after the third anniversary of the date hereof, Compositech wishes to
sell all (but not less than all) of the Shares held by Compositech (the "Offered
Shares"), Compositech shall make an irrevocable offer (the "Compositech Offer")
in accordance with the procedures set forth hereinafter:
15.5.1 Compositech shall offer the Offered Shares to the Investors (together
the "Other Shareholders") in accordance with the procedures set forth
in subsection 15.6.
15.5.2 Should one or more of the Other Shareholders exercise options pursuant
to subsection 15.5.1 so as to purchase all of the Offered Shares,
Compositech shall sell to each such Other Shareholder the Offered
Shares for which it has delivered notice(s) of exercise, in accordance
with this Agreement and the terms and conditions of the Compositech
Offer.
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15.5.3 Unless one or more Other Shareholders elects within the time required
to exercise its options pursuant to subsection 15.5.1 such that all of
the Offered Shares shall be purchased by the Other Shareholders, the
option of the Other Shareholders shall expire, none of the Other
Shareholders shall be eligible to purchase the Offered Shares, and
Compositech shall be free for a period of ninety (90) days from the
end of the expiration of the last offer period, to sell all (but not
less than all) of the Offered Shares to a Person acting at Arm's
Length to Compositech (the "Third Party") on the terms and conditions
provided in the Compositech Offer, provided, however, that it shall be
a condition precedent to the right of Compositech to sell the Offered
Shares that the Third Party has executed a counterpart of this
Agreement in accordance with subsection 25.6 and has agreed to be
bound by the terms and conditions of this Agreement, as if the Third
Party had been an original party to such agreement in place of
Compositech. If no sale takes place within the ninety (90) day period
referred to in this subsection, then Compositech shall not transfer
the Offered Shares without again following and being subject to this
Section 15.
15.5.4 In the event of a sale by Compositech of its Offered Shares pursuant
to this subsection 15.5, Compositech shall remain bound by the Stock
Exchange Agreement and by the Compositech Subscription.
15.6 Procedure for Offers. Offers by the Offering Investor (pursuant to
subsection 15.1, 15.2 or 15.3) or Compositech (pursuant to subsection 15.4 or
15.5) (the "Offering Shareholder") to the Other Investors (pursuant to
subsection 15.1.1, 15.2.1 or 15.3.1), Compositech (pursuant to subsection 15.2.2
or 15.3.2) or the Other Shareholders (pursuant to subsection 15.4.1 or 15.5.1)
(the "Offeree Shareholders") shall be conducted in accordance with the following
procedures:
15.6.1 The Offering Shareholder shall deliver a notice of its desire to sell
the Offered Shares in accordance with the terms of the Offer to the
Offeree Shareholders, and then each of the Offeree Shareholders shall
have an option to acquire its Proportionate Share of the Offered
Shares or, if subsection 15.2.2 applies, the Unaccepted Offered Shares
(the "First Offer"). Each of the Offeree Shareholders who elects to
exercise its option under this subsection shall deliver a notice to
the Offering Shareholder, each other Offeree Shareholder and the
Corporation indicating its exercise of the option, such notice to be
sent no later than thirty (30) days and, if the Offer is made pursuant
to subsection 15.1, no later than fifteen (15) days after the date on
which the notice is received, after which time the option hereby
granted to the Offeree Shareholders shall expire.
15.6.2 If after the First Offer or any Additional Offer made pursuant to this
subsection 15.6.2 (the "Prior Offers"), there remains Offered Shares
that the Offeree Shareholders have not accepted in the Prior Offers
(the "Remaining Offered Shares"), the Offering Shareholder shall
deliver a notice to the Offeree Shareholders that accepted the last
such offer (the "Accepting Offeree Shareholders"), of each such
Accepting Offeree Shareholder's option to purchase its Proportionate
Share of the Remaining Offered Shares (an "Additional
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Offer"). Each Accepting Offeree Shareholders who elects to exercise
its option under this subsection shall deliver a notice to the
Offering Shareholder, each other Accepting Offeree Shareholder and the
Corporation indicating its exercise of the option, such notice to be
sent no later than ten (10) days after the date on which the notice of
the Additional Offer is received, after which time the option hereby
granted to the Accepting Offeree Shareholders shall expire. The
Offering Shareholder shall continue to make offers pursuant to this
subsection 15.6.2 until there is no Accepting Offeree Shareholders or
no Remaining Offered Shares.
15.7 Validity of Offer and Closing provisions. Each offer made pursuant to
subsections 15.1, 15.2, 15.3, 15.4 and 15.5 shall be in a writing signed by the
Offering Shareholder and addressed to the Offeree Shareholders and shall:
15.7.1 identify the subsection pursuant to which it is delivered and identify
and provide particulars of the Offered Shares; (in the event of an
Exchange Offer, such particulars shall include the agreement or
Section of this Agreement pursuant to which the Offered Shares were
issued and the date(s) on which the Offered Shares were issued)
15.7.2 require that the sale of the Offered Shares be on the same terms and
conditions as the TP Offer; (this provision shall not apply in the
event of an Exchange Offer, an Investor Offer or a Compositech Offer)
15.7.3 provide for the deliverance by the TP Offeror of a letter of credit,
surety bond or similar security in form and substance satisfactory to
the Offeree Shareholders, acting reasonably, as security for the
payment of the purchase price of the Offered Shares; (this provision
shall not apply in the event of an Exchange Offer, an Investor Offer
or a Compositech Offer)
15.7.4 state the purchase price per Offered Share, which purchase price shall
be payable in full, in cash, in Canadian dollars at Closing;
15.7.5 state the name and address of the TP Offeror to whom it proposes to
sell the Offered Shares, and include a copy of the TP Offer; (this
provision shall not apply in the event of an Exchange Offer, an
Investor Offer or a Compositech Offer)
15.7.6 provide that the Closing shall be held at the principal offices of the
Corporation at 10:00 a.m. on the Closing Date, or at such other place,
at such other time or on such other date as the parties thereto may
agree, in accordance with the following terms and conditions:
15.7.6.1 at Closing, the Offering Shareholder shall deliver
to the Offeree Shareholders who have accepted an Offer (the
"Purchaser") certificates representing the Offered Shares
being transferred, which certificates shall be
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accompanied by a duly executed assignment of the Offered
Shares to the Purchaser;
15.7.6.2 payment for the Offered Shares being transferred
shall be made in full at Closing. All payments shall be made
by way of bank draft or electronic fund transfer to the
Offering Shareholder's account in Canada (in the United
States if the Offering Shareholder is Compositech);
15.7.6.3 at Closing, the Offering Shareholder shall deliver
to the Purchaser a written warranty that:
15.7.6.3.1 there are no contractual or other restrictions on
the transfer of the Offered Shares being
transferred (other than the restrictions set out
in the Articles of Incorporation and in this
Agreement), and
15.7.6.3.2 the Offering Shareholder is the registered and
beneficial owner of the Offered Shares being
transferred with full right, title and authority
to transfer such Offered Shares to the Purchaser,
free and clear of all claims, liens and other
encumbrances whatsoever;
15.7.6.4 if there is more than one Purchaser, then the
obligations of each Purchaser in connection with the
purchase of the Offered Shares shall be independent of the
obligations of the other Purchaser in that regard. If,
however, at the Closing one of the Purchasers fails to pay
for its Offered Shares but the other Purchasers pay for
their Offered Shares, then the Offering Shareholder shall
not be obliged to proceed with the Closing with the other
Purchasers;
15.7.6.5 at Closing, all necessary and proper corporate
proceedings required by counsel for the Purchaser, acting
reasonably, shall be taken for the transfer of the Offered
Shares;
15.7.6.6 if the Purchaser fails at the Closing to pay for
its Offered Shares, provided that the Offering Shareholder
has fulfilled all of its obligations hereunder, then without
prejudice to the other rights of the Offering Shareholder,
the purchase price for the Offered Shares shall bear
interest from the date of Closing until paid in full at a
rate of interest per annum equal to the Prime Rate plus
three percent (3%). Such interest shall be payable on
demand;
15.7.6.7 at Closing, the Offering Shareholder shall deliver
to the Corporation signed resignations of all of its
nominees as directors, officers and employees of the
Corporation unless waived by the Corporation;
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15.7.6.8 if the Offering Shareholder is bound by a guarantee
whereby such Offering Shareholder has guaranteed the payment
of any debt or liability of the Corporation or if the
Offering Shareholder has granted any advance to the
Corporation, then the Purchaser shall use all reasonable
efforts to cause such guarantee to be released and cancelled
at Closing and/or such advance to be reimbursed at Closing,
failing which the Purchaser shall agree to indemnify and
hold the Offering Shareholder harmless from all claims,
costs, demands and actions suffered or incurred after the
Closing resulting from, arising out of, or relating to such
guarantee or such advances;
15.7.6.9 if any of the conditions set forth in this
subsection 15.7.6 made for the exclusive benefit of the
Purchaser are not satisfied at the Closing, then the
Purchaser may, at its option, either:
15.7.6.9.1 refuse to proceed with the Closing, or
15.7.6.9.2 proceed with the Closing,
in either case without prejudice to its remedies and
recourses against the Offering Shareholder as a result of
such condition not being satisfied;
15.7.6.10 however, if at Closing the Offered Shares being
transferred are not free and clear of all claims, liens and
other encumbrances whatsoever, the Purchaser may, without
prejudice to any other rights which it may have, purchase
such Offered Shares subject to such claims, liens and other
encumbrances. In that event, the Purchaser shall at the
Closing assume all obligations and liabilities with respect
to such claims, liens and encumbrances and the purchase
price payable by the Purchaser for such Offered Shares shall
be satisfied, in whole or in part, as the case may be, by
such assumption. The amount so assumed shall reduce the
purchase price payable at Closing;
15.7.6.11 if the Offering Shareholder fails to complete the
transaction, then the amount which the Purchaser would
otherwise be required to pay to the Offering Shareholder at
Closing may be deposited by the Purchaser into an
interest-bearing trust account in the name of the Offering
Shareholder at the bank branch used by the Corporation. Upon
making such deposit and giving the Offering Shareholder
notice thereof, the purchase of the Offering Shareholder's
Offered Shares by that Purchaser shall be deemed to have
been fully completed and all right, title, benefit and
interest in and to the Offered Shares be deemed to have been
transferred and assigned to and vested in the Purchaser. The
Offering Shareholder shall be entitled to receive the amount
deposited in the trust account upon satisfying the Offering
Shareholder's obligations pursuant to subsection 15.2;
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15.7.6.12 the Offering Shareholder hereby irrevocably
nominates, constitutes and appoints each Purchaser as its
true and lawful mandatary and agent for, in the name of and
on behalf of the Offering Shareholder to execute and deliver
in the name of the Offering Shareholder all such instruments
as may be necessary to effectively transfer the Offered
Shares being sold to the Purchaser. The Offering Shareholder
hereby ratifies and confirms, and agrees to ratify and
confirm, all that Purchaser may lawfully do or cause to be
done by virtue of such appointment and power of attorney;
15.7.6.13 it is recognized that serious and irreparable
damage for which monetary damages would not be an adequate
remedy would result to the Purchaser from the violation of
the provisions of this Section 15. Each party agrees that,
in addition to any and all remedies available to the
Purchaser in the event of a violation of such covenants,
such Purchaser shall have the immediate remedy of injunction
or such other relief as may be decreed or issued by any
court of competent jurisdiction to enforce this Section 15.
15.7.7 in the event that an Investor receives a TP Offer pursuant to
subsection 15.2.4 and the TP Offeror is a competitor of the
Corporation or supplier of main raw materials to the Corporation, the
sale of any Shares to the TP Offeror by the Offering Investor pursuant
to subsection 15.2.4 shall be subject to the written approval of
Compositech, which approval shall not be unreasonably withheld, and
such approval shall be sent to the Offering Investor within thirty
(30) days of the receipt by Compositech of the offer of the Unaccepted
Offered Shares pursuant to subsection 15.2.2. If the Offering Investor
has not received such written approval within the prescribed delays,
the sale of any Shares to the TP Offeror shall be deemed approved.
