As filed with the Securities and Exchange Commission on March ___, 1999
Registration Number 333-______
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Compositech Ltd.
(Exact name of registrant as specified in its charter)
Delaware 11-2710467
(State of incorporation) (I.R.S. Employer Identification No.)
120 Ricefield Lane, Hauppauge, NY 11788 - (516) 436-5200
(Address, including zip code, and telephone number, including area
code, of registrant's principal executive offices)
Samuel S. Gross
Executive Vice President, Secretary and Treasurer
120 Ricefield Lane, Hauppauge, NY 11788 - (516) 436-5200
(Address, including zip code, and telephone
number, including area code, of agent for service)
With a copy to:
Edward F. Cox, Esq.
Patterson, Belknap, Webb & Tyler LLP
1133 Avenue of the Americas, New York, NY 10036-6710 (212) 336-2000
Approximate date of commencement of proposed sale to the public: As soon as
practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. |_|
If any of the securities being registered on this Form are being offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. |X|
If this Form is filed to register additional securities pursuant to Rule
462(b) under the Securities Act, please check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. |_|
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. |_|
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. |_|
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<TABLE>
CALCULATION OF REGISTRATION FEE
=========================================================================================================
Title of Each Class Amount of Proposed Maximum Proposed Maximum Amount of
of Securities to be shares to be Offering Price Aggregate Offering Registration
Registered Registered Per Share (1) Price (1) Fee (1)
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock 1,633,657 (2) $2.109 $ 3,445,383
($0.01 par value)
Common Stock 949,022 (4) $2.109 $ 2,001,487
($0.01 par value) (3)
Common Stock 275,040 (4) $2.125 $ 584,460
($0.01 par value) (5)
Common Stock 75,000 (4) $2.6125 $ 195,938
($0.01 par value) (6)
Common Stock 36,000 (4) $3.000 $ 108,000
($0.01 par value) (7)
- ---------------------------------------------------------------------------------------------------------
Totals 2,968,719 $ 6,335,268 $ 1,762
=========================================================================================================
</TABLE>
(1) The maximum offering price of $2.109 per share for the 1,646,157 shares of
common stock, par value $0.01, of Compositech Ltd.,(the "Common Stock") was
based upon the average of the high and low prices of the Common Stock of
the Company, par value $.01, reported by The Nasdaq SmallCapSM Market for
the Registrant's Common Stock on March 25, 1999, a date within five (5)
business days prior to the date of initial filing of this Registration
Statement (in accordance with Sections (c) and (g) of Rule 457 of
Regulation C). The maximum offering price of $2.109 is used for the 949,022
shares of Common Stock underlying the $1.125 Warrants, the $2.035 Warrants
and the $2.053 Warrants, (each as defined below), since it is higher than
the exercise price of such warrants. The maximum offering price per share
of $2.125, $2.6125 and $3.00, respectively, for the 275,040, 75,000 and
36,000, respectively, shares of Common Stock underlying the $2.125
Warrants, $2.6125 Warrants and the $3.00 Warrants (each as defined below)
equals their respective exercise price, since in each case it is higher
than the average of the high and low prices of the Common Stock of the
Company, par value $.01, reported by The Nasdaq SmallCapSM Market for the
Registrant's Common Stock on March 25, 1999, a date within five (5)
business days prior to the date of initial filing of this Registration
Statement (in accordance with Section (g) of Rule 457 of Regulation C).
(2) Represents 1,554,301 shares of Common Stock issued pursuant to a private
placement of the Company's Common Stock, which had its final closing on
March 26, 1999 and 79,356 shares of Common Stock issued as compensation in
connection with a loan financing which had its final closing in January
1999.
(3) Represents (i) 475,635 shares of Common Stock underlying Common Stock
Purchase Warrants, exercisable at $1.125 per share until February 15, 2001
(the "$1.125 Warrants"); (ii) 36,855 shares of Common Stock underlying
Common Stock Purchase Warrants, exercisable at $2.035 per share until
February 15, 2001 (the "$2.035 Warrants"); (iii) 36,532 shares of Common
Stock underlying Common Stock Purchase Warrants, exercisable at $2.053 per
share until February 15, 2001 (the "$2.053 Warrants"); and (iv) 400,000
shares of Common Stock underlying Common Stock Purchase Warrants,
exercisable at $1.25 per share until January 12, 2004 (the "$1.25
Warrants"). All of these warrants, excluding the $1.25 Warrants which were
issued in exchange for consulting services, were issued pursuant to a
private placement of Common Stock which had its final closing on March 26,
1999.
(4) Pursuant to Rule 416 of the Securities Act of 1933, there are also being
registered hereunder such indeterminate number of additional shares as may
be issued to the selling stockholders because of exercise price adjustments
pursuant to the terms of the Common Stock Purchase Warrants.
(5) Represents shares of Common Stock underlying Common Stock Purchase
Warrants, exercisable at $2.125 per share until February 15, 2001 (the
"$2.125 Warrants"), issued pursuant to a private placement of Common Stock
which had its final closing on March 26, 1999.
(6) Represents shares of Common Stock underlying the Common Stock Purchase
Warrants, exercisable at $2.6125 per share until April 24, 2003 (the
"$2.6125 Warrants"), issued as compensation in connection with the
Registrant's final conversion of its 5% Convertible Debentures, which
occurred in April 1998
(7) Represents shares of Common Stock underlying the Common Stock Purchase
Warrants, exercisable at $3.00 per share until August 3, 2000 (the "$3.00
Warrants"), issued to several stockholders in connection with a private
placement of the Company's Common Stock in 1995.
The registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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The information contained in this prospectus is not complete and may be changed.
We may not sell these securities until the registration statement of which this
Prospectus is a part is effective. This Prospectus is not an offer to sell these
securities and is not soliciting an offer to buy these securities in any State
where the offer or sale is not permitted.
Subject to Completion, dated April ___, 1999
PROSPECTUS
COMPOSITECH LTD.
2,968,719 Shares of Common Stock
---------------------------------------
This Prospectus relates to an offering (the "Offering") by certain Stockholders
named herein under the caption "Selling Stockholders" (collectively, the
"Selling Stockholders") or by pledgees, donees, transferees or other successors
in interest of the Selling Stockholders (the "Transferees") for sale to the
public of the following securities of Compositech Ltd., a Delaware corporation
("Compositech" or the "Company"): (i) 1,554,301 shares of Common Stock, par
value $.01 of the Company (the "Common Stock"), issued pursuant to a private
placement of the Company's common stock, which had its final closing on March
26, 1999; (ii) 79,356 shares of Common Stock, issued pursuant to a loan
financing which had its final closing in January 1999; (iii) 475,635 shares of
Common Stock underlying Common Stock Purchase Warrants, exercisable at $1.125
per share until February 15, 2001 (the "$1.125 Warrants"), issued pursuant to a
private placement of the Company's Common Stock, which had its final closing on
March 26, 1999; (iv) 36,855 shares of Common Stock underlying Common Stock
Purchase Warrants, exercisable at $2.035 per share until February 15, 2001 (the
"$2.035 Warrants"), issued pursuant to a private placement of the Company's
Common Stock, which had its final closing on March 26, 1999; (v) 36,532 shares
of Common Stock underlying Common Stock Purchase Warrants, exercisable at $2.053
per share until February 15, 2001 (the "$2.053 Warrants"), issued pursuant to a
private placement of the Company's Common Stock, which had its final closing on
March 26, 1999; (vi) 275,040 shares of Common Stock underlying Common Stock
Purchase Warrants, exercisable at $2.125 per share until February 15, 2001 (the
"$2.125 Warrants"), issued pursuant to a private placement of the Company's
Common Stock, which had its final closing on March 26, 1999; (vii) 400,000
shares of Common Stock underlying Common Stock Purchase Warrants, exercisable at
$1.25 per share until January 12, 2004 (the "$1.25 Warrants"), issued in
exchange for consulting services; (viii) 75,000 shares of Common Stock
underlying Common Stock Purchase Warrants, exercisable at $2.6125 per share
until April 24, 2003 (the $2.6125 Warrants"), issued as compensation in
connection with the Registrant's final conversion of its 5% Convertible
Debentures, which occurred in April 1998; and (ix) 36,000 shares of Common Stock
underlying Common Stock Purchase Warrants, exercisable at $3.00 per share until
January 12, 2004 (the "$3.00 Warrants", collectively with the $1.125 Warrants,
the $2.035 Warrants, the $2.053 Warrants, the $1.25 Warrants and the $2.6125
Warrants, the "Warrants"), issued in connection with the Company's 1995 private
placement.
The number of shares of Common Stock issuable upon exercise of the Warrants is
subject to adjustment in certain events. The number of shares to be offered for
sale is based on the number of shares to be registered according to the
agreements with the stockholders.
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---------------------------------------
THE SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK AND SUBSTANTIAL
DILUTION. SEE "RISK FACTORS" ON PAGE 14 FOR INFORMATION THAT SHOULD BE
CONSIDERED CAREFULLY BEFORE YOU MAKE AN INVESTMENT DECISION.
---------------------------------------
The Company will not receive any of the proceeds from the sale of shares of
Common Stock being registered by this Registration Statement (the "Shares"). The
Company will receive the exercise price upon exercise of the Warrants, if
exercised. The Registration Statement of which this Prospectus forms a part is
being filed pursuant to the terms of certain agreements between the Company and
the Selling Stockholders.
The Selling Stockholders have advised the Company that they or the Transferees
may sell, directly or through brokers, all or a portion of the securities
offered hereby in negotiated transactions or in one or more transactions in the
market at the price prevailing at the time of sale. In connection with such
sales, the Selling Stockholders, the Transferees and any participating broker
may be deemed to be "underwriters" of the Common Stock within the meaning of the
Securities Act of 1933, as amended (the "Securities Act"). It is anticipated
that usual and customary brokerage fees will be paid by the Selling Stockholders
or Transferees in all open market transactions. The Company will pay all other
expenses of this Offering. See "Plan of Distribution."
The Company has informed the Selling Stockholders that the anti-manipulation
provisions of Regulation M under the Securities Exchange Act of 1934, as amended
(the "Exchange Act") may apply to the sales of their shares offered hereby. The
Company also has advised the Selling Stockholders of the requirement for
delivery of this Prospectus in connection with any sale of the shares offered
hereby. Certain Selling Stockholders may from time to time purchase shares of
Common Stock in the open market. The Selling Stockholders have been notified
that they should not commence any distribution of shares of Common Stock unless
they have terminated their purchasing and bidding for Common Stock in the open
market as provided in applicable securities regulations.
The Common Stock is listed and traded on The Nasdaq SmallCap Market(SM) under
symbol "CTEK." The closing price of the Common Stock on March 25, 1999 was
$2.125 per share.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED THESE SECURITIES OR PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this Prospectus is April ___, 1999.
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WHERE YOU CAN FIND MORE INFORMATION
The Company is subject to the informational requirements of the Exchange Act,
and files annual, quarterly and current reports, proxy statements and other
information with the Securities and Exchange Commission (the "Commission"). Such
reports, proxy statements and other information concerning the Company can be
inspected and copied at the public reference facilities maintained by the
Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C., 20549, and at
the Commission's Regional Offices at the 13th Floor, World Trade Center, New
York, New York, 10048; and 500 West Madison Street, Suite 1400, Chicago,
Illinois, 60661. Copies of such material can be obtained upon written request
addressed to the Commission, Public Reference Section, 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates. The Commission maintains a Web site
at http://www.sec.gov that also contains such material regarding the registrant.
Such documents filed by the Company can also be inspected at the offices of The
Nasdaq SmallCap Market, 1735 K Street, NW, Washington, DC 20006-1500.
This Prospectus is a part of a registration statement on Form S-3 (together with
all amendments and exhibits, the "Registration Statement") filed with the
Commission pursuant to the Securities Act. The Registration Statement contains
more information than this Prospectus regarding the Company and its Common Stock
including certain exhibits. You may obtain a copy of the Registration Statement
from the SEC at any of the addresses listed above or through its Internet site.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Commission allows issuers to "incorporate" information into a prospectus
that is filed with the Commission in other documents pursuant to the Exchange
Act. This means that important information may be disclosed to you by reference
to other documents. The following documents filed by the Company with the
Commission pursuant to the Exchange Act are incorporated by reference into this
Prospectus:
(1) The Company's Annual Report on Form 10-KSB for the year ended December
31, 1998;
(2) The description of the Company's Common Stock contained in the
Company's Registration Statement on Form 8-A (File No. 0-20701),
declared effective on July 2, 1996, by which the Company's shares of
Common Stock were registered under Section 12 of the Exchange Act and
any other amendments or reports filed for the purpose of updating such
description.
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this Prospectus and prior to
the termination of the offering of the shares of Common Stock shall be deemed to
be incorporated by reference into this Prospectus and to be a part of this
Prospectus from the date of filing of such documents.
Any statement contained in this Prospectus or in a document incorporated or
deemed to be incorporated in this Prospectus may be modified or superseded for
purposes of this Prospectus to the extent that a statement contained in any
subsequently filed document which is deemed to be incorporated by reference in
this Prospectus modifies or supersedes such statement. Any such
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statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Prospectus.
The Company will provide, without charge, to each person to whom a copy of this
Prospectus is delivered, on the written or oral request of such person, a copy
of any or all of the documents incorporated in this Prospectus by reference
(other than exhibits to such documents, unless such exhibits are specifically
incorporated by reference into the information that this Prospectus
incorporates). You may request a copy of these documents by writing to:
Compositech Ltd.
120 Ricefield Lane
Hauppauge, NY 11788
Attention: Investor Relations
Telephone: (516) 436-5200, Extension 114
IMPORTANT FACTORS REGARDING FORWARD-LOOKING STATEMENTS
Certain of the statements set forth under the captions "The Company," "Risk
Factors" and "Use of Proceeds," and set forth elsewhere in this Prospectus
constitute "Forward Looking Statements" within the meaning of Section 27A of the
Securities Act which are intended to be covered by the safe harbors from
liability created under such section. All such forward looking statements
involve risks and uncertainties. As a result, there can be no assurance that the
forward looking statements in this Prospectus will prove to be accurate. In
light of the significant uncertainties inherent in the forward looking
statements included in this Prospectus, the inclusion of such information should
not be regarded as a representation by the Company or any other person that the
objectives and plans of the Company will be achieved.
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This prospectus is qualified in its entirety by the detailed information and
financial statements appearing in the documents incorporated in this Prospectus
by reference.
THE COMPANY
General
Compositech Ltd. (the "Company" or "Compositech") was founded in 1984 by Jonas
Medney, the Company's Chairman, and Fred Klimpl, its Vice Chairman, to develop
and market innovative superior copper-clad fiberglass epoxy laminates used to
make printed circuit boards required by the electronics industry. The Company
became a publicly owned corporation in 1996. The primary innovation of
Compositech was to replace the fiberglass cloth component of the laminate with a
more modern and structurally efficient fiberglass core resulting from a uniform,
orthogonally layered construction. Based on its own benchmark testing and
evaluations by customers and other potential users, the Company believes that it
has succeeded in developing a laminate that is superior to competitive
copper-clad fiberglass epoxy laminates.
From May through August 1997, the Company issued $6,505,000 of 5% Convertible
Debentures (the "Debentures") in a private placement and received net proceeds
of approximately $5.9 million for working capital and to obtain additional
production equipment. By April 23, 1998, the Debentures had been fully converted
into an aggregate of 4,586,957 shares of Common Stock.
On May 29, 1998, the Company issued $2,200,000 of 7% Series B convertible
preferred stock, (the "Series B Stock") and received net proceeds of
approximately $1.9 million which were used for working capital and to purchase
production equipment. In 1999, Series B stock, with a face value of $1,950,000,
were converted into 1,387,332 shares of Common Stock.
On June 23, 1998, Christopher F. Johnson was elected President and Chief
Executive Officer of the Company and elected to the Board of Directors. He
replaced Jonas Medney as Chief Executive Officer. Mr. Medney continues as
Chairman. Mr. Johnson has over thirty years of experience in sales and marketing
and general management with suppliers of specialty materials for printed circuit
fabrication.
Technology History
The Company's innovative laminates are produced using proprietary processes and
machinery, designed by the Company's engineering staff. The Company has received
grants of 29 patents covering its products, processes and apparatus, including
five in the United States, and has submitted five additional patent
applications. The most recent patents granted were a fifth one in Japan and one
in Kazakhstan. The patents on the laminates, processes and apparatus are
supplemented with other proprietary technology unprotected by patents and
considered by the Company to be of substantial value.
Compositech's laminate construction is structurally more efficient than
competitive copper-clad fiberglass epoxy laminates designated "FR-4", which is
the industry standard, resulting in enhanced smoothness and greater dimensional
stability. The Company believes, based on results of customers' evaluations,
that its improved products can economically substitute for the fiberglass woven
cloth epoxy laminates currently used in the electronics industry. According to
the Institute
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for Interconnecting and Packaging Electronic Circuits (the "IPC"), this market
exceeded $3.2 billion in 1997, the latest year for which data is available.
The Company successfully constructed, debugged and operated its first pilot
plant production equipment for laminates with a panel size of 24" x 24" in 1991.
In 1991 and 1992, Compositech recruited an initial sales staff to develop the
market potential of its product, continued refining its product and designing
its production equipment to manufacture laminates with a panel size of 36" x 48"
and initiated a sampling program targeted at major potential customers. In 1994,
the Company started up and began debugging its first production module to
manufacture 36" x 48" laminates and, in 1995 and 1996, produced laminates on
this equipment in limited quantities for the purpose of making modifications to
the production processes and equipment constituting the module and reformulating
the laminates produced by the module. In the last quarter of 1996, the Company
began installation of advanced production equipment which was completed in 1997.
Throughout 1997 and 1998, the Company worked on adjusting and enhancing its
production equipment and its manufacturing processes. In 1998, the Company added
production equipment. The Company also worked on solving problems with incoming
raw materials and interior environment which affect manufacturing yields. Sales
consisted of qualifying orders and small production runs.
Joint Ventures
On October 16, 1997, 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 from banks 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. The Quebec
Investors 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 in 2000 with an anticipated annual
production capacity of approximately 12 million square feet.
