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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 1 TO
SCHEDULE 13D
Under the Securities Exchange Act of 1934
CONVERSION TECHNOLOGIES INTERNATIONAL, INC.
- - --------------------------------------------------------------------------------
(Name of Issuer)
COMMON STOCK, PAR VALUE $.00025 PER SHARE
- - --------------------------------------------------------------------------------
(Title of Class of Securities)
212546105
- - --------------------------------------------------------------------------------
(CUSIP Number)
Paramount Capital Asset Management, Inc.
c/o Lindsay A. Rosenwald, M.D.
787 Seventh Avenue
New York, NY 10019
(212) 554-4300
with a copy to:
David R. Walner, Esq.
Paramount Capital Asset Management, Inc.
787 Seventh Avenue
New York, NY 10019
(212) 554-4372
--------------
(Name, Address and Telephone Number of Person Authorized to
Receive Notices and Communications)
MAY 8, 1998
-----------
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Statement because of Rule
13d-1(b)(3) or (4), check the following:
[ ]
Check the following box if a fee is being paid with this Statement:
[ ]
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<PAGE>
CUSIP No. [212546105] 13 D Page 2 of 9 Pages
- - --------------------------------------------------------------------------------
1) NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Paramount Capital Asset Management, Inc.
- - --------------------------------------------------------------------------------
2) CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [_]
(b) [_]
- - --------------------------------------------------------------------------------
3) SEC USE ONLY
- - --------------------------------------------------------------------------------
4) SOURCE OF FUNDS*
OO (see Item 3 below)
- - --------------------------------------------------------------------------------
5) CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) OR 2(e) [_]
- - --------------------------------------------------------------------------------
6) CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
- - --------------------------------------------------------------------------------
7) SOLE VOTING POWER
NUMBER OF none
SHARES --------------------------------------------------------------
BENEFICIALLY 8) SHARED VOTING POWER
OWNED BY
EACH REPORTING 1,496,945
PERSON --------------------------------------------------------------
WITH 9) SOLE DISPOSITIVE POWER
none
--------------------------------------------------------------
10) SHARED DISPOSITIVE POWER
1,496,945
- - --------------------------------------------------------------------------------
11) AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
1,496,945
- - --------------------------------------------------------------------------------
12) CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES* [_]
- - --------------------------------------------------------------------------------
13) PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
21.3%
- - --------------------------------------------------------------------------------
14) TYPE OF REPORTING PERSON*
CO
- - --------------------------------------------------------------------------------
<PAGE>
CUSIP No. [212546105] 13 D Page 3 of 9 Pages
- - --------------------------------------------------------------------------------
1) NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Aries Domestic Fund, L.P.
- - --------------------------------------------------------------------------------
2) CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [_]
(b) [_]
- - --------------------------------------------------------------------------------
3) SEC USE ONLY
- - --------------------------------------------------------------------------------
4) SOURCE OF FUNDS*
OO (see Item 3 below)
- - --------------------------------------------------------------------------------
5) CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) OR 2(e) [_]
- - --------------------------------------------------------------------------------
6) CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
- - --------------------------------------------------------------------------------
7) SOLE VOTING POWER
NUMBER OF None
SHARES --------------------------------------------------------------
BENEFICIALLY 8) SHARED VOTING POWER
OWNED BY 548,008
EACH REPORTING
PERSON --------------------------------------------------------------
WITH 9) SOLE DISPOSITIVE POWER
None
--------------------------------------------------------------
10) SHARED DISPOSITIVE POWER
548,008
- - --------------------------------------------------------------------------------
11) AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
548,008
- - --------------------------------------------------------------------------------
12) CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES* [_]
- - --------------------------------------------------------------------------------
13) PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
9/0%
- - --------------------------------------------------------------------------------
14) TYPE OF REPORTING PERSON*
PN
- - --------------------------------------------------------------------------------
<PAGE>
CUSIP No. [212546105] 13 D Page 4 of 9 Pages
- - --------------------------------------------------------------------------------
1) NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
The Aries Fund, A Cayman Island Trust
- - --------------------------------------------------------------------------------
2) CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [_]
(b) [_]
- - --------------------------------------------------------------------------------
3) SEC USE ONLY
- - --------------------------------------------------------------------------------
4) SOURCE OF FUNDS*
OO (see Item 3 below)
- - --------------------------------------------------------------------------------
5) CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) OR 2(e) [_]
- - --------------------------------------------------------------------------------
6) CITIZENSHIP OR PLACE OF ORGANIZATION
Cayman Islands
- - --------------------------------------------------------------------------------
7) SOLE VOTING POWER
None
NUMBER OF
SHARES --------------------------------------------------------------
BENEFICIALLY 8) SHARED VOTING POWER
OWNED BY 948,937
EACH REPORTING
PERSON --------------------------------------------------------------
WITH 9) SOLE DISPOSITIVE POWER
None
--------------------------------------------------------------
10) SHARED DISPOSITIVE POWER
948,937
- - --------------------------------------------------------------------------------
11) AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
948,937
- - --------------------------------------------------------------------------------
12) CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES* [_]
- - --------------------------------------------------------------------------------
13) PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
14.6%
- - --------------------------------------------------------------------------------
14) TYPE OF REPORTING PERSON*
OO (see Item 2)
- - --------------------------------------------------------------------------------
<PAGE>
CUSIP No. [212546105] 13 D Page 5 of 9 Pages
- - --------------------------------------------------------------------------------
1) NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Lindsay A. Rosenwald, M.D.
- - --------------------------------------------------------------------------------
2) CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [_]
(b) [_]
- - --------------------------------------------------------------------------------
3) SEC USE ONLY
- - --------------------------------------------------------------------------------
4) SOURCE OF FUNDS*
OO (see Item 3 below)
- - --------------------------------------------------------------------------------
5) CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) OR 2(e) [_]
- - --------------------------------------------------------------------------------
6) CITIZENSHIP OR PLACE OF ORGANIZATION
United States
- - --------------------------------------------------------------------------------
7) SOLE VOTING POWER
NUMBER OF 205,134
SHARES -------------------------------------------------------------
BENEFICIALLY 8) SHARED VOTING POWER
OWNED BY 1,496,945
EACH REPORTING --------------------------------------------------------------
PERSON 9) SOLE DISPOSITIVE POWER
WITH 205,134
--------------------------------------------------------------
10) SHARED DISPOSITIVE POWER
1,496,945
- - --------------------------------------------------------------------------------
11) AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
1,702,079
- - --------------------------------------------------------------------------------
12) CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES* [_]
- - --------------------------------------------------------------------------------
13) PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
23.5%
- - --------------------------------------------------------------------------------
14) TYPE OF REPORTING PERSON*
IN
- - --------------------------------------------------------------------------------
<PAGE>
SCHEDULE 13D
This Amendment No. 1 (the "Amendment") amends and supplements the
following Items of the Reporting Persons' Statement on Schedule 13D, dated
September 4, 1997 (the "Schedule").
Item 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
The information contained in Item 3 to the Schedule is hereby amended
and restated to read in its entirety as follows:
On December 7, 1995, Aries Domestic used its general funds to
extend a bridge loan (a "Bridge Loan") to the Issuer in the
amount of $125,000 for which it received 62,500 Class A Warrants
(the "Class A Warrants") and the Aries Trust used its general
funds to extend a Bridge Loan to the Issuer in the amount of
$75,000 for which it received 37,500 Class A Warrants./1/ Each
Class A Warrant entitles its holder to acquire (a) one (1) share
of common stock of the Issuer par value $.00025 (the "Common
Stock") and (b) one (1) Class B Warrant (the "Class B Warrants")
to acquire one (1) share of Common Stock. The Class A Warrants
are presently exercisable at $4.42 per share of Common Stock and
the Class B Warrants will be exercisable, when issued, at $5.89
per share of Common Stock (subject to adjustment). The Class A
Warrants and the Class B Warrants will expire on May 16, 2001. On
July 21, 1997, Aries Domestic used its general funds to extend a
line of credit (a "Line of Credit") to the Issuer in the amount
of $154,000 for which Aries Domestic received warrants (the
"Original LOC Warrants") to purchase 35,000 shares of Common
Stock of the Issuer and the Aries Trust used its general funds to
extend a Line of Credit to the Issuer in the amount of $346,000
for which the Aries Trust received Original LOC Warrants to
purchase 65,000 shares of Common Stock of the Issuer./2/ The
Original LOC Warrants are presently exercisable at $.99 per share
of Common Stock and will expire on July 21, 2002. In addition, on
August 29, 1997, in a private placement (the "Private Placement")
of the Issuer's securities, Aries Domestic used its general funds
to purchase 3.4 units the "Units" for an aggregate purchase price
of $340,000, with each Unit consisting of 10,000 shares of
Preferred Stock (the "Preferred Stock"). The 3.4 Units held by
Aries Domestic are presently convertible into 380,800/3/ shares
of Common Stock of the Issuer. The Aries Trust used its general
funds to purchase 6.6 Units in the Private Placement for an
aggregate purchase price of $660,000, which 6.6 Units are
presently convertible into 739,200/4/ shares of Common Stock of
the Issuer. In connection with the Private Placement, Paramount
Capital, Inc. (the "Placement Agent"), designated recipients of
warrants to purchase
--------
/1/ Pursuant to certain antidilution adjustments, Aries Domestic and Aries
Trust currently own 82,721 and 49,632 Class A Warrants, respectively.
/2/ Pursuant to certain antidilution adjustments, Aries Domestic and Aries
Trust currently own Original LOC Warrants to purchase 46,401 and 86,174
shares of Common Stock, respectively.
/3/ Reflects certain antidilution adjustments and the issuance of additional
shares of Preferred Stock to purchasers of Units in the Private Placement.
/4/ Reflects certain antidilution adjustments and the issuance of additional
shares of Preferred Stock to purchasers of Units in the Private Placement.
Page 6 of 9 pages
<PAGE>
10% of the Units sold in the Private Placement exercisable for
ten years at 110% of the offering price per unit sold in the
Private Placement (the "Placement Warrants"). The Placement Agent
designated The Aries Trust, Aries Domestic and Dr. Rosenwald as
designated recipients of Placement Warrants to purchase 7,393,
3,809 and 16,041 shares of Preferred Stock respectively
(convertible into 73,931, 38,086 and 160,407 shares of Common
Stock, respectively). On May 8, 1998 Aries Domestic used its
general funds to extend a line of credit (the "New Line of
Credit") to the Issuer in the amount of $87,000 for which Aries
Domestic received warrants (the "New LOC Warrants") to purchase
17,400 shares of Common Stock of the Issuer and the Aries Trust
used its general funds to extend the New Line of Credit to the
Issuer in the amount of $213,000 for which the Aries Trust
received New LOC Warrants to purchase 42,600 shares of Common
Stock of the Issuer. The New LOC Warrants are presently
exercisable at $1.00 per share of Common Stock and will expire on
May 8, 2003.
Item 5. INTEREST IN SECURITIES OF THE ISSUER.
The information contained in Item 5 to the Schedule is hereby amended
and restated to read in its entirety as follows:
(a) As of May 8, 1998, Paramount Capital, through
acquisition of the shares by the Aries Trust and
Aries Domestic, beneficially owned 1,496,945 shares
or 21.3% of the Issuer's securities and Aries
Domestic and the Aries Trust beneficially owned as
follows:
AMOUNT OWNED
Aries Domestic 548,008 Shares
Aries Trust 948,937 Shares
As of May 8, 1998, Dr. Rosenwald, through his
acquisition of the shares and the acquisition of the
shares by the Aries Trust and Aries Domestic,
beneficially owned 1,702,079 shares or 23.5% of the
Issuer's securities
(b) Dr. Rosenwald and Paramount Capital share the power
to vote or to direct the vote, to dispose or to
direct the disposition of those shares owned by each
of Aries Domestic and Aries Trust.
(c) No open market transactions were made by Aries
Domestic and the Aries Trust in the past 60 days.
Other than as set forth herein the Reporting Parties
have not engaged in any transactions in the Common
Stock of the Issuer during the past 60 days.
(d) & (e) Not applicable.
Item 6. Contracts, Arrangements, Understandings or Relationships
WITH RESPECT TO SECURITIES OF THE ISSUER
The information contained in Item 6 to the Schedule is hereby amended
and restated to read in its entirety as follows:
Paramount Capital is the Investment Manager of the Aries Trust
and the General Partner of Aries Domestic and in such
capacities has the authority to make certain investment
decisions on behalf of such entities, including decisions
relating to the securities of the Issuer. In connection with
its investment management duties, Paramount Capital receives
certain management fees and performance allocations from the
Aries Trust and Aries Domestic. Dr. Rosenwald is the President
and sole shareholder of Paramount Capital. Mr.
Page 7 of 9 pages
<PAGE>
David Walner, an Associate Director of the Placement Agent
serves as a member of the Board of Directors of the Issuer and
receives compensation for such services. The Placement Agent,
an NASD member broker dealer and an affiliate of Aries
Domestic and the Aries Trust acted as Placement Agent for the
Issuer's Private Placement which was concluded on December 8,
1997 and has received certain cash fees and Placement Warrants
for such services (see Item 3). On May 8, 1998, Aries Trust
and Aries Domestic entered into a line of credit agreement
with the Issuer pursuant to which Aries Trust and Aries
Domestic advanced a line of credit of up to $1,200,000 in
consideration of New LOC Warrants (see Item 3).
Except as indicated in this 13D and exhibits, there is no
contract, arrangement, understanding or relationship between
the Reporting Parties and any other person, with respect to
any securities of the Issuer.
Item 7. MATERIAL TO BE FILED AS EXHIBITS:
The information contained in Item 7 to the Schedule is hereby amended
and supplemented to read in its entirety as follows:
Exhibit A - Copy of an Agreement between Dr. Rosenwald, Paramount Capital,
Aries Domestic and Aries Trust to file this Statement on Schedule
13D on behalf of each of them.
Exhibit B - List of executive officers and directors of Paramount Capital and
information called for by Items 2-6 of this statement relating to
said officers and directors.
Exhibit C - List of executive officers and directors of Aries Domestic and
information called for by Items 2-6 of this statement relating to
said officers and directors.
Exhibit D - List of executive officers and directors of Aries Trust and
information called for by Items 2-6 of this statement relating to
said officers and directors.
Exhibit E - Placement Agency Agreement dated April 1, 1997.