15.8 Piggy Back - Investors. If Compositech receives a TP Offer pursuant to
subsection 15.4 or makes a Compositech Offer pursuant to subsection 15.5, each
Investor shall have the right, at such Investor's option, in lieu of exercising
options to purchase Offered Shares, to require that all of the Shares held by
such Investor be included in any sale to the TP Offeror or Third Party, together
with the Offered Shares, on terms and conditions which are identical to those
offered by the TP Offeror to Compositech pursuant to the TP Offer or to those
made pursuant to the Compositech Offer, as the case may be and it shall be a
condition precedent of the right of Compositech to sell any Offered Shares that
the TP Offeror or Third Party purchase all the Shares held by an Investor
exercising the right granted in this subsection 15.8. If an Investor wishes to
exercise the right granted in this subsection 15.8, then it shall do so by
giving written notice thereof to Compositech at any time prior to the end of the
expiration of the last offer period of Compositech to sell Offered Shares to the
Investors. For greater certainty, the provisions of this subsection 15.8 shall
only apply if all of the Offered Shares are not purchased by one or more of the
Investors under subsection 15.4 or 15.5 and are sold to the TP Offeror or the
Third Party by Compositech.
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15.9 Corporation's obligations. The Corporation shall record each transfer of
Shares provided, however, that the Corporation shall refuse to record a transfer
of Shares made in contravention of this Agreement.
15.10 Offers irrevocable. All Offers and TP Offers are irrevocable for the
period of time during which they are open for acceptance.
15.11 Share Certificates. The Corporation shall cause, and the Shareholders
shall vote their Shares to cause the Corporation to cause, all certificates for
Shares to be endorsed with the following inscription:
"Ownership, alienation and encumbrance of the Shares represented by
this certificate are subject to the terms of the Unanimous
Shareholders Agreement of Lamines CTEK Inc. dated October 16, 1997, a
copy of which is on file at the registered office of Lamines CTEK
Inc."
SECTION 16 - EXCHANGE RIGHTS
16.1 Exchange rights. Compositech hereby confirms that any Shares held at any
time by an Investor pursuant to this Agreement, shall form part of the shares
entitled to be exchanged pursuant to the Stock Exchange Agreement at the
exchange rate set forth in the Stock Exchange Agreement. Furthermore, in the
event of a transfer by an Investor of any of its Shares in conformity with this
Agreement, Compositech hereby confirms that the transferee of such Shares shall
benefit from those exchange rights contemplated in the Stock Exchange Agreement
at the exchange rate set forth in the Stock Exchange Agreement.
SECTION 17 - OPTION TO SELL
17.1 Termination of License Agreement or Sales Agency and Marketing Agreement.
If, at the initiative of Compositech, the License Agreement or the Sales Agency
and Marketing Agreement is terminated or not renewed, the Shareholders hereby
agree and undertake to determine or have determined, within thirty (30) days of
such termination or non-renewal, the Fair Market Value of the Shares as of the
date of such termination or non-renewal, (which Fair Market Value shall, at the
request of a Selling Investor (as hereinafter defined), be determined as if the
License Agreement and/or the Sales Agency and Marketing Agreement was/were still
in force). Notwithstanding the provisions of Sections 14 and 15, each Investor
(the "Selling Investor") shall, after such determination, have the option, at
any time, to sell to Compositech, which shall have the obligation to purchase,
its Shares at a price per share equal to such Fair Market Value of said Shares,
the whole in addition to the Selling Investor's right to exchange its Shares for
shares of Compositech Common Stock.
17.2 Notice to Compositech. To exercise its foregoing option, the Selling
Investor shall give written notice to that effect to Compositech and each other
Investor of its wish to sell its Shares.
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17.3 Closing. The closing in connection with the purchase by Compositech of a
Selling Investor's Shares pursuant to subsection 17.1 shall be held at the
principal offices of the Corporation at 10:00 a.m. on the date which is sixty
(60) days after the receipt by Compositech of the notice under subsection 17.2,
or at such other place, at such other time or on such other date as the parties
thereto may agree. Payment for the Selling Investor's Shares being purchased by
Compositech shall be made in full at such closing. All payments shall be made by
way of certified cheque or electronic fund transfer to the Selling Investor's
account.
SECTION 18 - FORCED SALE OF THE CORPORATION
18.1 Termination of Sales Agency and Marketing Agreement. If at the initiative
of the Corporation the Sales Agency and Marketing Agreement is terminated
pursuant to subsection 21.1 of the Sales Agency and Marketing Agreement or not
renewed and at least one Investor remains a Shareholder, the Shareholders hereby
agree that the following provisions shall apply:
18.1.1 each Entity shall seek a written offer, which it is willing to accept,
from any Person not Affiliated or Related to any Shareholder (the
"Buyer") to purchase all the issued and outstanding Shares held by all
the Shareholders or to purchase all the assets of the Corporation as
an on-going concern. The Entity (the "Receiving Entity") receiving
such an offer (the "Offer to Purchase") shall send a copy of the Offer
to Purchase to the other Entity (the "Other Entity") within thirty
(30) days of its receipt;
18.1.2 the Other Entity shall, within thirty (30) days of receipt of a copy
of the Offer to Purchase, notify the Receiving Entity of its intent
to:
18.1.2.1 accept the Offer to Purchase in which case both
Parties shall sell all their Shares or shall consent to the
sale of the assets of the Corporation to the Buyer in
accordance with the terms and conditions of the Offer to
Purchase; or
18.1.2.2 refuse the Offer to Purchase in which case the
Other Entity shall be obliged to purchase all the Shares
held by the Receiving Entity on terms and conditions which
are identical to those offered by the Buyer to the Receiving
Entity pursuant to the Offer to Purchase. If the Offer to
Purchase is for the assets of the Corporation, the purchase
price per Share held by the Receiving Entity shall be equal
to the purchase price set forth in the Offer to Purchase
(net of any debts related to such assets and taxes) divided
by the aggregate number of issued and outstanding Shares
held by all the Shareholders.
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18.2 Delays for the forced sale. If within twenty-four (24) months of the notice
of termination or non-renewal, an Offer to Purchase has not been accepted by the
Shareholders nor has one Entity sold all his Shares to the other Entity pursuant
to subsection 18.1, the Shareholders agree to proceed with the winding-up,
dissolution or liquidation of the Corporation within two (2) months of the
twenty-four (24) month period.
18.3 Closing. The closing in connection with the purchase of the Shares or
assets of the Corporation by the Buyer or the purchase by the Other Entity of
all the issued and outstanding Shares of the Receiving Entity pursuant to this
Section 18 shall be held at the principal offices of the Corporation at 10:00
a.m. on the date which is thirty (30) days after the expiry of the applicable
period under this Section 18 or at such other place, at such other time or on
such other date as the parties thereto may agree. Any payment shall be made in
full at such closing. All payments shall be made by way of bank draft or
electronic fund transfer to the Corporation's account or to a Shareholder's
account, as the case may be. Each of the parties hereby undertakes to act in the
best interest of the Corporation until such closing.
18.4 Validity of Offer. The Offer to Purchase shall be in writing signed by the
Buyer and addressed to the Shareholders and shall:
18.4.1 state the name and address of the Buyer;
18.4.2 state the purchase price per Share or of the assets, which purchase
price shall be payable in full, in cash, in Canadian dollars at
closing;
18.4.3 state all the terms and conditions of the purchase of the Shares or
assets;
18.4.4 provide for the deliverance by the Buyer of a letter of credit, surety
bond or similar security in form and substance satisfactory to the
Shareholders, acting reasonably, as security for the payment of the
purchase price of the Shares or assets of the Corporation, as the case
may be;
SECTION 19 - REIMBURSEMENT OF LOANS
19.1 Reimbursement of loans. If full funding is not needed to complete the
Project, the Corporation shall give priority to the reimbursement of any loans
it has received from any financial institutions.
SECTION 20 - FORCED LIQUIDATION
20.1 Unusual Event. The occurrence of any of the following events shall
constitute an unusual event (each an "Unusual Event"):
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20.1.1 the institution of any proceeding for the liquidation, dissolution,
winding-up or other distribution of all or substantially all of the
assets of Compositech;
20.1.2 should either of Compositech or the Corporation: (i) commit an act of
bankruptcy or become insolvent, (ii) make an assignment for the
benefit for its creditors, (iii) file or consent to the filing of a
petition in bankruptcy, a proposal, a notice of intention or
proceeding under the Bankruptcy and Insolvency Act (Canada) or the
United States Bankruptcy Code, as amended, or otherwise take advantage
of, or consent to the filing of any proceeding under, any insolvency
or bankruptcy law, (iv) commence any proceeding relating to it or its
rights, assets or properties under any reorganization, arrangement,
readjustment, composition or liquidation law of any jurisdiction; or
should any proceeding of any type be instituted in any jurisdiction in
respect of the alleged insolvency or bankruptcy of either of them;
20.1.3 should either of the Corporation or Compositech cease to carry on its
business as a going concern for a period of three (3) consecutive
months, except in the event of Force Majeure, in which case this three
(3) consecutive month period shall be extended for an additional six
(6) consecutive months, or should Compositech cease to manufacture
Products (as such term is defined in the License Agreement) for a
period of three (3) consecutive months, except in the event of Force
Majeure, in which case this three (3) consecutive month period shall
be extended for an additional six (6) consecutive months;
20.1.4 any event having a materially adverse impact upon the business of the
Corporation or Compositech;
20.1.5 any event having a materially adverse impact upon the ability of the
Corporation or Compositech to carry on business in the ordinary
course;
20.1.6 any event(s) having a materially adverse impact upon the financial
position of the Corporation or Compositech;
20.1.7 any event having a materially adverse impact upon the Intellectual
Property or the Technology licensed pursuant to the License Agreement
which is necessary for the business of the Corporation;
20.1.8 any event having a materially adverse impact upon the Corporation's
right to use the Intellectual Property or the Technology licensed
pursuant to the License Agreement which is necessary for the business
of the Corporation;
20.1.9 the inability of the Corporation or Compositech to perform its
material obligations under or enforce the execution of any of the
Material Agreements; and
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20.1.10 the Investors becoming aware of any material incorrectness in, or
material breach of, any representation or warranty made to them by the
Corporation or Compositech in this Agreement or in any of the Material
Agreements, provided that damages cannot adequately compensate the
Investors for such material incorrectness or material breach.
20.2 Right to Liquidate. Upon the occurrence of an Unusual Event referred to in
paragraphs 20.1.1 or 20.1.2, the Investors, if they collectively own at least
fifty percent (50 %) of the issued and outstanding Common Shares, will be
entitled, upon written notice to Compositech, to forthwith proceed with the
winding-up, dissolution or liquidation of the Corporation, the whole in
accordance with Section 2 of the Articles of Incorporation. Upon the occurrence
of an Unusual Event referred to in paragraphs 20.1.3, 20.1.4, 20.1.5, 20.1.6,
20.1.7, 20.1.8, 20.1.9 or 20.1.10, the Investors shall give notice of such
Unusual Event to Compositech, setting forth in reasonable detail the nature of
such Unusual Event. Compositech will have thirty (30) days from the date of its
receipt of the said notice to give the Investors notice (the "Contesting
Notice") that it contests the occurrence of such Unusual Event, in which event
the matter shall be definitively settled by arbitration in accordance with
subsection 24.1 hereof. In the event that (i) the arbitrator rules in favour of
the Investors or (ii) Compositech fails to send the Contesting Notice to the
Investors within the said thirty (30) day period, then the Investors, if they
collectively own at least fifty percent (50 %) of the issued and outstanding
Common Shares, will be entitled to forthwith proceed with the winding-up,
dissolution or liquidation of the Corporation, the whole in accordance with
Section 2 of the Articles of Incorporation.
20.3 Additional Right to Liquidate. Furthermore, in the event that (i) a
Financing is not obtained within 24 months of the date hereof, or (ii) the
engineering and design work in respect of the Project is not substantially in
process within 24 months of the date hereof and the construction of the Plant is
not commenced within 24 months of the date hereof, each Entity (the "Liquidating
Entity"), if it owns at least thirty-three and one-third percent (331/3 %) of
the issued and outstanding Common Shares, will be entitled, upon written notice
to the other Entity (the "Non-Liquidating Entity"), to forthwith proceed with
the winding-up, dissolution or liquidation of the Corporation, the whole in
accordance with Section 2 of the Articles of Incorporation. The Non-Liquidating
Entity will have thirty (30) days from the date of its receipt of the said
notice to give the Liquidating Entity notice (the "Contesting Notice") that it
disagrees with the Liquidating Entity's determination that (i) a Financing has
not been obtained or (ii) the engineering and design work in respect of the
Project is not substantially in process or the construction of the Plant has not
commenced, in which event the matter shall be definitively settled by
arbitration in accordance with subsection 24.1 hereof. In the event that (i) the
arbitrator rules in favour of the Liquidating Entity or (ii) the Non-Liquidating
Entity fails to send the Contesting Notice to the Liquidating Entity within the
said thirty (30) day period, then the Liquidating Entity, if it owns at least
thirty-three and one-third percent (33 1/3 %) of the issued and outstanding
Common Shares, will be entitled to forthwith proceed with the winding-up,
dissolution or liquidation of the Corporation, the whole in accordance with
Section 2 of the Articles of Incorporation.