On February 9, 1998, the Company entered into a joint venture agreement and
patent, information and trademark agreement with a Taiwanese investor group led
by Cheng Xin Venture Capital Corporation (formerly Fidelity Venture Capital
Corp.) ("Cheng Xin") to establish a joint venture, under the name of Composite
Technologies, Inc., to manufacture the Company's laminates in Taiwan. The
Company received $1 million as a license down payment and is to receive
additional up-front license payments of $1 million, upon the achievement of
certain milestones. As part of the transaction, Composite Technologies, Inc.
acquired 587,372 shares of the Company's Common Stock for $1 million and agreed
to buy a like amount of shares for another $1 million within 30 days following
approval of the joint venture license by the science park where the joint
venture is proposed to be located. During 1998, the Company received an advance
of $500,000 against the latter purchase of shares, substantially all of which it
invested in the joint venture in accordance with the joint venture agreement.
The Company will receive an approximate 10% interest in the joint venture and
royalty payments based on sales. A related letter of intent with Cheng Xin
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provides for entering into a contract with the Company for it to supply the
joint venture with the requisite manufacturing equipment.
Industry Overview
Initially, most circuit boards had circuits (traces) on one or two sides. In the
last ten years, rapid technological advances in both semiconductor design and
fabrication techniques have placed significant demands on the performance of
printed circuit boards. Greater circuit density, complexity and miniaturization
have increased demand for more sophisticated printed circuit boards. In response
to this demand, multilayer printed circuit boards were developed which
incorporate multiple layers of metallic traces. The several layers of circuitry
are aligned and bonded together in a stack to form a multilayer board with both
horizontal and vertical electrical interconnections. Further circuit board
sophistication is currently being achieved by decreasing the width and
separation of the traces, drilling and plating smaller holes to connect the
internal trace layers and precisely situating the traces and pads on the board
surface to accommodate surface mount components.
These trends in the printed circuit board industry have placed increasingly
rigorous demands on the electrical, thermal, chemical and mechanical properties
of laminates. Mechanical properties must be increasingly more uniform and
tightly controlled in order to align the various layers in a multilayer printed
circuit board. Electrical properties of laminates must be highly consistent and
predictable in order to avoid circuit timing malfunctions. Thermal stability is
also critical for attaching the components and for dense, high speed systems,
because of the heat generated.
Compositech's technology is targeted at the fiberglass laminate segment of the
laminate industry. According to the IPC, in 1997 the single- and double-sided
laminate market was approximately $1.1 billion and the multilayer/high
performance laminate market was approximately $2.1 billion, totaling $3.2
billion. In these two segments, the United States' share was approximately $988
million while experiencing a growth rate of 25%.
Products
Printed Circuit Board Laminates. Printed circuit boards are the basic platforms
used to interconnect the microprocessors, integrated circuits and other
components essential to the functioning of electronic products. They consist of
a pattern of electrical circuitry resulting from etching copper foil laminated
to a composite made of insulating materials usually comprised of fiberglass and
epoxy. The laminate itself, therefore, is the copper-clad, fiberglass and epoxy
core from which printed circuit boards are produced.
Compositech's Laminates. CL200+ is the first Compositech laminate. This laminate
uses the same basic raw materials as conventional laminates: fiberglass yarn,
epoxy resin and copper foil. Compositech combines these materials into a unique,
more efficient laminate. Conventional laminates are made from woven fiberglass
cloth in which the yarn is twisted and crimped in the weaving process. The
resultant weave pattern is impressed into the copper foil, thereby roughening
the surface of the laminate. In the construction of Compositech's laminates, the
filaments of fiberglass are wound in orthogonal layers of flat, continuous
parallel filaments. This construction creates the enhanced smoothness and
improved dimensional stability of Compositech's laminates.
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High processing temperature tolerance is necessary for soldering components to
circuit boards. CL200+ uses a proprietary epoxy resin formulation that,
according to Company tests, results in a thermal rating over 200(degree)C,
principally because of the formulation, which is generally 20(degree)C to
80(degree)C higher than other copper-clad fiberglass epoxy laminates. Certain
laminates produced from materials other than fiberglass epoxy, addressing a
small, higher cost end of the market, have thermal ratings which equal or exceed
those of the Company's introductory CL200+ laminates.
Management believes that the benefits of Compositech's laminates should enable
the printed circuit board industry to:
o Decrease costs through reducing waste in the manufacture of existing
boards because the improved dimensional stability, temperature
tolerances and enhanced smoothness increase manufacturers' yields.
o Economically produce large printed circuit boards with high layer
counts because of the improved dimensional stability.
o Accelerate the development of new products requiring denser circuitry
by permitting finer lines and smaller pads. A pad is a portion of a
conductive pattern which is usually, but not exclusively, used for the
connection and/or attachment of components.
Compositech's Strategy
The Company's objective is to be the leading manufacturer of copper-clad
fiberglass epoxy laminates for electronics equipment. The Company expects to
achieve this position through the effective exploitation of its patented and
proprietary products and processes.
Management has targeted the $2.1 billion multilayer laminate market sector for
its initial sales efforts to establish its laminates as the leading-edge
technology for current and future economical production of printed circuit
boards.
Management believes that the strategic value of the Company's products to its
prospective customers is to enable them economically to produce increasingly
sophisticated circuit boards in a shorter time cycle. This combination of
benefits is a basic element of Compositech's product technology thrust.
The Company has patented and developed a flexible manufacturing process that it
believes can be exceptionally responsive to the ever-changing product iterations
required by the rapid introduction of new designs into the electronics market.
The manufacturing capacity can be expanded incrementally in response to
increased market demand.
Management believes that the Company's technology has global potential.
According to IPC data, approximately 70% of the 1997 world laminate market is
outside of North America. The Company plans to export its products and form
strategic alliances to manufacture and market its laminates internationally.
The foregoing strategic objectives represent anticipated accomplishments
dependent on future events. As in the case of all forward looking statements,
the Company can not ensure that it will achieve these goals.
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Marketing and Customers
The Company's marketing efforts are directed to establishing good working
relations with leading-edge producers of printed circuit boards. According to
the IPC, in 1997 there were over 670 manufacturers of printed circuit boards in
North America with nine companies comprising approximately one-third of the
market. The Company has sold its laminates principally on a test basis to a
select group of these companies considered to be the key companies for
Compositech's growth. During the past three years, Compositech has encouraged
benchmark comparisons of its laminates with current laminates which have
included qualities such as dimensional stability, smoothness, flatness and
thermal processing. In virtually all of these evaluations, CL200+ has proven
superior to current laminates. Customers benefit from increased production yield
primarily by reducing waste caused by circuitry misalignment. These results have
led several manufacturers to begin to use CL200+ for current production
applications in limited quantities. Recently, sales have been affected by delays
in or cancellation of customers' programs for which Compositech's laminates had
been qualified or were in the process of being qualified and from delays in
testing and qualification programs from major customers.
During 1998, the Company received orders from Teradyne, Inc. for its CL200+
copper-clad laminates. The orders will enable Teradyne to do extensive material
testing and product evaluation in backplane programs that will include circuit
boards with as many as 48 circuit layers. The CL200+ laminates will be used for
expanded production testing and customer qualification of complex backplanes. A
backplane, sometimes known as a motherboard or backpanel, is a type of printed
circuit board which serves as the backbone of large electronic equipment, such
as internet servers and telecommunication switching equipment and often utilizes
20-, 30- and even 60-layer boards to which smaller printed circuit boards are
connected.
Compositech's laminates are designed to be and have proven to be directly
substitutable for conventional laminates in the circuit board production process
as demonstrated by their use in production by customers. This compatibility
enables the circuit board manufacturer to substitute Compositech's laminates
with minimal process changes and without the need for additional equipment or
new process technology.
The Company markets to circuit board manufacturers in the United States and
Canada with its own direct sales force supplemented by independent sales
representatives. The Company's own sales force currently consists of its
President, its Vice President of Sales, its Technical Director and a marketing
associate. The Company plans to add to its sales force and use additional
independent sales representatives to expand sales.
The Company does not intend that its future business will be dependent upon a
single customer. In view of current production capacity the Company currently is
focusing its efforts on a growing number of select accounts. In 1998, Teradyne,
Inc. and HADCO Corporation represented 48% and 37% respectively, of the
Company's net sales. The printed circuit board industry generally follows a
"just-in-time" strategy by purchasing laminates only as they are required for
production runs. Accordingly, the Company currently does not have a significant
backlog of sales commitments. The Company expects the backlog to increase in
relation to its planned sales expansion, including long term supply agreements
and warehouse stock points, located near customer locations, enabling
just-in-time delivery.
11
<PAGE>
------------------------------
The Company's offices are at 120 Ricefield Lane, Hauppauge, New York 11788 and
its telephone number is (516) 436-5200.
THE OFFERING
Securities Offered..................... 2,968,719 shares of Common Stock, par
value $0.01 per share, offered by the
Selling Stockholders. (1)
Common Stock Outstanding
prior to the Offering............. 15,643,694 shares as of March 26, 1999.
(2)
Plan of Distribution................... The Common Stock offered hereby may be
sold from time to time in one or more
transactions at market prices prevailing
at the time of the sale, at prices
related to such prevailing market prices
or at negotiated prices.
Use of Proceeds........................ The Company will not receive any of the
proceeds from the sale of the shares of
Common Stock offered hereby. The
proceeds, if any, from the exercise of
Warrants will be used for working
capital and general corporate purposes.
Symbol for Common Stock................ CTEK
------------------------------
(1) Includes 1,335,062 shares of Common Stock underlying the Warrants.
(2) Does not include 8,122,362 shares issuable upon exercise of outstanding
options, warrants and a stock purchase agreement at a weighted exercise
price of $4.15 per share, the outstanding shares of Series A Convertible
Preferred Stock, which are convertible into 243,827 shares of Common Stock
at the option of the stockholder and the outstanding shares of the 7%
Series B Convertible Preferred Stock, which are currently convertible into
approximately 147,913 shares of Common Stock at the option of the
stockholders. Also does not include 1,066,192 shares which may be issuable
under the terms of a Stock Exchange Agreement between the Company and the
Quebec Investors in the Montreal joint venture.
12
<PAGE>
RISK FACTORS
If you purchase shares of Compositech Common Stock you will take a financial
risk. In deciding whether to invest in this offering,, prospective investors
should read this entire Prospectus and the information incorporated in this
Prospectus by reference and carefully consider the following risk factors in
addition to the other information set forth elsewhere in this Prospectus.
Development Stage Company Until December 31, 1996; Ability to Continue as Going
Concern; Uncertainty of Future Financial Results
The Company was a development stage company through December 31, 1996 and has
had limited revenues from the sale of laminates, has incurred significant losses
and has had substantial negative cash flow since its inception. As of December
31, 1998, the Company had an accumulated deficit of $33,954,155. The Company's
independent auditors have included an explanatory paragraph in their report
covering the December 31, 1998 financial statements, which expresses substantial
doubt about the Company's ability to continue as a going concern. The Company
will require additional funding to cover operating expenses and expenditures for
additional equipment until revenues from operations are sufficient for these
purposes. The Company expects that significant operating losses will continue
for a substantial part of 1999. There can be no assurance that the Company will
successfully complete expansion and enhancements of its production equipment,
achieve broad commercial acceptance of its product or generate sufficient
revenues to achieve profitable operations.
Need for Additional Financing
The Company's available funds, without giving effect to alternative sources of
revenue, are not sufficient to raise the Company's production level to
profitability or provide sufficient working capital for expansion of sales. The
Company will need additional funding for operations in 1999 and additional
funding is being sought. Such additional funding may be raised through sources
including:
o license fees;
o sales of equipment in connection with licensing operations;
o joint ventures or other collaborative relationships; or
o equity or debt financing.
No assurance can be given that additional funding will be sufficient and
available or, if it is available, that it will be available on acceptable terms.
If additional funds are raised through the issuance of equity securities or
securities convertible into equity securities, the percentage ownership of then
current stockholders of the Company will be reduced and such securities may have
rights, preferences or privileges senior to those of the holders of Common
Stock.
If adequate funds are not available to satisfy either short-term or long-term
capital requirements, the Company may be required to limit its operations
significantly.
13
<PAGE>
Liens on Assets and Patents
The Company's patents and certain other assets are subject to liens securing
outstanding debt of the Company as follows:
o Notes payable to stockholders in the amount of $100,000 and notes
payable to stockholders/directors/officers in the amount of $675,000
due January 2, 2000 (as extended) are collateralized by a second lien
on U.S. Patents and Patent Applications.
o Notes payable to stockholders/directors/officers in the amount of
$745,000 due January 2, 2000 (as extended) are collateralized by a
first lien on the Company's patents, patent applications and certain
production equipment.
o A term note of $500,000 obtained in March 1999 is collateralized by
two pieces of production equipment.
If there is a default under the notes, the Company could lose all or most of its
patents and certain production equipment. The potential loss of these assets
could force the Company to negotiate new and disadvantageous terms to extend
such notes.
Competition
The laminate manufacturing business is highly competitive. The Company's
competitors include major corporations, such as General Electric Company and
AlliedSignal Inc., which have substantial financial, marketing and technical
resources. In 1994, the Company granted patent immunity on its product patents
to AMP and Akzo Electronics Products NV, which, at the time, were operating a
joint venture which was developing a new process to make linear laminates. The
future success of the Company will depend on its ability to effectively market
its products against competitors with potentially greater resources. The Company
may need to raise substantial additional resources to compete effectively. There
is no assurance that the Company will be able to compete successfully in the
future.
Management of Growth
The Company intends to expand significantly its overall level of operations. Any
such expansion, however, is expected to strain the Company's management,
technical, financial and other resources. To manage growth effectively, the
Company must:
o add manufacturing capacity;
o add personnel;
o maintain a high level of quality;
o achieve good manufacturing efficiency; and
o expand, train and manage its employee base.
The Company's failure to add capacity and manage growth effectively could have a
material adverse effect on the Company's business, financial condition and
results of operations.
Reliance Upon Key Personnel
The Company believes that its success will depend to a significant extent upon
the efforts of its executive officers and senior management as well as its
ability to attract and retain highly qualified managerial, technical and sales
personnel. The Company maintains and is the beneficiary of $2 million key person
life insurance policies on each of Jonas Medney, its Chairman, and Fred E.
14
<PAGE>
Klimpl, its Vice Chairman. The loss or unavailability of its executive officers
or other senior management or the inability to attract, assimilate or retain
such personnel in the future could have a material adverse effect on the
Company's business, financial condition and results of operations.
Dependence on Single Manufacturing Facility
The Company's current laminate manufacturing operations are centralized in one
building in Hauppauge, New York, although the joint venture in Montreal plans to
build an additional larger plant in Montreal and the joint venture in Taiwan
plans to build a third plant. See "The Company - Joint Ventures." Because
currently the Company does not operate multiple facilities in different
geographic areas, the ability to service large orders or time sensitive orders
may be affected. Further, a disruption of the Company's manufacturing operations
resulting from sustained process abnormalities, human error, government
intervention or a natural disaster such as fire, earthquake or flood could cause
the Company to cease or limit its manufacturing operations and consequently have
a material adverse effect on the Company's business, financial condition and
results of operations.
Uncertainty of Production Quality and Production Costs; Process Disruption
The Company has limited experience in producing laminates on its
production-scale modules. The Company recently added production modules to
increase production levels and achieve economies of scale. This expansion is the
first production-scale expansion undertaken by the Company, and consequently no
assurances can be made that the Company's production facilities will meet the
Company's production targets in a timely way or that the resultant product will
meet the high commercial standard needed for successful market penetration.
Furthermore, the expanded production facilities may not be able to provide
adequate efficiencies or produce high yields. In addition, the costs of
production may not be as low as management expects, in which case the Company
may not achieve profitable operations. The Company's business involves highly
complex manufacturing processes which are subject to disruption. Process
disruptions have occurred, resulting in delays in product shipments. Process
disruptions were due to:
o machine breakdowns;
o lack of adequate interior atmospheric control of temperature and
humidity;
o electric utility power failures;
o problems of breaking in an expanded workforce;
o contamination principally generated during installation of equipment
and development of processes; and
o defective incoming copper foil.
No assurance can be given that disruptions will not occur in the future. The
loss of revenue and earnings to the Company from such a disruption could have a
materially adverse effect on its results of operations.
Dependence on Significant Customers
Due to current productive capacity, the Company has been focusing its efforts on
a growing number of select accounts. However, during 1998, Teradyne, Inc. and
HADCO Corporation accounted for 48% and 37%, respectively, of sales. Loss of
these customers could have a material adverse effect on the Company's business.
15
<PAGE>
Technological Change
The Company's laminates are used in the electronic printed circuit board
industry which could encounter competition from new technologies in the future
and reduce the number of circuit boards required in electronic equipment or
render existing interconnect technology less competitive or obsolete.
Availability of Materials; Price Fluctuations of Raw Materials; Dependence Upon
Third-Party Supplier
Raw materials used by the Company to produce laminates are purchased by the
Company and in certain circumstances the Company bears the risk of price
fluctuations. In addition, shortages of and defects in certain types of
materials have occurred in the past and may occur in the future. During 1997,
the Company experienced defects in incoming copper foil used to make laminates.
The Company has obtained an alternate source of supply and also has explored
solutions with the previous supplier. Future shortages, defects or price
fluctuations in raw materials could have a material adverse effect on the
Company's business, financial condition and results of operations.
Advanced Glassfiber Yarns LLC (successor company to Owens Corning), a major
fiberglass manufacturer, has developed and continues to develop products to meet
the Company's processing and product requirements. Should this manufacturer not
continue supplying the Company's quality and quantity needs, the Company would
have to secure another supplier. Such event could have a material adverse effect
on the Company's ability to supply customers; could reduce expected sales and
could increase the costs of manufacturing the Company's product. No assurances
can be given that an alternative supplier could meet the Company's quality and
quantity needs on satisfactory terms.
Patents and Intellectual Property Protection
The Company believes that its patent estate and its know-how are important for
the protection of its technology. The Company can give no assurance that any
patents issued to the Company will not be challenged, invalidated or
circumvented or that such patents will provide substantial protection with
respect to the Company's product, process or competitive position. In addition,
certain proprietary information which is considered to be of substantial value
is not covered by patents and, along with the Company's other intellectual
property, is subject to misappropriation or obsolescence. In addition, the
Company granted certain immunities on its product patents to AMP and Akzo
Electronics Products NV which are potential competitors of the Company,. The
Company, under a license, granted HT Troplast AG ("HT"), a significant
stockholder of the Company, the exclusive right to produce and market
Compositech's laminates in Europe, the countries of the former Soviet Union and
Turkey. Although HT exited the laminate business, the license remains in effect.