Exhibit F - Form of Class A Warrant
Exhibit G - Form of Class B Warrant
Exhibit H - Form of Original LOC Warrant
Exhibit I - Form of New LOC Warrant
Exhibit J - Form of Placement Warrant
Page 8 of 9 pages
<PAGE>
SIGNATURES
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
PARAMOUNT CAPITAL ASSET MANAGEMENT, INC.
Dated: May 21, 1998
New York, NY By /S/ LINDSAY A. ROSENWALD, M.D.
------------------------------
Lindsay A. Rosenwald, M.D.
President
ARIES DOMESTIC FUND, L.P.
By Paramount Capital Asset Management,
Inc.
General Partner
Dated: May 21, 1998
New York, NY By /S/ LINDSAY A. ROSENWALD, M.D.
------------------------------
Lindsay A. Rosenwald, M.D.
President
THE ARIES TRUST
By Paramount Capital Asset Management,
Inc.
Investment Manager
Dated: May 21, 1998
New York, NY By /S/ LINDSAY A. ROSENWALD, M.D.
------------------------------
Lindsay A. Rosenwald, M.D.
President
Dated: May 21, 1998
New York, NY By /S/ LINDSAY A. ROSENWALD, M.D.
------------------------------
Lindsay A. Rosenwald, M.D.
Page 9 of 9 pages
<PAGE>
EXHIBIT A
AGREEMENT
JOINT FILING OF SCHEDULE 13D
The undersigned hereby agrees to jointly prepare and file with
regulatory authorities a Schedule 13D and any future amendments thereto
reporting each of the undersigned's ownership of securities of Conversion
Technologies, Inc. and hereby affirm that such Schedule 13D is being filed on
behalf of each of the undersigned.
PARAMOUNT CAPITAL ASSET MANAGEMENT, INC.
Dated: May 21, 1998
New York, NY By /S/ LINDSAY A. ROSENWALD, M.D.
------------------------------
Lindsay A. Rosenwald, M.D.
President
ARIES DOMESTIC FUND, L.P.
By Paramount Capital Asset Management,
Inc.
General Partner
Dated: May 21, 1998
New York, NY By /S/ LINDSAY A. ROSENWALD, M.D.
------------------------------
Lindsay A. Rosenwald, M.D.
President
THE ARIES TRUST
By Paramount Capital Asset Management,
Inc.
Investment Manager
Dated: May 21, 1998
New York, NY By /S/ LINDSAY A. ROSENWALD, M.D.
------------------------------
Lindsay A. Rosenwald, M.D.
President
Dated: May 21, 1998
New York, NY By /S/ LINDSAY A. ROSENWALD, M.D.
------------------------------
Lindsay A. Rosenwald, M.D.
<PAGE>
EXHIBIT B
The name and principal occupation or employment, which in each instance
is with Paramount Capital Asset Management, Inc. ("Paramount Capital") located
at 787 Seventh Avenue, New York, New York, 10019, of each executive officer and
director of Paramount Capital is as follows:
PRINCIPAL OCCUPATION
NAME OR EMPLOYMENT
Lindsay A. Rosenwald, M.D. Chairman of the Board, President of
Paramount Capital Asset Management, Inc.,
Paramount Capital Investments, LLC and
Paramount Capital, Inc.
Peter Morgan Kash Director of Paramount Capital Asset
Management, Inc., Senior Managing
Director, Paramount Capital, Inc.
Dr. Yuichi Iwaki Director of Paramount Capital Asset
Management, Inc., Professor, University of
Southern California School of Medicine
Item 2.
During the five years prior to the date hereof, none of the above
persons (to the best of Paramount Capital's knowledge) was convicted in a
criminal proceeding (excluding traffic violations or similar misdemeanors) or
was a party to a civil proceeding of a judicial or administrative body of
competent jurisdiction, as a result of which such person was or is subject to a
judgment, decree or final order enjoining future violations of, or prohibiting
or mandating activities subject to, Federal or State securities laws or finding
any violation with respect to such laws.
Items 3-6.
Please refer to Items 3-6 herein reporting the beneficial ownership.
<PAGE>
EXHIBIT C
The name and principal occupation or employment, which is located at
787 Seventh Avenue, New York, New York, 10019, of the General Partner of Aries
Domestic is as follows:
PRINCIPAL OCCUPATION
NAME OR EMPLOYMENT
Paramount Capital Asset Management, Inc. General Partner
Exhibit B is hereby incorporated by reference.
Item 2.
During the five years prior to the date hereof, the above person (to
the best of Aries Domestic's knowledge) has not been convicted in a criminal
proceeding (excluding traffic violations or similar misdemeanors) or was a party
to a civil proceeding of a judicial or administrative body of competent
jurisdiction, as a result of which such person was or is subject to a judgment,
decree or final order enjoining future violations of, or prohibiting or
mandating activities subject to, Federal or State securities laws or finding any
violation with respect to such laws.
Items 3-6.
Please refer to Items 3-6 herein reporting the beneficial ownership.
<PAGE>
EXHIBIT D
The name and principal occupation or employment, which in the case of
Paramount Capital Asset Management, Inc. is located at 787 Seventh Avenue, 48th
Floor, New York, New York, 10019, of each executive officer and director of
Aries Trust is as follows:
PRINCIPAL OCCUPATION
NAME OR EMPLOYMENT
Paramount Capital Asset Management, Inc. Investment Manager
MeesPierson (Cayman) Limited Trustee
P.O. Box 2003
British American Centre
Phase 3, Dr. Roy's Drive
George Town, Grand Cayman
Exhibit B is hereby incorporated by reference.
Item 2.
During the five years prior to the date hereof, neither of the above
persons (to the best of Aries Trust's knowledge) have been convicted in a
criminal proceeding (excluding traffic violations or similar misdemeanors) or
was a party to a civil proceeding of a judicial or administrative body of
competent jurisdiction, as a result of which such person was or is subject to a
judgment, decree or final order enjoining future violations of, or prohibiting
or mandating activities subject to, Federal or State securities laws or finding
any violation with respect to such laws.
Items 3-6.
Please refer to Items 3-6 herein reporting the beneficial ownership.
<PAGE>
EXHIBIT E
EXECUTION COPY
CONVERSION TECHNOLOGIES INTERNATIONAL, INC.
PLACEMENT AGENCY AGREEMENT
--------------------------
April 1, 1997
Paramount Capital, Inc.
787 Seventh Avenue
New York, New York 10019
Dear Sirs:
Conversion Technologies International, Inc., a Delaware corporation
(the "Company"), hereby confirms its agreement to retain Paramount Capital, Inc.
(the "Placement Agent") on an exclusive basis to introduce the Company to, and
to procure subscriptions from, certain "accredited investors" (as defined in
Regulation D under the Securities Act of 1933, as amended) as prospective
purchasers of a minimum of thirty (30) Units (the "Minimum Offering") and a
maximum of fifty (50) Units (the "Maximum Offering"), with an option in favor of
the Placement Agent to offer up to an additional thirty (30) Units to cover
over-allotments at a purchase price of $100,000 per Unit, with each "Unit"
consisting of 10,000 shares of Premium Preferred StockTM, stated value $10.00
per share, of the Company (the "Preferred Stock"). The Preferred Stock shall
have the terms set forth in the Term Sheet (as defined below).
The sale to such purchasers (the "Offering") will be made through a
private placement by the Placement Agent (or its designated selected dealers) on
a "best efforts" basis pursuant to the Confidential Term Sheet dated August 8,
1997, and all supplements, amendments and exhibits thereto, all of which
constitute an integral part thereof (the "Term Sheet"), and separate purchase
agreements and related documents (the "Subscription Agreements") in accordance
with Section 4(2) of the Securities Act of 1933, as amended (the "Securities
Act"), and Regulation D promulgated thereunder.
The Term Sheet, the Subscription Agreements, the exhibits to the
Subscription Agreements, the Certificate of Designation relating to the
Preferred Stock (the "Certificate of Designation"), the Escrow Agreement, dated
August 8, 1997 (the "Escrow Agreement"), the Financial Advisory Agreement (as
defined in Section 4(k) below), the Placement Warrants (as defined in Section
3(d) below) and this Placement Agency Agreement are collectively referred to
herein as the "Offering Documents."
<PAGE>
Paramount Capital, Inc.
Page 2
EXECUTION COPY
The Company, at its sole cost, shall prepare and deliver to the
Placement Agent a reasonable number of copies of the Offering Documents in form
and substance satisfactory to the Placement Agent.
Each prospective investor subscribing to purchase Units shall be
required to deliver, among other things, a Subscription Agreement, which shall
include a Confidential Investor Questionnaire ("Questionnaire"). The Company
shall make available to each prospective purchaser at a reasonable time prior to
the purchase of the Units the opportunity to ask questions of and receive
answers from the Company concerning the terms and conditions of the Offering and
the opportunity to obtain additional information necessary to verify the
accuracy of the documents delivered in connection with the purchase of the Units
to the extent it possesses such information or can acquire it without
unreasonable effort or expense. After the Offering Documents have been reviewed
by investors, and they have had the opportunity to address all inquiries to the
Company, separate Subscription Agreements shall be completed by each prospective
investor. The Company, with the consent of the Placement Agent and the Placement
Agent, in its sole discretion, shall have the right to reject subscriptions in
whole or in part. The Company shall evidence its acceptance of a subscription by
countersigning a copy of the applicable Subscription Agreement and returning the
same to the Placement Agent.
Capitalized terms used in this Agreement, unless otherwise defined
herein or unless the context otherwise indicates, shall have the same meanings
provided in the Offering Documents.
1. APPOINTMENT OF PLACEMENT AGENT.
(a) The Placement Agent is hereby appointed exclusive placement
agent of the Company (subject to the Placement Agent's right to have Selected
Dealers, as defined in Section 1(c) hereof, participate in the Offering) during
the Offering Period herein specified for the purposes of assisting the Company
in finding qualified subscribers pursuant to the Offering described in the
Offering Documents. The Placement Agent shall not be deemed an agent of the
Company for any other purpose. The Offering Period shall commence on August 8,
1997 (the "Commencement Date"). Upon receipt of the Minimum Offering amount, the
Placement Agent may conduct a closing (the "Initial Closing Date") and may
conduct subsequent closings on an interim basis until the Maximum Offering
amount (and any over-allotment amount) has been reached (the "Final Closing
Date"). Each such closing may be referred to herein as a "Closing". The Offering
Period shall terminate at 11:59 p.m. New York City Time on October 8, 1997,
subject to an extension, at the option of the Placement Agent, for an additional
sixty (60) days.
<PAGE>
Paramount Capital, Inc.
Page 3
EXECUTION COPY
(b) Subject to the performance by the Company of all of its
obligations to be performed under this Agreement and to the completeness and
accuracy of all representations and warranties of the Company contained in this
Agreement, the Placement Agent hereby accepts such agency and agrees to use its
best efforts to assist the Company in finding qualified subscribers pursuant to
the Offering described in the Offering Documents. It is understood that the
Placement Agent has no commitment to sell the Units. The Placement Agent's
agency hereunder is not terminable by the Company except upon termination of the
Offering Period.
(c) The Placement Agent may engage other persons, selected by it
in its discretion, that are members of the National Association of Securities
Dealers, Inc. ("NASD") or who are located outside the United States and that
have executed a Selected Dealers Agreement (each such person being hereinafter
referred to as a "Selected Dealer") and the Placement Agent may allow such
persons such part of the compensation and payment of expenses payable to the
Placement Agent hereunder as the Placement Agent shall determine.
(d) Subscriptions for Units shall be evidenced by the execution
by qualified subscribers of a Subscription Agreement. No Subscription Agreement
shall be effective unless and until it is accepted by the Company. Until a
Closing is held, all subscription funds received shall be held as described in
the Subscription Agreement. The Placement Agent shall not have any independent
obligation to verify the accuracy or completeness of any information contained
in any Subscription Agreement or the authenticity, sufficiency or validity of
any check delivered by any prospective investor in payment for Units, nor shall
the Placement Agent incur any liability with respect to any such check.
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents, warrants and covenants to the Placement Agent and each Selected
Dealer, if any, as follows:
(a) SECURITIES LAW COMPLIANCE. The Offering Documents as of their
respective dates do, and as of the date of the Term Sheet and each Closing shall
describe the material aspects of an investment in the Company and conform in all
respects with the requirements of Section 4(2) of the Securities Act and
Regulation D promulgated thereunder and with the requirements of all other
published rules and regulations of the Securities and Exchange Commission (the
"Commission") currently in effect relating to "private offerings" to "accredited
investors" of the type contemplated by the Company. The Offering Documents shall
not as of the date of the Term Sheet and each Closing contain an untrue
statement of a material fact or omit to state any material fact necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading, provided, however, that no representation is
made with
<PAGE>
Paramount Capital, Inc.
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respect to information relating to the Placement Agent which is provided in
writing by the Placement Agent to the Company specifically for inclusion in the
Offering Documents. If at any time prior to the completion of the Offering or
other termination of this Agreement any event shall occur as a result of which
it might become necessary to amend or supplement the Offering Documents so that
they do not include any untrue statement of any material fact or omit to state
any material fact necessary in order to make the statements therein, in the
light of the circumstances then existing, not misleading, the Company will
promptly notify the Placement Agent and will supply the Placement Agent (or the
prospective purchasers designated by the Placement Agent) with amendments or
supplements correcting such statement or omission. The Company will also provide
the Placement Agent for delivery to all offerees and purchasers and their
representatives, if any, any information, documents and instruments which the
Placement Agent and the Company's counsel reasonably deem necessary to comply
with applicable state and federal law.
The Company acknowledges that the Placement Agent (i) has not supplied
any information for inclusion in the Offering Documents other than information
relating to the Placement Agent furnished in writing to the Company by the
Placement Agent specifically for inclusion in the Offering Documents; (ii) has
no obligation to independently verify any of the information in the Offering
Documents; and (iii) has no responsibility for the accuracy or completeness of
the Offering Documents, except for the information relating to the Placement
Agent furnished in writing by the Placement Agent to the Company specifically
for inclusion in the Offering Documents.
(b) ORGANIZATION. Each of the Company and Dunkirk International
Glass and Ceramics Corporation and Advanced Particle Technologies, Inc. (each, a
"Subsidiary" and collectively, the "Subsidiaries") is a corporation duly
incorporated, validly existing and in good standing under the laws of the
jurisdiction of its incorporation and has all requisite corporate power and
authority to own and lease its properties, to carry on its respective business
as currently conducted and as proposed to be conducted, to execute and deliver
this Agreement and to carry out the transactions contemplated by this Agreement,
as appropriate and is duly licensed or qualified to do business as a foreign
corporation in each jurisdiction in which the conduct of its business or
ownership or leasing of its properties requires it to be so qualified, except
where the failure to be so qualified would not have a material adverse effect on
the business, financial condition or prospects of the Company.