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20.4 Sale of shares of Compositech Common Stock. In the event that the Investors
or Compositech wish to proceed with the winding-up, dissolution or liquidation
of the Corporation in accordance with subsection 20.2 or subsection 20.3 and
Section 2 of the Articles of Incorporation, the Investors shall, unanimously and
at their sole discretion, prior to the distribution of the assets of the
Corporation, notify the Corporation and Compositech by written notice of which
one of the two following subsections shall apply:
20.4.1 each Investor shall, following the distribution of the assets of the
Corporation in accordance with the Articles of Incorporation, sell to
Compositech, for an aggregate purchase price of one dollar ($1), the
number of shares of Compositech Common Stock that each Investor owns
equal to 50 % of the amount received by each Investor on its Class A
Common Shares upon the distribution of the assets of the Corporation
divided by the Compositech Initial Subscription Price; or
20.4.2 the Shareholders shall, prior to the distribution of the assets of the
Corporation, amend the Articles of Incorporation in order to convert
all the issued and outstanding Class A Common Shares into Class B
Common Shares on a share for share basis. Following such amendment to
the Articles of Incorporation and concurrently with the distribution
of assets of the Corporation, each Investor shall sell to Compositech,
and Compositech shall purchase for cancellation from each Investor, a
number of shares of Compositech Common Stock equal to such Investor's
Proportionate Amount divided by the Compositech Initial Subscription
Price. The purchase price for each Investor's shares of Compositech
Common Stock sold shall be such Investor's Proportionate Amount and
Compositech hereby undertakes to direct the Corporation to remit, on
its behalf, upon distribution of the assets of the Corporation, to
each Investor its Proportionate Amount instead of remitting such
amounts to Compositech upon the distribution of the assets of the
Corporation. Furthermore, Compositech hereby undertakes to execute and
deliver to the Corporation and the Investors all such instruments and
resolutions of Compositech as may be necessary to effectively redeem
the Investors' shares of Compositech Common Stock which are sold and
to direct the Corporation to remit to each Investor, on its behalf,
such Investor's Proportionate Amount.
20.5 Failure of Investors to notify. If the Investors fail to notify the
Corporation and Compositech of which of subsections 20.4.1 or 20.4.2 shall apply
or if such notice is not given unanimously by all the Investors, the Corporation
shall distribute its assets in accordance with the Articles of Incorporation and
the parties shall apply subsection 20.4.1 hereof following such distribution.
20.6 Deemed Consent. In the event of the winding-up, dissolution or liquidation
of the Corporation by the Investors or Compositech in accordance with subsection
20.2 or subsection 20.3 and Section 2 of the Articles of Incorporation,
Compositech or the Investors, as the case may be, as Shareholder(s), is/are
hereby deemed to have consented to such winding-up, dissolution or liquidation
of the Corporation and, if subsection 20.4.2 is applicable, to the amendment of
the
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Articles of Incorporation, and hereby irrevocably nominate(s), constitute(s) and
appoint(s) the Investors or Compositech, as the case may be, as its/their true
and lawful mandatary and agent for, in the name of and on behalf of Compositech
or of the Investors, as the case may be, to execute and deliver in the name of
Compositech or the Investors, as the case may be, all such instruments and
resolutions as may be necessary to effectively wind-up, dissolve or liquidate
the Corporation and, if subsection 20.4.2 is applicable, to amend the Articles
of Incorporation. Compositech hereby ratifies and confirms, and agrees to ratify
and confirm, if required, all that such Investors may lawfully do or cause to be
done by virtue of such appointment and power of attorney and the Investors
hereby ratify and confirm, and agree to ratify and confirm, if required, all
that Compositech may lawfully do or cause to be done by virtue of such
appointment and power of attorney.
SECTION 21 - CONFIDENTIALITY
21.1 Confidentiality. Each of the Shareholders agrees to use, and to use its
best efforts to ensure that its authorized representatives use, the same degree
of care as such Shareholder uses to protect its own confidential information, to
keep confidential and not to make use of any Confidential Information in its
possession. Such Shareholder may disclose Confidential Information (i) to any
shareholder, subsidiary or parent of such Shareholder for the purpose of
reporting on the activities of, or evaluating its investment in the Corporation
provided that prior to disclosure such shareholder, subsidiary or parent agrees
to be bound by the confidentiality provisions of this Section 21 and such other
confidentiality provisions as may be requested by the Corporation in its sole
discretion; or (ii) to any TP Offeror, Third Party, Permitted Transferee,
Governmental Body or Limited Partnership for purposes related to the purchase or
transfer of such Shareholder's Shares pursuant to the provisions of Sections 14
or 15 hereof, provided that prior to disclosure such TP Offeror, Third Party,
Permitted Transferee, Governmental Body or Limited Partnership agrees to be
bound by the confidentiality provisions of this Section 21 and such other
confidentiality provisions as may be requested by the Corporation in its sole
discretion.
21.2 Disclosure required. Anything to the contrary herein notwithstanding,
disclosure of Confidential Information shall not be precluded if such disclosure
is in response to a valid order of a Governmental Body or is otherwise required
by law; provided, however, that the said Shareholders shall, if reasonably
possible, first have given notice thereof to the Corporation and shall have, as
appropriate:
21.2.1 fully cooperated in the Corporation's attempt, if any, to obtain a
"protective order" from the appropriate Governmental Body; or
21.2.2 attempted to classify such documents to prevent access by the public,
in accordance with the provisions of any law pertaining to freedom of
information.
21.3 Reasonableness of Covenants. The covenants set forth in subsections 21.1
and 21.2 are reasonable and valid in all respects and each Shareholder hereby
irrevocably agrees to waive
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(and irrevocably agrees not to raise) as a defense any issue of reasonableness
in any proceeding to enforce any such covenant.
SECTION 22 - FINANCIAL INFORMATION AND COVENANTS OF THE CORPORATION
22.1 Financial Information. The Corporation, at its costs, undertakes toward the
Shareholders to remit to the latter the following documents:
22.1.1 within ninety (90) days after the end of each fiscal year, a copy of
the balance sheet of the Corporation as at the end of such year,
together with statements of earnings, shareholders' equity, statement
of changes in financial position and cash flow of the Corporation for
such year, setting forth in each case in comparative form the
corresponding figures for the preceding fiscal year, all in reasonable
detail. The financial statements delivered pursuant to this subsection
shall be audited and duly reported on by the Auditors. These financial
statements shall be prepared in accordance with Canadian generally
accepted accounting principles which shall be applied on a consistent
basis, except if otherwise agreed to by the Board;
22.1.2 within thirty (30) days after the end of each of the first three (3)
fiscal quarters during each fiscal year, a balance sheet of the
Corporation as of the end of such fiscal quarter and statements of
earnings, shareholders' equity, statement of changes in financial
position and cash flow for such quarter and for the period from the
beginning of the then current fiscal year to the end of such quarter,
setting forth in each case in comparative form the corresponding
figures for the corresponding period of the preceding fiscal year, all
in reasonable detail. The financial statements delivered pursuant to
this subsection need not be audited;
22.1.3 within the thirty (30) days following the end of each month, complete
unaudited monthly financial statements, including the balance sheet,
the income statement and the statement of changes in financial
position as well as a comparison with the budgets established for the
same period, containing a detailed explanation of any variations;
22.1.4 at least thirty (30) days prior to the commencement of a fiscal year,
an annual operating budget, projected cash flow and projected income
statement for the Corporation;
22.1.5 promptly following the receipt thereof, any written report,
"management letter" and any other communication submitted to the
Corporation by the Auditors relating to the business, prospects or
financial condition of the Corporation;
22.1.6 within ninety (90) days of the end of each fiscal year of the
Corporation, a report prepared by the Auditors describing all
transactions between the Corporation and Persons not
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dealing at Arm's Length with the Corporation during the preceding
fiscal year and any recommendation of the Auditors, if any;
22.1.7 within one hundred any eighty (180) days of the end of each fiscal
year of the Corporation, a copy of any tax return filed for such
fiscal year;
22.1.8 within fifteen (15) days of the end of each month, a report prepared
by the controller of the Corporation confirming the status of the sale
taxes, deductions at source, other tax payments and other prescribed
payments;
22.1.9 within thirty (30) days of each Board or Shareholders meeting, a copy
of the minutes of such meeting; and
22.1.10 within a reasonable delay, any other reasonable information required
by a Shareholder.
22.2 Inspection by Shareholders. The Corporation shall permit each Shareholder,
at such Shareholder's expense, to visit and inspect the Corporation's
properties, to examine its books of accounts and records and to discuss the
Corporation's affairs, finances and accounts with its officers, all at such
reasonable times as may be requested by the Shareholder.
22.3 Compliance by Corporation. The Corporation hereby agrees to take all
necessary action in order to comply with this Agreement and to comply with all
applicable laws and regulations in respect of its corporate existence and the
conduct of its business including, without limitation, those laws and
regulations dealing with the protection of the environment, and further agrees
to obtain all permits, licenses and authorizations necessary for the conduct of
its business and the ownership of its properties.
22.4 Insurance. The Corporation hereby agrees to use its best efforts to
maintain in full force at all times adequate property insurance, business
interruption insurance and civil liability insurance, which insurance policies
shall be subject to the reasonable approval of the Board, and agrees to advise
each of the Shareholders in writing of any loss or claim under such insurance
policies, immediately upon the occurrence of any loss or claim and further
agrees to advise each of the Shareholders in writing of any renewal or
non-renewal of such insurance policies with a copy of such renewed policy or
non-renewal, as the case may be.
SECTION 23 - NOTICES
23.1 Notices. All notices, requests, 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:
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if to Compositech: COMPOSITECH LTD.
120 Ricefield Lane
Hauppauge, New York
11788-2008, U.S.A.
Attention: the President
Telecopier: (516) 436-5203
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
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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: LAMINES CTEK INC.
600 de la Gauchetiere Street West
Suite 1700
Montreal, Quebec H3B 4L8
Attention: Chairman and President
Telecopier: (514) 398-8055
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
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
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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.
SECTION 24 - ARBITRATION
24.1 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, which may be obtained from any court or tribunal having
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 the arbitration shall be borne in the manner
provided for in the arbitration award.
SECTION 25 - MISCELLANEOUS PROVISIONS
25.1 Press release. Any press release or any public announcement, statement or
publicity with respect to the transaction contemplated in this Agreement shall
be made only with the prior consent of the Shareholders unless such release,
announcement, statement or publicity is required by law, in which case the
Shareholder required to make such release, announcement, statement or publicity
shall use its best efforts to obtain the approval of the other Shareholders to
the form, nature and extent of such disclosure, which approval shall not be
unreasonably withheld.
25.2 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.
25.3 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.
25.4 Transfer contrary to this Agreement. Any purported transfer of Shares
contrary to the terms of this Agreement shall be null and void and have no legal
effect.
25.5 Time of the essence. Time shall be of the essence in this Agreement.
<PAGE>
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25.6 Counterpart. No Person shall become a holder of any Shares without first
having executed a counterpart of this Agreement in accordance with Schedule
"25.6" annexed hereto. Each such counterpart so executed shall be deemed to be
an original and such counterparts together shall constitute one and the same
instrument.
25.7 Originals. 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.
25.8 Termination of Agreement. This Agreement shall terminate automatically upon
the occurrence of any of the following eventualities:
25.8.1 the bankruptcy or dissolution (whether voluntary or involuntary) of
the Corporation;
25.8.2 all issued and outstanding Shares are held by one Person only; or
25.8.3 by written agreement of all of the Shareholders.
25.9 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.
IN WITNESS WHEREOF, the parties have signed at the place and on the date
first hereinabove mentioned.
COMPOSITECH LTD. INDUSTRIES DEVMA INC.
Per: Per:
--------------------------------- ----------------------------------
Jonas Medney
Per:
----------------------------------
<PAGE>
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SOCIETE INNOVATECH DU FONDS DE SOLIDARITE DES
GRAND MONTREAL TRAVAILLEURS DU QUEBEC (F.T.Q)
Per: Per:
--------------------------------- ----------------------------------
Hubert Manseau
LAMINES CTEK INC. FONDS REGIONAL DE SOLIDARITE ILE DE
MONTREAL, limited partnership, by its
general partner, Gestion du Fonds
Regional de Solidarite Ile de Montreal
Inc.