Pursuant to the agreement, the Company is obligated to sell only through HT in
such territories.
16
<PAGE>
Environmental Compliance
The Company uses copper and chemicals in its manufacturing process and limited
amounts of solvents for the sole purpose of cleaning its equipment. Although the
Company believes that its facility complies in all material respects with
existing environmental laws and regulations, it can give no assurance that
violations will not occur. In the event of any future violations of
environmental law and regulations, the Company could be held liable for damages
and for the cost of remedial actions. In addition, environmental laws could
become more stringent over time, imposing greater compliance costs and
increasing the risks and penalties associated with a violation.
Control by Existing Stockholders
As at March 26, 1999, officers, directors and certain other significant
stockholders of the Company owned approximately 43.4% of the Company's Common
Stock and voting preferred stock, including stock options and warrants
exercisable within 60 days. It is expected that these stockholders will continue
to control the management and policies of the Company, including, without
limitation, the power to elect and remove a majority of directors of the Company
and the power to approve any action requiring common stockholder approval. In
addition, some of these officers, directors and other stockholders, in
connection with certain outstanding loans, have a security interest in the
Company's manufacturing equipment and either all of the Company's patents and
patent applications or in the Company's U.S. patents and patent applications.
Quotation of the Common Stock on The Nasdaq SmallCap Market(SM); Possible Loss
of Quotation of the Common Stock
The Common Stock is quoted on The Nasdaq SmallCap Market(SM). The Company can
give no assurance that the Company will continue to meet the maintenance
criteria for continued listing of the Common Stock on The Nasdaq SmallCap
Market(SM). The minimum listing requirements for The Nasdaq SmallCap Market(SM)
include, among other criteria:
o net tangible assets of at least $2.0 million, or market capitalization
of $35 million, or net income of $500,000 (in the latest fiscal year
or two of the last three fiscal years);
o a minimum bid price per share of $1.00;
o a market value of the public float of $1.0 million;
o 300 round lot shareholders;
o two market makers.
Furthermore, The Nasdaq SmallCap Market(SM) listing and maintenance criteria may
become more stringent over time and thus more difficult for the Company to meet.
Failure to meet the maintenance criteria may result in the discontinuance of the
inclusion of the Common Stock in The Nasdaq SmallCap Market(SM). In such event,
trading, if any, in the Common Stock may continue to be conducted in non-Nasdaq
over-the-counter markets and investors may find it more difficult to dispose of,
or to obtain accurate quotations as to the price of, the Common Stock. The
Common Stock would then be subject to the risk that it could become
characterized as low-priced or "penny stock," which characterization could
severely affect the ability of stockholders to sell their Common Stock.
17
<PAGE>
Penny Stock Regulation
Broker-dealer practices in connection with transactions in "penny stocks" are
regulated by certain penny stock rules adopted by the Securities and Exchange
Commission. Penny stocks generally are equity securities with a price of less
than $5.00 (other than securities registered on certain national securities
exchanges or quoted on the Nasdaq system, provided that current price and volume
information with respect to transactions in such securities is provided by the
exchange or system). The penny stock rules require a broker-dealer, prior to a
transaction in a penny stock not otherwise exempt from the rules, to deliver a
standardized risk disclosure document that provides information about penny
stocks and the risks in the penny stock market. The broker-dealer also must
provide the customer with current bid and offer quotations for the penny stock,
the compensation of the broker-dealer and its salesperson in the transaction,
and monthly account statements showing the market value of each penny stock held
in the customer's account. In addition, the penny stock rules generally require
that prior to a transaction in a penny stock the broker-dealer make a special
written determination that the penny stock is a suitable investment for the
purchaser and receive the purchaser's written agreement to the transaction.
These disclosure requirements may have the effect of reducing the level of
trading activity in the secondary market for a stock that becomes subject to the
penny stock rules. If the Common Stock becomes subject to the penny stock rules,
investors may find it more difficult to sell their Common Stock.
Certain Restrictive Charter and Bylaw Provisions
The Company's Certificate of Incorporation and Bylaws allow the Board of
Directors, without approval of the stockholders, to issue shares of preferred
stock and to fix the rights and preferences of the preferred stock. The Board of
Directors can also prohibit stockholders of the Company from calling a special
meeting unless requested by at least a majority of the outstanding voting
shares. The certificate does not provide for cumulative voting for election of
directors. In addition, the Bylaws of the Company provide that while the removal
of a director or the entire board of directors, with or without cause, may be
accomplished by the holders of the majority of shares entitled to vote, any
director designated by HT, may only so be removed for cause. These provisions
could have the effect of deterring unsolicited takeovers or other business
combinations or delaying or preventing changes in control or management of the
Company. This may prevent transactions in which stockholders might otherwise
receive a premium for the securities over then-current market prices. In
addition, these provisions may limit the ability of stockholders to approve
transactions that they may deem to be in their best interests.
Possible Depressive Effect of Future Sales of Common Stock; Registration Rights
Immediately following this Offering, there would be an aggregate of 17,058,112
shares of Common Stock outstanding, if the amount of shares being registered
pursuant to this Prospectus are issued. In addition, an aggregate of 8,245,232
shares of Common Stock are issuable pursuant to outstanding options, warrants
and stock purchase and stock exchange agreements, including:
o 243,827 shares issuable upon the conversion of Series A Convertible
Preferred Stock; and
o 147,913 shares issuable, including accrued dividends, upon the
conversion of 7% Series B Preferred Stock.
Subject to restrictions on transfer referred to below, shares of Common Stock
issued by the Company in private transactions, are treated as "restricted
securities" as defined under the Securities Act and in the future may be sold in
compliance with Rule 144 under the Securities Act
18
<PAGE>
or pursuant to a registration statement filed under the Securities Act. As of
March 22, 1999, (including shares which may be acquired upon conversion of
Series A Convertible Preferred Stock) 5,199,386 shares are eligible for sale
under Rule 144.
Rule 144 generally provides that a person holding restricted securities for a
period of one year may sell every three months in brokerage transactions or
market-maker transactions an amount equal to the greater of:
o one percent (1%) of the Company's issued and outstanding Common Stock;
or
o the average weekly trading volume of the Common Stock during the four
calendar weeks prior to such sale.
Rule 144 also permits, under certain circumstances, the sale of shares without
any quantity limitation by a person who is not an affiliate of the Company and
who has satisfied a two-year holding period. In addition, 681,953 shares
(including shares which may be acquired upon exercise of outstanding warrants),
are entitled in certain cases, subject to certain restrictions, to include their
shares in any registration of securities by the Company. The sale of substantial
numbers of such shares, whether pursuant to Rule 144 or pursuant to a
registration statement, may have a depressive effect on the market price of the
Common Stock.
USE OF PROCEEDS
The Company will not receive any proceeds resulting from the sale of the shares
of Common Stock by the Selling Stockholders. See "Selling Stockholders."
The Warrants have exercise prices ranging from $1.125 per share to $3.00 per
share. The Warrants have to be exercised to purchase shares of Common Stock
prior to the resale of the Common Stock offered by the Selling Stockholder
pursuant to this offering. The exercise of all the Warrants would result in
total gross proceeds to the Company of $2,073,487. In the event that any of the
Warrants are exercised in the future, net cash proceeds to the Company would be
used for working capital or general corporate purposes. The Company cannot
predict whether, how and to what extent any Warrants will be exercised.
19
<PAGE>
SELLING STOCKHOLDERS
The following table sets forth certain information concerning the number of
shares of Common Stock offered pursuant to this Prospectus by each of the
Selling Stockholders and the Selling Stockholders' ownership of shares of Common
Stock after the offering, assuming all of the shares of Common Stock being
offered are sold. The number of shares of Common Stock shown as securities owned
prior to the offering and as shares to be offered includes the number of shares
to be registered according to the agreements with the holders of the Common
Stock and Common Stock Purchase Warrants. The footnotes to the Selling
Stockholder table below indicate those Selling Stockholders which disclosed to
the Company their holdings of Common Stock of the Company and their ultimate
control persons pursuant to filings under the Exchange Act.
<TABLE>
<CAPTION>
Shares Owned
Securities Owned Prior to after the
the Offering (1) Offering (1)
---------------------------- ---------- -------------------
Common Shares to
Name of Selling Stockholder Stock(2) Warrants(3) be Offered Shares(4) %
- --------------------------- -------- ----------- ---------- --------- -------
<S> <C> <C> <C> <C>
Alan R. Bartelheimer 115,300 12,500 62,500 65,300 *
Louis Berrick 36,000 6,250 31,250 11,000 *
Nils Bjork Living Trust 100,000 20,000 100,000 20,000 *
Boca Investments 400,000 400,000 0
Richard Boivin 10,000 2,500 12,500 0
Anna Rose Borgia 17,500 1,500 7,500 11,500 *
Harry J. Briscoe 50,264 4,891 24,455 30,700 *
William C. Buchanan 46,600 11,025 55,125 2,500 *
Olga L. Cadaval 10,000 2,500 12,500 0
Luiz Cadaval 10,000 2,500 12,500 0
Charles A. Carriker 11,000 2,750 13,750 0
Dr. Kunjaraman Chandramohan 25,000 6,250 31,250 0
Phillip R. Clark 57,905 12,351 61,756 8,500 *
Timothy Cronin 34,722 7,555 37,777 4,500 *
Jeffrey J. Davis, MD 45,000 6,250 31,250 20,000 *
Helga Gabriel 12,000 12,000 0
Oscar Garza 59,972 5,556 27,778 37,750 *
Haskin & Associates, Inc. 39,678 0 39,678 0
Investor Resource Services, Inc. 655,556 0 655,556 0
Kazak Securities Ltd. 111,111 0 111,111 0 *
</TABLE>
20
<PAGE>
<TABLE>
<CAPTION>
Shares Owned
Securities Owned Prior to after the
the Offering (1) Offering (1)
---------------------------- ---------- -------------------
Common Shares to
Name of Selling Stockholder Stock(2) Warrants(3) be Offered Shares(4) %
- --------------------------- -------- ----------- ---------- --------- -------
<S> <C> <C> <C> <C>
Eugene Kuhar 11,000 2,500 12,500 1,000 *
Charles & Sandra Loomis 10,500 2,500 12,500 500 *
Elmer Macke 45,750 (5) 2,500 12,500 35,750 *
Harry C. & Phyllis F. Marcus 27,200 6,500 32,500 1,200 *
Jeffrey Mulgheir 8,900 2,225 11,125 0
Kornelius Munte 8,000 18,000 18,000 8,000 *
Thomas C. & Nancy E. Parker 21,200 (6) 5,000 25,000 1,200 *
Arthur Rother 15,000 3,750 18,750 0
SBSI Corporation Pension Fund 15,600 3,900 19,500 0
Albert Schimel 26,400 4,688 23,438 7,650 *
Renate Siepe 6,000 6,000 0
Robert Franklin Smith 115,000 5,000 25,000 95,000 *
ROC Management LLC 97,849 69,717 167,566 0
Michael Sovelenko Trust 38,500 1,250 6,250 33,500 *
Sovereign Capital Advisors, LLC 0 3,670 (7) 3,670 0
Roy E. Stephens, Jr. 44,272 11,006 55,028 250 *
Howard James Stryker 55,900 13,750 68,750 900 *
Bart Verdirame 5,000 1,250 6,250 0
Robert L. Weber 60,700 (8) 2,250 11,250 51,700 *
Trautman & Company, Inc. 450,907 (9) 124,142 (10) 163,820 411,229 2.4
Gregory O. Trautman 44,852 (11) 272,307 (11) 272,307 44,852 *
Mark Barbera 22,426 (12) 118,790 (12) 118,790 22,426 *
Mark Gillis 0 107,089 (13) 107,089 0
Robert J. Kramer 44,852 (14) 30,900 (14) 30,900 44,852 *
---------- ---------- ---------- --------- ---
Totals 2,605,416 1,335,062 2,968,719 971,759 5.5
========== ========== ========== ========= ===
</TABLE>
21
<PAGE>
- ----------
(*) Assuming the sale of all shares of Common Stock being offered for sale by
this Prospectus, represents less than 1% of the outstanding Common Stock.
(1) The shares of Common Stock and voting rights owned by each person, and the
shares included in the total number of shares of Common Stock and votes
outstanding used to determine the percentage of shares of Common Stock and
voting rights owned by each person and such group, have been adjusted in
accordance with Rule 13d-3 under the Securities Exchange Act of 1934 to
reflect the ownership of shares issuable upon exercise of outstanding
options, warrants or other Common Stock equivalents which are exercisable
within 60 days of the date of this Prospectus. As provided in such Rule,
such shares issuable to any holder are deemed outstanding for the purpose
of calculating such holder's beneficial ownership but not any other
holder's beneficial ownership.
(2) May include shares of Common Stock and Common Stock equivalents
(exercisable within 60 days of the date of this Prospectus) owned by
selling stockholders that are not being offered for sale pursuant to this
prospectus.
(3) Represents shares of Common Stock underlying Common Stock Purchase Warrants
that are being registered pursuant to this Prospectus and offered for sale
by the selling stockholders.
(4) Represents shares of Common Stock and Common Stock equivalents owned after
the offering assuming no further sales other than those made pursuant to
this Prospectus.
(5) Includes 12,250 shares of Common Stock held by a self directed retirement
plan owned by Mr. Macke.
(6) Includes 1,200 shares of Common Stock held by a self directed retirement
plan owned by Mrs. Parker.
(7) Includes 1,843 shares of Common Stock underlying Common Stock Purchase
Warrants, exercisable at $2.035, and 1,827 shares of Common Stock
underlying Common Stock Purchase Warrants, exercisable at $2.053, issued
pursuant to a private placement of the Company's Common Stock, which had
its final closing on March 26, 1999.
(8) Includes 50,000 shares of Common Stock held by a self directed retirement
plan owned by Mr. Weber.
(9) Formerly known as Trautman Kramer & Company, Inc. The securities consist
of: (i) 32,394 shares of Common Stock and 3,085 shares underlying
Redeemable Common Stock Warrants, as of the close of business on March 22,
1999, held in the trading account of Trautman & Company, Inc., a market
maker of the Company's Common Stock and Redeemable Common Stock Warrants
(this total may fluctuate on a daily basis depending on trading activity);
(ii) 125,000 shares of Common Stock, held in their investment account;
(iii) 39,678 shares issued as compensation in connection with the closing
of a loan financing, which had its final closing in January 1999; (iv)
40,750 shares underlying Common Stock Purchase Warrants exercisable at
$6.00 per share issued as partial compensation for the Company's private
placement of its 5% Convertible Debentures which had its final closing on
August 26, 1997; and (vi) 210,000 shares underlying 105,000 of the
Company's Unit Purchase Options, enabling the holder to purchase units, at
$7.50 per unit, consisting of a share of the Company's Common Stock and a
Common Stock Purchase Warrant to purchase a share of the Company's Common
Stock for $7.8125 per share.
(10) The securities consist of 66,546 shares of Common Stock underlying Common
Stock Purchase Warrants, exercisable at $1.125 and 57,596 shares of Common
Stock underlying Common Stock Purchase Warrants, exercisable at $2.125,
issued as partial compensation pursuant to a private placement of the
Company's Common Stock, which had its final closing on March 26, 1999.
(11) Mr. Trautman is a principal of the firm of Trautman & Company, Inc. He
disclaims beneficial ownership of shares attributable to Trautman &
Company, Inc.. The securities listed under Common Stock consist of 44,852
shares underlying Common Stock Purchase Warrants exercisable at $6.00 per
share issued as partial compensation for the Company's private placement of
its 5% Convertible Debentures which had its final closing on August 26,
1997. The securities listed under Warrants consist of (i) 29,400 shares of
Common Stock underlying Common Stock Purchase Warrants, exercisable at
$2.6125, issued as partial compensation pursuant to the Company's final
conversion of its 5% Convertible Debentures, which occurred in April 1998;
(ii) 187,989 shares of Common Stock underlying Common Stock Purchase
Warrants, exercisable at $1.125, and 54,918 shares of Common Stock
underlying Common Stock Purchase Warrants, exercisable at $2.125, issued as
partial compensation pursuant to a private placement of the Company's
Common Stock, which had its final closing on March 26, 1999.
(12) Mr. Barbera is an employee of the firm of Trautman & Company, Inc. The
securities listed under Common Stock consist of 22,426 shares underlying
Common Stock Purchase Warrants exercisable at $6.00 per share
22
<PAGE>
issued as partial compensation for the Company's private placement of its
5% Convertible Debentures which had its final closing on August 26, 1997.
The securities listed under Warrants consist of (i) 14,700 shares of Common
Stock underlying Common Stock Purchase Warrants, exercisable at $2.6125,
issued as partial compensation pursuant to the Registrant's final
conversion of its 5% Convertible Debentures, which occurred in April 1998;
(ii) 80,567 shares of Common Stock underlying Common Stock Purchase
Warrants, exercisable at $1.125, and 23,523 shares of Common Stock
underlying Common Stock Purchase Warrants, exercisable at $2.125, issued as
partial compensation pursuant to a private placement of the Company's
Common Stock, which had its final closing on March 26, 1999.
(13) Mr. Gillis is an employee of the firm of Trautman & Company, Inc. The
securities listed under Warrants consist of 58,516 shares of Common Stock
underlying Common Stock Purchase Warrants, exercisable at $1.125, and
48,573 shares of Common Stock underlying Common Stock Purchase Warrants,
exercisable at $2.125, issued as partial compensation pursuant to a private
placement of the Company's Common Stock, which had its final closing on
March 26, 1999.
(14) Mr. Kramer is a former principal of the firm of Trautman & Company, Inc.
The securities listed under Common Stock consist of 44,852 shares
underlying Common Stock Purchase Warrants exercisable at $6.00 per share
issued as partial compensation for the Company's private placement of its
5% Convertible Debentures which had its final closing on August 26, 1997.
The securities listed under Warrants consist of 30,900 shares of Common
Stock underlying Common Stock Purchase Warrants, exercisable at $2.6125,
issued as partial compensation pursuant to the Company's final conversion
of its 5% Convertible Debentures, which occurred in April 1998.