(c) CAPITALIZATION. The authorized, issued and outstanding
capital stock of the Company prior to the consummation of the transactions
contemplated hereby is as set forth in the Offering Document. All issued and
outstanding shares of the Company are validly issued, fully paid and
nonassessable and have not been issued in violation of the preemptive rights of
any stockholder of the Company. The Preferred
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Stock, when issued, will have the rights, preferences and privileges
substantially as set forth in the Form of Certificate of Designation attached as
Exhibit B to the Term Sheet. All prior sales of securities of the Company were
either registered under the Act and, except as set forth in Schedule 2(c),
applicable state securities laws or exempt from such registration, and no
security holder has any rescission rights with respect thereto. Except as set
forth in the Term Sheet, there are no outstanding options, warrants, agreements,
convertible securities, preemptive rights or other rights to subscribe for or to
purchase any shares of capital stock of the Company. Except as set forth in the
Term Sheet and as otherwise required by law, there are no restrictions upon the
voting or transfer of any shares of the Company's capital stock pursuant to the
Company's Certificate of Incorporation, By-Laws or other governing documents or
any agreement or other instruments to which the Company is a party or by which
the Company is bound.
(d) WARRANTS, PREEMPTIVE RIGHTS, ETC. Except as set forth in or
contemplated by the Term Sheet, there are not, nor will there be immediately
after any Closing, any outstanding warrants, options, agreements, convertible
securities, rights of first refusal, rights of first offer, preemptive rights or
other rights to subscribe for or to purchase or other commitments pursuant to
which the Company is, or may become, obligated to issue any shares of its
capital stock or other securities of the Company and this Offering will not
cause any anti-dilution adjustments to such securities or commitments except as
reflected in the Term Sheet.
(e) SUBSIDIARIES AND INVESTMENTS. Except with respect to a
wholly-owned subsidiary of the Company, CTI ACQSUB-II, Inc., which presently
holds no assets and which was formed in connection with a previously proposed
merger of the Company, and other than as disclosed in the Term Sheet, the
Company does not own, directly or indirectly, capital stock or other equity
ownership or proprietary interests in any other corporation, association, trust,
partnership, joint venture or other entity.
(f) FINANCIAL STATEMENTS. The financial information contained in
the Offering Documents is accurate in all material respects. The Company's
financial statements have been prepared in conformity with generally accepted
accounting principles consistently applied and show all material liabilities,
absolute or contingent, of the Company and the Subsidiaries required to be
recorded thereon and present fairly the financial position and results of
operations of the Company and the Subsidiaries as of the dates and for the
periods indicated.
(g) ABSENCE OF CHANGES. Since the date hereof, except as has been
or will be reflected in the Term Sheet prior to Closing, neither the Company nor
the Subsidiaries has incurred any liabilities or obligations, direct or
contingent, other than those which were incurred in the ordinary course of
business, nor has the Company or the Subsidiaries entered into any transaction
which is material to the business of the
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Company or the Subsidiaries, and there has not been any change in the capital
stock of, or any incurrence of long-term debt by, the Company or the
Subsidiaries, or any issuance of options, warrants or other rights to purchase
the capital stock of the Company or the Subsidiaries, or any adverse change or
any development involving a prospective adverse change in the condition
(financial or otherwise), net worth, results of operations, business, key
personnel or properties which would be material to the business or financial
condition of the Company or the Subsidiaries, and neither the Company nor the
Subsidiaries has become a party to, and neither the business nor the property of
the Company or the Subsidiaries has become the subject of, any litigation
whether or not in the ordinary course of business.
(h) TITLE. Except as set forth on Schedule 2(h), each of the
Company and the Subsidiaries has good and marketable title to all tangible
properties and assets owned by it, free and clear of all liens, charges,
encumbrances or restrictions, except such as are not materially significant or
important in relation to the Company's or the Subsidiary's respective business;
all of the material leases and subleases under which the Company is the lessor
or sublessor of properties or assets or under which the Company or the
Subsidiaries hold properties or assets as lessee or sublessee are in full force
and effect, and neither the Company nor either of the Subsidiaries is in default
in any material respect with respect to any of the terms or provisions of any of
such leases or subleases, and no material claim has been asserted by anyone
adverse to rights of the Company or the Subsidiaries as lessor, sublessor,
lessee or sublessee under any of the leases or subleases mentioned above, or
affecting or questioning the right of the Company or the Subsidiaries to
continued possession of the leased or subleased premises or assets under any
such lease or sublease. Each of the Company and the Subsidiaries owns or leases
all such tangible properties as are necessary to its respective operations as
now conducted and proposed to be conducted and, except to the extent described
in the Term Sheet, neither the Company nor the Subsidiaries presently anticipate
the need for any capital expenditures.
(i) PROPRIETARY RIGHTS. Except as has been or will be reflected
in the Term Sheet prior to each Closing, each of the Company and the
Subsidiaries owns or possesses adequate and enforceable rights to use all
patents, patent applications, trademarks, service marks, trade names, corporate
names, copyrights, trade secrets, processes, mask works, licenses, inventions,
formulations, technology and know-how and other intangible property used or
proposed to be used in the conduct of its business as described in or
contemplated by the Term Sheet (the "Proprietary Rights"). Except as has been or
will be reflected in the Term Sheet prior to each Closing, the Company and the
Subsidiaries or the entities from whom the Company or the Subsidiaries has
acquired rights has taken all necessary action to protect all of the Company's
and the Subsidiary's Proprietary Rights. Except as set forth in the Term Sheet,
neither the Company nor the Subsidiaries has received any notice of, and there
are not any facts
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known to the Company or the Subsidiaries which indicate the existence of, (i)
any infringement or misappropriation by any third party of any of the
Proprietary Rights or (ii) any claim by a third party contesting the validity of
any of the Proprietary Rights; the Company has not received any notice of any
infringement, misappropriation or violation by the Company or the Subsidiaries
or any of its employees of any proprietary rights of third parties, and, to the
best of the Company's knowledge, neither the Company nor the Subsidiaries nor
any of its employees has infringed, misappropriated or otherwise violated any
Proprietary Rights of any third parties; and, to the best of the Company's
knowledge, no infringement, illicit copying, misappropriation or violation of
any intellectual property rights of any third party has occurred or will occur
with respect to any products currently being sold by the Company or the
Subsidiaries or with respect to any products currently under development by the
Company or the Subsidiaries or with respect to the conduct of the Company's or
either of the Subsidiary's businesses as currently contemplated. Except as
described in the Term Sheet, the Company is not aware that any of its employees
are obligated under any contract (including licenses, covenants or commitments
of any nature) or other agreement, or subject to any judgment, decree or order
of any court or administrative agency, that would interfere with the use of the
employee's best efforts to promote the interests of the Company or the
Subsidiaries or that would conflict with the Company's or the Subsidiary's
businesses as currently conducted or as proposed to be conducted. To the best of
the Company's knowledge, neither the execution nor delivery of this Agreement,
nor the carrying on of the Company's or either of the Subsidiary's businesses by
the employees of the Company or either of the Subsidiaries, nor the conduct of
the Company's or either of the Subsidiary's businesses, as currently conducted
or as proposed to be conducted, will conflict with or result in a breach of the
terms, conditions or provisions of, or constitute a default under, any contract,
covenant or instrument under which any such employee is now obligated.
(j) LITIGATION. Except as set forth in the Term Sheet, there is
no action, suit, claim or proceeding at law or in equity, or to the Company's
knowledge, investigation or customer complaint, by or before any arbitrator,
governmental instrumentality or other agency now pending or, to the knowledge of
the Company, threatened against the Company or the Subsidiaries (or basis
therefor known to the Company which the Company believes will result in the
foregoing). Neither the Company nor the Subsidiaries is subject to any judgment,
order, writ, injunction or decree of any Federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality,
domestic or foreign which would materially adversely affect the Company's or
either of the Subsidiary's businesses, prospects or financial condition.
(k) NON-DEFAULTS, NON-CONTRAVENTION. Except as set forth on
Schedule 2(k), neither the Company nor the Subsidiaries is in violation of or
default under, nor will the execution and delivery of this Agreement or any of
the Offering
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Documents, or consummation of the transactions contemplated herein or therein
result in a violation of or constitute a default in the performance or
observance of any obligation (i) under its Certificate of Incorporation, or its
By-laws, or any indenture, mortgage, contract, material purchase order or other
agreement or instrument to which the Company is a party or by which it or its
property is bound or affected or (ii) with respect to any order, writ,
injunction or decree of any court of any Federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality,
domestic or foreign, and there is no existing condition, event or act which
constitutes, nor which after notice, the lapse of time or both, could
constitute, a default under any of the foregoing.
(l) TAXES. Each of the Company and the Subsidiaries has filed all
Federal, state, local and foreign tax returns which are required to be filed by
it and all such returns are true and correct in all material respects. Each of
the Company and the Subsidiaries has paid all taxes due pursuant to such returns
or pursuant to any assessments received by it or which it is obligated to
withhold from amounts owing to any employee, creditor or third party. Each of
the Company and the Subsidiaries has properly accrued all taxes required to be
accrued. The tax returns of the Company and the Subsidiaries have never been
audited by any state, local or Federal authorities. Each of the Company and the
Subsidiaries has not waived any statute of limitations with respect to taxes or
agreed to any extension of time with respect to any tax assessment or
deficiency.
(m) COMPLIANCE WITH LAWS, LICENSES, ETC. Each of the Company and
the Subsidiaries is in compliance with all federal, state, local or foreign,
laws, ordinances, regulations and orders applicable to its respective business,
the violation of, or noncompliance with which, would have a materially adverse
effect on the business, financial condition, prospects or operations of the
Company or the Subsidiaries. Each of the Company and the Subsidiaries has all
governmental licenses and permits and other governmental certificates,
authorizations and permits and approvals (collectively, "Licenses") required by
every federal, state and local government or regulatory body for the operation
of its respective business as currently conducted and the use of its properties,
except where the failure to be licensed would not have a material adverse effect
on the business of the Company or either of the Subsidiaries. Each of the
Company's and the Subsidiary's Licenses are in full force and effect and no
violations are or have been recorded in respect of any License and no proceeding
is pending or, to the best knowledge of the Company, threatened to revoke or
limit any thereof.
(n) AUTHORIZATION OF DOCUMENTS AND UNITS. Each of the Offering
Documents, has been, or prior to any Closing will be duly and validly
authorized, executed and delivered by the Company and the execution, delivery
and performance by the Company of the Offering Documents has been duly
authorized by all
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requisite corporate action by the Company and when delivered, constitute or will
constitute the legal, valid and binding obligations of the Company, enforceable
in accordance with their respective terms, subject to the availability and
enforceability of equitable remedies and to applicable bankruptcy and other laws
relating to the rights of creditors generally and except as the enforcement of
the rights to indemnification and contribution hereunder and under any other
Offering Documents may be limited by federal or state securities laws or public
policy. Subject to the filing prior to the Initial Closing Date of the
Certificate of Designation, the Company has full power and lawful authority to
authorize, issue and sell the Units to be sold to the Purchasers. No consent is
required by the Company or either of the Subsidiaries from any third party to
perform any of its obligations under this Agreement or any of the Offering
Documents.
(o) EXEMPTION FROM REGISTRATION. Assuming (i) the accuracy of the
information provided by the respective Purchasers in the Subscription
Agreements, and (ii) the timely filing of a Form D by the Company, the offer and
sale of the Units and the granting of the Placement Warrants pursuant to the
terms of this Agreement are exempt from the registration requirements of the
Securities Act and the rules and regulations promulgated thereunder (the
"Regulations"). The Company is not disqualified from the exemption under
Regulation D by virtue of the disqualifications contained in Rule 505(b)(2)(iii)
or Rule 507 promulgated thereunder and the securities underlying the Units.
There exist no fact or set of facts which might cause the Offering to be
integrated with any other offering of the Company's securities.
(p) REGISTRATION RIGHTS. Except as set forth in the Term Sheet or
Section 5 of the Subscription Agreements, no person has any right to cause the
Company to effect the registration under the Securities Act of any securities of
the Company.
(q) BROKERS. Neither the Company nor any of its officers,
directors, employees or stockholders has employed any broker or finder in
connection with the transactions contemplated by this Agreement other than the
Placement Agent.
(r) TITLE TO PREFERRED STOCK. When certificates representing the
Preferred Stock shall have been duly delivered to the Purchasers and payment
shall have been made for the Units, the several Purchasers shall have good and
valid title to the Preferred Stock, and upon conversion of such Preferred Stock
(including the Preferred Stock issuable upon exercise of the Placement
Warrants), subject to the filing of an amended Certificate of Incorporation
increasing the number of authorized shares of the Company's Common Stock as
contemplated by the Term Sheet, will have good and valid title to the Common
Stock issuable upon such conversion (the "Conversion Shares"), in each case,
free and clear of all liens, encumbrances and adverse claims, whatsoever (except
as arising from applicable Federal and state securities laws), and the Company
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shall have paid all taxes, if any, in respect of the original issuance thereof.
When certificates representing the Placement Warrants shall have been duly
delivered to the Placement Agent, the Placement Agent or its designees shall
have good and valid title to the Placement Warrants, and upon exercise of such
Placement Warrants, will have good and valid title to the Preferred Stock
issuable upon such exercise, and upon conversion of the Preferred Stock issuable
upon exercise of such Placement Warrants, will have good and valid title to the
Common Stock into which such Preferred Stock is converted, in each case, free
and clear of all liens, encumbrances and adverse claims, whatsoever (except as
arising from applicable Federal and state securities laws), and the Company
shall have paid all taxes, if any, in respect of the original issuance thereof.
(s) NON-AFFILIATED DIRECTORS. The Company's Board of Directors
has not less than two directors who are independent from, and unaffiliated with,
management of the Company.
(t) ACCURACY OF REPORTS. All reports required to be filed by the
Company and the Subsidiaries under the Securities and Exchange Act of 1934, as
amended (the "Exchange Act"), have been duly filed with the Commission, complied
at the time of filing in all material respects with the requirements of their
respective forms and, except to the extent updated or superseded by the Term
Sheet or any subsequently filed report, were complete and correct in all
material respects as of the dates at which the information was furnished, and
contained (as of such dates) no untrue statement of a material fact or omitted
to state a material fact necessary in order to make the statements contained
therein, in light of the circumstances under which they were made, not
misleading.