Per: Per:
--------------------------------- ----------------------------------
Louis Riopel Danielle Blanchard
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
<PAGE>
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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
SECTION 1 - PREAMBLE
1.1 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");
1.2 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;
1.3 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:
SECTION 2 - DEFINITIONS
2.1 Definitions. In this Agreement:
2.1.1 "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;
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2.1.2 "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;
2.1.3 "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;
2.1.4 "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;
2.1.5 "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;
2.1.6 "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;
2.1.7 "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;
2.1.8 "Business Day" 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;
<PAGE>
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2.1.9 "Canco" shall have the meaning ascribed thereto in subsection 1.1;
2.1.10 "Canco Shares" shall mean the Initial Canco Shares, the Project Canco
Shares, the Distress Canco Shares and the Subsequent Canco Shares,
collectively;
2.1.11 "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;
2.1.12 "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;
2.1.13 "Closing" shall mean the closing of any exchange of any Canco Shares for
Common Shares;
2.1.14 "Closing Date" shall mean the date of each Closing;
2.1.15 "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;
2.1.16 "Company SEC Documents" shall have the meaning ascribed thereto in
paragraph 6.1.1;
2.1.17 "Company Shares" shall mean any class of shares of the Company's stock;
2.1.18 "Currency Exchange Rate" means the noon rate as reported by the Bank of
Canada, for the conversion of Canadian dollars into US dollars;
2.1.19 "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;
<PAGE>
- 5 -
2.1.20 "dollar", "dollars" and the sign "$" shall, unless otherwise indicated,
each mean lawful money of the United States;
2.1.21 "Exchange Act" shall mean the Securities Exchange Act of 1934 (United
States), as amended from time to time;
2.1.22 "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;
2.1.23 "Exchange Right" shall have the meaning ascribed thereto in subsection
3.2;
2.1.24 "Forced Closing" shall have the meaning ascribed thereto in subsection
5.4;
2.1.25 "Forced Exchange" shall have the meaning ascribed thereto in subsection
3.3;
2.1.26 "Forced Exchange Conditions" shall have the meaning ascribed thereto in
subsection 5.1;
2.1.27 "Forced Exchange Notice" shall have the meaning ascribed thereto in
subsection 5.2;
2.1.28 "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;
2.1.29 "Notice of Exchange" shall have the meaning ascribed thereto in
subsection 4.1;
2.1.30 "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;
2.1.31 "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;
2.1.32 "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;
2.1.33 "Purchaser's Sale Notice" shall have the meaning ascribed thereto in
subsection 5.3;
2.1.34 "Recapitalization" shall have the meaning ascribed thereto in
subsection 3.5;
<PAGE>
- 6 -
2.1.35 "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;
2.1.36 "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;
2.1.37 "SEC" shall mean the United Stated Securities and Exchange Commission;
2.1.38 "SEC Documents" shall mean the documents filed by the Company with the
SEC at any time;
2.1.39 "Securities Act" shall mean the Securities Act of 1933 (United States),
as amended from time to time;
2.1.40 "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.
2.1.41 "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;
2.1.42 "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;
2.1.43 "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;
2.1.44 "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
<PAGE>
- 7 -
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");
2.1.45 "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;
2.1.46 "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;
2.1.47 "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;
2.1.48 "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;
2.1.49 "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");
2.1.50 "Voluntary Closing" shall have the meaning ascribed thereto in
subsection 4.1;
2.1.51 "Weighted Average Price Per Common Share" shall have the meaning
ascribed thereto in Schedule 2.1.51;
<PAGE>
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SECTION 3 - AUTHORIZATION AND EXCHANGE OF CANCO SHARES
3.1 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.
3.2 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").
3.3 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.
3.4 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.
3.5 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 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
<PAGE>
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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.
3.6 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.
3.7 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.
SECTION 4 - EXCHANGE RIGHT
4.1 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.
4.2 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.
<PAGE>
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4.3 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:
4.3.1 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;
4.3.2 the Company shall have complied with all its covenants, obligations and
agreements contained in this Agreement;
4.3.3 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;
4.3.4 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;
4.3.5 the Company shall have furnished to such Purchaser an opinion addressed
to it and dated the date of such Closing 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;
4.3.6 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;
4.3.7 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
<PAGE>
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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
4.3.8 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.
4.4 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.
4.5 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.
SECTION 5 - FORCED EXCHANGE
5.1 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:
5.1.1 the Average Closing Price Per Common Share is at least 150% of the
Weighted Average Price Per Common Share in respect of each Purchaser;
5.1.2 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
<PAGE>
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response to firm orders received by Canco in the normal course of
business justifying the manufacturing of such quantity of laminates;
5.2 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.
5.3 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.
5.4 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.
5.5 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 in part by the Purchasers, provided that any waiver to be
effective must be in writing:
5.5.1 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;
5.5.2 the Company shall have complied with all its covenants, obligations and
agreements contained in this Agreement;
5.5.3 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;
5.5.4 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;
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5.5.5 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;
5.5.6 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;
5.5.7 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;
5.5.8 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
5.5.9 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.
5.6 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
<PAGE>
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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.
5.7 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.
5.8 Delivery. At the Forced Closing, the Purchasers shall surrender the
certificates representing all of the Canco Shares, duly endorsed. Thereupon, the
Company 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.
SECTION 6 REPRESENTATIONS, WARRANTIES, ACKNOWLEDGEMENTS
AND COVENANTS OF THE COMPANY
6.1 Representations and Warranties. The Company hereby represents and warrants
to each of the Purchasers, as of the date hereof, the following:
6.1.1 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,
<PAGE>
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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.
6.1.2 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.
6.1.3 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.
6.1.4 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.
6.1.5 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.
6.1.6 Binding Agreement. This Agreement, when executed and delivered by the
Company, shall constitute a valid and binding obligation of the Company,
enforceable in
<PAGE>
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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.
6.1.7 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.
6.1.8 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 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;
6.1.9 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;
6.1.10 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.
6.1.11 Reservation of Stock. The Company has reserved up to one million two
hundred thousand (1,200,000) Common Shares for issuance hereunder.
6.1.12 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.
<PAGE>
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6.2 Covenants of the Company. The Company hereby covenants as follows:
6.2.1 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;
6.2.2 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;
6.2.3 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 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;
6.2.4 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;
6.2.5 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.
6.2.6 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.
6.2.7 Recapitalization. The Company shall at least ninety (90) days prior to
any Recapitalization, advise each Purchaser of same in writing.
SECTION 7 - REPRESENTATIONS, WARRANTIES AND ACKNOWLEDGEMENTS OF THE PURCHASERS
7.1 Representation and Warranties. Each Purchaser hereby, severally and not
jointly and severally, represents and warrants to the Company as follows:
7.1.1 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
<PAGE>
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of the other Purchasers), and not with the view to, or for resale in
connection with, any distribution thereof.
7.1.2 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.
7.1.3 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.
7.2 Acknowledgements. Each Purchaser hereby makes the following
acknowledgements:
7.2.1 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.
7.2.2 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.
7.2.3 Accredited Investor. It is an "accredited investor" within the meaning
of Rule 501 under the Securities Act.
7.2.4 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.
SECTION 8 - GENERAL PROVISIONS
8.1 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.
<PAGE>
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8.2 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.
8.3 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 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.
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
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.
8.5 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 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
<PAGE>
- 20 -
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 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
<PAGE>
- 21 -
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
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.
8.6 Time of the Essence. Time shall be of the essence in this Agreement.
8.7 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.
<PAGE>
- 22 -
8.8 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.
8.9 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.
8.10 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.
8.11 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 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.
8.12 Preamble. The preamble hereof shall form an integral part of this
Agreement.
8.13 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.
8.14 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.
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: Per:
--------------------------- ---------------------------
<PAGE>
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Per:
---------------------------
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
SALES AGENCY AND MARKETING AGREEMENT MADE AND ENTERED INTO IN THE CITY AND
DISTRICT OF MONTREAL, ON THE 16TH DAY OF OCTOBER, 1997
BY AND BETWEEN: LAMINES CTEK INC., a body politic and corporate, duly
incorporated according to the Canada 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 FIRST PART
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 "Agent")
PARTY OF THE SECOND PART
SECTION 1 - PREAMBLE
1.1 WHEREAS the Agent is engaged in the business of developing, manufacturing,
marketing and selling Agent's and JV's Products (as hereinafter defined);
1.2 WHEREAS the Corporation will be engaged in the business of manufacturing and
selling Canco Products (as hereinafter defined);
1.3 WHEREAS the Agent's and JV's Products and the Canco Products are similar in
nature and the Agent has represented to the Corporation that it is familiar with
the market for the Canco Products in the Territory (as hereinafter defined) and
is qualified and prepared to market and sell the Canco Products throughout the
Territory for the mutual benefit of both parties;
1.4 WHEREAS the parties hereto are desirous of entering into this Agreement
whereby the Agent shall act as the exclusive sales agent of the Corporation and
shall solicit orders on its behalf for the Canco Products within the Territory.
NOW THEREFORE THE PARTIES HAVE AGREED AS FOLLOWS:
<PAGE>
- 2 -
SECTION 2 - DEFINITIONS
2.1 Definitions. In this Agreement:
2.1.1 "Affiliate" has the meaning ascribed thereto in the Canada Business
Corporations Act; however, the parties shall not be deemed to be
"Affiliates" of one another for the purposes of this Agreement;
2.1.2 "Agent Approval" has the meaning ascribed thereto at subsection 4.6;
2.1.3 "Agent Determination" has the meaning ascribed thereto at subsection
4.6;
2.1.4 "Agent's Bad Debts" means the aggregate annual amount of all accounts or
notes receivable related to the sale, in North America, of any Products
manufactured by the Agent or any of its Affiliates at Agent's Plants
that are reasonably considered uncollectible;
2.1.5 "Agent's and JV's Plant(s)" means any manufacturing plant of laminates
for printed wiring boards and all other uses owned, in whole or in part,
by the Agent, its Affiliates or Joint Ventures;
2.1.6 "Agent's Plant(s)" means any manufacturing plant of laminates for
printed wiring boards and all other uses owned, in whole or in part, by
the Agent or its Affiliates;
2.1.7 "Agent's and JV's Products" means any Products manufactured by the
Agent, any of its Affiliates or Joint Ventures at Agent's and JV's
Plants;
2.1.8 "Agent's Products" means any Products manufactured by the Agent or any
of its Affiliates at Agent's Plants;
2.1.9 "Agent's Proportionate Share" means a fraction, the numerator of which
shall be the aggregate amount of annual sales in North America of
Agent's Products and the denominator of which shall be the aggregate
amount of annual sales in North America of Canco Products and Agent's
Products;
2.1.10 "Amount" has the meaning ascribed thereto at subsection 9.3.2;
2.1.11 "Annual Marketing Plan" has the meaning ascribed thereto at subsection
4.1;
2.1.12 "Approval" has the meaning ascribed thereto at subsection 4.6;
<PAGE>
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2.1.13 "Average Price per Similar Product" has the meaning ascribed thereto at
subsection 10.1;
2.1.14 "Canco Product(s)" means any Products manufactured at the Plant;
2.1.15 "Compensated Party" has the meaning ascribed thereto at subsection 10.2;
2.1.16 "Confidential Information" of a Disclosing Party means all business
plans, customers lists, selling price of Products and knowledge
concerning the business and affairs of the Disclosing Party, including,
without limitation, data as to sales of Products or as to customers and
any other information relating to the marketing or selling of the
Products, all of which information is proprietary to the Disclosing
Party, except for information that the Receiving Party can reasonably
demonstrate:
2.1.16.1 has become generally known to those in the printed wiring board
field other than through unauthorized disclosure by the
Receiving Party;
2.1.16.2 is known to the Receiving Party prior to disclosure by the
Disclosing Party; or
2.1.16.3 has become available to the Receiving Party on a
non-confidential basis from a source other than the Disclosing
Party.