- -----------
The shares of Common Stock are being registered under the Securities Act
pursuant to the terms of certain registration rights agreements between the
Selling Stockholders and the Company entered into at the time the Selling
Stockholders acquired the Common Stock and the Warrants. Each Selling
Stockholder will be entitled to receive all of the proceeds from the future sale
of his, her or its shares of Common Stock. Except for the costs of including
such shares of Common Stock within the registration statement of which this
Prospectus forms a part, which costs are borne by the Company, the Selling
Stockholders will bear all expenses of any offering by them of their shares of
Common Stock, including the costs of their counsel and any sales commissions
incurred.
23
<PAGE>
PLAN OF DISTRIBUTION
The Selling Stockholder or Transferees may, from time to time, sell all or a
portion of the shares of Common Stock being registered pursuant to this
Prospectus (the "Shares") in privately negotiated transactions or otherwise, at
fixed prices that may be changed, at market prices prevailing at the time of
sale, at prices related to such market prices or at negotiated prices. The
Shares may be sold by the Selling Stockholders by one or more of the following
methods, without limitation:
o block trades in which the broker or dealer so engaged will attempt to
sell the Shares as agent but may position and resell a portion of the
block as principal to facilitate the transaction;
o purchases by a broker or dealer as principal and resale by such broker
or dealer for its account pursuant to this Prospectus;
o an exchange distribution in accordance with the rules of the
applicable exchange;
o ordinary brokerage transactions and transactions in which the broker
solicits purchasers;
o privately negotiated transactions;
o short sales;
o a combination of any such methods of sale; and
o any other method permitted pursuant to applicable law.
From time to time, the Selling Stockholders may engage in short sales, short
sales against the box, puts and calls and other transactions in securities of
the Company or derivatives of such securities, and may sell and deliver the
Shares in connection therewith or in settlement of securities loans. From time
to time, the Selling Stockholders may pledge their Shares pursuant to the margin
provisions of its customer agreements with its brokers. Upon a default by the
Selling Stockholders, the broker may offer and sell the pledged Shares from time
to time.
In effecting sales, brokers and dealers engaged by the Selling Stockholders may
arrange for other brokers or dealers to participate in such sales. Brokers or
dealers may receive commissions or discounts from the Selling Stockholders (or,
if any such broker-dealer acts as agent for the purchaser of such shares, from
such purchaser) in amounts to be negotiated which are not expected to exceed
those customary in the types of transactions involved. Broker-dealers may agree
with the Selling Stockholders to sell a specified number of such Shares at a
stipulated price per share, and, to the extent such broker-dealer is unable to
do so acting as agent for a Selling Stockholder, to purchase as principal any
unsold Shares at the price required to fulfill the broker-dealer commitment to
the Selling Stockholders. Broker-dealers who acquire Shares as principal may
thereafter resell such Shares from time to time in transactions (which may
involve block transactions and sales to and through other broker-dealers,
including transactions of the nature described above) in the over-the-counter
market or otherwise at prices and on terms then prevailing at the time of sale,
at prices then related to the then-current market price or in negotiated
transactions and, in connection with such resales, may pay to or receive from
the purchasers of such Shares commissions as described above. The Selling
Stockholders may also sell the Shares in accordance with Rule 144 under the
Securities Act, rather than pursuant to this Prospectus.
The Selling Stockholders and any broker-dealers or agents that participate with
the Selling Stockholders in sales of the Shares may be deemed to be
"underwriters" within the meaning of the Securities Act in connection with such
sales. In such event, any commissions received by such broker-dealers or agents
and any profit on the resale of the Shares purchased by them may be deemed to be
underwriting commissions or discounts under the Securities Act.
24
<PAGE>
The Company has agreed to indemnify the Selling Stockholders against certain
losses, claims, damages and liabilities, including liabilities under the
Securities Act.
The Company has informed the Selling Stockholders that the anti-manipulation
provisions of Regulation M under the Exchange Act may apply to the sales of
their Shares offered hereby. The Company also has advised the Selling
Stockholders of the requirement for delivery of this Prospectus in connection
with any sale of the Shares offered hereby.
Certain Selling Stockholders may from time to time purchase shares of Common
Stock in the open market. These Selling Stockholders have been notified that
they should not commence any distribution of Shares unless they have terminated
their purchasing and bidding for Common Stock in the open market as provided in
applicable securities regulations.
There is no assurance that the Selling Stockholders or the Transferees will sell
any or all of the Shares offered by them hereby.
LEGAL OPINIONS
The validity of the shares of Common Stock offered hereby will be passed upon
for the Company and Selling Stockholders by Patterson, Belknap, Webb & Tyler
LLP, 1133 Avenue of the Americas, New York, New York, 10036-6710.
EXPERTS
The financial statements of Compositech Ltd. appearing in the Company's Annual
Report (Form 10-KSB) for the year ended December 31, 1998, have been audited by
Ernst & Young LLP, independent auditors, as set forth in their report thereon
(which contains an explanatory paragraph describing conditions that raise
substantial doubt about the Company's ability to continue as a going concern as
described in Note 1 to the financial statements) included therein and
incorporated herein by reference. Such financial statements are incorporated
herein by reference in reliance upon such report given upon the authority of
such firm as experts in accounting and auditing.
25
<PAGE>
No dealer, salesman or other person has been authorized to give any information
or to make any representation not contained in this Prospectus, and, if given or
made, such information or representation must not be relied upon as having been
authorized by the Company or the Selling Stockholders. This Prospectus does not
constitute an offer to buy any of these securities offered hereby in any
jurisdiction to any person to whom it is unlawful to make such offer in such
jurisdiction.
CONTENTS
Page
Where You Can Find
More Information .......................................................... 5
Incorporation of Certain
Documents by Reference .................................................... 5
The Company ............................................................... 7
The Offering .............................................................. 12
Risk Factors .............................................................. 13
Use of Proceeds ........................................................... 19
Selling Stockholders ...................................................... 20
Plan of Distribution ...................................................... 24
Legal Opinions ............................................................ 25
Experts ................................................................... 25
2,968,719 Shares of
Common Stock
COMPOSITECH LTD.
----------------------------
PROSPECTUS
----------------------------
April ___, 1999
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
The following table sets forth the various estimated amount of fees and
expenses payable in connection with this offering other than sales commissions.
All such expenses will be borne by the Registrant.
Item Amount of Expenses
Commission Registration Fees $ 1,762
Printing Expenses 2,000
Accounting Fees and Expenses 2,000
Legal Fees and Expenses 7,000
Miscellaneous 2,000
-------
Total $14,762
- ----------
Item 15. Indemnification of Directors and Officers.
Section 145 of the General Corporation Law of the State of Delaware and
Article Eighth of the Company's Amended and Restated Certificate of
Incorporation contain provisions for indemnification of officers, directors,
employees and agents of the Company. The Amended and Restated Certificate of
Incorporation requires the Company to indemnify such persons to the full extent
permitted by Delaware Law. Each person will be indemnified in any proceeding if
he acted in good faith and in a manner which he reasonably believed to be in ,
or not opposed to, the best interest of the Company. Indemnification would cover
expenses, including attorney's fees, judgments, fines and amounts paid in
settlement.
The Company has directors' and officers' liability insurance. Such
insurance may cover liabilities asserted against any present or past director or
officer incurred in the capacity of director or officer arising out of such
status, whether or not the Company would have the power to indemnify such
person.
<PAGE>
Item 16. Exhibits.
4.1.1* Form of Common Stock Purchase Warrant issued (i) to certain investors
in connection with a private placement of the Company's Common Stock,
which had its final closing on March 26, 1999 and (ii) in exchange for
consulting services.
4.1.2* Form of Common Stock Purchase Warrant issued (i) in connection with
the final closing of the Company's Debentures and (ii) in connection
with the Company's 1995 private placement.
5.1* Opinion of Patterson, Belknap, Webb & Tyler LLP, special counsel for
the Registrant, as to the legality of the securities being offered.
10.1* Form of Investor Subscription Agreement between the Company and
certain investors in connection with a private placement of the
Company's Common Stock which had its final closing on March 26, 1999.
23.1* Consent of Ernst & Young LLP
23.2* Consent of Patterson, Belknap, Webb & Tyler LLP (contained in Exhibit
5.1)
24* Power of Attorney (see signature pages of Registration Statement)
- -------------
* Filed herewith.
Item 17. Undertakings.
(a) The undersigned Registrant hereby undertakes:
(1) to file, during any period in which offers or sales are being
made, a post-effective amendment to this registration Statement:
(i) to include any prospectus required by Section 10 (a) (3) of the
Securities Act of 1933;
(ii) to reflect in the prospectus any facts or events arising after
the effective date of the Registration Statement (or the most
recent post-effective amendment thereof) which, individually or
in the aggregate, represents a fundamental change in the
information set forth in the Registration Statement;
(iii) to include any material information with respect to the Plan of
Distribution not previously disclosed in this Registration
Statement or any material change to such information in this
Registration Statement;
provided, however, that paragraphs (i) and (ii) do not apply to this
Registration Statement if the information required to be included in a
post-effective amendment by those paragraphs is contained
II-2
<PAGE>
in periodic reports filed by the Registrant pursuant to Section 13 or
Section 15 (d) of the Securities Exchange Act of 1934 and incorporated by
reference in this Registration Statement;
(2) that, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof;
(3) to remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned Registrant hereby undertakes that, for the purpose of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13 (a) or Section 15 (d) of the
Securities Exchange Act of 1934 that is incorporated by reference in this
registration statement shall be deemed to be a new Registration Statement
relating to the securities offered herein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the provisions described in the first paragraph of
Item 15 above, or otherwise, the Registrant has been advised that in the opinion
of the Securities and Exchange commission such indemnification is against public
policy as expressed in said Securities Act and is, therefore, unenforceable. In
the event that as claim for indemnification against such liabilities (other than
the payment by the Registrant of expenses incurred or paid by a director,
officer or controlling person of the Registrant in the successful defense of any
action, suit, or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the Hamlet of Hauppauge, State of New York, on March 31, 1999.
COMPOSITECH LTD.
Date: March 31, 1999 By: /s/ Jonas Medney
-----------------------------------
Jonas Medney
Chairman
In accordance with the Securities Act of 1933, this report has been
signed below by the following persons on behalf of the Registrant and in the
capacities and on the dates indicated. Each person whose signature appears below
constitutes and appoints each of Christopher F. Johnson and Samuel S. Gross his
true and lawful attorney-in-fact and agent, with full power of substitution and
resubstitution for him and in his name, place and stead, in any and all
capacities to sign any and all amendments (including post-effective amendments)
to this Registration Statement, and to file the same, with all exhibits thereto,
and other documents in connection therewith, with the Securities and Exchange
Commission, and to take such actions in, and file with the appropriate
authorities in, whatever states said attorney-in-fact and agent shall determine,
such applications, statements, consents and other documents as may be necessary
or expedient to register securities of the Company for sale, granting unto said
attorney-in-fact and agent full power and authority to do so and perform each
and every act and thing requisite or necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorney-in-fact and agent
or his substitute or substitutes may lawfully do or cause to be done by virtue
hereof and the Registrant hereby confers like authority on its behalf.
/s/ Jonas Medney March 31, 1999
- -------------------------------------------
Jonas Medney
Chairman of the Board and Director
/s/ Fred E. Klimpl March 31, 1999
- -------------------------------------------
Fred E. Klimpl, Vice Chairman and Director
/s/ Christopher F. Johnson March 31, 1999
- -------------------------------------------
Christopher F. Johnson
President, Chief Executive Officer
and Director (Principal Executive Officer)
II-4
<PAGE>
/s/ Samuel S. Gross March 31, 1999
- --------------------------------------------
Samuel S. Gross
Executive Vice President, Secretary,
Treasurer and Director
(Principal Financial and
Accounting Officer)
/s/ Willard T. Jackson March 31, 1999
- --------------------------------------------
Willard T. Jackson, Director
/s/ Pierre Laflamme March 31, 1999
- --------------------------------------------
Pierre Laflamme, Director
/s/ Robert W. Middleton March 31, 1999
- --------------------------------------------
Robert W. Middleton, Director
/s/ Heinz-Gerd Reinkemeyer March 31, 1999
- --------------------------------------------
Heinz-Gerd Reinkemeyer, Director
/s/ James W. Taylor March 31, 1999
- --------------------------------------------
James W. Taylor, Director
II-5
<PAGE>
INDEX TO EXHIBITS
Exhibit
Number Description
- ------ -----------
4.1.1* Form of Common Stock Purchase Warrant issued (i) to certain investors
in connection with a private placement of the Company's Common Stock,
which had its final closing on March 26, 1999 and (ii) in exchange for
consulting services.
4.1.2* Form of Common Stock Purchase Warrant issued (i) in connection with
the final closing of the Company's Debentures and (ii) in connection
with the Company's 1995 private placement.
5.1* Opinion of Patterson, Belknap, Webb & Tyler LLP, special counsel for
the Registrant, as to the legality of the securities being offered.
10.1* Form of Investor Subscription Agreement between the Company and
certain investors in connection with a private placement of the
Company's Common Stock which had its final closing on March 26, 1999.
23.1* Consent of Ernst & Young LLP
23.2* Consent of Patterson, Belknap, Webb & Tyler LLP (contained in Exhibit
5.1)
24* Power of Attorney (see signature pages of Registration Statement)
- -------------
* Filed herewith.
II-6
EXHIBIT 4.1.1
THE SECURITIES REPRESENTED BY THIS CERTIFICATE AND THE SHARES ISSUABLE PURSUANT
HERETO HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
AND MAY NOT BE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED
THERETO OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY IN FORM AND SCOPE TO
THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF
1933.
COMPOSITECH LTD.
COMMON STOCK PURCHASE WARRANT
VOID AFTER ____________________
1 Number and Price of Shares Subject to Warrant. Subject to the terms and
conditions herein set forth, ______________________, his or her designees,
successors and assigns (together, the "Warrantholder") are entitled to purchase
from Compositech Ltd., a Delaware corporation (the "Company"), at any time or
from time to time after the date hereof and on or before ____________________,
in whole or in part, _______________ (_________) fully paid and non-assessable
shares of common stock, par value $.01 per share (the "Common Stock" and such
number of shares as adjusted as described below, the "Shares"), upon surrender
hereof to the Company and upon payment of the Purchase Price as hereinafter
defined. The purchase price per Share shall be $__________ (as may be adjusted
as described below, the "Purchase Price").
2 Adjustments; Anti-Dilution Provisions.
2.1. In the event of a change in the capital stock of the Company, such as
a stock dividend, stock split or combination or similar recapitalization, the
Warrantholder upon exercise hereof shall be entitled to receive, in lieu of the
number of shares of Common Stock which he would have been entitled to receive
upon exercise at that date had there been no such change, such number of shares
of Common Stock as such holder would have received pursuant to such change if
the exercise of this Warrant had been effected prior to such change and the
Purchase Price shall be adjusted proportionately.
2.2. In the case of (i) any consolidation or merger of the Company, (ii)
any sale or transfer of all or substantially all the assets of the Company, or
(iii) any share exchange whereby the Common Stock is converted into other
securities or property, the Warrantholder shall have the right to exercise this
Warrant and receive upon such exercise the kind and amount of shares of stock or
other securities or property receivable upon the consolidation, merger, sale,
transfer or share exchange by a holder of the number of shares of Common Stock
for which this Warrant might have been exercised immediately prior to the
consolidation, merger, sale, transfer or share exchange.
2.3. The Company shall, within a reasonable time period after written
request at any time of the Warrantholder, furnish or cause to be furnished to
such holder a certificate setting forth adjustments and readjustments regarding
(i) the number of Shares, (ii) the amount, if any, of other property at the time
receivable upon the exercise of this Warrant, or (iii) the Purchase Price.
<PAGE>
3 Registration Rights
(a) As used in this Section 3, the following terms shall have the following
meanings:
(i) "Affiliate" shall mean, with respect to any person, any other
person controlling, controlled by or under direct or indirect common
control with such person (for the purposes of this definition "control,"
when used with respect to any specified person, shall mean the power to
direct the management and policies of such person, directly or indirectly,
whether through ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" shall have meanings
correlative to the foregoing).
(ii) "Business Day" shall mean a day Monday through Friday on which
banks are generally open for business in New York.
(iii) "Holders" shall mean the undersigned and any person holding
Registrable Securities to whom the rights under Section 3 have been
transferred in accordance with Section 3(i).
(iv) "Person" shall mean any person, individual, corporation,
partnership, trust or other nongovernmental entity or any governmental
agency, court, authority or other body (whether foreign, federal, state,
local or otherwise).
(v) The terms "register," "registered" and "registration" refer to the
registration effected by preparing and filing a registration statement in
compliance with the Securities Act, and the declaration or ordering of the
effectiveness of such registration statement.
(vi) "Registrable Securities" shall mean the Shares and any shares of
common stock of the Company issued as a dividend or other distribution with
respect to or in replacement of Shares; provided, however, that such
securities shall only be treated as Registrable Securities if and only for
so long as they (A) have not been disposed of pursuant to a registration
statement declared effective by the SEC,
2
<PAGE>
(B) have not been sold in a transaction exempt from the registration
requirements of the Securities Act so that all transfer restriction and
restrictive legends with respect thereto are removed upon the consummation
of such sale or (C) are held by a Holder or a permitted transferee pursuant
to Section 3(i).
(vii) "Registration Expenses" shall mean all expenses incurred by the
Company in complying with Section 3(b) hereof, including, without
limitation, all registration, qualification and filing fees, printing
expenses, escrow fees, fees and expenses of counsel for the Company, blue
sky fees and expense (for a reasonable number of states) and the expenses
of any special audits incident to or required by any such registration (but
excluding the fees of legal counsel for any Holder).
(viii) "Registration Statement" shall have the meaning ascribed to
such term in Section 3(b).
(ix) "Registration Period" shall have the meaning ascribed to such
term in Section 3(c).
(x) "SEC" shall mean the U.S. Securities and Exchange Commission.
(xi) "Selling Expenses" shall mean all underwriting discounts and
selling commissions applicable to the sale of Registrable Securities and
all fees and expenses of legal counsel for any Holder.