(u) AUTHORIZED SHARES. The Company shall (i) use its best efforts
to increase the authorized shares of Common Stock of the Company to a minimum of
40,000,000 and in any case a number of shares sufficient for the purpose of
conversion of all the Preferred Stock sold in or related to this Offering
including without limitation, (x) the Common Stock underlying the Placement
Warrants and (y) the Common Stock underlying the Preferred Stock resulting from
dividends paid on the Preferred Stock (or such other amounts as may be
authorized by the Board of Directors) within 90 days following the Final Closing
Date but in any event shall effect such increase no later than 180 days
following the Final Closing Date and (ii) at all times after the date upon which
such Common Stock is authorized, reserve and keep available out of its
authorized but unissued shares of Common Stock solely for the purpose of
effecting the conversion of the shares of Preferred Stock, such number of shares
of Common Stock as shall from time to time be sufficient to effect the
conversion of all outstanding shares of the Preferred Stock. If at any time
Placement Agent elects to convert any of its shares of Preferred Stock and the
Company does not have authorized and reserved for issuance a sufficient number
of shares of Common Stock to permit conversion in full of all
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outstanding shares of Preferred Stock, then the Placement Agent shall be
entitled to receive upon conversion of its Preferred Stock only that number of
shares of Common Stock as equals the Placement Agent's Pro Rata Percentage of
the number of shares of Common Stock authorized and reserved for issuance upon
conversion of Preferred Stock.
For purposes of the previous sentence, the Placement Agent's "Pro Rata
Percentage" on any date equals the number of shares of Preferred Stock held of
record by the Placement Agent on such date divided by the number of shares of
Preferred Stock held of record by all holders of Preferred Stock on such date.
In addition to the foregoing, if after 180 days following the Final
Closing Date the Company has failed to authorize and reserve a sufficient number
of shares of Common Stock to permit conversion in full of all outstanding shares
of Preferred Stock, the Company shall, for no additional consideration, issue to
the Placement Agent additional shares of Preferred Stock equal to 0.25% of the
shares of Preferred Stock then held by Placement Agent, exclusive of shares of
Preferred Stock issued pursuant to this Section 2(u), for each day the Company
lacks sufficient authorized and reserved shares of Common Stock to permit
conversion in full of all outstanding shares of Preferred Stock.
3. CLOSING; PLACEMENT AND FEES.
(a) CLOSING. Provided that the Placement Agent has received
subscriptions for the Minimum Offering amount, the Placement Agent may conduct,
in its sole discretion, closings (the date of each a "Closing Date") at the
offices of the Placement Agent, 787 Seventh Avenue, New York, New York, until
the Final Closing Date. On each Closing Date, payment for the Units issued and
sold by the Company shall be made to the Company in immediately available funds
against delivery of certificates evidencing the Preferred Stock comprising such
Units.
(b) CONDITIONS TO PLACEMENT AGENT'S OBLIGATIONS. The obligations
of the Placement Agent hereunder are subject to the accuracy of the
representations and warranties of the Company herein contained as of the date
hereof and as of each Closing Date, to the performance by the Company of its
obligations hereunder and to the following additional conditions:
(i) DUE QUALIFICATION OR EXEMPTION. (A) The Offering
contemplated by this Agreement will become qualified or be exempt from
qualification under the securities laws of the several states pursuant to
paragraph 3(c) below not later than the Closing Date, subject to any filings to
be made thereafter, and (B) at the Closing Date, no stop order suspending the
sale of the Units shall have been issued, and no proceeding for that purpose
shall have been initiated or threatened;
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(ii) NO MATERIAL MISSTATEMENTS. Neither the Blue Sky
qualification materials, the Offering Documents, nor the Term Sheet, nor any
supplement thereto, will contain an untrue statement of a fact which in the
opinion of the Placement Agent is material, or omit to state a fact, which in
the opinion of the Placement Agent is material and is required to be stated
therein, or is, in the opinion of the Placement Agent, necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading;
(iii) COMPLIANCE WITH AGREEMENTS. The Company will have
complied with all agreements and satisfied all conditions on its part to be
performed or satisfied hereunder and under the Subscription Agreements at or
prior to each Closing;
(iv) CORPORATE ACTION. The Company will have taken all
corporate action necessary to permit the valid execution, delivery and
performance of the Offering Documents by the Company, including without
limitation, obtaining the approval of the Company's board of directors for the
execution and delivery of the Offering Documents, the increase in authorized
shares of Common Stock of the Company, the performance by the Company of its
obligations hereunder and the Offering contemplated hereby;
(v) OPINIONS OF COUNSEL TO THE COMPANY. The Placement Agent
shall receive the opinion of Buchanan Ingersoll, counsel to the Company (stating
that each of the Purchasers may rely thereon as though addressed directly to
such Purchaser), dated as of each Closing Date, substantially to the effect
that:
(A) Each of the Company and the Subsidiaries is duly
incorporated and is validly existing and in corporate good standing under the
laws of its jurisdiction of incorporation, has all requisite corporate power and
authority necessary to own or hold its properties and conduct its business as
described in the Term Sheet and is duly qualified or licensed to do business as
a foreign corporation and is in good standing in each jurisdiction in which the
nature of the business conducted, or as proposed to be conducted in the Term
Sheet, by it or the properties owned, leased or operated by it, makes such
qualification or licensing necessary and where the failure to be so qualified or
licensed would have a material adverse effect upon the business, prospects and
financial condition of the Company. To such counsel's knowledge, except with
respect to the Subsidiaries, the Company does not own, directly or indirectly,
any capital stock or other equity ownership or proprietary interests in any
other corporation, association, trust, partnership, joint venture or other
entity;
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(B) the execution, delivery and performance of each of
the Offering Documents to which the Company is a signatory, and the issuance of
(I) the Preferred Stock and the Placement Warrants, (II) the Preferred Stock
issuable upon exercise of the Placement Warrants and (III) the Conversion Shares
(including the Conversion Shares underlying the Preferred Stock issuable upon
exercise of the Placement Warrants), have been duly authorized, subject to the
filing of an amended Certificate of Incorporation increasing the number of
authorized shares of the Company's Common Stock as contemplated by the Term
Sheet, by all necessary corporate action on the part of the Company. Each of the
Offering Documents to which the Company is a signatory has been duly executed
and delivered by the Company and constitutes a legal, valid and binding
obligation of the Company enforceable in accordance with its terms, except as
such enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance, receivership or other laws of
general application relating to or affecting generally the enforcement of
creditors' rights and the application of equitable principles in any action,
legal or equitable, and except as rights to indemnity or contribution may be
limited by applicable law;
(C) the authorized, issued and outstanding capital
stock of the Company as of the date hereof (before giving effect to the
transactions contemplated by this Agreement) is as set forth in the Term Sheet.
To such counsel's knowledge, there are no outstanding warrants, options,
agreements, convertible securities, preemptive rights or other commitments
pursuant to which the Company is, or may become, obligated to issue any shares
of its capital stock or other securities of the Company other than as set forth
in the Term Sheet. All of the issued shares of capital stock of the Company have
been duly and validly authorized and issued, are fully paid and nonassessable
and to the best of such counsel's knowledge, have not been issued in violation
of the preemptive rights of any security holder;
(D) assuming (x) the accuracy of the information
provided by the Subscribers in the Subscription Documents, (y) the timely filing
with the Commission and any applicable state securities authority of a Form D
and amendments thereto containing accurate and complete information, the
issuance and sale of the Units is exempt from registration under the Securities
Act and Rule 506 of Regulation D promulgated thereunder;
(E) neither the execution and delivery of the Offering
Documents nor compliance with the terms hereof or thereof, nor the consummation
of the transactions herein or therein contemplated, has, nor will, conflict
with, result in a breach of, or constitute a default under the Certificate of
Incorporation or By-laws of the Company or either of the Subsidiaries, or any
material contract, instrument or document known to such counsel, after due
inquiry, to which the Company or either of the Subsidiaries is a party, or by
which it or any of its properties is bound
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or, to the best knowledge of such counsel, violate any applicable order or
decree of any governmental agency or court having jurisdiction over the Company
or either of the Subsidiaries or any of its properties or business;
(F) except as disclosed in the Term Sheet, to such
counsel's best knowledge, there are no claims, actions, suits, investigations or
proceedings before or by any arbitrator, court, governmental authority or
instrumentality pending or threatened against the Company or either of the
Subsidiaries. Except as disclosed in the Term Sheet, to such counsel's
knowledge, neither the Company nor either of the Subsidiaries is a party or
subject to the provisions of any order, writ, injunction, judgment or decree of
any court or government agency or instrumentality;
(G) upon the issuance of the Units, the Preferred Stock
(including the shares of Preferred Stock issuable upon exercise of the Placement
Warrants), the Placement Warrants and the Conversion Shares, subject to the
filing of an amended Certificate of Incorporation increasing the number of
authorized shares of the Company's Common Stock as contemplated by the Term
Sheet, (including the Conversion Shares underlying the Preferred Stock issuable
upon exercise of Placement Warrants), each of the purchasers or the Placement
Agent and its designees, as the case may be, shall acquire such securities, free
and clear of all pledges, liens, claims, encumbrances, preemptive rights, rights
of first offer or right of first refusal and restrictions known to such counsel
after due inquiry, except for the transfer restrictions set forth in the
Subscription Agreements and any action taken to encumber such securities by the
holders thereof;
(H) the Placement Warrants, when issued in accordance
with the terms of this Agreement and/or the Subscription Agreement, as
applicable, for the consideration expressed therein, will have been validly
issued and will constitute legal, valid and binding obligations of the Company
enforceable against the Company in accordance with their respective terms,
except as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other laws of general application
relating or affecting generally the enforcement of creditors' rights and the
application of equitable principles in any action, legal or equitable. The
Preferred Stock to be issued as of the date of such opinion, when issued in
accordance with the terms of this Agreement and the Subscription Agreements for
the consideration expressed therein, will have been validly issued and such
Preferred Stock will be fully paid and nonassessable. The Preferred Stock
issuable upon exercise of the Placement Warrants, when issued in accordance with
the terms thereof for the consideration expressed therein, will have been duly
issued; such Preferred Stock will be fully paid and nonassessable and the
provisions of the Preferred Stock Certificate of Designation will constitute
legal, valid and binding obligations of the Company enforceable against the
Company in accordance with their terms, except as such enforceability may be
limited
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by applicable bankruptcy, insolvency, reorganization, moratorium or other laws
of general application relating or affecting generally the enforcement of
creditors' rights and the application of equitable principles in any action,
legal or equitable. Except as set forth in the Term Sheet, the Conversion Shares
(including the Conversion Shares underlying the Preferred Stock issuable upon
exercise of the Placement Warrants), subject to the filing of an amended
Certificate of Incorporation increasing the number of authorized shares of the
Company's Common Stock as contemplated by the Term Sheet, have been duly
authorized and reserved for issuance and, when issued in accordance with the
terms of the Preferred Stock, will have been validly issued and will be fully
paid and nonassessable.
(I) the Company's By-laws and/or Certificate of
Incorporation, as in effect as of the date of such opinion, contain provisions
indemnifying all directors against liability and absolving all directors from
liability to the Company and its stockholders to the maximum extent permitted
under the laws of the State of Delaware.
Such counsel shall state, in opining on any matter
stated to be subject to the knowledge of such counsel, that such counsel has
made appropriate inquiries of officers of the Company and the Subsidiaries with
respect to the subject matter of such opinion and has reviewed all documents the
existence of which is disclosed by such inquiries or of which such counsel
otherwise is aware of as a result of its representation of the Company.
In addition, such counsel shall state that in the
course of the preparation of the Offering Documents, which involved, among other
things, discussions and inquiries concerning the various legal matters and the
review of certain corporate records, documents and proceedings, counsel
participated in conferences with certain officers and other representatives of
the Company and the Placement Agent during which the contents of the Offering
Documents and related matters were discussed. Such counsel shall advise the
Placement Agent in the form of an opinion of counsel that such counsel has no
reason to believe that, as of each Closing Date, the Term Sheet or any document
incorporated by reference therein contained any untrue statement of a material
fact relating to the Company or omitted to state a material fact relating to the
Company required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances under which they were
made.
(vi) OPINIONS OF ENVIRONMENTAL AND PATENT COUNSEL. If
requested by the Placement Agent, the Placement Agent shall receive the opinions
of environmental counsel and patent counsel to the Company (which such counsel
shall be satisfactory to the Placement Agent in its sole discretion), dated the
Closing Date in the form and substance satisfactory to counsel for the Placement
Agent.
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(vii) COMFORT LETTER. The Company shall cause the Company's
independent public accountants to address and deliver to the Company and the
Placement Agent a letter or letters (which letters are frequently referred to as
"Comfort Letters") dated as of each Closing Date and the effective date of the
Shelf Registration Statement required to be filed in connection with the
Subscription Agreements.
(viii) OFFICER'S CERTIFICATE. The Placement Agent shall
receive an Officer's Certificate substantially in the form of Exhibit A hereto
and a Secretary's Certificate substantially in the form of Exhibit B hereto,
signed by the appropriate parties and dated as of each Closing Date. These
certificates shall state, among other things, that the representations and
warranties contained in Section 2 hereof are true and accurate in all respects
at such Closing Date with the same effect as though expressly made at such
Closing Date.
(ix) ESCROW AGREEMENT. The Placement Agent shall receive a
copy of a duly executed Escrow Agreement with Fleet National Bank.
(x) TRANSMITTAL LETTERS. The Placement Agent shall receive
copies of all letters from the Company to the investors transmitting the
Preferred Stock and shall receive a letter from the Company confirming
transmittal of the securities to the investors.
(c) BLUE SKY. A summary blue sky survey, at the sole cost of the
Company (including, without limitation, the legal fees and disbursements in
connection therewith), shall be prepared by counsel to the Placement Agent
stating the extent to which and the conditions upon which offers and sales of
the Units may be made in certain jurisdictions. It is understood that such
survey may be based on or rely upon (i) the representations of each Subscriber
set forth in the Subscription Agreement delivered by such Subscriber, (ii) the
representations, warranties and agreements of the Company set forth in Section 2
of this Agreement, (iii) the representations and warranties of the Placement
Agent and (iv) the representations of the Company set forth in the certificate
to be delivered at the Closing pursuant to paragraph (viii) of Section 3(b).