2.1.17 "Corporation Determination" has the meaning ascribed thereto at
subsection 4.6;;
2.1.18 "Corporation Expense Adjustment" has the meaning ascribed thereto at
subsection 4.6;
2.1.19 "Corporation's Bad Debts" means the aggregate amount of all accounts or
notes receivable related to the sale of Canco Products in North America
that are reasonably considered uncollectible;
2.1.20 "Corporation's Proportionate Share" means a fraction, the numerator of
which shall be the aggregate amount of annual sales of Canco Products in
North America and the denominator of which shall be the aggregate amount
of sales in North America of Canco Products and Agent's Products;
2.1.21 "Defaulting Party" has the meaning ascribed thereto at subsection 21.1;
2.1.22 "Disclosing Party" has the meaning ascribed thereto at subsection 15.1;
2.1.23 "Dispute" has the meaning ascribed thereto at subsection 18.1;
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2.1.24 "Expense Adjustment" has the meaning ascribed thereto at subsection 4.6;
2.1.25 "Expenses" means the expenses, up to the maximum amount provided in the
Annual Marketing Plan, associated with the sale and marketing of the
Canco Products and Agent's and JV's Products in North America excluding
any expenses set out in subsection 13.1 of the License Agreement and
which are to be paid by the Corporation and similar expenses to be paid
by any licensee of the Agent as provided in a license agreement entered
into by such licensee and the Agent. Any Expenses payable in a currency
other than United States dollars shall be converted into United States
dollars on the date of the payment of such Expenses by the Agent;
2.1.26 "Fairness Committee" has the meaning ascribed thereto at subsection 15.1
of the License Agreement;
2.1.27 "First Period" has the meaning ascribed thereto at subsection 9.3;
2.1.28 "Force Majeure" has the meaning ascribed thereto at subsection 13.1;
2.1.29 "Joint Ventures" means any entity in which the Agent or any of its
Affiliates has an equity interest of at least 33 1/3 %; however, the
parties shall not be deemed to be in a "Joint Venture" relationship with
one another for the purposes of this Agreement;
2.1.30 "License Agreement" means that certain technology licensing agreement
entered into between the Agent and the Corporation on the date hereof;
2.1.31 "Licensee" means any entity which is a licensee or sub-licensee of the
Agent or any of its Affiliates or Joint Ventures and for which the Agent
acts as sales and/or marketing agent; however, for the purposes of this
Agreement, the Corporation shall not be deemed to be a "Licensee" of the
Agent;
2.1.32 "Licensee's Plant(s)" means any manufacturing plant of laminates for
printed wiring boards and all other uses owned, in whole or in part, by
a Licensee;
2.1.33 "Licensee's Products" means any Products manufactured by a Licensee at
Licensee's Plants;
2.1.34 "Normal Capacity" means the Plant both manufacturing and shipping
2,475,000 square feet of Canco Products during the same period of three
(3) consecutive months in response to firm orders received by the
Corporation in the normal course of business justifying the
manufacturing of such quantity of Canco Products;
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2.1.35 "North America" means Canada, the United States of America, Mexico, the
Caribbean Islands including the Antilles and the Bahamas;
2.1.36 "Person" means an individual, partnership, joint venture, trustee,
trust, corporation, division of a corporation, unincorporated
organization or other entity or a government, state or agency or
political subdivision thereof, and pronouns when they refer to a Person
have a similar extended meaning;
2.1.37 "Planned Proportion" means a fraction the numerator of which shall be
the planned manufacturing capacity of the Plant for the twelve (12)
month period in question and the denominator of which shall be the
aggregate of (i) the planned manufacturing capacity of the Plant for
such twelve (12) month period and (ii) the planned manufacturing
capacity of the Agent's and JV's Plants and the Licensee's Plants
situated in North America for such twelve (12) month period;
2.1.38 "Plant" means the manufacturing plant of the Corporation to be situated
in the Montreal region;
2.1.39 "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;
2.1.40 "Product(s)" shall have the meaning ascribed thereto at subsection
2.1.29 of the License Agreement;
2.1.41 "Projected Sales Proportion" means a fraction the numerator of which
shall be the projected annual sales of Canco Products in North America
and the denominator of which shall be the aggregate of (i) the projected
annual sales of Canco Products in North America; (ii) when an Agent's
and JV's Plant has sold Agent's and JV's Products in North America, the
projected annual sales of Agent's and JV's Products in North America of
such plant; (iii) in the event that an Agent's and JV's Plant situated
in North America has not made any sales of Agent's and JV's Products in
North America in a given year, the planned manufacturing capacity of
such plant multiplied by the estimated weighted average selling price of
all Products sold in North America in such year; (iv) when a Licensee's
Plant has sold Licensee's Products in North America, the projected
annual sales of Licensee's Products in North America of such plant; and
(v) in the event that a Licensee's Plant situated in North America has
not made any sales of Licensee's Products in North America in a given
year, the planned manufacturing capacity of such plant multiplied by the
estimated weighted average selling price of all Products sold in North
America in such year;
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2.1.42 "Proportionate" means the proportion equal to the manufacturing capacity
of the Plant divided by the manufacturing capacity of the Plant and the
Agent's and JV's Plants situated in North America;
2.1.43 "Receiving Party" has the meaning ascribed thereto at subsection 15.1.2;
2.1.44 "Representatives" has the meaning ascribed thereto at subsection 15.2;
2.1.45 "Sales Proportion" means a fraction the numerator of which shall be the
actual annual sales of Canco Products in North America and the
denominator of which shall be the aggregate of (i) the actual annual
sales of Canco Products in North America; (ii) when an Agent's and JV's
Plant has sold Agent's and JV's Products in North America, the actual
annual sales of Agent's and JV's Products in North America of such
plant; (iii) in the event that an Agent's and JV's Plant situated in
North America has not made any sales of Agent's and JV's Products in
North America in a given year, the planned manufacturing capacity of
such plant multiplied by the weighted average selling price of all
Products sold in North America in such year; (iv) when a Licensee's
Plant has sold Licensee's Products in North America, the projected
annual sales of Licensee's Products in North America of such plant; and
(v) in the event that a Licensee's Plant situated in North America has
not made any sales of Licensee's Products in North America in a given
year, the planned manufacturing capacity of such plant multiplied by the
weighted average selling price of all Products sold in North America in
such year;
2.1.46 "Similar Products" means, when comparing Products manufactured by
different plants, Products having a similar core thickness, copper-grade
content (ounces per square foot), sheet size and thermal rating;
2.1.47 "Technical Services Agreement" means the services agreement entered into
on the date hereof between the Agent and the Corporation;
2.1.48 "Terms and Policies" shall have the meaning ascribed thereto at
subsection 7.1;
2.1.49 "Territory" means the world;
2.1.50 "Total Bad Debts" means the sum of the Agent's Bad Debts and the
Corporation's Bad Debts.
2.2 Determination of "sales" and "price". For the purposes of the definitions of
"Agent's Proportionate Share", "Corporation's Proportionate Share", "Projected
Sales Proportion" and "Sales Proportion" and for the purposes of determining the
"Average Price per Similar Product" or the "average price per square foot"
pursuant to subsections and hereof, the sales and prices shall be calculated on
an "Ex-Works" basis net of any tariff, customs duties and penalties, sales and
value added taxes, user fees, service fees, packaging costs, freight costs and
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transportation insurance costs, transloading costs and all other costs
associated with deliveries, damage allowances, rebates, returns, volume
incentives and any other costs, duties and fees which should be excluded to
allow the sales and prices to be calculated on an "Ex-Works" basis as provided
in the 1990 Incoterms of the International Chamber of Commerce.
SECTION 3 - EXCLUSIVE SALES REPRESENTATIVE
3.1 Appointment. The Corporation hereby grants to the Agent, who accepts, the
exclusive right to act as the sales representative of the Corporation by
soliciting orders for Canco Products within the Territory in accordance with the
Annual Marketing Plan and the Terms and Policies, the whole in accordance with
the terms and conditions hereof.
3.2 Exclusivity. The Corporation shall not, during the term of this Agreement,
grant to any other person or entity within the Territory the right to represent
or sell the Canco Products. The Corporation hereby undertakes to refer to the
Agent all inquiries relating to the Canco Products received by the Corporation
from actual or potential customers.
SECTION 4 - OBLIGATIONS OF THE AGENT
4.1 Annual Marketing Plan. The Agent shall prepare for each fiscal year of the
Corporation an annual marketing plan (the "Annual Marketing Plan") for the
Corporation, the Agent and all of its Affiliates and Joint Ventures. The Annual
Marketing Plan shall provide without limitation, for the applicable fiscal year,
the following, the goal of which shall be to operate the Plant at maximum
production capacity:
4.1.1 the marketing budget details for North America;
4.1.2 the marketing and sales strategies and policies for North America;
4.1.3 the provisions as to the warranty to be granted for the Canco Products
and Agent's and JV's Products sold in North America;
4.1.4 the maximum Expenses for the fiscal year in question;
and shall provide, without limitation, the following to allow the Corporation to
plan the Plant's production of Canco Products in the fiscal year in question:
4.1.5 the estimated delays for production and delivery of Canco Products;
4.1.6 information regarding the type, regional volumes and quantities of Canco
Products estimated by the Agent to be required in the Territory and to
be manufactured by the Plant during the fiscal year in question; and
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4.1.7 the projected sales of Canco Products and Agent's and JV's Products in
North America.
The Annual Marketing Plan shall be submitted to the board of directors and/or
shareholders, if applicable, of the Corporation for their approval at the latest
three (3) months before the end of each fiscal year of the Corporation. If the
board of directors or shareholders of the Corporation is(are) unable to arrive
at a decision relating to an Annual Marketing Plan, the Annual Marketing Plan of
the prior year shall be renewed mutatis mutandis. The Annual Marketing Plan
shall be adjusted on a quarterly basis (particularly to take into account
changing market conditions including, without limitation, the volume of sales or
expenses related to the marketing of Canco Products and Agent's and JV's
Products and requested types of Products) and any adjustment to the Annual
Marketing Plan shall be submitted to the board of directors and/or shareholders,
if applicable, of the Corporation for their approval before coming into effect.
4.2 First Annual Marketing Plan. The Agent shall submit to the board of
directors of the Corporation, at its first meeting following the execution
hereof, a first Annual Marketing Plan for a period commencing on the date hereof
and ending on December 31, 1998. Until such time as the board of directors
approves the first Annual Marketing Plan, the Corporation shall not make any
payments to the Agent pursuant to Section 9 hereof, however, after such
approval, the Corporation shall reimburse the Agent, retroactively to the date
hereof and in the manner provided in Section 9 hereof, for the Expenses
incurred.
4.3 Guiding Principles. The parties shall, at all times, adhere to the guiding
principles set forth in Section 19 hereof.
4.4 Receivables. The Agent shall, with commercially reasonable diligence,
collect all the outstanding accounts owed to the Corporation pursuant to orders
accepted by the Corporation failing which, the Agent, after reasonable notice
from the Corporation, shall cease to be responsible for such collection. Such
accounts shall remain at all times the property of the Corporation. Furthermore,
the Agent shall transmit promptly to the Corporation any payments received by
the Agent on behalf of the Corporation and until such payments are transmitted,
the Agent shall hold such payments separately on deposit on the Corporation's
behalf. The Agent shall satisfy itself, with due diligence, of the solvency of
customers whose orders it transmits to the Corporation and shall not transmit
orders from customers of which it knows or ought to know that they are unable to
pay their creditors in the ordinary course of business, without informing the
Corporation in advance of such fact.
4.5 Information. The Agent shall, at all times, maintain updated and accurate
information, in all material respects, on the sales of Canco Products and
Agent's and JV's Products and on all the customers (actual, potential and
targeted) of the Corporation, the Agent, its Affiliates and Joint Ventures and
shall make such information and all marketing plans, data and information
concerning the sales of the Canco Products and Agent's and JV's Products
available
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at all times to the Corporation for its consultation and the Corporation shall
be allowed to make copies of all such documents subject to confidentiality
requirements.
4.6 Planned Manufacturing Capacity. The Agent shall be obliged to promptly
inform the Corporation in writing of the planned manufacturing capacity in
square feet of Products in all Agent's and JV's Plants and Licensee's Plants
situated in North America and of any change thereto (the "Agent Determination").
The board of directors of the Corporation shall then decide whether or not to
approve such Agent Determination. In the event that such board of directors
approves of same in writing within 10 days of being informed by the Agent
thereof (the "Approval"), then the parties shall determine any adjustment to the
Expenses already paid by the Corporation for the period in question and the
manner in which same is to be acquitted (the "Expense Adjustment"). In the event
that the parties cannot agree on the Expense Adjustment within 10 days of the
Approval, then the parties shall submit this matter to the Fairness Committee
pursuant to Section 18 hereof. However, in the event that such board of
directors does not approve of the Agent Determination within 10 days of being
informed by Agent thereof, then the parties shall submit the Agent Determination
as well as the Expense Adjustment to the Fairness Committee pursuant to Section
18 hereof.