(b) No later than 90 days after the purchase of Shares pursuant to this
Subscription Agreement (the "Filing Date"), the Company will file a registration
statement (the "Registration Statement") with the SEC and use its reasonable
best efforts to effect the registration, qualifications or compliances
(including, without limitation, the execution of any required undertaking to
file post-effective amendments, appropriate qualifications or exemptions under
applicable blue sky or other state securities laws and appropriate compliance
with applicable securities laws, requirements or regulations) as may be so
reasonably requested and as would permit or facilitate the sale and distribution
of all Registrable Securities. Notwithstanding the foregoing, the Company will
not be obligated to enter into any underwriting agreement for the sale of any of
the Shares.
(c) All Registration Expenses incurred in connection with any registration,
qualification, exemption or compliance pursuant to Section 3(b) shall be borne
by the Company. All Selling Expenses relating to the sale of securities
registered by or behalf of Holders shall be borne by such Holders pro rata on
the basis of the number of securities so registered.
3
<PAGE>
(d) In the case of the registration, qualification, exemption or compliance
effected by the Company pursuant to this Subscription Agreement, the Company
will, upon reasonable request, inform each Holder as to the status of such
registration, qualification, exemption and compliance. At its expense the
Company will:
(i) use its reasonable best efforts to keep such registration, and any
qualification, exemption or compliance under state securities laws which
the Company determines to obtain, continuously effective until at least the
second anniversary of the Closing Date or until the Holders have completed
the distribution described in the registration statement relating thereto,
whichever first occurs. The period of time during which the Company is
required hereunder to keep the Registration Statement effective is referred
to herein as "the Registration Period." Notwithstanding the foregoing at
the Company's election, the Company may cease to keep such registration,
qualification or compliance effective with respect to any Registrable
Securities and the registration rights of a Holder shall expire, at such
time as the Holder may sell under Rule 144 under the Securities Act (or
other exemption from registration acceptable to the Company) in a
three-month period all Registrable Securities then held by such Holder;
(ii) advise the Holders:
(A) when the Registration Statement or any amendment thereto has
been filed with the SEC and when the Registration Statement or any
post-effective amendment thereto has become effective;
(B) of any request by the SEC for amendments or supplements to
the Registration Statement or the prospectus included therein or for
additional information;
(C) of the issuance by the SEC of any stop order suspending the
effectiveness of the Registration Statement or the initiation of any
proceeding for such purpose;
(D) of the receipt by the Company of any notification with
respect to the suspension of the qualification of the Shares included
therein for sale in any jurisdiction or the initiation or threatening
of any proceeding for such purpose; and
(E) of the happening of any event that
4
<PAGE>
requires the making of any changes in the Registration Statement or
the prospectus so that, as of such date, the statements therein are
not misleading and do not omit to state a material fact required to be
stated therein or necessary to make the statements therein (in the
case of the prospectus, in the light of the circumstances under which
they were made) not misleading;
(iii) make every reasonable effort to obtain the withdrawal of any
order suspending the effectiveness of any Registration Statement at the
earliest possible time;
(iv) during the Registration Period deliver to each Holder, without
charge, as many copies of the prospectus included in such Registration
Statement and any amendment or supplement thereto as such Holder may
reasonably request; and the Company consents to the use, consistent with
the provisions hereof, of the prospectus or any amendment or supplement
thereto by each of the selling Holders of Registrable Securities in
connection with the offering and sale of the Registrable Securities covered
by the prospectus or any amendment or supplement thereto;
(v) prior to any public offering of the Registrable Securities
pursuant to any Registration Statement, register or qualify or obtain an
exemption for offer and sale under the securities or blue sky laws of such
jurisdictions as any such Holders reasonably request in writing, provided
that the Company shall not for any such purpose be required to qualify
generally to transact business as a foreign corporation in any jurisdiction
where it is not so qualified or to consent to general service of process in
any such jurisdiction, and do any and all other acts or things reasonably
necessary or advisable to enable the offer and sale in such jurisdictions
of the Registrable Securities covered by such Registration Statement;
(vi) cooperate with the Holders to facilitate the timely preparation
and delivery of certificates representing Registrable Securities to be sold
pursuant to any Registration Statement free of any restrictive legends to
the extent not required at such time and in such denomination and
registered in such names as Holders may request at least three business
days prior to sales of Registrable Securities pursuant to such Registration
Statement; and
(vii) upon the occurrence of any event
5
<PAGE>
contemplated by Section 3(d)(ii)(E) above, the Company shall promptly
prepare a post-effective amendment to the Registration Statement or a
supplement to the related prospectus, or file any other required document
so that, as thereafter delivered to purchasers of the Registrable
Securities included therein not misleading, the prospectus will not include
any untrue statement of a material fact or omit to state any material fact
necessary to make the statements therein not misleading in the light of the
circumstances under which they were made.
(e) The Holders shall have no right to take any action to restrain, enjoin
or otherwise delay any registration pursuant to Section 3(b) hereof as a result
of any controversy that may arise with respect to the interpretation or
implementation of this Subscription Agreement.
(f) (i) To the extent permitted by law, the Company will indemnify
each Holder, each underwriter of the Registrable Securities and each
person controlling such Holder within the meaning of Section 15 of the
Securities Act, with respect to which any registration, qualification
or compliance has been effected pursuant to this Subscription
Agreement, against losses, damages and liabilities (or action in
respect thereof), including any of the incurred in settlement of any
litigation, commenced or threatened (subject to Section 3(f)(iii)
below), arising out of or based on any untrue statement (or alleged
untrue statement) of a material fact contained in any Registration
Statement, prospectus or offering circular, or any amendment or
supplement thereof, incident to any such registration, qualification
or compliance, or based on any omission (or alleged omission) to state
therein a material fact required to be stated therein or necessary to
make the statements therein not misleading, in light of the
circumstances in which they were made, and will reimburse each Holder,
each underwriter of the Registrable Securities and each person
controlling such Holder, for reasonable legal and any other expenses
reasonably incurred in connection with investigating or defending any
such claim, loss, damage, liability or action as incurred; provided
that the Company will not be liable in any such case to the extent
that any untrue statement or omission or allegation thereof is made in
reliance upon and in conformity with written information furnished to
the Company by or on behalf of such Holder and stated to be
specifically for use in preparation of such registration statement,
prospectus or offering circular; further provided that the indemnity
contained in this Section 3(f)(i) shall not apply to amounts paid in
settlement of any such claim, loss, damages, liability, action or
proceeding if such
6
<PAGE>
settlement is effected without the consent of the Company (which
consent shall not be unreasonably withheld), nor shall the Company be
liable in any such case where the claim, loss, damage or liability
arises out of or is related to the failure of the Holder to comply
with the covenants and agreements contained in this Agreement with
respect to the sales of Registrable Securities, and except that the
foregoing indemnity agreement is subject to the conditions that
insofar as it relates to (A) any such untrue statement or alleged
untrue statement or omission or alleged omission made in the
preliminary prospectus but eliminated or remedied in the amended
prospectus filed with the SEC pursuant to Rule 424(b) or in the
prospectus subject to completion and term sheet under Rule 434 of the
Securities Act, which together meet the requirements of Section 10(a)
of the Securities Act (the "Final Prospectus"), such indemnity
agreement shall not inure to the benefit of any such Holder, any such
underwriter or any such controlling person, if a copy of the Final
Prospectus was not furnished to person or entity asserting the loss,
liability, claim or damage at or prior to the time such furnishing is
required by the Securities Act, and (B) any such untrue statement or
alleged untrue statement or omission or alleged omission based upon
information furnished to the Company by such Holder, such indemnity
agreement shall not inure to the benefit of any such Holder, any such
underwriter or any such controlling person;
(ii) Each Holder will severally, if Registrable Securities held
by such Holder are included in the securities as to which such
registration, qualification or compliance is being effected, indemnify
the Company, each of its directors and officers, each underwriter of
the Shares and each person who controls the Company within the meaning
of Section 15 of the Securities Act, against all claims, losses,
damages and liabilities (or actions in respect thereof), including any
of the foregoing incurred in settlement of any litigation, commenced
or threatened (subject to Section 3(f)(iii) below), arising out of or
based on any untrue statement (or alleged untrue statement) of a
material fact contained in any registration statement, prospectus or
offering circular, or any amendment or supplement thereof, incident to
any such registration, qualification or compliance, or based on any
omission (or alleged omission) to state therein a material fact
required to be stated therein or necessary to make the statements
therein not misleading, in light of the circumstances in which they
were made, and will reimburse the Company, such directors and
officers, each underwriter of the Shares and each person controlling
the Company
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for reasonable legal and any other expenses reasonably incurred in
connection with investigating or defending any such claim, loss,
damage, liability or action as incurred, in each case to the extent,
but only to the extent, that such untrue statement or omission or
allegation thereof is made in reliance upon and in conformity with
written information furnished to the Company by or on behalf of the
Holder and stated to be specifically for use in preparation of such
registration statement, prospectus or offering circular; provided that
the indemnity shall not apply to the extent that such claim, loss,
damage or liability results from the fact that a current copy of the
prospectus that was made available to the Holder was not sent or given
to the person asserting any such claim, loss, damage or liability at
or prior to the written confirmation of the sale of the Registrable
Securities confirmed to such person if such current copy of the
prospectus would have cured the defect giving rise to such loss,
claim, damage or liability. Notwithstanding the foregoing, in no event
shall a Holder be liable for any such claims, losses, damages or
liabilities in excess of the proceeds received by such Holder in the
offering, except in the event of fraud by such Holder;
(iii) Each party entitled to indemnification under this Section
3(f) (the "Indemnified Party") shall give notice to the party required
to provide indemnification (the "Indemnifying Party") promptly after
such Indemnified Party has actual knowledge of any claim as to which
indemnity may be sought, and shall permit the Indemnifying Party to
assume the defense of any such claim or any litigation resulting
therefrom, provided that counsel for the Indemnifying Party, who shall
conduct the defense of such claim or litigation, shall be approved by
the Indemnified Party (whose approval shall not unreasonably be
withheld), and the Indemnified Party may participate in such defense
at such Indemnified Party's expense, and provided further that the
failure of any Indemnified Party to give notice as provided herein
shall not relieve the Indemnifying Party of its obligations under this
Subscription Agreement, unless such failure is prejudicial to the
Indemnifying Party in defending such claim or litigation. An
Indemnifying Party shall not be liable for any settlement of an action
or claim effected without its written consent (which consent will not
be unreasonably withheld);
(iv) If the indemnification provided for in this Section 3(f) is
held by a court of competent jurisdiction to be unavailable to an
Indemnified Party with respect to any loss, liability, claim, damage
or
8
<PAGE>
expense referred to therein, then the Indemnifying Party, in lieu of
indemnifying such Indemnified Party thereunder, shall contribute to
the amount paid or payable by such Indemnified Party as a result of
such loss, liability, claim, damage or expense in such proportion as
is appropriate to reflect the relative fault of the Indemnifying Party
on the one hand and of the Indemnified Party on the other in
connection with the statements or omissions which resulted in such
loss, liability, claim, damage or expense as well as any other
relevant equitable considerations. The relative fault of the
Indemnifying Party and of the Indemnified Party shall be determined by
reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission to state a material fact
relates to information supplied by the Indemnifying Party or by the
Indemnified Party and the parties' relative intent, knowledge, access
to information and opportunity to correct or prevent such statement or
omission.
(g) (i) Each Holder agrees that, upon receipt of any notice from the
Company of the happening of any event requiring the preparation of a
supplement or amendment to a prospectus relating to Registrable
Securities so that, as thereafter delivered to the Holders, such
prospectus will not contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading, each Holder
will forthwith discontinue disposition of Registrable Securities
pursuant to the Registration Statement contemplated by Section 3(b)
until its receipt of copies of the supplemented or amended prospectus
from the Company and, if so directed by the Company, each Holder shall
deliver to the Company all copies, other than permanent file copies
then in such Holder's possession, of the prospectus covering such
Registrable Securities current at the time of receipt of such notice;
(ii) Each Holder agrees to suspend, upon request of the Company,
any disposition of Registrable Securities pursuant to the Registration
Statement and prospectus contemplated by Section 3(b) during (A) any
period not to exceed two 30-day periods within any one 12-month period
the Company requires in connection with a primary underwritten
offering of equity securities and (B) any period, not to exceed one
30-day period per circumstance or development, when the Company
determines in good faith that offers and sales pursuant thereto should
not be made by reason of the presence of material undisclosed
circumstances or developments with respect to which the disclosure
that would be required
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<PAGE>
in such a prospectus is premature, would have an adverse effect on the
Company or is otherwise inadvisable;
(iii) As a condition to the inclusion of its Registrable
Securities, each Holder shall furnish to the Company such information
regarding such Holder and the distribution proposed by such Holder as
the Company may request in writing or as shall be required in
connection with any registration, qualification or compliance referred
to in this Section 3;
(iv) Each Holder hereby covenants with the Company (A) not to
make any sale of the Registrable Securities without effectively
causing the prospectus delivery requirements under the Securities Act
to be satisfied, and (B) if such Registrable Securities are to be sold
by any method or in any transaction other than on a national
securities exchange, in the over-the-counter market, in privately
negotiated transactions, or in a combination of such methods, to
notify the Company at least five business days prior to the date on
which the Holder first offers to sell any such Shares;
(v) Each Holder acknowledges and agrees that the Registrable
Securities sold pursuant to a Registration Statement are not
transferable on the books of the Company unless the stock certificate
submitted to the transfer agent evidencing such Registrable Securities
is accompanied by a certificate reasonably satisfactory to the Company
to the effect that (A) the Registrable Securities have been sold in
accordance with such Registration Statement and (B) the requirement of
delivering a current prospectus has been satisfied;
(vi) Each Holder agrees not to take any action with respect to
any distribution deemed to be made pursuant to such Registration
Statement, that constitutes a violation of Regulation M under the
Exchange Act or any other applicable rule, regulation or law;
(vii) At the end of the period during which the Company is
obligated to keep the Registration Statement current and effective as
described above, the Holders of Registrable Securities included in the
Registration Statement shall discontinue sales of shares pursuant to
such Registration Statement upon receipt of notice from the Company of
its intention to remove from registration the shares covered by such
Registration Statement which remain unsold, and such Holders shall
notify the Company of the number of
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<PAGE>
shares registered which remain unsold immediately upon receipt of such
notice from the Company.
(h) With a view to making available to the Holders the benefits of certain
rules and regulations of the SEC which at any time permit the sale of the
Registrable Securities to the public without registration, the Company agrees to
use its reasonable best efforts to:
(i) make and keep public information available, as those terms are
understood and defined in Rule 144 under the Securities Act, at all times;
(ii) file with the SEC in a timely manner all reports and other
documents required of the Company under the Exchange Act; and
(iii) so long as a Holder owns any unregistered Registrable
Securities, furnish to such Holder upon any reasonable request a written
statement by the Company as to its compliance with Rule 144 under the
Securities Act, and of the Exchange Act, a copy of the most recent annual
or quarterly report of the Company, and such other reports and documents of
the Company as such Holder may reasonably request in availing itself of any
rule or regulation of the SEC allowing a Holder to sell any such securities
without registration.
(i) The rights to cause the Company to register Registrable Securities
granted to the Holders by the Company under Section 3(a) may be assigned in full
by a Holder, provided that such transfer may otherwise be effected in accordance
with applicable securities laws; (ii) such Holder gives prior written notice to
the Company; and (iii) such transferee agrees to comply with the terms and
provisions of this Subscription Agreement, and such transfer is otherwise in
compliance with this Subscription Agreement. Except as specifically permitted by
this Section 3(i), the rights of a Holder with respect to Registrable Securities
as set out herein shall not be transferable to any other Person, and any
attempted transfer shall cause all rights of such Holder therein to be
forfeited.
(j) With the written consent of the Company and the Holders holding at
least a majority of the Registrable Securities that are then outstanding, any
provision of this Section 3 may be waived (either generally or in a particular
instance, either retroactively or prospectively and either for a specified
period of time or indefinitely) or amended. Upon the effectuation of each such
waiver or amendment, the Company shall promptly give written notice thereof to
the Holders, if any, who have not previously received notice thereof or
consented thereto in writing.
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<PAGE>
4 No Fractional Shares. No fractional Shares or scrip representing
fractional Shares shall be issued upon the exercise of this Warrant. All Shares
(including fractions thereof) issuable upon exercise of this Warrant or any part
hereof by the holder hereof shall be aggregated for purposes of determining
whether the conversion would result in the issuance of any fractional Share. If
any such conversion results in a fraction, an amount equal to such fraction
multiplied by the then current market price (as determined in good faith by the
board of directors of the Company) of one Share shall be paid to such holder in
cash by the Company.
5 No Shareholder Rights. This Warrant shall not entitle its holder to any
of the rights of a shareholder of the Company.
6 Reservation of Shares. The Company covenants that during the period this
Warrant is exercisable, the Company will reserve from its authorized and
unissued shares of Common Stock a sufficient number of shares to provide for the
issuance of the Shares upon the exercise of this Warrant and, from time to time,
will take all steps necessary to provide therefore, including any required
amendment to, its Restated Certificate of Incorporation.
7 Exercise of Warrant.
7.1. In order to exercise this Warrant, in whole or in part, the
Warrantholder shall deliver to the Company (i) a written notice of the
Warrantholder's election to exercise this Warrant, specifying the number of
Shares to be purchased and designating the Purchase Price to be applied, (ii)
cash or a check or checks payable to the order of the Company in an amount equal
to the product of the Purchase Price so designated per Share and the number of
Shares to be purchased at such time pursuant to the Warrant, and (iii) this
Warrant. Except as set forth in section 7.2, upon receipt of such items, the
Company shall, as promptly as practicable, and in any event within 20 days
thereafter, issue or cause to be issued and delivered to such holder a
certificate or, if requested by the holder, multiple certificates representing
the aggregate number of full Shares issuable upon such exercise, together with
cash in lieu of any fraction of a Share, as provided in section 4 above. This
Warrant shall be deemed to have been exercised and such certificate or
certificates shall be deemed to have been issued, and such holder or any other
person so designated to be named therein shall be deemed to have become a holder
of record of such Shares for all purposes, as of the date that said notice,
together with said cash or check or checks and this Warrant, are received by the
Company as aforesaid. If this Warrant shall have been exercised in part, the
Company shall, at the time of delivery of said certificate or certificates,
deliver to such holder a new Warrant evidencing the rights of such holder to
purchase the unpurchased Shares, or such other securities as may become subject
to the right to purchase by the holder hereof
12
<PAGE>
under the terms hereof, called for by this Warrant, which new Warrant shall in
all other respects be identical to this Warrant.