(d) PLACEMENT FEES AND EXPENSES. (i) Simultaneously with payment
for and delivery of the Units at each Closing as provided in paragraph 3(a)
above, the Company shall at such Closing pay to the Placement Agent (i) a
commission (the "Cash Commission") equal to nine percent (9%) of the aggregate
purchase price of the Units sold and (ii) a non-accountable expense allowance
(the "Expense Allowance") equal to four percent (4%) of the aggregate purchase
price of the Units sold. The Company shall also pay all expenses in connection
with the
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qualification of the Units under the securities or Blue Sky laws of the states
which the Placement Agent shall designate. In addition, upon each Closing of the
sale of the Units being offered, the Company will sell to the Placement Agent
and/or its designees, for $.001 per warrant, preferred stock warrants (the
"Placement Warrants") to acquire a number of newly issued shares of Preferred
Stock equal to ten percent (10%) of the number of shares of Preferred Stock
issued in the Offering, exercisable for a period of ten (10) years commencing
six months after the Final Closing Date at an exercise price equal to one
hundred ten percent (110%) of the initial offering price of the Units. The
Company agrees with the Placement Agent and its successors and assigns that the
Placement Warrants will not be subject to redemption by the Company nor will
they be callable or mandatorily convertible by the Company. The Placement
Warrants cannot be transferred, sold, assigned or hypothecated for six months
except that they may be assigned in whole or in part during such period to any
NASD member participating in the Offering or any officer or employee of the
Placement Agent or any such NASD member. The Placement Warrants will contain a
cashless exercise feature and antidilution provisions and the right to have the
Conversion Shares issuable upon conversion of the Preferred Stock underlying
such warrants included on the Shelf Registration Statement.
(ii) The Cash Commission, Expense Allowance and Placement
Warrants as set forth in this Agreement shall be paid to the Placement Agent
with respect to any investment by any investors introduced to the Company by the
Placement Agent ("Covered Investors") in the event that any such Covered
Investor purchases securities from the Company during the twelve (12) months
following the Final Closing Date of the Offering.
(e) NO ADVERSE CHANGES. There shall not have occurred, at any
time prior to the Closing, (i) any domestic or international event, act or
occurrence which has disrupted, or in the Placement Agent's determination will
in the immediate future disrupt, the securities markets; (ii) a general
suspension of, or a general limitation on prices for, trading in securities on
the New York Stock Exchange, the American Stock Exchange, the Nasdaq National
Market, the Nasdaq SmallCap Market, or in the over-the-counter market; (iii) any
outbreak of major hostilities or other national or international calamity; (iv)
any banking moratorium declared by a state or federal authority; (v) any
moratorium declared in foreign exchange trading by major international banks or
other persons; (vi) any material interruption in the mail service or other means
of communication within the United States; (vii) any material adverse change in
the business, properties, assets, results of operations, financial condition or
prospects of the Company; or (viii) any change in the market for securities in
general or in political, financial, or economic conditions which, in the
Placement Agent's reasonable judgment, makes it inadvisable to proceed with the
offering, sale and delivery of the Units.
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4. COVENANTS OF THE COMPANY.
(a) USE OF PROCEEDS. Except as set forth on Schedule 4(a) hereto,
the Company shall not use any proceeds from the Offering to repay any
indebtedness of the Company, including but not limited to any indebtedness to
current executive officers or principal stockholders of the Company, but
excluding accounts payable to non-affiliates incurred in the ordinary course,
including scheduled repayments of principal and interest on existing
indebtedness and lines of credit secured by the receivables and inventory of the
Company, and such other indebtedness as shall be agreed upon in writing by the
Company and the Placement Agent.
(b) EXPENSES OF OFFERING. The Company shall be responsible for
and shall bear all expenses incurred in connection with the proposed Offering,
including but not limited to, the costs of preparing and duplicating the Term
Sheet and all exhibits thereto; the costs of preparing, printing and filing with
the Commission the Shelf Registration Statement and amendments, post-effective
amendments and supplements thereto; preparing, duplicating and delivering
exhibits thereto and copies of the preliminary, final and supplemental
prospectus; preparing, duplicating and delivering (including by facsimile) all
selling documents, including but not limited to the Term Sheet, the Placement
Agency Agreement, Subscription Agreements, Placement Warrants, blue sky
memorandum and stock and warrant certificates; blue sky fees, filing fees and
legal fees and disbursements of the Placement Agent's counsel and blue sky
counsel; fees and disbursements of the transfer and warrant agent; the cost of a
total of two sets of bound closing volumes for the Placement Agent and its
counsel; and the cost of three tombstone advertisements, at least one of which
shall appear in a national business newspaper and one of which shall appear in a
major New York newspaper (or, at the option of the Placement Agent, forty (40)
lucite deal mementos) (collectively, the "Company Expenses"). The Company agrees
to use a printer designated by the Placement Agent and which is reasonably
acceptable to the Company. The Company shall pay to the Placement Agent a
non-accountable expense allowance equal to 4% of the total proceeds of the
Offering (the "Expense Allowance"), of which twenty thousand dollars ($20,000)
shall have been paid upon execution of the Letter of Intent between the Company
and the Placement Agent dated April 16, 1997 and twenty thousand dollars
($20,000) of which shall be due and payable upon the date the Term Sheet is
completed, to cover the cost of the Placement Agent's mailing, telephone,
telecopy, travel, due diligence meetings and other similar expenses excluding
legal fees of the Placement Agent's counsel and blue sky counsel (which fees
shall be the responsibility of the Company as provided above and any other items
designated above as Company Expenses). Such prepaid expense allowances shall be
non-refundable. If the proposed financing is not completed because the Company
prevents it or because of a breach by the Company of any covenants,
representations or warranties contained herein, then the Company shall pay
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to the Placement Agent a fee of one hundred thousand dollars ($100,000) (in
addition to the Company Expenses for which the Company shall in all events
remain liable).
(c) NOTIFICATION. The Company shall notify the Placement Agent
immediately, and in writing, (A) when any event shall have occurred during the
period commencing on the date hereof and ending on the later of the Closing or
the Final Closing Date as a result of which the Offering Documents would include
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 in light of the circumstances under which they were made and (B) of
the receipt of any notification with respect to the modification, rescission,
withdrawal or suspension of the qualification or registration of the Units, the
Placements Warrants and the Registrable Capital Stock (as defined herein), or of
any exemption from such registration or qualification, in any jurisdiction. The
Company will use its best efforts to prevent the issuance of any such
modification, rescission, withdrawal or suspension and, if any such
modification, rescission, withdrawal or suspension is issued and you so request,
to obtain the lifting thereof as promptly as possible.
(d) BLUE SKY. The Company will use its best efforts to qualify
the Units for offering and sale under exemptions from qualification or
registration requirements under the securities or "blue sky" laws of such
jurisdictions as the Placement Agent may reasonably request; provided however,
that the Company will not be obligated to qualify as a dealer in securities in
any jurisdiction in which it is not so qualified. The Company will not
consummate any sale of Units in any jurisdiction in which it is not so qualified
or in any manner in which such sale may not be lawfully made.
(e) REGISTRATION STATEMENT FILING. The Company will, as soon as
practicable, but not later than 30 days after the Final Closing Date, (i) file a
shelf registration statement (the "Shelf Registration Statement") with respect
to (i) the Conversion Shares and (ii) the shares of Common Stock issuable upon
conversion of the Preferred Stock underlying the Placement Warrants (as defined
in paragraph 3(d)) (together, the "Registrable Capital Stock") with the SEC and
use its best efforts to have such Shelf Registration Statement declared
effective by the SEC prior to the date which is 75 days after the Final Closing
Date (subject to penalties for failure to effect such registration in the time
frames required as set forth in the Subscription Agreement) and (b) cause such
Shelf Registration Statement to remain effective until such date as the holders
of the securities have completed the distribution described in the Shelf
Registration Statement or at such time that such shares are no longer, by reason
of Rule 144(k) under the Securities Act, required to be registered for the sale
thereof by such holders. If requested by the Placement Agent, and in accordance
with applicable securities laws, the Shelf Registration Statement shall cover
the direct sale
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of such Registrable Capital Stock to the holders of such securities. The
Registrable Capital Stock will be subject to a staggered "lock-up" as may be
deemed advisable by the Placement Agent.
(f) FORM D FILING. The Company shall file five copies of a Notice
of Sales of Securities on Form D with the Commission no later than 15 days after
the first Closing Date. The Company shall file promptly such amendments to such
Notice on Form D as shall become necessary and shall also comply with any filing
requirement imposed by the laws of any state or jurisdiction in which offers and
sales are made. The Company shall furnish the Placement Agent with copies of all
such filings.
(g) PRESS RELEASES, ETC. Except as otherwise required by
applicable law, the Company shall not, during the period commencing on the date
hereof and ending thirty days after the Final Closing Date, issue any press
release or other communication, make any written or oral statement to any media
organization or publication or hold any press conference, presentation or
seminar, or engage in any other publicity with respect to the Company, its
financial condition, results of operations, business, properties, assets, or
liabilities, or the Offering, without the prior written consent of the Placement
Agent. Upon the request of the Placement Agent, the Company shall make a Rule
135(c) (under the Securities Act of 1933, as amended) announcement prior to the
commencement of the Offering.
(h) PUBLIC DOCUMENTS. Following the Final Closing Date of the
Offering, the Company will furnish to the Placement Agent: (i) as soon as
practicable (but in the case of the annual report of the Company to its
stockholders, within 120 days after the end of each fiscal year of the Company)
one copy of: (A) its annual report to its stockholders (which annual report
shall contain financial statements audited in accordance with generally accepted
accounting principles in the United States of America by a firm of certified
public accountants of recognized standing), (B) if not included in substance in
its annual report to stockholders, its annual report on Form 10-KSB, (C) each of
its quarterly reports to its stockholders, and if not included in substance in
its quarterly reports to stockholders, its quarterly report on Form 10-QSB, (D)
each of its current reports on Form 8-K, and (E) a copy of the full Shelf
Registration Statement, (the foregoing, in each case, excluding exhibits); and
(ii) upon reasonable request, all exhibits excluded by the parenthetical to the
immediately preceding clause 4(h)(i)(E) and all other information that is
generally available to the public. In addition, the Company upon reasonable
request will meet with the Placement Agent or its representatives to discuss all
information relevant for disclosure in any Shelf Registration Statement covering
shares purchased by Purchasers from the Company and offered by them for resale
and will cooperate in any reasonable investigation undertaken by the Placement
Agent for the purpose of
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confirming the accuracy of the Shelf Registration Statement, including the
production of information at the Company's offices.
(i) RESTRICTIONS ON SECURITIES. During the eighteen (18) months
following the Closing of the Offering, the Company shall not, without the prior
written consent of the Placement Agent, offer or sell any of its securities in
reliance on Regulation S of the Securities Act. During the 18-month period
following the date hereof, (i) the Placement Agent shall have the right of first
refusal to act as placement agent for the offering of any securities of the
Company and (ii) the Company will not extend the expiration date or decrease the
exercise price of any options, warrants, convertible securities or other similar
security purchase rights without the prior written consent of the Placement
Agent.
(j) LISTING. The Company will take all action necessary to
promptly file an Application for Listing of Additional Shares with the New York
Stock Exchange, the American Stock Exchange, the Nasdaq National Market, the
Nasdaq SmallCap Market, or the OTC Electronic Bulletin Board, as applicable, in
accordance with Regulation M under the Exchange Act and/or take any other
necessary action to enable the Common Stock into which the Preferred Stock is
convertible (including the Common Stock issuable upon conversion of the
Preferred Stock underlying the Placement Warrants) to trade thereon.
(k) FINANCIAL ADVISORY AGREEMENT. Upon the Final Closing Date,
the Company and the Placement Agent will enter into an engagement agreement in
form and substance satisfactory to the Placement Agent (the "Financial Advisory
Agreement") whereby the Placement Agent will act as the Company's financial
advisor. Such engagement will provide that the Placement Agent receive
out-of-pocket expenses and standard success fees.
(l) NO OFFERINGS. Pending completion or termination of the
Offering in accordance with the terms of this Agreement, the Company agrees that
it will not enter into an agreement (whether binding or not) or negotiate with
any other person or entity relating to a possible public or private offering or
placement of its securities (other than in connection with a corporate
partnership, strategic alliance or government funding).
(m) NO STATEMENTS. The Company shall not use the name of the
Placement Agent or any officer, director, employee or shareholder thereof
without the express written consent of the Placement Agent and such person.
(n) COMPANY INSIDERS. Officers, directors or principal
stockholders of the Company may invest in the Offering. Any such investments
will
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be included in calculating whether the 30 Units have been sold in the Minimum
Offering, whether the 50 Units have been sold in the Maximum Offering, and
whether the 30 Units have been sold pursuant to the over-allotment.
(o) PLACEMENT AGENT INSIDERS. Certain affiliates of the Placement
Agent may purchase Units in the Offering. Affiliates of the Placement Agent will
invest net of cash commissions and expenses. Accordingly, the Placement Agent
will not receive a commission on the Units purchased by its affiliates and the
Company will receive net proceeds equivalent to the net proceeds received from
the purchase of Units by persons not affiliated with the Placement Agent. The
aggregate offering price of any such investments will be included in calculating
whether the 30 Units have been sold in the Minimum Offering, whether the 50
Units have been sold in the Maximum Offering, and whether the 30 Units have been
sold pursuant to the over-allotment option.
5. INDEMNIFICATION.
(a) The Company agrees to indemnify and hold harmless the
Placement Agent and each Selected Dealer, if any, and their respective partners,
affiliates, shareholders, directors, officers, agents, advisors,
representatives, employees, counsel and controlling persons within the meaning
of the Securities Act (a "Paramount Indemnified Party") against any and all
losses, liabilities, claims, damages and expenses whatsoever (and all actions in
respect thereof), and to reimburse such Paramount Indemnified Party for legal
fees and related expenses as incurred (including, but not limited to, the costs
of giving testimony or furnishing documents in response to a subpoena or
otherwise, the costs of investigating, preparing, pursuing or defending any such
action or claim whether or not pending or threatened and whether or not the
Placement Agent or any Paramount Indemnified Party is a party thereto), insofar
as such losses, liabilities, claims, damages or expenses arise out of, relate
to, are incurred in connection with or are in any way a result of (i) the
engagement of the Placement Agent pursuant to this Agreement and in connection
with the transactions contemplated by this Agreement and the other Offering
Documents (the "Engagement"), including any modifications or future additions to
such engagement and related activities prior to the date hereof, (ii) any act by
the Placement Agent or any Paramount Indemnified Party taken in connection with
the Engagement, (iii) a breach of any representation, warranty, covenant or
agreement of the Company contained in this Agreement, (iv) the employment by the
Company of any device, scheme or artifice to defraud, or the engaging by the
Company in any act, practice or course of business which operates or would
operate as a fraud or deceit, or any conspiracy with respect thereto, in
connection with the sale of the Units, or (v) any untrue statement or alleged
untrue statement of a material fact contained in the
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Offering Documents or the omission or alleged omission therefrom of a material
fact necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading, provided, however,
that the Company will not be liable in any such case if and to the extent that
any such loss, claim, damage, liability or expense arises out of or is based
upon an untrue statement or alleged untrue statement or omission or alleged
omission so made in conformity with information furnished by any such Paramount
Indemnified Party in writing specifically for use in the Offering Documents.