The board of directors of the Corporation shall be obliged to promptly inform
the Agent in writing of the planned manufacturing capacity in square feet of
Products in the Plant and of any change thereto (the "Corporation
Determination"). The Agent shall then decide whether or not to approve such
Corporation Determination. In the event that the Agent approves of same in
writing within 10 days of being informed by the Corporation thereof (the "Agent
Approval"), then the parties shall determine any adjustment to the Expenses
already paid by the Corporation for the period in question and the manner in
which same is to be acquitted (the "Corporation Expense Adjustment"). In the
event that (i) the parties cannot agree on the Corporation Expense Adjustment
within 10 days of the Agent Approval or (ii) the board of directors of the
Corporation cannot advise the Agent in writing of the Corporation Determination
within 10 days of being requested in writing to do so by the Agent, then the
parties shall submit this matter to the Fairness Committee pursuant to Section
18 hereof. However, in the event that the Agent does not approve of the
Corporation Determination within 10 days of being informed by the board of
directors of the Corporation thereof, then the parties shall submit the
Corporation Determination as well as the Corporation Expense Adjustment to the
Fairness Committee pursuant to Section 18 hereof.
For the first two twelve (12) month periods following the date hereof, the
parties hereby agree that the estimated planned manufacturing capacity of the
Plant is 9 900 000 square feet of Products per twelve (12) month period and the
estimated planned manufacturing capacity of the Agent's Plant situated in Long
Island, New York is 4 950 000 square feet of Products per twelve (12) month
period, the whole subject to the provisions of the first two paragraphs of this
subsection 4.6.
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SECTION 5 - SALES EFFORT
5.1 Sales Effort. The Agent agrees to actively solicit orders for Canco Products
on behalf of Corporation, employ in its own name, at its own expense, such
number of salespersons or representatives as to ensure proper coverage and
servicing of customers and to diligently promote the sale of and stimulate
interest in the Canco Products throughout the Territory.
5.2 Representatives of the Agent. In the event the Agent employs representatives
for the purposes hereof, the Agent shall promptly following the hiring of each
representative send a written notice to the Corporation advising it of the name
and address of such representative, it being understood that notwithstanding
such notice, the Agent shall remain solely responsible for such representatives.
All such representatives shall have to be bound by a trade secrecy and
non-competition agreement reasonably satisfactory to the Corporation. The
Corporation shall not in any way be responsible for the employment, control and
covenants of the employees, representatives and salesmen of the Agent and for
injuries to same or to others through acts or omissions of same.
SECTION 6 - PRODUCTS
6.1 Product specifications. The Agent shall provide to the Corporation on a
timely basis, any Product specifications, within the limits of the Plant's
production capacity, in order to allow the Corporation to manufacture Canco
Products in accordance with the market requirements and the Annual Marketing
Plan. The Corporation shall, in all respects, comply with such specifications,
subject only to the actual limits of the Plant's production capacity, and the
Agent shall ensure that the Agent's and JV's Products also comply, in all
respects, with equivalent specifications in the event the Agent, its Affiliates
or Joint Venture are manufacturing Products which are similar to the Canco
Products.
6.2 Information to be supplied by the Corporation. The Corporation shall supply
to the Agent, on a timely basis, any information required by the Agent to comply
with laws, rules or regulations of any importing country and which are
applicable to the import, use, distribution, marketing or sale of the Canco
Products in such country.
6.3 Exchange of information. The Agent and the Corporation shall openly exchange
all technical information related to the selling of Products, promptly after it
is known, as well as information related to production capacity, supply of
materials and improvement as to quality of Products.
SECTION 7 - TERMS AND CONDITIONS OF SALE
7.1 Terms of purchase. The Corporation shall provide to the Agent a list of
suggested prices per Canco Product and shall have the right to determine terms
and conditions governing the sale of Canco Products as well as policies and
other guidelines relating to credit to be accorded
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to customers (hereinafter collectively referred to as "Terms and Policies"), the
whole in accordance and subject to the Annual Marketing Plan. The Terms and
Policies shall be prepared by the Corporation and communicated to the Agent.
Notwithstanding the foregoing, the Corporation agrees to consult with the Agent,
from time to time, with regard to the Terms and Policies. In the event that the
conditions of the market or any particular circumstance requires the
modification of the Terms and Policies, either party may send a written notice
to the other explaining the necessity of such modifications and the parties
shall agree upon such proposed changes and upon the date of coming into effect
of such changes before such changes come into effect.
7.2 Terms and conditions of sale. When negotiating with customers, the Agent
shall offer the Canco Products strictly in accordance with the terms and
conditions provided in the Annual Marketing Plan and the Terms and Policies.
7.3 Invoicing. The Corporation shall make all shipments of Canco Products and
invoice customers in accordance with the Annual Marketing Plan and the Terms and
Policies in effect at the time of the acceptance of the customer's order by the
Corporation.
SECTION 8 - HANDLING AND ACCEPTANCE OF ORDERS
8.1 Acceptance and rejection of orders. Orders obtained by the Agent shall be in
conformity, in all material respects, with the Annual Marketing Plan and the
Terms and Policies and shall provide for a reasonable delay for production and
delivery. The Agent shall forward to the Corporation the original copy of each
order obtained by the Agent immediately following receipt thereof by the Agent.
All said sale orders shall be subject to acceptance or rejection in whole or in
part by the Corporation, however the Corporation may not unreasonably reject the
orders transmitted by the Agent if such orders originate from credit worthy
customers, conform, in all material respects, to the Annual Marketing Plan and
the Terms and Policies and conform to the guiding principles of Section 19
hereof. The Corporation shall respond diligently to all orders transmitted by
the Agent. In the event that the Corporation does not advise the Agent in
writing that it refuses an order within seven (7) days of receipt thereof, the
Corporation shall be deemed to have accepted such order.
8.2 Payments. All payments shall be made at the head office of the Corporation
or at any other place designated in writing by the Corporation.
8.3 Authority of the Agent. The Agent shall have no authority to make any sales,
accept any order or enter into any sales arrangements or into agreements of any
kind or nature on behalf of the Corporation or otherwise bind the Corporation,
unless previously expressly authorized by the Corporation in writing.
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SECTION 9 - COST SHARING
9.1 Payment of costs incurred by the Agent. No commission on sales of Canco
Products in the Territory shall be payable to the Agent by the Corporation.
However, the Corporation shall pay such costs incurred by the Agent in
accordance with the provisions of this Section 9 only if an Annual Marketing
Plan is approved for the relevant year. Furthermore, in the event that an Annual
Marketing Plan is not approved and the Annual Marketing Plan of the prior year
is renewed mutatis mutandis, the Corporation shall only pay the costs incurred
by the Agent which are reasonable given the marketing needs and financial state
of the Agent and the Corporation, the whole in accordance with the provisions of
this Section 9.
9.2 First 24 months. For the first two twelve (12) month periods following the
date hereof, the Corporation shall pay to the Agent the Planned Proportion of
the Expenses within thirty (30) days of the Agent furnishing to the Corporation
a reasonably detailed invoice of such Expenses which invoice shall be supported
by the relevant invoices, including those of suppliers of marketing services or
materials, if any.
9.3 After the first 24 months. For the period commencing on the 25th month
following the date hereof and ending December 31, 2000 (the "First Period") and
for each fiscal year of the Corporation thereafter, the Corporation shall pay to
the Agent the Sales Proportion of the Expenses in accordance with the following
provisions:
9.3.1 for the First Period and for each fiscal year of the Corporation
thereafter, the Agent shall submit to the Corporation, with the Annual
Marketing Plan, the projected amount of sales of Canco Products, Agent's
and JV's Products and Licensee's Products in North America. The
Corporation shall pay to the Agent the Projected Sales Proportion of the
Expenses within thirty (30) days of the Agent furnishing to the
Corporation a detailed invoice of such Expenses which invoice shall be
supported by the relevant invoices, including those of suppliers of
marketing services or materials, if any; and
9.3.2 thereafter, within sixty (60) days of the end of the fiscal year in
question, the parties shall calculate the Sales Proportion and the
aggregate amount (the "Amount") which should have been paid to the
Agent for such fiscal year based on the Sales Proportion. Any
difference between the Amount and the aggregate amounts paid to the
Agent during such fiscal year pursuant to subsection 9.3.1 hereof,
shall be paid, if the difference is a positive number, by the
Corporation to the Agent, or, if the difference is a negative number,
by the Agent to the Corporation, within thirty (30) days of the
calculation of the Sales Proportion and the Amount.
9.4 International Sales. In the event that the marketing efforts of the Agent
outside North America should benefit the Corporation, the parties agree to
negotiate in good faith the
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compensation that is owing by the Corporation to the Agent for any expenses
associated with the sale and marketing of Canco Products anywhere in the
Territory except North America.
SECTION 10 - ADJUSTMENTS
10.1 Price per Product. Within thirty (30) days following the end of each
quarter of a fiscal year, an average price per square foot of each Similar
Product shall be determined by the parties (the "Average Price per Similar
Product"). The Average Price per Similar Product shall be equal to (i) the total
amount of sales in North America of a Similar Product manufactured by the Plant
and any Agent's Plants, divided by (ii) the total number of square feet of a
Similar Product sold in North America by the Corporation and the Agent and its
Affiliates.
10.2 Adjustments as to price per Product. Within thirty (30) days following the
end of each quarter of a fiscal year, the parties shall determine if any Similar
Products have been manufactured by the Plant and any of the Agent's Plants and
sold in North America during such quarter. If a Similar Product manufactured by
each of the Plant and Agent's Plants is sold in North America at different
average prices per square foot of a Similar Product, any difference in the
average price per square foot of a Similar Product sold in North America and
manufactured by the Plant and the Agent's Plants shall be compensated in the
following manner: (i) the Average Price per Similar Product shall be determined
for each Similar Product pursuant to subsection hereof, (ii) the number of
square feet of a Similar Product sold by the party who has sold such Similar
Product in North America at an actual average price per square foot lower than
the Average Price per Similar Product (the "Compensated Party") shall be
multiplied by the Average Price per Similar Product of such Similar Product, and
(iii) the party having sold such Similar Product in North America at an actual
average price per square foot higher than the Average Price per Similar Product
shall pay to the Compensated Party, within thirty (30) days of the thirty (30)
day delay mentioned above, an amount equal to the product obtained in (ii) less
the total amount of sales in North America of such Similar Product manufactured
by the Compensated Party.
10.3 Bad Debts Adjustments. Within thirty (30) days following the end of each
fiscal year, the parties shall determine the Corporation's Proportionate Share,
the Agent's Proportionate Share, the Corporation's Bad Debts, the Agent's Bad
Debts and the Total Bad Debts. In the event that the Corporation's Proportionate
Share of the Total Bad Debts is an amount which is greater than the
Corporation's Bad Debts, the Corporation shall pay to the Agent the difference
between such amounts and in the event that the Agent's Proportionate Share of
the Total Bad Debts is an amount which is greater than the Agent's Bad Debts,
the Agent shall pay to the Corporation the difference between such amounts. In
the event that following the above-mentioned determination by the parties
pursuant this subsection, any account or note receivable included in the Total
Bad Debts is collected by a party, the parties agree that if the Corporation is
the party who has collected such account receivable, the Corporation shall pay
to the Agent the Agent's Proportionate Share of the amount collected and if the
Agent is the party who has collected such account receivable, the Agent shall
pay to the Corporation the Corporation's Proportionate Share of the amount
collected. All payments by one party to the other party pursuant to this
subsection
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shall be made within thirty (30) days of the of the end of the above thirty (30)
day period or within thirty (30) days of the receipt by a party of the amount of
an account receivable included in the Total Bad Debts.
10.4 Effect of adjustments. The payment of any adjustment amount by the Agent to
the Corporation pursuant to subsections 10.2 or 10.3 shall not be construed as a
remedy to a default by the Agent of its obligations pursuant to subsection 4.3.
10.5 Sales in North America by Joint Ventures or Licensees. If any Joint
Ventures or Licensees sells any Products in North America, the parties agree to
make the necessary adjustments to Section 10 to take into consideration such
sales and to make the necessary modifications to subsection 11.2 to provide for
the disclosure of relevant information concerning such Licensees to effect the
adjustments provided in this Section 10.
10.6 Sales outside North America. If either party or any of their Affiliates or
if any Joint Ventures sells any Products outside North America, the parties
agree to make the necessary adjustments to Section 10 to take into consideration
such sales.