7.2. All Shares issuable upon the exercise of this Warrant shall be validly
issued, fully paid and nonassessable, and the Company shall pay all expenses in
connection with, and all taxes and other governmental charges that may be
imposed in respect of, the issue or delivery thereof other than any federal,
state or local income tax or other tax based upon gross or net income, owed by
the Warrantholder. The Company shall not be required, however, to pay any tax or
other charge imposed in connection with any transfer involved in the issue of
any certificate for Shares in any name other than that of the registered
Warrantholder, and in such case the Company shall not be required to issue or
deliver any stock certificate until such tax or other charge has been paid or it
has been established to the Company's satisfaction that no such tax or other
charge is due.
8 Optional Redemption. After the Company shall have given to the
Warrantholder sixty days' notice and opportunity to exercise, the Company may
redeem this Warrant for $0.01 per Share if at any time twelve months subsequent
to the date of this Warrant, the Common Stock has traded for at least the 20
consecutive trading days prior to the giving of notice at or above 200% of the
per share Warrant price.
9 Replacement of Warrants. On receipt of evidence reasonably satisfactory
to the Company of the loss, theft, destruction or mutilation of any Warrant and,
in the case of any such loss, theft or destruction of any Warrant, on delivery
of an indemnity agreement or security reasonably satisfactory in form and amount
to the Company or, in the case of any such mutilation, upon surrender and
cancellation of such Warrant, the Company, at the expense of the holder will
execute and deliver, in lieu thereof, a new warrant of like tenor.
10 Transfer of Warrant. This Warrant and all rights hereunder are
transferable upon surrender of this Warrant; provided, however, that (i) such
transfer must be effected in accordance with applicable securities laws, (ii)
the Company is, prior to such transfer, furnished with written notice of the
name and address of such transferee and the portion of the amount of Shares to
which the transferee is entitled, and (iii) immediately following such transfer
the further disposition of such securities by the transferee or assignee is
restricted under the Act. Upon such surrender, the Company, at the expense of
the transferee or transferor hereof, as the transferee and transferor may decide
between themselves, will issue and deliver to and on the order of the
Warrantholder, a new warrant of like tenor in the name of the new Warrantholder,
on payment by the Warrantholder of any applicable transfer taxes, calling in the
aggregate for the number of Shares called for by the Warrant surrendered.
13
<PAGE>
11 Remedies. The Company stipulates that the remedies at law of the
Warrantholder in the event of any default or threatened default by the Company
in the performance of or compliance with any of the terms of this Warrant are
not and will not be adequate, and that such terms may be specifically enforced
by a decree for the specific performance of any agreement contained herein or by
an injunction against a violation of any of the terms hereof or otherwise.
12 Notices. All notices, requests, demands and other communications
required or permitted hereunder shall be deemed to have been duly given if
delivered by hand, telecopied (with receipt confirmed), sent by overnight
courier service or mailed by certified or registered mail and shall be deemed to
be received on the date of receipt:
(a) If to the Company, to:
Compositech Ltd.
120 Ricefield Lane
Hauppauge, New York 11788-2008
Attention: Mr. Samuel S. Gross
with a copy to:
Patterson, Belknap, Webb & Tyler LLP
1133 Avenue of the Americas
New York, New York 10036-6710
Attention: Edward F. Cox, Esq.
or to such other person or address as the Company shall furnish to the
Warrantholder in writing.
(b) If to the Warrantholder, to:
--------------------------------------------
--------------------------------------------
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or to such other person or address as the Warrantholder shall furnish to the
Company in writing.
13 Miscellaneous. This Warrant shall be governed by the laws of the State
of New York applicable to agreements made and to be performed entirely within
such state. The headings in this Warrant are for purposes of convenience and
reference only, and shall not be deemed to constitute a part hereof. Neither
this Warrant nor any term hereof may be changed, waived,
14
<PAGE>
discharged or terminated orally but only by an instrument in writing signed by
the Company and the registered holder hereof. The invalidity or unenforceability
of any provision hereof shall in no way affect the validity or enforceability of
any other provision.
ISSUED as of the ______th day of _____________, 199___.
COMPOSITECH LTD.
By:___________________________
Samuel S. Gross
Executive Vice President
and Treasurer
15
EXHIBIT 4.1.2
THE SECURITIES REPRESENTED BY THIS CERTIFICATE AND THE SHARES ISSUABLE PURSUANT
HERETO HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
AND MAY NOT BE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED
THERETO OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY IN FORM AND SCOPE TO
THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF
1933.
COMPOSITECH LTD.
COMMON STOCK PURCHASE WARRANT
VOID AFTER _________________________
1 Number and Price of Shares Subject to Warrant. Subject to the terms and
conditions herein set forth, ________, his or her designees, successors and
assigns (together, the "Warrantholder") are entitled to purchase from
Compositech Ltd., a Delaware corporation (the "Company"), at any time or from
time to time after the date hereof and on or before _____________________, in
whole or in part, (________) fully paid and non-assessable shares of common
stock, par value $.01 per share (the "Common Stock" and such number of shares as
adjusted as described below, the "Shares"), upon surrender hereof to the Company
and upon payment of the Purchase Price as hereinafter defined. The purchase
price per Share shall be $______ (as may be adjusted as described below, the
"Purchase Price").
2 Adjustments; Anti-Dilution Provisions.
2.1. In the event of a change in the capital stock of the Company, such as
a stock dividend, stock split or combination or similar recapitalization, the
Warrantholder upon exercise hereof shall be entitled to receive, in lieu of the
number of shares of Common Stock which he would have been entitled to receive
upon exercise at that date had there been no such change, such number of shares
of Common Stock as such holder would have received pursuant to such change if
the exercise of this Warrant had been effected prior to such change and the
Purchase Price shall be adjusted proportionately.
2.2. In the case of (i) any consolidation or merger of the Company, (ii)
any sale or transfer of all or substantially all the assets of the Company, or
(iii) any share exchange whereby the Common Stock is converted into other
securities or property, the Warrantholder shall have the right to exercise this
Warrant and receive upon such exercise the kind and amount of shares of stock or
other securities or property receivable upon the consolidation, merger, sale,
transfer or share exchange by a holder of the number of shares of Common Stock
for which this Warrant might have been exercised immediately prior to the
consolidation, merger, sale, transfer or share exchange.
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<PAGE>
2.3. The Company shall, within a reasonable time period after written
request at any time of the Warrantholder, furnish or cause to be furnished to
such holder a certificate setting forth adjustments and readjustments regarding
(i) the number of Shares, (ii) the amount, if any, of other property at the time
receivable upon the exercise of this Warrant, or (iii) the Purchase Price.
3 Registration Rights. The Warrantholder shall have registration rights as
follows:
3.1. If prior to ________________ (i) the Company shall file a registration
statement to cover a public offering by the Company (other than to employees) or
its shareholders of any equity securities, and (ii) the form of such
registration statement may be used under the Securities Act of 1933, as amended
(the "Act"), to cover a public offering of the Securities (for the purposes of
this section 3 "Securities" shall mean the Shares or other securities receivable
upon exercise hereof by the Warrantholder), the Company will, at least 20 days
prior to filing such registration statement, notify the Warrantholder in writing
of its intention to make such filing. If the Warrantholder shall request the
inclusion of Securities in such registration statement, the Company will comply
with such request at the Company's expense. If Securities are included in a
registration statement pursuant to this section 3.1 and the managing underwriter
of such offering shall advise the Company in writing that, in its opinion, the
distribution of the Securities concurrently with the securities being registered
by the Company would materially adversely affect the distribution of the
securities being registered by the Company, the number of Securities included in
the public offering shall be reduced, in an amount determined by the managing
underwriter, pro rata among the holders of Securities requesting inclusion in
the filing.
3.2. The following provisions shall also be applicable to any such
registration statement utilized pursuant to section 3.1 hereof:
(a) The registered holders whose Securities are to be included therein (the
"Sellers") shall furnish the Company with such appropriate information (relating
to the intentions of such Sellers) in connection therewith as the Company shall
reasonably request in writing. Following the effective date of the registration
statement, the Company shall upon the request of any Seller forthwith supply
such reasonable number of prospectuses meeting the requirements of the Act as
shall be requested by such Seller to permit such Seller to make a public
offering of all the Securities of such Seller included therein. The Company
shall use its best efforts (i) to keep such registration statement current for a
period not exceeding 180 days from the date of effectiveness, as requested by
the Sellers; (ii) to qualify such Securities for sale in such states as the
Sellers shall
2
<PAGE>
reasonably designate at the cost and expense of the Company, provided that no
such qualification shall be required in any jurisdiction where, as a result
thereof, the Company would be subject to service of general process or to
taxation as a foreign corporation doing business in such jurisdiction to which
it is not then subject; and (iii) to qualify such offering, at the cost and
expense of the Company, with the National Association of Securities Dealers,
Inc. The Company will furnish each Seller with an opinion of its counsel to the
effect that the registration statement and any amendments or supplements
thereto, other than the financial statements and notes thereto and other
financial and statistical information included therein or omitted therefrom, as
to which such counsel need express no opinion, comply as to form in all material
respects with the Act and that such counsel does not know or have reason to know
of any untrue statement of a material fact or omission of a statement of any
material fact required to be stated therein or necessary to make the statements
therein not misleading in said registration statement and any amendments or
supplements thereto.
(b) The Company shall indemnify and hold harmless each Seller and each
underwriter, within the meaning of the Act, who may purchase from or sell for
any Seller any Securities from and against any and all loss, liability, claim,
damage and expense whatsoever (including, but not limited to, any and all
expenses whatsoever reasonably incurred in investigating, preparing or defending
against any litigation, commenced or threatened, or any claim whatsoever)
arising out of any untrue statement or alleged untrue statement of a material
fact contained in the registration statement or any amendment thereto or any
prospectus included therein required to be filed or furnished by reason of this
section 3, or caused by any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading, except insofar as such loss, liability, claim, damage or expense is
caused by any such untrue statement or alleged untrue statement or omission or
alleged omission based upon information furnished in writing to the Company by
such Seller or underwriter expressly for use therein, which indemnification
shall include each person, if any, who controls any such Seller or underwriter
within the meaning of the Act; provided, however, that the indemnity agreement
by the Company set forth in this section 3 with respect to any prospectus which
shall be subsequently amended prior to the written confirmation of the sale of
any such Securities, shall not inure to the benefit of any Seller or underwriter
from whom the person asserting any such loss, liability, claim, damage or
expense purchased the Securities which are the subject thereof (or to the
benefit of any person controlling such Seller or underwriter), if such Seller or
underwriter failed to send or give a copy of the prospectus as so amended to
such person at or prior to the written confirmation of the sale of such
Securities to such person and if the amended prospectus did not contain any
untrue statement or alleged untrue statement or omission or
3
<PAGE>
alleged omission giving rise to such loss, liability, claim, damage or expense.
(c) Each Seller and underwriter shall at the same time indemnify the
Company, its directors, each officer signing the related registration statement
and each person, if any, who controls the Company within the meaning of the Act,
from and against any and all loss, liability, claim, damage and expense
whatsoever (including, but not limited to, any and all expenses whatsoever
reasonably incurred in investigating, preparing or defending against any
litigation, commenced or threatened, or any claims whatsoever) arising out of
any untrue statement or alleged untrue statement of a material fact contained in
any registration statement or any prospectus required to be filed or furnished
by reason of this section 3 or caused by any omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading, insofar as such loss, liability, claim, damage or expense
is caused by any untrue statement or alleged untrue statement or omission or
alleged omission based upon information furnished in writing to the Company by
any such Seller or underwriter expressly for use therein.
3.4. Agreement to Lock Up. In connection with any registration of the
Company's securities (whether or not a Warrantholder is participating in such
registration), upon the request of the Company and the managing underwriter, the
Warrantholders shall not sell, make any short sale of, loan, grant any option
for the purchase of, or otherwise dispose of any Securities other than those
included in such registration without the prior written consent of the Company
and the managing underwriter for such period of time from the effective date of
such registration statement as the Company and the managing underwriter may
specify.
4 No Fractional Shares. No fractional Shares or scrip representing
fractional Shares shall be issued upon the exercise of this Warrant. All Shares
(including fractions thereof) issuable upon exercise of this Warrant or any part
hereof by the holder hereof shall be aggregated for purposes of determining
whether the conversion would result in the issuance of any fractional Share. If
any such conversion results in a fraction, an amount equal to such fraction
multiplied by the then current market price (as determined in good faith by the
board of directors of the Company) of one Share shall be paid to such holder in
cash by the Company.
5 No Shareholder Rights. This Warrant shall not entitle its holder to any
of the rights of a shareholder of the Company.
6 Reservation of Shares. The Company covenants that during the period this
Warrant is exercisable, the Company will
4
<PAGE>
reserve from its authorized and unissued shares of Common Stock a sufficient
number of shares to provide for the issuance of the Shares upon the exercise of
this Warrant and, from time to time, will take all steps necessary to provide
therefore, including any required amendment to, its Restated Certificate of
Incorporation.
7 Exercise of Warrant.
7.1. In order to exercise this Warrant, in whole or in part, the
Warrantholder shall deliver to the Company (i) a written notice of the
Warrantholder's election to exercise this Warrant, specifying the number of
Shares to be purchased and designating the Purchase Price to be applied, (ii)
cash or a check or checks payable to the order of the Company in an amount equal
to the product of the Purchase Price so designated per Share and the number of
Shares to be purchased at such time pursuant to the Warrant, and (iii) this
Warrant. Except as set forth in section 7.2, upon receipt of such items, the
Company shall, as promptly as practicable, and in any event within 20 days
thereafter, issue or cause to be issued and delivered to such holder a
certificate or, if requested by the holder, multiple certificates representing
the aggregate number of full Shares issuable upon such exercise, together with
cash in lieu of any fraction of a Share, as provided in section 4 above. This
Warrant shall be deemed to have been exercised and such certificate or
certificates shall be deemed to have been issued, and such holder or any other
person so designated to be named therein shall be deemed to have become a holder
of record of such Shares for all purposes, as of the date that said notice,
together with said cash or check or checks and this Warrant, are received by the
Company as aforesaid. If this Warrant shall have been exercised in part, the
Company shall, at the time of delivery of said certificate or certificates,
deliver to such holder a new Warrant evidencing the rights of such holder to
purchase the unpurchased Shares, or such other securities as may become subject
to the right to purchase by the holder hereof under the terms hereof, called for
by this Warrant, which new Warrant shall in all other respects be identical to
this Warrant.
7.2. All Shares issuable upon the exercise of this Warrant shall be validly
issued, fully paid and nonassessable, and the Company shall pay all expenses in
connection with, and all taxes and other governmental charges that may be
imposed in respect of, the issue or delivery thereof other than any federal,
state or local income tax or other tax based upon gross or net income, owed by
the Warrantholder. The Company shall not be required, however, to pay any tax or
other charge imposed in connection with any transfer involved in the issue of
any certificate for Shares in any name other than that of the registered
Warrantholder, and in such case the Company shall not be required to issue or
deliver any stock certificate until such tax or other charge has been paid or it
has been established to the Company's satisfaction that no such tax or other
charge is due.
5
<PAGE>
8 Optional Redemption. After the Company shall have given to the
Warrantholder sixty days' notice and opportunity to exercise, the Company may
redeem this Warrant for $0.01 per Share if at any time twelve months subsequent
to the date of this Warrant, the Common Stock has traded for at least the 20
consecutive trading days prior to the giving of notice at or above 200% of the
per share Warrant price.
9 Replacement of Warrants. On receipt of evidence reasonably satisfactory
to the Company of the loss, theft, destruction or mutilation of any Warrant and,
in the case of any such loss, theft or destruction of any Warrant, on delivery
of an indemnity agreement or security reasonably satisfactory in form and amount
to the Company or, in the case of any such mutilation, upon surrender and
cancellation of such Warrant, the Company, at the expense of the holder will
execute and deliver, in lieu thereof, a new warrant of like tenor.
10 Transfer of Warrant. This Warrant and all rights hereunder are
transferable upon surrender of this Warrant; provided, however, that (i) such
transfer must be effected in accordance with applicable securities laws, (ii)
the Company is, prior to such transfer, furnished with written notice of the
name and address of such transferee and the portion of the amount of Shares to
which the transferee is entitled, and (iii) immediately following such transfer
the further disposition of such securities by the transferee or assignee is
restricted under the Act. Upon such surrender, the Company, at the expense of
the transferee or transferor hereof, as the transferee and transferor may decide
between themselves, will issue and deliver to and on the order of the
Warrantholder, a new warrant of like tenor in the name of the new Warrantholder,
on payment by the Warrantholder of any applicable transfer taxes, calling in the
aggregate for the number of Shares called for by the Warrant surrendered.
11 Remedies. The Company stipulates that the remedies at law of the
Warrantholder in the event of any default or threatened default by the Company
in the performance of or compliance with any of the terms of this Warrant are
not and will not be adequate, and that such terms may be specifically enforced
by a decree for the specific performance of any agreement contained herein or by
an injunction against a violation of any of the terms hereof or otherwise.
12 Notices. All notices, requests, demands and other communications
required or permitted hereunder shall be deemed to have been duly given if
delivered by hand, telecopied (with receipt confirmed), sent by overnight
courier service or mailed by certified or registered mail and shall be deemed to
be received on the date of receipt:
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<PAGE>
(a) If to the Company, to:
Compositech Ltd.
120 Ricefield Lane
Hauppauge, New York 11788-2008
Attention: Mr. Samuel S. Gross
with a copy to:
Patterson, Belknap, Webb & Tyler LLP
1133 Avenue of the Americas
New York, New York 10036-6710
Attention: Edward F. Cox, Esq.
or to such other person or address as the Company shall furnish to the
Warrantholder in writing.
(b) If to the Warrantholder, to:
------------------------------------------------
------------------------------------------------
------------------------------------------------
or to such other person or address as the Warrantholder shall furnish to the
Company in writing.