(b) The Company agrees to indemnify and hold harmless a Paramount
Indemnified Party to the same extent as the foregoing indemnity, and subject to
the limitations set forth therein, against any and all loss, liability, claim,
damage and expense whatsoever directly arising out of the exercise by any person
of any right under the Securities Act or the Exchange Act or the securities or
Blue Sky laws of any state on account of violations of the representations,
warranties or agreements set forth in Section 2 hereof.
(c) Promptly after receipt by a person entitled to
indemnification pursuant to subsection (a) or (b) (an "indemnified party") of
this Section of notice of the commencement of any action, the indemnified party
will, if a claim in respect thereof is to be made against a person granting
indemnification (an "indemnifying party") under this Section, notify in writing
the indemnifying party of the commencement thereof; but the omission so to
notify the indemnifying party will not relieve it from any liability which it
may have to the indemnified party otherwise than under this Section. In case any
such action is brought against an indemnified party, and it notifies the
indemnifying party of the commencement thereof, the indemnifying party will be
entitled to participate in, and, to the extent that it may wish, jointly with
any other indemnifying party similarly notified, to assume the defense thereof,
subject to the provisions herein stated, with counsel reasonably satisfactory to
the indemnified party, and after notice from the indemnifying party to the
indemnified party of its election so to assume the defense thereof, the
indemnifying party will not be liable to the indemnified party for any legal or
other expenses subsequently incurred by the indemnified party in connection with
the defense thereof other than reasonable costs of investigation incurred at the
request of the indemnifying party. The indemnified party shall have the right to
employ separate counsel in any such action and to participate in the defense
thereof, but the fees and expenses of such counsel shall not be at the expense
of the indemnifying party if the indemnifying party has assumed the defense of
the action with counsel reasonably satisfactory to the indemnified party;
provided that the fees and expenses of such counsel shall be at the expense of
the indemnifying party if (i) the employment of such counsel has been
specifically authorized in writing by the indemnifying party or
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(ii) the named parties to any such action (including any impleaded parties)
include both the indemnified party or parties and the indemnifying party and, in
the judgment of the indemnified party, it is advisable for the indemnified
parties to be represented by separate counsel, in which case the indemnifying
party shall not have the right to assume the defense of such action on behalf of
the indemnified party or parties, it being understood, however, that the
indemnifying party shall not, in connection with any one such action or separate
but substantially similar or related actions in the same jurisdiction arising
out of the same general allegations or circumstances, be liable for the
reasonable fees and expenses of more than one separate firm of attorneys for the
indemnified party or parties. No settlement, compromise, consent to entry of
judgment or other termination of any action (collectively, "Terminations") in
respect of which a Paramount Indemnified Party may seek indemnification
hereunder (whether or not any Paramount Indemnified Party is a party thereto)
shall be made without the prior written consent of the Paramount Indemnified
Party, which such consent may be withheld at the sole discretion of such
Paramount Indemnified Party, provided, however, that the foregoing requirement
of prior written consent for Terminations shall not apply to the Placement Agent
who may agree to such Terminations without the prior written consent of any
Paramount Indemnified Party.
(e) Notwithstanding any of the provisions of this Agreement, the
aggregate indemnification or contribution of the Placement Agent for or on
account of any losses, claims, damages, liabilities or actions under this
Section 5, Section 6 or any other applicable section of this Agreement, shall
not exceed the Cash Commissions actually paid to the Placement Agent. The
indemnity and contribution agreements by the Company contained in subsections
(a), (b) and (c) of this Section 5 and Section 6, and the covenants,
representations and warranties of the Company set forth in Sections 1, 2, 3 and
4 shall remain operative and in full force and effect regardless of (i) any
investigation made by the Placement Agent, on the Placement Agent's behalf or by
or on behalf of any person who controls the Placement Agent, (ii) acceptance of
any of the Units and payment therefor or (iii) any termination of this
Agreement, and shall survive the delivery of the Units, and any successor of the
Placement Agent or of any person who controls the Placement Agent, as the case
may be, shall be entitled to the benefit of such respective indemnity and
contribution agreements. The indemnity and contribution agreements by the
Company contained in subsections (a), (b) and (c) of this Section 5 and Section
6 shall be in addition to any liability which the Company may otherwise have.
6. CONTRIBUTION.
(a) To provide for just and equitable contribution, if (i) an
indemnified party makes a claim for indemnification pursuant to Section 5 but it
is
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found in a final judicial determination, by a court of competent jurisdiction,
not subject to further appeal, that such indemnification may not be enforced in
such case, even though this Agreement expressly provides for indemnification in
such case, or (ii) any indemnified or indemnifying party seeks contribution
under the Securities Act, the Exchange Act or otherwise, then the Company
(including for this purpose any contribution made by or on behalf of any
officer, director, employee or agent for the Company, or any controlling person
of the Company), on the one hand, and the Placement Agent and any Selected
Dealers (including for this purpose any contribution by or on behalf of an
indemnified party), on the other hand, shall contribute to the losses,
liabilities, claims, damages and expenses whatsoever to which any of them may be
subject, in such proportions as are appropriate to reflect the relative benefits
received by the Company, on the one hand, and the Placement Agent and the
Selected Dealers, on the other hand; provided, however, that if applicable law
does not permit such allocation, then other relevant equitable considerations
such as the relative fault of the Company and the Placement Agent and the
Selected Dealers in connection with the facts which resulted in such losses,
liabilities, claims, damages, and expenses shall also be considered. In no case
shall the Placement Agent or a Selected Dealer be responsible for a portion of
the contribution obligation in excess of the compensation received by it
pursuant to Section 3 hereof or the Selected Dealer Agreement, as the case may
be. No person guilty of a fraudulent misrepresentation shall be entitled to
contribution from any person who is not guilty of such fraudulent
misrepresentation. For purposes of this Section 6, each person, if any, who
controls the Placement Agent or a Selected Dealer within the meaning of Section
15 of the Securities Act or Section 20(a) of the Exchange Act and each officer,
director, stockholder, employee and agent of the Placement Agent or a Selected
Dealer, shall have the same rights to contribution as the Placement Agent or the
Selected Dealer, and each person, if any who controls the Company within the
meaning of Section 15 of the Securities Act or Section 20(a) of the Exchange Act
and each officer, director, employee and agent of the Company, shall have the
same rights to contribution as the Company, subject in each case to the
provisions of this Section 6. Anything in this Section 6 to the contrary
notwithstanding, no party shall be liable for contribution with respect to the
settlement of any claim or action effected without its written consent. This
Section 6 is intended to supersede any right to contribution under the
Securities Act, the Exchange Act or otherwise.
7. MISCELLANEOUS.
(a) SURVIVAL. Any termination of the Offering without any Closing
shall be without obligation on the part of any party except that the provisions
regarding fees and expenses contained in Section 4(b), the indemnification
provided in
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Section 5 hereof and the contribution provided in Section 6 hereof shall survive
any termination and shall survive any Closing.
(b) REPRESENTATIONS, WARRANTIES AND COVENANTS TO SURVIVE
DELIVERY. Except as provided in Section 7(a), the respective representations,
warranties, indemnities, agreements, covenants and other statements of the
Company and the Placement Agent as of the date hereof shall survive execution of
this Agreement and delivery of the Units and the termination of this Agreement.
(c) NO OTHER BENEFICIARIES. This Agreement is intended for the
sole and exclusive benefit of the parties hereto and their respective successors
and controlling persons, and no other person, firm or corporation shall have any
third-party beneficiary or other rights hereunder.
(d) GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the law of the State of New York without regard to
conflict of law provisions.
(e) COUNTERPARTS. This Agreement may be signed in counterparts
with the same effect as if both parties had signed one and the same instrument.
(f) NOTICES. Any communications specifically required hereunder
to be in writing, if sent to the Placement Agent, will be mailed, delivered and
confirmed to it at Paramount Capital, 787 Seventh Avenue, New York, New York,
10019, Att: Michael S. Weiss and if sent to the Company, will be mailed,
delivered or telegraphed and confirmed to it at Conversion Technologies
International, Inc., 3452 Lake Lynda Drive, Suite 280, Orlando, Florida 32817
Attn: President.
(g) TERMINATION. Subject to the general survival provisions
contained in Sections 7(a) and 7(b), this Agreement may be terminated by either
party prior to any Closing upon written notice to the other party.
(h) ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement of the parties with respect to the matters herein referred and
supersedes all prior agreements and understandings, written and oral, between
the parties with respect to the subject matter hereof. Neither this Agreement
nor any term hereof may be changed, waived or terminated orally, but only by an
instrument in writing signed by the party against which enforcement of the
change, waiver or termination is sought.
<PAGE>
Paramount Capital, Inc.
Page 27
EXECUTION COPY
(i) Nothing contained herein or otherwise shall be construed to
create a partnership or joint venture between you and the Company.
(j) The headings and captions of the various subdivisions of this
Agreement are for convenience of reference only and shall in no way modify or
affect the meaning or construction of any of the terms or provisions hereof.
<PAGE>
Paramount Capital, Inc.
Page 28
EXECUTION COPY
If you find the foregoing is in accordance with our
understanding, kindly sign and return to us a counterpart hereof, whereupon this
instrument along with all counterparts will become a binding agreement between
us.
Very truly yours,
CONVERSION TECHNOLOGIES
INTERNATIONAL, INC.
By:
---------------------------
Name:
Title:
Agreed to by:
PARAMOUNT CAPITAL, INC.
By:
--------------------------------
Name: Lindsay A. Rosenwald, M.D.
Title: Chairman
<PAGE>
EXECUTION COPY
EXHIBIT A
CONVERSION TECHNOLOGIES INTERNATIONAL, INC.
OFFICERS' CERTIFICATE
August __, 1997
I, _____________, certify that I am the ____________________ of
Conversion Technologies International, Inc., a Delaware corporation (the
"Company"), and that, as such, I am authorized to execute this certificate on
behalf of the Company. All capitalized terms used herein but not otherwise
defined herein shall the meanings ascribed to such terms in the Agency Agreement
(as defined below). Reference is made herein to the closing held on [ ] (the
"Closing Date"). I do hereby certify that I have carefully examined all of the
Offering Documents (as defined in the Placement Agency Agreement dated as of
April 1, 1997 between the Company and Paramount Capital, Inc. (the "Agency
Agreement")), and do hereby further certify that:
1. All of the representations and warranties of the Company contained
in the subscription agreements (the "Subscription Agreements") between the
Company and the purchasers (the "Purchasers") of the Units of Preferred Stock of
the Company contemplated by the Company's Confidential Term Sheet, dated August
8, 1997 (as supplemented, the "Term Sheet") are true and correct in all material
respects on the Closing Date with the same force and effect as if made on and as
of the Closing Date, and the Company has performed all covenants and agreements
and has satisfied all conditions in the Subscription Agreements to be performed
or satisfied on its part before the Closing Date in all material respects.
2. The Term Sheet does not contain any untrue statement of a material
fact or omit to state any fact required to be stated in order to make the
statements therein not misleading as of the Closing Date. Since the date of the
Term Sheet, no event has occurred concerning which information is required to be
contained in an amended or supplemented Term Sheet concerning which such
information is not contained herein.
3. All of the representations and warranties of the Company contained
in the Agency Agreement are true and correct in all material respects on the
Closing Date, and the Company has performed all covenants and agreements and has
satisfied all conditions contained in the Agency Agreement to be performed and
satisfied on its part at or prior to the Closing Date in all material respects.
A-i
<PAGE>
Paramount Capital, Inc.
Page ii
EXECUTION COPY
4. All of the representations and warranties of the Company contained
each of the other Offering Documents are true and correct in all material
respects on the Closing Date, and the Company has performed all covenants and
agreements and has satisfied all conditions contained in such Offering Documents
to be performed and satisfied on its part at or prior to the Closing Date in all
material respects.
5. Since the date of the most recent financial statements and the
information included in the Term Sheet, there has been no material adverse
change in the condition (financial or other), earnings, business, properties or
prospects of the Company and the Subsidiaries taken as a whole, whether or not
arising from transactions in the ordinary course of business, nor has there
occurred any material event required to be set forth in the Term Sheet,
including, without limitation, in accordance with Section 2(g) of the Agency
Agreement.
6. There is no litigation pending or, to our knowledge, threatened by
or against the Company or the Subsidiaries, except as disclosed in the Term
Sheet.
7. The Company will promptly take all action necessary to list all
shares of Common Stock issuable upon conversion of the Preferred Stock
(including the shares of Common Stock issuable upon conversion of the Preferred
Stock underlying the Placement Warrants) on the Nasdaq SmallCap Market.
8. Since August 1, 1997, the Company has not offered to sell to or
solicited any offers to buy from any person shares of capital stock of the
Company, except in connection with the Offering contemplated by the Term Sheet
or shares issued upon exercise of stock options outstanding prior to the date
hereof.
IN WITNESS WHEREOF, I have executed this certificate on this __ day of
August, 1997.