SECTION 11 - RIGHTS OF THE CORPORATION
11.1 Right to visit its customers. The Corporation shall have the right to visit
its customers and communicate with them directly subject to the Corporation
first requesting the Agent to make the necessary arrangements for such visit or
communication and the right of the Agent to join the Corporation during such
visit or to obtain copies of any written communication. All visits with
customers shall be subject to the Agent's approval, which shall not be
unreasonably withheld.
11.2 Right to information. The Corporation shall have the right, during regular
business hours and subject to 24 hours prior notice, to consult, audit (and make
copies of) the Agent's books, records and documents relating to the sale of
Canco Products and Agent's and JV's Products and related matters such as market
studies, customer information and Expenses. Notwithstanding the provisions of
Section 15 hereof, in the event that a Licensee sells any Products in North
America, the Corporation authorizes the Agent to disclose its sales figures to
such Licensee provided that i) such disclosure is required for the Agent to
respect its obligations as sales and/or marketing agent of such Licensee and ii)
such Licensee has granted a reciprocal authorization to the Agent to make
comparable disclosures to the Corporation. However, in the event that such
reciprocal authorization is not granted, the Corporation shall name an
independent auditor, acceptable to the Agent acting reasonably, to consult,
audit (and make copies of) the Agent's books, records and documents relating to
the sale of Licensee's Products. Such independent auditor shall be bound by
confidentiality obligations similar to the provisions of Section 15 hereof.
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SECTION 12 - COMPLAINTS BY CUSTOMERS
12.1 Complaints by customers. The Agent shall immediately inform the Corporation
of any observations or complaints received from customers in respect of the
Canco Products. The parties hereto shall deal promptly and properly with such
complaints. The Corporation shall be solely responsible for any claims made by
its customers as to the failure of the Canco Products to conform to any warranty
as provided to the customer by the Corporation, and the Agent has no authority
to bind in any way the Corporation, unless it has received a specific written
authorization to that effect.
SECTION 13 - FORCE MAJEURE
13.1 Definition of Force Majeure. The obligations of either party hereunder
shall be suspended during the time and to the extent that such party is
prevented from complying therewith due to any event or circumstance beyond the
control and without the fault or negligence of that party so affected (which
circumstance is hereinafter referred to as "Force Majeure") including but not
limited to inevitable accidents, perils of navigation, floods, fire, storms,
epidemics, acts of God, earthquake, explosion, hostilities, civil commotion, war
(declared or undeclared), orders, requisitions, regulations or acts of any
government or governmental authority, whether de jure or de facto or any
official purporting to act under the authority of any such government,
illegality arising from domestic or foreign laws or regulations, insurrections,
failure or slowdown of public utilities or common carriers, inability to procure
raw materials or other circumstances or conditions of a similar nature,
quarantine or custom restrictions, strikes, lockouts or any other labour
difficulty from staff or other members of personnel of a party and/or its
suppliers of goods and/or raw materials.
13.2 Notice. As soon as possible after being affected by a Force Majeure, the
party so affected shall furnish to the other party all particulars of the Force
Majeure and the manner in which its performance is thereby prevented or delayed.
The party whose obligations hereunder have been suspended shall promptly and
diligently pursue appropriate action to enable it to perform such obligations,
except that the parties shall not be obligated to settle any strike, lockout or
other labour difficulty on terms contrary to their wishes.
13.3 Termination. In the event that any Force Majeure cannot be removed,
overcome or abated within twelve (12) months (or such other period as the
parties jointly shall determine) from the date the party affected first became
affected, then either party may, at the expiration of such period by notice to
the other party terminate this Agreement.
13.4 Corporation affected by Force Majeure. In the event that the Corporation is
affected by a Force Majeure and that the manufacturing of Canco Products is
temporarily suspended, the Agent shall use its commercially reasonable best
efforts to supply the Canco Products which it shall temporarily manufacture or
have manufactured for the Corporation's customers in order to avoid any
disruption of supply to the Corporation's customers. Such
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manufacturing and supplying of Canco Products shall immediately cease when the
Force Majeure is removed, overcome or abated.
SECTION 14 - RESTRICTIVE COVENANTS
14.1 Selling of Products. In consideration of the obligations herein undertaken
by the Agent and to assure the Agent's ability to carry out those obligations,
the Agent, its Affiliates and Joint Ventures shall not, anywhere in North
America, market, promote, advertise, sell, distribute or merchandise, directly
or indirectly, products manufactured outside North America and which are the
same or similar to the Canco Products, and the Agent and its Affiliates and
Joint Ventures hereby further agree that they shall include in any license or
sub-license granted to any Person a provision prohibiting such licensee or
sub-licensee (excluding the Corporation) from marketing, promoting, advertising,
selling, distributing or merchandising anywhere in North America, products
manufactured outside North America and which are the same or similar to the
Canco Products (and enforce such provision in the event of any breach thereof by
any such licensee or sub-licensee, to the extent reasonable), except if:
14.1.1 such marketing, promotion, advertising, sale, distribution or
merchandising is directly effected through the Agent, acting as agent or
principal; and
14.1.2 a customer of the Agent, its Affiliates or Joint Ventures or such
licensee or sub- licensee has expressly requested that such products be
manufactured by a specific plant situated outside North America, after
such customer has been informed by the Agent, its Affiliates or Joint
Ventures or such licensee or sub-licensee that the Corporation is an
authorized supplier of such products in North America, and the
Corporation has a reciprocal right to market, promote, advertise, sell,
distribute and merchandise Canco Products in such territory or
territories outside North America from where the Person who owns such
specific plant is authorized to market, promote, advertise, sell,
distribute and merchandise products which are the same or similar to the
Canco Products.
Notwithstanding the foregoing, it is expressly agreed and understood that
the Agent, its Affiliates and Joint Ventures and any licensee or sub-licensee of
the Agent or its Affiliates shall be free to engage in any business activities
they desire which do not involve products which are the same or similar to the
Canco Products.
SECTION 15 - CONFIDENTIALITY PROVISIONS
15.1 Confidential Information. Each party hereby acknowledges that it may
receive Confidential Information from the other party (the "Disclosing Party").
Each party hereby acknowledges, accepts and agrees that:
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15.1.1 the Confidential Information designated as such in the manner provided
for in this Section is non-public and confidential and shall at all
times remain the property of the Disclosing Party;
15.1.2 the disclosure by the Disclosing Party of the Confidential Information
to the other party (the "Receiving Party") is for the sole purpose of
enabling it to carry out its obligations under the terms of this
Agreement; and
15.1.3 the Receiving Party shall not assert, directly or indirectly, any right
with respect to the Confidential Information which may impair or be
adverse to the Disclosing Party's ownership thereof.
15.2 Obligations of parties. Each party shall keep the Confidential Information,
and the fact that the Confidential Information has been provided, confidential
at all times (regardless of the extent or duration of the relationship of the
parties and regardless of whether such Confidential Information was disclosed
before or after the date of this Agreement) and shall not disclose such
Confidential Information, in whole or in part, to any person other than to its
agents, employees and other authorized representatives (collectively herein
referred to as the "Representatives") who need to know such information in
connection with the performance of its obligations under the terms of this
Agreement, without the prior written consent of the Disclosing Party. Each party
shall inform its Representatives of the confidential nature of the Confidential
Information and shall require such Representatives to keep such information
confidential by legally binding means. Each party shall be fully responsible for
any breach of this Agreement by its Representatives and shall, at its expense,
promptly take appropriate legal action to stop or minimize improper disclosures
by any of its employees or ex-employees or other Representatives. Each party
shall exercise careful judgment to minimize the number of its Representatives
who have access to the other party's Confidential Information and to limit them
to individuals reasonably known to be trustworthy and of sound judgment. Neither
party shall use the other's Confidential Information except in accordance with
the terms of this Agreement, and each party shall take all practicable steps to
cause their Representatives to do the same.
15.3 Property Rights In Confidential Information. Any Confidential Information
disclosed by the Disclosing Party shall remain the sole and exclusive property
of the Disclosing Party.
15.4 Transfer of Confidential Information. All Confidential Information
furnished hereunder by either party to the other, whether orally, in writing or
by demonstration or otherwise, shall be maintained as confidential unless the
Disclosing Party notifies the Receiving Party to the contrary in writing.
15.5 Proprietary Information. Neither party hereto shall in any event disclose
any of its proprietary information which may reveal incidentally or otherwise
Confidential Information originating with the Disclosing Party.
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15.6 Breach of Confidentiality. In the event of a material breach of the
undertakings of either party under this Section 15, the parties agree that money
damages may be inadequate and the Disclosing Party shall be entitled to seek
injunctive relief and specific performance. Such remedy shall not be deemed to
be the exclusive remedy for any such breach but shall be in addition to all
other remedies available at law. The Disclosing Party shall be entitled to
reasonable legal fees (including reasonable attorney's fees and expenses) and
other costs reasonably incurred to remedy any and all material breaches by the
Receiving Party of this Agreement.
SECTION 16 - INSURANCE AND INDEMNIFICATION
16.1 Insurance. The Corporation shall maintain, commencing on the date that it
begins to sell Canco Products and throughout the remainder of the term of this
Agreement, comprehensive general liability insurance against claims based upon
product liability for the Canco Products in an amount to be determined by the
parties. Such insurance shall be written with a responsible and reputable
insurer. Such policy or policies shall be in force on the date that the Plant
starts manufacturing Canco Products and the Agent shall be named as additional
insured as its interests may appear with respect to all claims for which an
indemnification is being given pursuant to subsection 16.2 hereof. Such
endorsement shall stipulate that the required coverages will not be reduced or
cancelled without thirty (30) days' prior written notice having been provided to
the Agent.
16.2 Indemnification. The Corporation agrees to indemnify the Agent, in its
capacity as agent, and save and hold it harmless from and against any debts,
liabilities, claims, actions, causes of action, suits, damages, losses, costs
and expenses, including reasonable attorneys' fees and expenses which Agent is
or may become liable for or be compelled to pay as a result or by reason of any
defects, failures or malfunctions of any of the Canco Products, except those
resulting from or arising out of or attributed to (i) the improper conduct,
operations or performance of the Agent, including improper storage, care or
handling or (ii) any warranty given by the Agent in connection with the Canco
Products beyond the warranty provided for by the Corporation in the Terms and
Policies.
SECTION 17 - FAIRNESS COMMITTEE
17.1 Responsibilities. The Fairness Committee will be responsible for the
settling of all Disputes, subject to Section 18 hereof, and all decisions of the
Fairness Committee shall be made unanimously by its members.
SECTION 18 - DISPUTES
18.1 Disputes. Any dispute or controversy (the "Dispute") between the parties
hereto relating only to any matter arising out of or connected with Sections 4,9
or 10 of this Agreement shall be settled by the Fairness Committee, in
accordance with Section 19 hereof. In the event that the Fairness Committee
fails to come to a decision within ten (10) days of its first meeting,
<PAGE>
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then the Dispute shall be referred to and definitively settled by arbitration in
accordance with the arbitration provisions set forth in subsection 18.2 hereof.
In rendering its decision, the arbitrator(s) shall adhere to and be guided by
the principles set forth in Section 19 hereof.
18.2 Arbitration. All disputes, controversies or claims arising out of or
relating to this Agreement, or the breach, termination or invalidity thereof,
other than a Dispute, shall be definitively settled and 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 jurisdiction, and until a final decision is rendered, this
Agreement shall continue in effect as if the dispute, controversy or claim did
not exist. 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 the arbitration shall be borne in the manner
provided for in the arbitration award.
SECTION 19 - GUIDING PRINCIPLES
19.1 Guiding principles. In executing their obligations and responsibilities
hereunder, the parties shall apply and the Fairness Committee shall adhere to
the following principles:
19.1.1 the Proportionate allocation by the Agent of manufacturing contracts for
Products between the Plant and the Agent's and JV's Plants situated in
North America in order that the Plant never operates at a production
capacity lower than that of any Agent's and JV's Plants situated in
North America;
19.1.2 the efficient, equitable and Proportionate allocation by the Agent of
manufacturing contracts for Products having a similar profit margin
between the Plant and the Agent's and JV's Plants situated in North
America;
19.1.3 the carrying out of the marketing and promotion of the Products
manufactured by the Plant and the Agent's and JV's Plants in a
cooperative, rather than competitive manner;
19.1.4 promoting fair business relations between the Agent and the Corporation;
19.1.5 the recognition that the customer has the final say and that the needs
of the customer are paramount (in the event that a customer has a
preference between the Corporation and the Agent, its Affiliates or
Joint Ventures, the parties will comply with such preference);
19.1.6 the equitable application of all credit policies and credit risks
regarding the sale of Products between the Agent, its Affiliates and
Joint Ventures and the Corporation;
19.1.7 the efficient management of resources;
<PAGE>
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19.1.8 the continual and complete exchange of information and data about the
customers of the Corporation and the Agent, its Affiliates and Joint
Ventures;
19.1.9 the sharing of customer lists, customer data and sales statistics
between the Agent and the Corporation;
19.1.10 the sharing of all Expenses in accordance with the provisions of this
Agreement.