13 Miscellaneous. This Warrant shall be governed by the laws of the State
of New York applicable to agreements made and to be performed entirely within
such state. The headings in this Warrant are for purposes of convenience and
reference only, and shall not be deemed to constitute a part hereof. Neither
this Warrant nor any term hereof may be changed, waived, discharged or
terminated orally but only by an instrument in writing signed by the Company and
the registered holder hereof. The invalidity or unenforceability of any
provision hereof shall in no way affect the validity or enforceability of any
other provision.
ISSUED as of the _____th day of _____________, _______.
COMPOSITECH LTD.
By:___________________________
Samuel S. Gross
Executive Vice President
7
EXHIBIT 5.1
Patterson, Belknap, Webb & Tyler LLP
1133 Avenue of the Americas
New York, NY 10036-6710
212-336-2000
Christopher C. Angell Robert W. Lehrburger Of Counsel
Douglas E. Barzelay Jeffrey I.D. Lewis
Susan F. Bloom Robert P. LoBue Harold R. Tyler, Jr.
Henry P. Bubel Ellen M. Martin __________
William F. Cavanaugh, Jr. Maureen W. McCarthy
Lisa E. Cleary Thomas C. Morrison Herbert H. Chaice
John Delli Venneri Bernard F. O'Hare Robert H. M. Ferguson
John M. DiMatteo Peter J. Pettibone Michael Finkelstein
Gregory L. Diskant Thomas W. Pippert George S. Frazza
David F. Dobbins Andrew D. Schau Robert M. Pennoyer
David W. Dykhouse John E. Schmeltzer, III Robert B. Shea
Robert J. Egan John P. Schmitt C. Sidamon-Eristoff
Philip R. Forlenza Stephen W. Schwarz Ira T. Wender, P.C.
Eugene M. Gelernter Arthur D. Sederbaum _________
Alan Gettner Karl E. Seib, Jr.
David M. Glaser Saul B. Shapiro Fax
Antonia M. Grumbach Richard R. Upton 212-336-2222
Scott Horton William W. Weisner
Rochelle Korman John D. Winter
Jeffrey E. LaGueux Stephen P. Younger
Kim J. Landsman Steven A. Zalesin
March 31, 1999
Compositech Ltd.
120 Ricefield Lane
Hauppauge, NY 11788
Dear Sirs:
We refer to the Registration Statement on Form S-3 (the "Registration
Statement") being filed by Compositech Ltd., a Delaware corporation
("Compositech" or the "Company"), with the Securities and Exchange Commission
(the "Commission") under the Securities Act of 1933, as amended (the "Securities
Act"), relating to the registration of shares of Common Stock, par value $.01
per share (the "Common Stock"), of the Company as described below: (i) 1,633,657
shares of issued and outstanding Common Stock (the "Shares"); (ii) 475,635
shares of Common Stock issuable upon the exercise of Common Stock Purchase
Warrants with an exercise price of $1.125 per share (the "$1.125 Warrants");
(iii) 36,855 shares of Common Stock issuable upon exercise of Common Stock
Purchase Warrants with an exercise price of $2.035 per share (the "$2.035
Warrants"); (iv) 36,532 shares of Common Stock issuable upon the exercise of
Common Stock Purchase Warrants with an exercise price of $2.053 per share (the
"$2.053 Warrants"); (v) 275,040 shares of Common Stock issuable upon the
exercise of Common Stock Purchase Warrants with an exercise price of $2.125 per
share (the "$2.125 Warrants"); (vi) 400,000 shares of Common Stock issuable upon
the exercise of Common Stock Purchase Warrants with an exercise price of $1.25
per share (the "$1.25 Warrants"); (vii) 75,000 shares of Common Stock issuable
upon the exercise of Common Stock Purchase Warrants with an exercise price of
$2.6125 per share (the "$2.6125 Warrants"); (viii) 36,000 shares of Common Stock
issuable upon the exercise of Common Stock Purchase Warrants with an exercise
price of $3.00 per share (the "$3.00 Warrants," collectively with the $1.125
Warrants, the $2.035 Warrants, the $2.053 Warrants, the $2.125 Warrants, the
$1.25 Warrants and the $2.6125 Warrants, the "Warrants"). You have requested
that we furnish our opinion as to the matters set forth below.
<PAGE>
In this connection, we have examined originals or copies, certified or
otherwise identified to our satisfaction, of such documents, corporate records,
certificates of public officials and other instruments as we have considered
necessary or advisable for the purpose of this opinion. We have relied as to
factual matters on certificates or other documents furnished by the Company or
its officers and directors and by governmental authorities and upon such other
documents and data as we have deemed appropriate. We have assumed the
authenticity of all documents submitted to us as originals and the conformity to
original documents of all documents submitted to us as copies. We have not
independently verified such information and assumptions. We express no opinion
as to the law of any jurisdiction other than the laws of the State of New York
and the General Corporation Law of the State of Delaware.
Subject to the foregoing, we are of the opinion that (i) the Shares have
been duly authorized and are validly issued, fully paid and nonassessable and
(ii) the shares of Common Stock issuable upon exercise of the Warrants have been
duly authorized and, upon delivery and payment therefor pursuant to the
respective terms of the Warrants, will be validly issued, fully paid and
nonassessable.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to our firm which appears in the
Prospectus constituting a part thereof under the caption "Legal Opinions." In
giving such consent, we do not thereby admit that we come within the category of
persons whose consent is required under Section 7 of the Securities Act or the
rules and regulations of the Commission thereunder.
Very truly yours,
PATTERSON, BELKNAP, WEBB & TYLER LLP
By: /s/ Edward F. Cox
--------------------------------
THE TERMS OF THIS SUBSCRIPTION AGREEMENT, AS SET FORTH BELOW,
HAVE BEEN MODIFIED IN ACCORDANCE WITH AN AGREEMENT BETWEEN
THE PURCHASERS AND THE COMPANY.
EXHIBIT 10.1
COMPOSITECH LTD.
INVESTOR SUBSCRIPTION AGREEMENT
AND INVESTOR QUESTIONNAIRE
THE SECURITIES OFFERED HEREBY IN THE FORM OF SHARES OF COMMON STOCK OF
COMPOSITECH LTD. HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, OR ANY STATE SECURITIES LAWS. THE SHARES CANNOT BE SOLD,
TRANSFERRED, ASSIGNED OR OTHERWISE DISPOSED OF EXCEPT IN COMPLIANCE WITH
THE RESTRICTIONS ON TRANSFERABILITY CONTAINED IN THIS AGREEMENT AND
APPLICABLE FEDERAL AND STATE SECURITIES LAWS AND WILL NOT BE TRANSFERRED OF
RECORD EXCEPT IN COMPLIANCE WITH THIS AGREEMENT AND SUCH LAWS.
* * * * * * *
PLEASE REVIEW THIS SUBSCRIPTION AGREEMENT CAREFULLY. PLEASE NOTE THAT IN
ADDITION TO SIGNING AND COMPLETING PAGE 15 OF THIS SUBSCRIPTION AGREEMENT,
YOU ARE REQUIRED TO INITIAL THE APPLICABLE PARAGRAPHS OF SECTION 4.
* * * * * * *
Compositech Ltd.
120 Ricefield Lane
Hauppauge, NY 11788
Gentlemen:
1. Subscription. Subject to the terms and conditions of this Subscription
Agreement, the undersigned hereby subscribes for and agrees to purchase
____________ shares of Common Stock, par value $.01 per share (the "Shares"), at
a price of $_________ per Share, of Compositech Ltd., a Delaware corporation
(the "Company") and warrants, exercisable until February 15, 2001, enabling the
holder to purchase __________shares of the Company's Common Stock at $ _______
per Share, a price agreed to between the undersigned and the Company, at or
about the market price on the date of the purchase. The undersigned herewith
delivers a certified or bank check or wires funds, in accordance with the wire
transfer instructions attached hereto as Exhibit A, in the amount of
$___________ which amount represents the aggregate purchase price of the Shares.
Except to the extent provided by applicable state securities laws, the
undersigned agrees that this subscription shall be irrevocable and shall survive
the death or disability of the
<PAGE>
undersigned. The undersigned further understands that if and to the extent that
this subscription is not accepted, in whole or in part, any amount received by
the Company from the undersigned will be returned to the undersigned without
interest or deduction.
2. Access to Information. The undersigned acknowledges that the Company has
made available to the undersigned, or the undersigned's personal advisors, the
opportunity to obtain additional information to evaluate the merits and risks of
the undersigned's investment in the Company.
3. General Representations and Warranties. The undersigned hereby
represents and warrants to the Company and the other purchasers of Shares as
follows:
(a) The Company has answered all inquiries that the undersigned has
made of it concerning the Company, its business and financial condition or
any other matter relating to the operation of the Company and the offer and
sale of the Shares.
(b) The undersigned has such knowledge and experience in financial and
business matters in general, and financial and business matters of the type
in which the Company will engage in particular, that the undersigned is
capable of evaluating the merits and risks of an investment in the Company.
(c) The undersigned is familiar with the nature of and risks attendant
to an investment of this type, the undersigned is financially capable of
bearing the economic risk of this investment and the undersigned can afford
the loss of the total amount of the investment.
(d) If the undersigned is a corporation, partnership, trust or other
entity, it is duly organized and validly existing under the laws of the
state and country of its incorporation or formation and the person
executing this Subscription Agreement in a representative or fiduciary
capacity has full power and authority to execute and deliver this
Subscription Agreement in such capacity and on behalf of the subscribing
corporation, partnership, trust or other entity. Such entity has full right
and power to perform its obligations pursuant to this Subscription
Agreement.
4. ACCREDITED INVESTOR STATUS REPRESENTATIONS AND WARRANTIES. PLEASE
INITIAL THE APPLICABLE REPRESENTATION BELOW ((A) OR (B)) REGARDING THE NATURE OF
YOUR STATUS AS AN "ACCREDITED INVESTOR" AS SUCH TERM IS DEFINED IN RULE 501(A)
OF REGULATION D ("REGULATION D") PROMULGATED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "SECURITIES ACT").
(a) INITIAL IF (i) AND (ii) BELOW ARE APPLICABLE ___________.
(i) The undersigned is an individual who is such an "Accredited
Investor" because: the undersigned is a director or executive officer
of the Company; or the undersigned has a net worth, or joint net worth
with the undersigned's spouse, in excess of $1,000,000 (which net
worth includes the value
2
<PAGE>
of homes, home furnishings and automobiles); or the undersigned had an
individual income in excess of $200,000 in each of the two most recent
years, or joint income with the undersigned's spouse in excess of
$300,000 in each of those years, and has a reasonable expectation of
reaching the same income level in the current year; and
(ii) The undersigned represents that the undersigned: (A) does
not have an overall commitment to investments which are not readily
marketable that is disproportionate to the undersigned's net worth,
and that the undersigned's investment in the Shares will not cause
such overall commitment to become excessive; and (B) has adequate net
worth and means of providing for the undersigned's current needs and
personal contingencies to sustain a complete loss of the undersigned's
investment in the Company at the time of investment and has no need
for liquidity in the undersigned's investment in the Shares.
OR
(b) INITIAL IF THE FOLLOWING IS APPLICABLE: ___________.
The undersigned is a corporation, partnership, trust, plan or other
organization, entity or institution which is an "Accredited Investor," as
defined in Regulation D.
5. Investment Representations. The undersigned hereby represents and
warrants to the Company and the other purchasers of Shares as follows:
(a) The undersigned understands that the Shares have not been
registered under the Securities Act or the securities laws of any state and
that the undersigned is purchasing the Shares for investment only; the
undersigned agrees and represents that the undersigned will not sell,
assign, pledge or otherwise dispose of any Shares or any portion thereof
unless, in the opinion of counsel for the Company, the same may be legally
sold or disposed of without registration or qualification under the
applicable state or federal statutes, or the Shares shall have been so
registered or qualified and an appropriate registration statement shall
then be in effect; the undersigned understands that the certificates
representing the Shares will bear a legend containing the foregoing
restriction; and the undersigned understands that the undersigned must bear
the economic risk of the investment for an indefinite period of time.
(b) The undersigned is fully aware that the Shares are being issued
and sold to the undersigned in reliance upon the exemption provided for in
Section 4(2) of the Securities Act and Rule 506 promulgated thereunder and
similar exemptions provided under state securities laws on the grounds that
no public offering is involved and that the representations, warranties and
agreements set forth in this Subscription Agreement are essential to the
claiming of such exemptions.
3
<PAGE>
(c) The undersigned is purchasing the Shares with the undersigned's
personal funds and not with the funds of any other person, firm or entity; the
undersigned is acquiring the Shares for the undersigned's personal account for
investment only, and without any intention of selling or distributing all or any
part thereof; the undersigned has no reason to anticipate any change in personal
circumstances, financial or otherwise, which would cause the undersigned to
sell, distribute, or necessitate or require any sale or distribution of the
Shares; and no person other than the undersigned has any beneficial interest in
the Shares.
(d) No representations, warranties or covenants have been made to the
undersigned by the Company or any officer, employee, agent, affiliate or
subsidiary of the Company, other than the representations, warranties and
covenants included in this Subscription Agreement.
6. Representations, Warranties and Covenants of the Company. The Company
represents, warrants and covenants that:
(a) The Company is duly organized, validly existing and in good
standing as a corporation under the laws of the State of Delaware.
(b) The Company is duly qualified to do business as a foreign
corporation in good standing in each jurisdiction in which its activities
or the ownership or leasing of property require such qualification or where
the failure to so qualify would have a material adverse effect on the
business, operations, condition (financial or otherwise) or results of
operations of the Company.
(c) The outstanding shares of capital stock of the Company are duly
authorized, validly issued, fully paid and nonassessable; none of such
shares has been issued in violation of the preemptive rights of any
shareholder of the Company. The Shares, when issued in accordance with the
terms thereof, will be duly authorized, validly issued, fully paid and
nonassessable; and none of the Shares will be issued in violation of the
preemptive rights of any shareholder of the Company.
(d) This Subscription Agreement has been duly authorized, executed and
delivered by the Company and constitutes a legal, valid and binding
obligation of the Company enforceable in accordance with its terms.
(e) The Company is not in violation of any term or provision of (i)
any of its charter documents, including its certificate of incorporation or
by-laws, (ii) any material term or provision of any indenture, mortgage,
deed of trust, note agreement, or other agreement or instrument to which it
is a party or by which it is or may be bound or to which any of its assets,
property or business is or may be subject, (iii) any material term of any
indebtedness or (iv) to the best of the Company's knowledge, any statute or
any judgment, decree, order, rule or regulation of any court, regulatory
body or administrative agency or other federal, state or other
4
<PAGE>
governmental body, domestic or foreign, having jurisdiction over its
assets, property or business, which violation or violations, either in any
case or in the aggregate, might result in any material adverse change,
financial or otherwise, in its assets, properties, condition, business,
earnings or prospects, and the execution and delivery by the Company of
this Subscription Agreement, the consummation by the Company of the
transactions herein contemplated and compliance by the Company with the
terms of this Subscription Agreement will not result in any such violation.
7. Indemnification. The undersigned agrees to indemnify and hold harmless
the Company, its officers, directors, employees, stockholders and affiliates,
and any person acting on behalf of the Company, from and against any and all
damage, loss, liability, cost and expense (including attorney's fees) which any
of them may incur by reason of the failure by the undersigned to fulfill any of
the terms and conditions of the Subscription Agreement, or by reason of any
breach of the representations, warranties and covenants made by the undersigned
herein, or in any other document provided by the undersigned to the Company. All
representations, warranties and covenants contained in this Subscription
Agreement, and the indemnification contained in this Section 7, shall survive
the acceptance of this Subscription Agreement by the Company.
8. Transferability; Binding Effect. The undersigned hereby agrees that this
Subscription Agreement may not be sold, assigned, pledged, transferred or
otherwise disposed of, except as otherwise provided for herein, in any manner,
by the purchaser, without the prior written consent of the Company. This
Subscription Agreement shall inure to the benefit of and be binding upon the
Company and its successors and assigns and the undersigned's heirs, personal
representatives, successors and permitted assigns.
9. Acceptance of Subscription. The Company shall have the right to accept
or reject this Subscription Agreement, in whole or in part, and this
Subscription Agreement shall be deemed to be accepted only when the acceptance
attached hereto is signed by the Company.
10. No Waiver. Notwithstanding any of the representations, warranties,
acknowledgments or agreements made herein by the undersigned, the undersigned
does not thereby or in any other manner waive any of the rights granted to the
undersigned under federal or state securities laws.
11. Registration Rights
(a) As used in this Section 11, the following terms shall have the
following meanings:
(i) "Affiliate" shall mean, with respect to any person, any other
person controlling, controlled by or under direct or indirect common
control with such person (for the purposes of this definition
"control," when used with respect to any specified person, shall mean
the power to direct the
5
<PAGE>
management and policies of such person, directly or indirectly,
whether through ownership of voting securities, by contract or
otherwise; and the terms "controlling" and "controlled" shall have
meanings correlative to the foregoing).
(ii) "Business Day" shall mean a day Monday through Friday on
which banks are generally open for business in New York.
(iii) "Holders" shall mean the undersigned and any person holding
Registrable Securities to whom the rights under Section 11 have been
transferred in accordance with Section 11(i).
(iv) "Person" shall mean any person, individual, corporation,
partnership, trust or other nongovernmental entity or any governmental
agency, court, authority or other body (whether foreign, federal,
state, local or otherwise).
(v) The terms "register," "registered" and "registration" refer
to the registration effected by preparing and filing a registration
statement in compliance with the Securities Act, and the declaration
or ordering of the effectiveness of such registration statement.
(vi) "Registrable Securities" shall mean the Shares and any
shares of common stock of the Company issued as a dividend or other
distribution with respect to or in replacement of Shares; provided,
however, that such securities shall only be treated as Registrable
Securities if and only for so long as they (A) have not been disposed
of pursuant to a registration statement declared effective by the SEC,
(B) have not been sold in a transaction exempt from the registration
requirements of the Securities Act so that all transfer restriction
and restrictive legends with respect thereto are removed upon the
consummation of such sale or (C) are held by a Holder or a permitted
transferee pursuant to Section 11(i).
(vii) "Registration Expenses" shall mean all expenses incurred by
the Company in complying with Section 11(b) hereof, including, without
limitation, all registration, qualification and filing fees, printing
expenses, escrow fees, fees and expenses of counsel for the Company,
blue sky fees and expense (for a reasonable number of states) and the
expenses of any special audits incident to or required by any such
registration (but excluding the fees of legal counsel for any Holder).