------------------------------------
Name:
Title:
A-ii
<PAGE>
EXECUTION COPY
EXHIBIT B
CONVERSION TECHNOLOGIES INTERNATIONAL, INC
SECRETARY'S CERTIFICATE
August [ ], 1997
I, Jack D. Hays, Jr., certify that I am the duly elected, qualified
and acting Secretary of Conversion Technologies International, Inc., a Delaware
corporation (the "Company"), and as such, I am duly authorized to execute this
Certificate on behalf of the Company, and that I am familiar with the facts
certified below. All capitalized terms used herein but not otherwise defined
herein shall the meanings ascribed to such terms in the Agency Agreement dated
as of April 1, 1997 between the Company and Paramount Capital, Inc. (the "Agency
Agreement"). Reference is made herein to the closing held on August __, 1997
(the "Closing Date"). In connection with the offering and sale of up to 50 units
(the "Units") each consisting of 10,000 shares of the Premium Preferred
Stock(TM), stated value $10.00 per share (the "Preferred Stock") of the Company
(the "Preferred Stock"), for which Paramount Capital, Inc. ("Paramount") has
acted as placement agent, I do hereby further certify as follows:
1. Attached hereto as Exhibit A is a true, correct and complete copy
of the Company's Certificate of Incorporation, as amended, which is in full
force and effect and, except as set forth in Paragraphs 2 and 5 below, no
amendment to such certificate has been approved by the Board of Directors or
stockholders of the Company or filed with the Delaware Secretary of State since
[____]. As of the Closing Date, the Company is duly incorporated and in good
standing in its state of incorporation and has paid all fees and taxes due and
payable by it on or prior to the Closing Date necessary for the maintenance or
continuation of its corporate existence. As of the Closing Date, there are no
proceedings or actions contemplated by the Company, relating to the merger,
liquidation, consolidation, or sale of all or substantially all of the assets or
business of the Company or which would otherwise threaten or impair the
Company's corporate existence.
2. Attached hereto as Exhibit B is a true, correct and complete copy
of the Certificate of Designation of the Company's Series A Convertible
Preferred Stock, as filed with the Delaware Secretary of State on [ ] and as in
effect on the Closing Date.
B-i
<PAGE>
Paramount Capital, Inc.
Page ii
EXECUTION COPY
3. Attached hereto as Exhibit C is a true, correct and complete copy
of the Bylaws of the Company, as in full force and effect on the Closing Date
and at all times from [___] through the Closing Date.
4. As of the Closing Date, each of the Offering Documents is in the
form authorized by the board of directors of the Company pursuant to the
resolutions set forth in Exhibit D.
5. Attached hereto as Exhibit D is a true, correct and complete copy
of resolutions duly adopted at a meeting of the Company's board of directors
duly called and held on August 6, 1997, which resolutions, (a) authorize the
issuance and sale of the Units and the Placement Warrants in accordance with the
requirements of Delaware law, (b) authorize the amendment to the Company's
Certificate of Incorporation increasing the authorized shares of Common Stock of
the Company, (c) are the only resolutions adopted by the board of directors of
the Company or any committee thereof with respect to the offering and sale of
the Units and the transactions relating thereto and (d) which have not been
revoked, modified and amended or rescinded and are in full force and effect on
the Closing Date.
6. Attached hereto as Exhibit E are true, correct and complete
specimens of the certificates representing the Preferred Stock heretofore
approved and adopted by the board of directors of the Company. Each of the
certificates representing Preferred Stock delivered on the Closing Date to each
of the Purchasers pursuant to the Subscription Agreements has been executed by
the genuine or facsimile signature of officers of the Company who have been duly
elected or appointed, qualified and acting as such officers on the date such
certificates were executed and delivered, all in accordance with the Certificate
and Bylaws of the Company and the requirements of applicable law.
7. Attached hereto as Exhibit F is a true, correct and complete copy
of the form of Placement Warrants heretofore approved and adopted by the Board
of Directors of the Company. Each of the Placement Warrants delivered on the
date hereof to each of the holders pursuant to the Agency Agreement has been
executed by the genuine or facsimile signature of officers of the Company who
have been duly elected or appointed, qualified and acting as such officers on
the date such certificates were executed and delivered, all in accordance with
the Certificate and Bylaws of the Company and the requirements of applicable
law.
8. The minute books and records of the Company, relating to all
proceedings of the stockholders, the Board of Directors of the Company and the
Compensation Committee and the Audit Committee of such Board have been made
B-ii
<PAGE>
Paramount Capital, Inc.
Page iii
EXECUTION COPY
available to Bachner, Tally, Polevoy & Misher LLP, counsel to Paramount, and, in
such form, are the original minute books and records of the Company. There have
been no material changes, alterations or additions in such minutes or records
since their examination by Bachner, Tally, Polevoy & Misher LLP on behalf of
Paramount.
9. Each person who, as an officer or director of the Company, signed
any of the Offering Documents or any other document in connection with the
offering and sale of the Preferred Stock, the Placement Warrants and the closing
relating thereto was duly elected or appointed, qualified and acting as such
officer or director at the respective times of the signing and delivery thereof
and was duly authorized to sign such document on behalf of the Company, and the
signature of each such person appearing on each such document is the genuine
signature of such officer, director or person duly appointed for the purpose of
executing such documents under valid powers of attorney, and each individual who
signed such signature pages, personally or by an attorney-in-fact, was then duly
elected, qualified and acting as an officer or director of the Company as stated
therein.
10. The following persons are, and have been at all times since August
1, 1997, duly qualified and acting officers of the Company, duly elected or
appointed to the offices set forth opposite their respective names, and the
signature opposite the name of each such officer is his or her, or a facsimile
of his or her, authentic signature, and the seal affixed hereto is the duly
adopted seal of the Company:
NAME OFFICE SIGNATURE
Eckhardt C. Beck Chairman of the Board
William L. Amt President and CEO
Jack D. Hays, Jr. Executive Vice President -
Operations and Marketing
and Secretary
This certificate is made for the benefit of, and may be relied upon
by, Paramount, Bachner, Tally, Polevoy & Misher LLP as counsel to Paramount, and
each of the Purchasers.
B-iii
<PAGE>
EXECUTION COPY
IN WITNESS WHEREOF, I have hereunto set forth my hand this __
day of August, 1997.
[SEAL]
-------------------------------------
Name: Jack D. Hays, Jr.
Title: Secretary
I, ______________, President and Chief Executive Officer of the
Company, do hereby certify that Jack D. Hays, Jr. whose genuine signature
appears above, is, and has been at all times since July 2, 1997, the duly
elected or appointed, qualified and acting Secretary of the Company.
IN WITNESS WHEREOF, I have hereunto set forth my hand this [ ]th day
of [ ], 1997.
-------------------------------------
Name:
Title: President
B-iv
<PAGE>
EXHIBIT F
[FORM OF FACE OF CLASS A WARRANT CERTIFICATE]
No. AW ______ Class A Warrants
VOID AFTER ___________, 2001
CLASS A WARRANT CERTIFICATE FOR PURCHASE
OF COMMON STOCK AND REDEEMABLE CLASS B WARRANTS
Conversion Technologies International, Inc.
This certifies that FOR VALUE RECEIVED __________________ or registered
assigns (the "Registered Holder") is the owner of the number of Class A Warrants
("Class A Warrants") specified above. Each Class A Warrant represented hereby
initially entitles the Registered Holder to purchase, subject to the terms and
conditions set forth in this Warrant Certificate and the Warrant Agreement (as
hereinafter defined), one fully paid and nonassessable share of Common Stock,
$.00025 value ("Common Stock"), of Conversion Technologies International, Inc.,
a Delaware corporation (the "Company"), and one Class B Warrant of the Company
at any time between ____________ and the Expiration Date (as hereinafter
defined), upon the presentation and surrender of this Warrant Certificate with
the Subscription Form on the reverse hereof duly executed, at the corporate
office of American Stock Transfer & Trust Company as Warrant Agent, or its
successor (the "Warrant Agent"), accompanied by payment of $5.85 (the "Purchase
Price") in lawful money of the United States of America in cash or by official
bank or certified check made payable to the Company.
This Warrant Certificate and each Class A Warrant represented hereby
are issued pursuant to and are subject in all respects to the terms and
conditions set forth in the Warrant Agreement (the "Warrant Agreement"), dated
______________, 1996, by and among the Company, the Warrant Agent and D.H. Blair
Investment Banking Corp.
In the event of certain contingencies provided for in the Warrant
Agreement, the Purchase Price or the number of shares of Common Stock and Class
B Warrants subject to purchase upon the exercise of each Class A Warrant
represented hereby are subject to modification or adjustment.
Each Class A Warrant represented hereby is exercisable at the option of
the Registered Holder, but no fractional shares of Common Stock will be issued.
In the case of the exercise of less than all the Class A Warrants represented
hereby, the Company shall cancel this Warrant Certificate upon the surrender
hereof and shall execute and deliver a new
A-1
<PAGE>
Warrant Certificate or Warrant Certificates of like tenor, which the Warrant
Agent shall countersign, for the balance of such Class A Warrants.
The term "Expiration Date" shall mean 5:00 P.M. (New York time) on
_______________, 2001, or such earlier date as the Class A Warrants shall be
redeemed. If such date shall in the State of New York be a holiday or a day on
which banks are authorized to close, then the Expiration Date shall mean 5:00
P.M. (New York time) on the next following day which in the State of New York is
not a holiday or a day on which banks are authorized to close.
The Company shall not be obligated to deliver any securities pursuant
to the exercise of the Class A Warrants represented hereby unless a registration
statement under the Securities Act of 1933, as amended, with respect to such
securities is effective. The Company has covenanted and agreed that it will file
a registration statement and will use its best efforts to cause the same to
become effective and to keep such registration statement current while any of
the Class A Warrants are outstanding. This Class A Warrants represented hereby
shall not be exercisable by a Registered Holder in any state where such exercise
would be unlawful.
This Warrant Certificate is exchangeable, upon the surrender hereof by
the Registered Holder at the corporate office of the Warrant Agent, for a new
Warrant Certificate or Warrant Certificates of like tenor representing an equal
aggregate number of Class A Warrants, each of such new Warrant Certificates to
represent such number of Class A Warrants as shall be designated by such
Registered Holder at the time of such surrender. Upon the presentment with any
applicable transfer fee in addition to any tax or other governmental charge
imposed in connection therewith, for registration of transfer of this Class A
Warrant Certificate at such office, a new Warrant Certificate or Warrant
Certificates representing an equal aggregate number of Class A Warrants will be
issued to the transferee in exchange therefor, subject to the limitations
provided in the Warrant Agreement.
Prior to the exercise of any Class A Warrant represented hereby, the
Registered Holder shall not be entitled to any rights of a stockholder of the
Company, including, without limitation, the right to vote or to receive
dividends or other distributions, and shall not be entitled to receive any
notice of any proceedings of the Company, except as provided in the Warrant
Agreement.
The Class A Warrants represented hereby may be redeemed at the option
of the Company, at a redemption price of $.05 per Class A Warrant at any time
after ______________, 1997, provided the Market Price (as defined in the Warrant
Agreement) for the Common Stock shall exceed $8.20 per share. Notice of
redemption shall be given not later than the thirtieth day before the date fixed
for redemption, all as provided in the Warrant Agreement. On and after the date
fixed for redemption, the Registered Holder shall have no rights with respect to
the Class A Warrants represented hereby except to receive the $.05 per Class A
Warrant upon surrender of this Warrant Certificate.
Prior to due presentation for registration of transfer hereof, the
Company and the Warrant Agent may deem and treat the Registered Holder as the
absolute owner hereof
A-2
<PAGE>
and of each Class A Warrant represented hereby (notwithstanding any notations of
ownership or writing hereon made by anyone other than a duly authorized officer
of the Company or the Warrant Agent) for all purposes and shall not be affected
by any notice to the contrary.
The Company has agreed to pay a fee of 5% of the Purchase Price upon
certain conditions as specified in the Warrant Agreement upon the exercise of
the Class A Warrants represented hereby.
This Warrant Certificate shall be governed by and construed in
accordance with the laws of the State of New York, without reference to
principles of conflict of laws.
This Warrant Certificate is not valid unless countersigned by the
Warrant Agent.
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to
be duly executed, manually or in facsimile, by two of its officers thereunto
duly authorized and a facsimile of its corporate seal to be imprinted hereon.
CONVERSION TECHNOLOGIES
INTERNATIONAL, INC.
Dated:_________________________ By:______________________________
By:______________________________
[seal]
Countersigned:
AMERICAN STOCK TRANSFER &
TRUST COMPANY, as Warrant Agent
By:____________________________________
Authorized Officer
A-3
<PAGE>
[FORM OF REVERSE OF WARRANT CERTIFICATE]
SUBSCRIPTION FORM
To be Executed by the Registered Holder
in Order to Exercise Warrants
The undersigned Registered Holder hereby irrevocably elects to exercise
______ Class A Warrants represented by this Warrant Certificate, and to purchase
the securities issuable upon the exercise of such Class A Warrants, and requests
that certificate for such securities shall be issued in the name of
PLEASE INSERT SOCIAL SECURITY OR OTHER TAXPAYER
IDENTIFICATION NUMBER
=======================
=======================
=======================
=======================
[please print or type name and address]
and be delivered to
=======================
=======================
=======================
=======================
[please print or type name and address]
and if such number of Class A Warrants shall not be all the Class A Warrants
evidenced by this Warrant Certificate, that a new Class A Warrant Certificate
for the balance of such Class A Warrants be registered in the name of, and
delivered to, the Registered Holder at the address stated below.
A-4
<PAGE>
The undersigned represents that the exercise of the Class A Warrants
evidenced hereby was solicited by a member of the National Association of
Securities Dealers, Inc. If not solicited by an NASD member, please write
"unsolicited" in the space below. Unless otherwise indicated by listing the name
of another NASD member firm, it will be assumed that the exercise was solicited
by D.H. Blair Investment Banking Corp. or D.H. Blair & Co., Inc.
------------------------------------
(Name of NASD Member)
Dated: _______________ X___________________________________
------------------------------------
------------------------------------
Address
------------------------------------
Taxpayer Identification Number
------------------------------------
Signature Guaranteed
------------------------------------
THE SIGNATURE TO THE ASSIGNMENT OR THE SUBSCRIPTION FORM MUST CORRESPOND TO THE
NAME AS WRITTEN UPON THE FACE OF THIS WARRANT CERTIFICATE IN EVERY PARTICULAR,
WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATSOEVER, AND MUST BE
GUARANTEED BY A MEMBER OF THE MEDALLION STAMP PROGRAM.
A-5
<PAGE>
ASSIGNMENT
To be Executed by the Registered Holder
in Order to Assign Warrants
FOR VALUE RECEIVED, __________________ hereby sells, assigns and
transfers unto
PLEASE INSERT SOCIAL SECURITY OR OTHER TAXPAYER
IDENTIFICATION NUMBER
=======================
=======================
=======================
=======================
[please print or type name and address]
________________ of the Class A Warrants represented by this Warrant
Certificate, and hereby irrevocably constitutes and appoints
_________________________ Attorney to transfer this Warrant Certificate on the
books of the Company, with full power of substitution in the premises.