SECTION 20 - TERM
20.1 Initial term. The term of this Agreement shall be for six (6) years from
the date of execution hereof. This Agreement shall be renewed on the same terms
and conditions for additional six (6) year periods, unless one party gives
written notice to the other of its intention to terminate this Agreement at
least twelve (12) months prior to the expiration of the term hereof or of any
renewal period hereof.
SECTION 21 - TERMINATION
21.1 Breach of Material Provisions. In the event of a breach by a party of any
of the material provisions of this Agreement (the "Defaulting Party"), the
aggrieved party shall have the right to terminate this Agreement. Such right of
termination shall be exercised by the aggrieved party giving written notice to
the Defaulting Party specifying the manner in which the Defaulting Party has
breached the Agreement and stating that the party giving notice elects to
terminate this Agreement as of a date not less than thirty (30) days subsequent
to the date of such notice unless the Defaulting Party shall have cured such
breach within the foregoing period. In the event the Defaulting Party fails to
cure such breach within the said notice period, this Agreement shall terminate
on the date specified in such notice as hereinabove provided, without prejudice
to any other rights of the non-defaulting party to seek other remedies or take
measures that may be otherwise available to it at law.
21.2 Termination without notice. In addition to the rights of the parties set
forth in subsection 21.1 hereof, each party shall have the right to terminate
this Agreement without notice or demand, upon the bankruptcy of the other party,
the occurrence of the insolvency of the other party, the filing by the other
party of a petition in bankruptcy or the filing of such petition against the
other party, the making of a proposal by the other party to its creditors or it
otherwise taking advantage of any insolvency legislation, the making by the
other party of an assignment for the benefit of its creditors, or the
application by the other party or any of its creditors for the appointment of a
trustee, custodian, receiver or any other person with like powers.
21.3 Corporation's right to terminate. In addition to the rights of the
Corporation set forth in this Agreement, the Corporation shall have the right to
terminate this Agreement upon simple notice of termination, if the Agent ceases
to hold any shares in the Corporation, in which case the termination of this
Agreement will be effective upon receipt or service of such notice.
<PAGE>
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21.4 Parties liability for termination or non-renewal. In the event of
termination of this Agreement other than pursuant to subsection 21.1, or the
non-renewal at the end of the stated term or any renewal thereof, the parties
shall not be liable to each other because of such termination or non-renewal
hereof for compensation, reimbursement or damages on account of the loss of
prospective profits on anticipated sales, or on account of expenditures,
investments, leases or commitments in connection with the business or goodwill
of the other party as contemplated herein, or for any other reason whatsoever
provided that such termination or non-renewal is effected in accordance with the
provisions of this Agreement.
SECTION 22 - EFFECT OF TERMINATION
22.1 Effect of termination. Upon termination of this Agreement for any reason
whatsoever or the expiration of its term:
22.1.1 the Agent will immediately cease to represent the Corporation;
22.1.2 all amounts owing by one party to the other pursuant to this Agreement
will become due and payable as provided in this Agreement
notwithstanding its termination or the expiration of its term;
22.1.3 the Agent will immediately deliver to the Corporation all information in
its possession concerning the marketing and sale of Canco Products,
including, without limitation, all information concerning sales of Canco
Products, all advertising materials, customer lists, prices, active
quotations and market studies;
22.1.4 the Corporation will immediately deliver to the Agent all information in
its possession concerning the marketing and sale of Agent's and JV's
Products, including, without limitation, all information concerning
sales of Agent's and JV's Products, all advertising materials, customer
lists, prices, active quotations and market studies;
22.1.5 the Agent will promptly return to the Corporation all advertising
material and samples which have been supplied to it by the Corporation
and are in the Agent's possession.
22.2 Surviving provisions. Termination of this Agreement for any reason
whatsoever or the expiration of the term of this Agreement shall not release any
party from any of its obligations which remain unfulfilled at such time or
release any party from those obligations which survive such termination or
expiration, including without limitation the obligations set forth in Sections
14 and 15.
SECTION 23 - PROHIBITION OF ASSIGNMENT
23.1 Assignment. The parties shall not assign nor transfer any of their rights
or obligations under this Agreement without the prior written consent of the
other party. However,
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the Corporation may hypothecate, assign or transfer its rights or obligations
under this Agreement to its lenders. Subject to the foregoing, this Agreement
shall enure to the benefit of and be binding upon each party hereto and its
respective successors and permitted assigns.
SECTION 24 - NOTICES
24.1 Notices. All notices, requests, 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 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 the Agent: 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: 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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SOCIETE INNOVATECH DU GRAND MONTREAL
2020 University Avenue
Suite 1527
Montreal, Quebec
H3A 2A5
Attention: President and Chief Executive Officer
Telecopier: (514) 864-4220
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
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
<PAGE>
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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
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
or at such other address as each party may have
previously indicated to the other party 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.
SECTION 25 - MISCELLANEOUS PROVISIONS
25.1 Further documents. Each party upon the request of the other, 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.
25.2 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.
25.3 Currency and conversion rate. All payments contemplated herein shall be
effected in the currency of the United States of America, at the address
designated by either party from time to time. For the purpose of calculating any
amount of sales or accounts receivable, the
<PAGE>
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amounts which are not in United States dollars will be converted into United
States dollars based on the average monthly closing rate for the period of sales
or of the accounts receivable as reported by the Chase Manhattan Bank, for the
conversion of such foreign currency into United States dollars.
25.4 Interest on due amounts. If any amounts owed by one party to the other are
overdue, the party owing such amounts will, in addition to paying the unpaid
amounts, pay to the other party interest on these unpaid amounts at an annual
rate equal to two percent (2 %) over the Prime Rate, calculated daily from their
due date until full payment.
25.5 Waiver of default. The failure of any party at any time to take action
against the other party, or the failure of the other party to terminate this
Agreement as provided herein shall not affect either party's right to require
the full performance of this Agreement at any time thereafter, and a waiver by
either party of a breach of any provision of this Agreement shall not constitute
a waiver of any subsequent breach thereof nor nullify the effectiveness of such
provisions or the right of such party to demand redress for their respective
losses, damages and prejudices.
25.6 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.
25.7 Separate entities. The parties hereto acknowledge that the Agent is an
independent contractor in virtue of the terms and conditions of this Agreement
and this Agreement shall not be construed so as to constitute the Agent and the
Corporation partners or joint venturers or so as to create any other form of
legal association which imposes liability upon either party for the acts or
omissions of the other party.
25.8 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.
25.9 Amendments. No amendment of this Agreement shall be binding unless
otherwise expressly provided in an instrument duly executed by the parties.
25.10 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.
<PAGE>
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25.11 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.
25.12 Preamble. The preamble hereof shall form an integral part of this
Agreement.
25.13 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.
25.14 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.
25.15 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.
COMPOSITECH LTD. LAMINES CTEK INC.
Per: _________________________ Per: _________________________
Jonas Medney Louis Riopel
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.Q.) and Fonds Regional de Solidarite
Ile 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 the 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 Shareholders shall not be entitled to refuse the next
proposed Investors' Nominee in accordance with the above sentence.
As further conditions to 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 be prepared and filed, a Statement on Schedule 13D under the
<PAGE>
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 or (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 term "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 owner and as beneficial owner; (ii) a governmental
body of or controlled by 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.
DATED: October 16, 1997
<PAGE>
COMPOSITECH LTD.
per:
-------------------------------- ---------------------------------------
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
- ------------------------------------ ---------------------------------------
JONAS MEDNEY
Address:
120 Ricefield Lane
Hauppauge, New York
11788-2008, U.S.A.
Attention: Jonas Medney
Telecopier: (516) 436-5203
SOCIETE INNOVATECH DU GRAND MONTREAL FONDS DE SOLIDARITE DES TRAVAILLEURS DU
QUEBEC (F.T.Q.)
Per: Per:
-------------------------------- -----------------------------------
Hubert Manseau Richard Bourget, Senior Vice-
President, Investments
Address: Address:
2020 University Avenue 8717 Berri Street
Suite 1527 Montreal, Quebec
Montreal, Quebec H2M 2T9
H3A 2A5 Attention: Vice President, Legal
Affairs
Attention: President and Chief
Executive Officer Telecopier: (514) 383-2500
Telecopier: (514) 864-4220 with a copy to: Senior Vice President,
Investments
Telecopier: (514) 383-2505
-3-
<PAGE>
INDUSTRIES DEVMA INC. FONDS REGIONAL DE SOLIDARITE ILE DE
MONTREAL, by its general partner,
Gestion du Fonds Regional de Solidarite
Ile de Montreal Inc.
Per:
--------------------------------
Per: Per:
-------------------------------- -----------------------------------
Address: Address:
600, de la Gauchetiere Street West 255, St-Jacques Street West
Suite 1700 3c Floor
Montreal, Quebec Montreal, Quebec
H3B 4L8 H2Y 1M6
Attention: President Attention: Managing Director
Telecopier: (514) 395-8055 Telecopier: (514) 845-0625
-4-
99.1
KCSA News
- -----------------------------------------------------------------------
Public & Investor Relations, Corporate & Marketing Communications
FOR: COMPOSITECH LTD.
120 Ricefield Lane
Hauppauge, NY 11788-2008
CONTACT: Fred Klimpl
(516) 436-5200
KCSA Joseph A. Mansi/Leslie A. Schupak
CONTACT: (212) 682-6300 ext. 205/207
FOR IMMEDIATE RELEASE
---------------------
COMPOSITECH LTD.
CLOSES $24 MILLION JOINT VENTURE IN CANADA
----------
Company's Second Copper-Clad Laminate Production Facility
to be Built in Montreal
HAUPPAUGE, NY, October 17, 1997 -- Compositech Ltd. (NASDAQ: CTEK) announced
today that it had closed its previously announced transaction with a Quebec
investor group to form a 50/50 joint venture in Canada.
The joint venture plans to establish a plant in the Montreal area for the
production of copper-clad laminates for printed circuit boards using a patented
process and equipment developed by Compositech Ltd.
The Montreal plant, planned to begin production late in 1998, is expected
to have an annual sales capacity of at least $30 million. Production from the
plant will be marketed principally in North America through Compositech Ltd.
Fred Klimpl, President, said, "Our partners in this venture include some of
the largest and most influential organizations in Canada active in joint venture
and investment projects. We are pleased that we shall be building with them a
world-class facility to manufacture our revolutionary, superior copper-clad
laminates. This location, combined with our New York operation, is expected to
meet anticipated North American demand for our product line."
The investor group is comprised of four institutional investors: Societe
Generale de Financement du Quebec, Fonds de solidarite des travailleurs du
Quebec (F.T.Q.), Societe Innovatech du Grand Montreal and Fonds regional de
solidarite Ile de Montreal. The total project is budgeted at over $24 million.
Approximately $11 million will be invested by the joint venture participants.
Approximately $13 million of the funds will be in the form of debt financing
pursuant to commitments from National Bank of Canada and the Canada-Quebec
Subsidiary Agreement on Industrial Development, an organization formed in 1991
to strengthen the Quebec economy by increasing major industrial investment. As
part of the
<PAGE>
transaction, the investor group has purchased $5.4 million of Compositech
Ltd. common stock at a price per share of $5.09. The funds received by
Compositech Ltd. have been used for the purchase of its 50% interest in the
joint venture.
Compositech Ltd. develops, produces and markets innovative and superior
copper-clad fiberglass epoxy laminates used to make printed circuit boards,
which are essential components of personal computers, workstations, data
communication and telecommunication equipment, automobiles and virtually all
electronic equipment.
###
The statements made in this press release contain certain forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934 that involve a number of
risks and uncertainties. Actual events or results may differ from the
Compositech Ltd.'s expectations. In addition to the matters described in this
press release, risk factors listed from time to time in Compositech Ltd.'s SEC
reports and filings, including, but not limited to, its Quarterly Report on Form
10-QSB for the quarter ended June 30, 1997, as well as its annual report on Form
10-KSB for the year ended December 31, 1996, may affect the results achieved by
Compositech Ltd.
This release is available on the KCSA Worldwide website at www.kcsa.com.