(viii) "Registration Statement" shall have the meaning ascribed
to such term in Section 11(b).
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<PAGE>
(ix) "Registration Period" shall have the meaning ascribed to
such term in Section 11(c).
(x) "SEC" shall mean the U.S. Securities and Exchange Commission.
(xi) "Selling Expenses" shall mean all underwriting discounts and
selling commissions applicable to the sale of Registrable Securities
and all fees and expenses of legal counsel for any Holder.
(b) No later than 60 days after the purchase of Shares pursuant to
this Subscription Agreement (the "Filing Date"), the Company will file a
registration statement (the "Registration Statement") with the SEC and use
its reasonable best efforts to effect the registration, qualifications or
compliances (including, without limitation, the execution of any required
undertaking to file post-effective amendments, appropriate qualifications
or exemptions under applicable blue sky or other state securities laws and
appropriate compliance with applicable securities laws, requirements or
regulations) as may be so reasonably requested and as would permit or
facilitate the sale and distribution of all Registrable Securities.
Notwithstanding the foregoing, the Company will not be obligated to enter
into any underwriting agreement for the sale of any of the Shares.
(c) All Registration Expenses incurred in connection with any
registration, qualification, exemption or compliance pursuant to Section
11(b) shall be borne by the Company. All Selling Expenses relating to the
sale of securities registered by or behalf of Holders shall be borne by
such Holders pro rata on the basis of the number of securities so
registered.
(d) In the case of the registration, qualification, exemption or
compliance effected by the Company pursuant to this Subscription Agreement,
the Company will, upon reasonable request, inform each Holder as to the
status of such registration, qualification, exemption and compliance. At
its expense the Company will:
(i) use its reasonable best efforts to keep such registration,
and any qualification, exemption or compliance under state securities
laws which the Company determines to obtain, continuously effective
until at least the second anniversary of the Closing Date or until the
Holders have completed the distribution described in the registration
statement relating thereto, whichever first occurs. The period of time
during which the Company is required hereunder to keep the
Registration Statement effective is referred to herein as "the
Registration Period." Notwithstanding the foregoing at the Company's
election, the Company may cease to keep such registration,
qualification or compliance effective with respect to any Registrable
Securities and the registration rights of a Holder shall expire, at
such time as the Holder may sell under Rule 144 under the Securities
Act (or other exemption from registration acceptable to the Company)
in a
7
<PAGE>
three-month period all Registrable Securities then held by such
Holder;
(ii) advise the Holders:
(A) when the Registration Statement or any amendment thereto
has been filed with the SEC and when the Registration Statement
or any post-effective amendment thereto has become effective;
(B) of any request by the SEC for amendments or supplements
to the Registration Statement or the prospectus included therein
or for additional information;
(C) of the issuance by the SEC of any stop order suspending
the effectiveness of the Registration Statement or the initiation
of any proceeding for such purpose;
(D) of the receipt by the Company of any notification with
respect to the suspension of the qualification of the Shares
included therein for sale in any jurisdiction or the initiation
or threatening of any proceeding for such purpose; and
(E) of the happening of any event that requires the making
of any changes in the Registration Statement or the prospectus so
that, as of such date, the statements therein are not misleading
and do not omit to state a material fact required to be stated
therein or necessary to make the statements therein (in the case
of the prospectus, in the light of the circumstances under which
they were made) not misleading;
(iii) make every reasonable effort to obtain the withdrawal of
any order suspending the effectiveness of any Registration Statement
at the earliest possible time;
(iv) during the Registration Period deliver to each Holder,
without charge, as many copies of the prospectus included in such
Registration Statement and any amendment or supplement thereto as such
Holder may reasonably request; and the Company consents to the use,
consistent with the provisions hereof, of the prospectus or any
amendment or supplement thereto by each of the selling Holders of
Registrable Securities in connection with the offering and sale of the
Registrable Securities covered by the prospectus or any amendment or
supplement thereto;
8
<PAGE>
(v) prior to any public offering of the Registrable Securities
pursuant to any Registration Statement, register or qualify or obtain
an exemption for offer and sale under the securities or blue sky laws
of such jurisdictions as any such Holders reasonably request in
writing, provided that the Company shall not for any such purpose be
required to qualify generally to transact business as a foreign
corporation in any jurisdiction where it is not so qualified or to
consent to general service of process in any such jurisdiction, and do
any and all other acts or things reasonably necessary or advisable to
enable the offer and sale in such jurisdictions of the Registrable
Securities covered by such Registration Statement;
(vi) cooperate with the Holders to facilitate the timely
preparation and delivery of certificates representing Registrable
Securities to be sold pursuant to any Registration Statement free of
any restrictive legends to the extent not required at such time and in
such denomination and registered in such names as Holders may request
at least three business days prior to sales of Registrable Securities
pursuant to such Registration Statement; and
(vii) upon the occurrence of any event contemplated by Section
11(d)(ii)(E) above, the Company shall promptly prepare a
post-effective amendment to the Registration Statement or a supplement
to the related prospectus, or file any other required document so
that, as thereafter delivered to purchasers of the Registrable
Securities included therein not misleading, the prospectus will not
include any untrue statement of a material fact or omit to state any
material fact necessary to make the statements therein not misleading
in the light of the circumstances under which they were made.
(e) The Holders shall have no right to take any action to restrain,
enjoin or otherwise delay any registration pursuant to Section 11(b) hereof
as a result of any controversy that may arise with respect to the
interpretation or implementation of this Subscription Agreement.
(f) (i) To the extent permitted by law, the Company will
indemnify each Holder, each underwriter of the Registrable Securities
and each person controlling such Holder within the meaning of Section
15 of the Securities Act, with respect to which any registration,
qualification or compliance has been effected pursuant to this
Subscription Agreement, against losses, damages and liabilities (or
action in respect thereof), including any of the incurred in
settlement of any litigation, commenced or threatened (subject to
Section 11(f)(iii) below), arising out of or based on any untrue
statement (or alleged untrue statement) of a material fact contained
in any Registration Statement, prospectus or offering circular, or any
amendment or supplement thereof, incident to any such registration,
qualification or compliance, or based on any omission (or alleged
9
<PAGE>
omission) to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, in
light of the circumstances in which they were made, and will reimburse
each Holder, each underwriter of the Registrable Securities and each
person controlling such Holder, for reasonable legal and any other
expenses reasonably incurred in connection with investigating or
defending any such claim, loss, damage, liability or action as
incurred; provided that the Company will not be liable in any such
case to the extent that any untrue statement or omission or allegation
thereof is made in reliance upon and in conformity with written
information furnished to the Company by or on behalf of such Holder
and stated to be specifically for use in preparation of such
registration statement, prospectus or offering circular; further
provided that the indemnity contained in this Section 11(f)(i) shall
not apply to amounts paid in settlement of any such claim, loss,
damages, liability, action or proceeding if such settlement is
effected without the consent of the Company (which consent shall not
be unreasonably withheld), nor shall the Company be liable in any such
case where the claim, loss, damage or liability arises out of or is
related to the failure of the Holder to comply with the covenants and
agreements contained in this Agreement with respect to the sales of
Registrable Securities, and except that the foregoing indemnity
agreement is subject to the conditions that insofar as it relates to
(A) any such untrue statement or alleged untrue statement or omission
or alleged omission made in the preliminary prospectus but eliminated
or remedied in the amended prospectus filed with the SEC pursuant to
Rule 424(b) or in the prospectus subject to completion and term sheet
under Rule 434 of the Securities Act, which together meet the
requirements of Section 10(a) of the Securities Act (the "Final
Prospectus"), such indemnity agreement shall not inure to the benefit
of any such Holder, any such underwriter or any such controlling
person, if a copy of the Final Prospectus was not furnished to person
or entity asserting the loss, liability, claim or damage at or prior
to the time such furnishing is required by the Securities Act, and (B)
any such untrue statement or alleged untrue statement or omission or
alleged omission based upon information furnished to the Company by
such Holder, such indemnity agreement shall not inure to the benefit
of any such Holder, any such underwriter or any such controlling
person;
(ii) Each Holder will severally, if Registrable Securities held
by such Holder are included in the securities as to which such
registration, qualification or compliance is being effected, indemnify
the Company, each of its directors and officers, each underwriter of
the Shares and each person who controls the Company within the meaning
of Section 15 of the Securities Act, against all claims, losses,
damages and liabilities (or actions in respect thereof), including any
of the foregoing incurred in settlement of any litigation, commenced
or threatened (subject to Section 11(f)(iii) below), arising out of or
based on any untrue statement (or alleged untrue statement) of a
material fact contained in any registration statement, prospectus or
offering circular, or any amendment or supplement thereof, incident to
any such registration, qualification or compliance, or based on any
omission (or alleged
10
<PAGE>
omission) to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, in
light of the circumstances in which they were made, and will reimburse
the Company, such directors and officers, each underwriter of the
Shares and each person controlling the Company for reasonable legal
and any other expenses reasonably incurred in connection with
investigating or defending any such claim, loss, damage, liability or
action as incurred, in each case to the extent, but only to the
extent, that such untrue statement or omission or allegation thereof
is made in reliance upon and in conformity with written information
furnished to the Company by or on behalf of the Holder and stated to
be specifically for use in preparation of such registration statement,
prospectus or offering circular; provided that the indemnity shall not
apply to the extent that such claim, loss, damage or liability results
from the fact that a current copy of the prospectus that was made
available to the Holder was not sent or given to the person asserting
any such claim, loss, damage or liability at or prior to the written
confirmation of the sale of the Registrable Securities confirmed to
such person if such current copy of the prospectus would have cured
the defect giving rise to such loss, claim, damage or liability.
Notwithstanding the foregoing, in no event shall a Holder be liable
for any such claims, losses, damages or liabilities in excess of the
proceeds received by such Holder in the offering, except in the event
of fraud by such Holder;
(iii) Each party entitled to indemnification under this Section
11(f) (the "Indemnified Party") shall give notice to the party
required to provide indemnification (the "Indemnifying Party")
promptly after such Indemnified Party has actual knowledge of any
claim as to which indemnity may be sought, and shall permit the
Indemnifying Party to assume the defense of any such claim or any
litigation resulting therefrom, provided that counsel for the
Indemnifying Party, who shall conduct the defense of such claim or
litigation, shall be approved by the Indemnified Party (whose approval
shall not unreasonably be withheld), and the Indemnified Party may
participate in such defense at such Indemnified Party's expense, and
provided further that the failure of any Indemnified Party to give
notice as provided herein shall not relieve the Indemnifying Party of
its obligations under this Subscription Agreement, unless such failure
is prejudicial to the Indemnifying Party in defending such claim or
litigation. An Indemnifying Party shall not be liable for any
settlement of an action or claim effected without its written consent
(which consent will not be unreasonably withheld);
(iv) If the indemnification provided for in this Section 11(f) is
held by a court of competent jurisdiction to be unavailable to an
Indemnified Party with respect to any loss, liability, claim, damage
or expense
11
<PAGE>
referred to therein, then the Indemnifying Party, in lieu of
indemnifying such Indemnified Party thereunder, shall contribute to
the amount paid or payable by such Indemnified Party as a result of
such loss, liability, claim, damage or expense in such proportion as
is appropriate to reflect the relative fault of the Indemnifying Party
on the one hand and of the Indemnified Party on the other in
connection with the statements or omissions which resulted in such
loss, liability, claim, damage or expense as well as any other
relevant equitable considerations. The relative fault of the
Indemnifying Party and of the Indemnified Party shall be determined by
reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission to state a material fact
relates to information supplied by the Indemnifying Party or by the
Indemnified Party and the parties' relative intent, knowledge, access
to information and opportunity to correct or prevent such statement or
omission.
(g) (i) Each Holder agrees that, upon receipt of any notice from the
Company of the happening of any event requiring the preparation of a
supplement or amendment to a prospectus relating to Registrable
Securities so that, as thereafter delivered to the Holders, such
prospectus will not contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading, each Holder
will forthwith discontinue disposition of Registrable Securities
pursuant to the Registration Statement contemplated by Section 11(b)
until its receipt of copies of the supplemented or amended prospectus
from the Company and, if so directed by the Company, each Holder shall
deliver to the Company all copies, other than permanent file copies
then in such Holder's possession, of the prospectus covering such
Registrable Securities current at the time of receipt of such notice;
(ii) Each Holder agrees to suspend, upon request of the Company,
any disposition of Registrable Securities pursuant to the Registration
Statement and prospectus contemplated by Section 11(b) during (A) any
period not to exceed two 30-day periods within any one 12-month period
the Company requires in connection with a primary underwritten
offering of equity securities and (B) any period, not to exceed one
30-day period per circumstance or development, when the Company
determines in good faith that offers and sales pursuant thereto should
not be made by reason of the presence of material undisclosed
circumstances or developments with respect to which the disclosure
that would be required in such a prospectus is premature, would have
an adverse effect on the Company or is otherwise inadvisable;
(iii) As a condition to the inclusion of its Registrable
Securities, each Holder shall furnish to the Company such information
regarding such Holder and the distribution proposed by such Holder as
the Company may
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<PAGE>
request in writing or as shall be required in connection with any
registration, qualification or compliance referred to in this Section
11;
(iv) Each Holder hereby covenants with the Company (A) not to
make any sale of the Registrable Securities without effectively
causing the prospectus delivery requirements under the Securities Act
to be satisfied, and (B) if such Registrable Securities are to be sold
by any method or in any transaction other than on a national
securities exchange, in the over-the-counter market, in privately
negotiated transactions, or in a combination of such methods, to
notify the Company at least five business days prior to the date on
which the Holder first offers to sell any such Shares;
(v) Each Holder acknowledges and agrees that the Registrable
Securities sold pursuant to a Registration Statement are not
transferable on the books of the Company unless the stock certificate
submitted to the transfer agent evidencing such Registrable Securities
is accompanied by a certificate reasonably satisfactory to the Company
to the effect that (A) the Registrable Securities have been sold in
accordance with such Registration Statement and (B) the requirement of
delivering a current prospectus has been satisfied;
(vi) Each Holder agrees not to take any action with respect to
any distribution deemed to be made pursuant to such Registration
Statement, that constitutes a violation of Regulation M under the
Exchange Act or any other applicable rule, regulation or law;
(vii) At the end of the period during which the Company is
obligated to keep the Registration Statement current and effective as
described above, the Holders of Registrable Securities included in the
Registration Statement shall discontinue sales of shares pursuant to
such Registration Statement upon receipt of notice from the Company of
its intention to remove from registration the shares covered by such
Registration Statement which remain unsold, and such Holders shall
notify the Company of the number of shares registered which remain
unsold immediately upon receipt of such notice from the Company.
(h) With a view to making available to the Holders the benefits of
certain rules and regulations of the SEC which at any time permit the sale
of the Registrable Securities to the public without registration, the
Company agrees to use its reasonable best efforts to:
(i) make and keep public information available, as those terms
are understood and defined in Rule 144 under the Securities Act, at
all times;
(ii) file with the SEC in a timely manner all reports and
13
<PAGE>
other documents required of the Company under the Exchange Act; and
(iii) so long as a Holder owns any unregistered Registrable
Securities, furnish to such Holder upon any reasonable request a
written statement by the Company as to its compliance with Rule 144
under the Securities Act, and of the Exchange Act, a copy of the most
recent annual or quarterly report of the Company, and such other
reports and documents of the Company as such Holder may reasonably
request in availing itself of any rule or regulation of the SEC
allowing a Holder to sell any such securities without registration.
(i) The rights to cause the Company to register Registrable Securities
granted to the Holders by the Company under Section 11(a) may be assigned
in full by a Holder, provided that such transfer may otherwise be effected
in accordance with applicable securities laws; (ii) such Holder gives prior
written notice to the Company; and (iii) such transferee agrees to comply
with the terms and provisions of this Subscription Agreement, and such
transfer is otherwise in compliance with this Subscription Agreement.
Except as specifically permitted by this Section 11(i), the rights of a
Holder with respect to Registrable Securities as set out herein shall not
be transferable to any other Person, and any attempted transfer shall cause
all rights of such Holder therein to be forfeited.
(j) With the written consent of the Company and the Holders holding at
least a majority of the Registrable Securities that are then outstanding,
any provision of this Section 11 may be waived (either generally or in a
particular instance, either retroactively or prospectively and either for a
specified period of time or indefinitely) or amended. Upon the effectuation
of each such waiver or amendment, the Company shall promptly give written
notice thereof to the Holders, if any, who have not previously received
notice thereof or consented thereto in writing.
12. Acknowledgment. The undersigned acknowledges that the undersigned has
carefully read and fully understands this Subscription Agreement and its
representations.
13. Governing Law. This Subscription Agreement shall be governed by and
construed in accordance with the laws of the State of New York with the
exception of the choice of law provisions thereof.
14. Counterparts. This Subscription Agreement shall be executed through the
use of separate signature pages or in any number of counterparts, and each of
such counterparts shall, for all purposes, constitute one agreement binding on
all parties.
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IN WITNESS WHEREOF, the undersigned has executed this Subscription
Agreement this day of ____________, 1998.
-----------------------------------
(Purchaser's Name)
-----------------------------------
(Purchaser's Signature)
-----------------------------------
-----------------------------------
-----------------------------------
(Purchaser's Address)
-----------------------------------
(Purchaser's Social Security or
Taxpayer Identification Number)
$
-----------------------------------
Subscription Amount
-----------------------------------
(Purchaser's Telephone Number)
15
<PAGE>
ACCEPTANCE
The undersigned hereby accepts the foregoing Subscription Agreement this
_____ day of _____________, 1998.
Compositech Ltd.
By:
-----------------------------------
Name:
-----------------------------------
Title:
-----------------------------------
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-3) and related Prospectus of Compositech Ltd. for
the registration of 2,968,719 shares of its Common Stock and to the
incorporation by reference therein of our report dated February 12, 1999, except
for Note 15 as to which the date is March 26, 1999, with respect to the
financial statements of Compositech Ltd. included in its Annual Report (Form
10-KSB) for the year ended December 31, 1998, filed with the Securities and
Exchange Commission.
/s/ Ernst & Young LLP
Melville, New York
March 31, 1999