Dated: _______________ X___________________________________
Signature Guaranteed
------------------------------------
THE SIGNATURE TO THE ASSIGNMENT OR THE SUBSCRIPTION FORM MUST CORRESPOND TO THE
NAME AS WRITTEN UPON THE FACE OF THIS WARRANT CERTIFICATE IN EVERY PARTICULAR,
WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATSOEVER, AND MUST BE
GUARANTEED BY A MEMBER OF THE MEDALLION STAMP PROGRAM.
A-6
<PAGE>
EXHIBIT G
[FORM OF FACE OF CLASS B WARRANT CERTIFICATE]
No. BW ______ Class B Warrants
VOID AFTER ___________, 2001
CLASS B WARRANT CERTIFICATE FOR
PURCHASE OF COMMON STOCK
CONVERSION TECHNOLOGIES INTERNATIONAL, INC.
This certifies that FOR VALUE RECEIVED __________________ or registered
assigns (the "Registered Holder") is the owner of the number of Class B Warrants
specified above. Each Class B Warrant represented hereby initially entitles the
Registered Holder to purchase, subject to the terms and conditions set forth in
this Warrant Certificate and the Warrant Agreement (as hereinafter defined), one
fully paid and nonassessable share of Common Stock, $.00025 par value ("Common
Stock"), of Conversion Technologies International, Inc., a Delaware corporation
(the "Company"), at any time between ____________ and the Expiration Date (as
hereinafter defined), upon the presentation and surrender of this Warrant
Certificate with the Subscription Form on the reverse hereof duly executed, at
the corporate office of American Stock Transfer & Trust Company as Warrant
Agent, or its successor (the "Warrant Agent"), accompanied by payment of $7.80
(the "Purchase Price") in lawful money of the United States of America in cash
or by official bank or certified check made payable to the Company.
This Warrant Certificate and each Class B Warrant represented hereby
are issued pursuant to and are subject in all respects to the terms and
conditions set forth in the Warrant Agreement (the "Warrant Agreement"), dated
______________, 1996, by and among the Company, the Warrant Agent and D.H. Blair
Investment Banking Corp.
In the event of certain contingencies provided for in the Warrant
Agreement, the Purchase Price or the number of shares of Common Stock subject to
purchase upon the exercise of each Class B Warrant represented hereby are
subject to modification or adjustment.
Each Class B Warrant represented hereby is exercisable at the option of
the Registered Holder, but no fractional shares of Common Stock will be issued.
In the case of the exercise of less than all the Class B Warrants represented
hereby, the Company shall cancel this Warrant Certificate upon the surrender
hereof and shall execute and deliver a new
B-1
<PAGE>
Warrant Certificate or Warrant Certificates of like tenor, which the Warrant
Agent shall countersign, for the balance of such Class B Warrants.
The term "Expiration Date" shall mean 5:00 P.M. (New York time) on
_______________, 2001, or such earlier date as the Class B Warrants shall be
redeemed. If such date shall in the State of New York be a holiday or a day on
which banks are authorized to close, then the Expiration Date shall mean 5:00
P.M. (New York time) on the next following day which in the State of New York is
not a holiday or a day on which banks are authorized to close.
The Company shall not be obligated to deliver any securities pursuant
to the exercise of the Class B Warrants represented hereby unless a registration
statement under the Securities Act of 1933, as amended, with respect to such
securities is effective. The Company has covenanted and agreed that it will file
a registration statement and will use its best efforts to cause the same to
become effective and to keep such registration statement current while any of
the Class B Warrants are outstanding. This Class A Warrants represented hereby
shall not be exercisable by a Registered Holder in any state where such exercise
would be unlawful.
This Warrant Certificate is exchangeable, upon the surrender hereof by
the Registered Holder at the corporate office of the Warrant Agent, for a new
Warrant Certificate or Warrant Certificates of like tenor representing an equal
aggregate number of Class B Warrants, each of such new Warrant Certificates to
represent such number of Class B Warrants as shall be designated by such
Registered Holder at the time of such surrender. Upon the presentment with any
applicable transfer fee in addition to any tax or other governmental charge
imposed in connection therewith, for registration of transfer of this Class B
Warrant Certificate at such office, a new Warrant Certificate or Warrant
Certificates representing an equal aggregate number of Class B Warrants will be
issued to the transferee in exchange therefor, subject to the limitations
provided in the Warrant Agreement.
Prior to the exercise of any Class B Warrant represented hereby, the
Registered Holder shall not be entitled to any rights of a stockholder of the
Company, including, without limitation, the right to vote or to receive
dividends or other distributions, and shall not be entitled to receive any
notice of any proceedings of the Company, except as provided in the Warrant
Agreement.
The Class B Warrants represented hereby may be redeemed at the option
of the Company, at a redemption price of $.05 per Class A Warrant at any time
after ______________, 1997, provided the Market Price (as defined in the Warrant
Agreement) for the Common Stock shall exceed $10.95 per share. Notice of
redemption shall be given not later than the thirtieth day before the date fixed
for redemption, all as provided in the Warrant Agreement. On and after the date
fixed for redemption, the Registered Holder shall have no rights with respect to
the Class B Warrants represented hereby except to receive the $.05 per Class B
Warrant upon surrender of this Warrant Certificate.
B-2
<PAGE>
Prior to due presentation for registration of transfer hereof, the
Company and the Warrant Agent may deem and treat the Registered Holder as the
absolute owner hereof and of each Class B Warrant represented hereby
(notwithstanding any notations of ownership or writing hereon made by anyone
other than a duly authorized officer of the Company or the Warrant Agent) for
all purposes and shall not be affected by any notice to the contrary.
The Company has agreed to pay a fee of 5% of the Purchase Price upon
certain conditions as specified in the Warrant Agreement upon the exercise of
the Class B Warrants represented hereby.
This Warrant Certificate shall be governed by and construed in
accordance with the laws of the State of New York, without reference to
principles of conflict of laws.
This Warrant Certificate is not valid unless countersigned by the
Warrant Agent.
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to
be duly executed, manually or in facsimile, by two of its officers thereunto
duly authorized and a facsimile of its corporate seal to be imprinted hereon.
CONVERSION TECHNOLOGIES
INTERNATIONAL, INC.
Dated:_________________________ By:________________________________
By:________________________________
[seal]
Countersigned:
AMERICAN STOCK TRANSFER &
TRUST COMPANY, as Warrant Agent
By:____________________________________
Authorized Officer
B-3
<PAGE>
[FORM OF REVERSE OF WARRANT CERTIFICATE]
SUBSCRIPTION FORM
To be Executed by the Registered Holder
in Order to Exercise Warrants
The undersigned Registered Holder hereby irrevocably elects to exercise
______ Class B Warrants represented by this Warrant Certificate, and to purchase
the securities issuable upon the exercise of such Class B Warrants, and requests
that certificate for such securities shall be issued in the name of
PLEASE INSERT SOCIAL SECURITY OR OTHER TAXPAYER
IDENTIFICATION NUMBER
=======================
=======================
=======================
=======================
[please print or type name and address]
and be delivered to
=======================
=======================
=======================
=======================
[please print or type name and address]
and if such number of Class B Warrants shall not be all the Class B Warrants
evidenced by this Warrant Certificate, that a new Warrant Certificate for the
balance of such Class B Warrants be registered in the name of, and delivered to,
the Registered Holder at the address stated below.
B-4
<PAGE>
The undersigned represents that the exercise of the Class B Warrants
evidenced hereby was solicited by a member of the National Association of
Securities Dealers, Inc. If not solicited by an NASD member, please write
"unsolicited" in the space below. Unless otherwise indicated by listing the name
of another NASD member firm, it will be assumed that the exercise was solicited
by D.H. Blair Investment Banking Corp. or D.H. Blair & Co., Inc.
------------------------------------
(Name of NASD Member)
Dated: _______________ X___________________________________
------------------------------------
------------------------------------
Address
------------------------------------
Taxpayer Identification Number
------------------------------------
Signature Guaranteed
------------------------------------
THE SIGNATURE TO THE ASSIGNMENT OR THE SUBSCRIPTION FORM MUST CORRESPOND TO THE
NAME AS WRITTEN UPON THE FACE OF THIS WARRANT CERTIFICATE IN EVERY PARTICULAR,
WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATSOEVER, AND MUST BE
GUARANTEED BY A MEMBER OF THE MEDALLION STAMP PROGRAM.
B-5
<PAGE>
ASSIGNMENT
To be Executed by the Registered Holder
in Order to Assign Warrants
FOR VALUE RECEIVED, __________________ hereby sells, assigns and
transfers unto
PLEASE INSERT SOCIAL SECURITY OR OTHER TAXPAYER
IDENTIFICATION NUMBER
=======================
=======================
=======================
=======================
[please print or type name and address]
________________ of the Class B Warrants represented by this Warrant
Certificate, and hereby irrevocably constitutes and appoints
_________________________ Attorney to transfer this Warrant Certificate on the
books of the Company, with full power of substitution in the premises.
Dated: _______________ X___________________________________
Signature Guaranteed
------------------------------------
THE SIGNATURE TO THE ASSIGNMENT OR THE SUBSCRIPTION FORM MUST CORRESPOND TO THE
NAME AS WRITTEN UPON THE FACE OF THIS WARRANT CERTIFICATE IN EVERY PARTICULAR,
WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATSOEVER, AND MUST BE
GUARANTEED BY A MEMBER OF THE MEDALLION STAMP PROGRAM.
B-6
<PAGE>
Exhibit H
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR
ANY APPLICABLE STATE SECURITIES LAWS. THEY MAY NOT BE SOLD, OFFERED FOR SALE,
PLEDGED OR HYPOTHECATED OR OTHERWISE TRANSFERRED IN THE ABSENCE OF A
REGISTRATION STATEMENT IN EFFECT WITH RESPECT TO THE SECURITIES UNDER SUCH ACT
OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS
NOT REQUIRED OR UNLESS SOLD PURSUANT TO RULE 144 OF SUCH ACT. ANY SUCH TRANSFER
MAY ALSO BE SUBJECT TO APPLICABLE STATE SECURITIES LAWS.
CONVERSION TECHNOLOGIES
INTERNATIONAL, INC.
WARRANT FOR THE PURCHASE OF SHARES OF
COMMON STOCK
NO. [ ] SHARES
FOR VALUE RECEIVED, CONVERSION TECHNOLOGIES
INTERNATIONAL, INC., a Delaware corporation (the "COMPANY"), hereby certifies
that [ ], or its permitted assigns, is entitled to purchase from the Company, at
any time or from time to time commencing on JULY 21, 1997, and prior to 5:00
P.M., New York City time, on JULY 21, 2002 (the "TERMINATION DATE"), [ ] fully
paid and non-assessable shares of the Common Stock, $.00025 par value per share,
of the Company at an exercise price equal to $1.3125 (Hereinafter, (i) said
Common Stock, together with any other equity securities which may be issued by
the Company with respect thereto or in substitution therefor, is referred to as
the "COMMON STOCK", (ii) the shares of the Common Stock purchasable hereunder or
under any other Warrant (as hereinafter defined) are referred to as the "WARRANT
SHARES", (iii) the aggregate purchase price payable for the Warrant Shares
hereunder is referred to as the "AGGREGATE WARRANT PRICE", (iv) the price
payable for each of the Warrant Shares hereunder is referred to as the "PER
SHARE WARRANT PRICE", (v) this Warrant, all similar Warrants issued on the date
hereof and all warrants hereafter issued in exchange or substitution for this
Warrant or such similar Warrants are referred to as the "WARRANTS" and (vi) the
holder of this Warrant is referred to as the "HOLDER" and the holder of this
Warrant and all other Warrants or Warrant Shares issued upon the exercise of any
Warrant are referred to as the "HOLDERS"). The Aggregate Warrant Price is not
subject to adjustment. The Per Share Warrant Price is subject to adjustment as
hereinafter provided; in the event of any such adjustment, the number of Warrant
Shares shall be adjusted by dividing the
<PAGE>
Aggregate Warrant Price by the Per Share Warrant Price in effect immediately
after such adjustment.
1. EXERCISE OF WARRANT.
(a) This Warrant may be exercised, in whole at any time or in part from
time to time, commencing on July 21, 1997 and prior to the Termination Date, by
the holder:
(i) by the surrender of this Warrant (with the subscription form
at the end hereof duly executed) at the address set forth in
Subsection 9(a) hereof, together with proper payment of the Aggregate
Warrant Price, or the proportionate part thereof if this Warrant is
exercised in part, with payment for Warrant Shares made by certified
or official bank check payable to the order of the Company; or
(ii) by the surrender of this Warrant (with the cashless exercise
form at the end hereof duly executed) (a "CASHLESS EXERCISE") at the
address set forth in Subsection 9(a) hereof. Such presentation and
surrender shall be deemed a waiver of the Holder's obligation to pay
the Aggregate Warrant Price, or the proportionate part thereof if this
Warrant is exercised in part. In the event of a Cashless Exercise, the
Holder shall exchange its Warrant for that number of Warrant Shares
subject to such Cashless Exercise multiplied by a fraction, the
numerator of which shall be the difference between the then current
Market Price per share (as hereinafter defined) of Common Stock and
the Per Share Warrant Price, and the denominator of which shall be the
then current Market Price per share of Common Stock. The then current
market price per share of the Common Stock at any date (the "MARKET
PRICE") shall be deemed to be the last sale price of the Common Stock
on the business day prior to the date of the Cashless Exercise or, in
case no such reported sales take place on such day, the average of the
last reported bid and asked prices of the Common Stock on such day, in
either case on the principal national securities exchange on which the
Common Stock is admitted to trading or listed, or if not listed or
admitted to trading on any such exchange, the representative closing
bid price of the Common Stock as reported by the Nasdaq National
Market System or the Nasdaq SmallCap Market ("NASDAQ"), or other
similar organization if NASDAQ is no longer reporting such
information, or if not so available, the fair market price of the
Common Stock as determined in good faith by the Board of Directors.
(b)If this Warrant is exercised in part, this Warrant must be exercised
for a number of whole shares of the Common Stock and the Holder is entitled to
receive a new Warrant covering the Warrant Shares which have not been exercised
and setting forth the proportionate part of the Aggregate Warrant Price
applicable to such Warrant Shares. Upon surrender of this Warrant, the Company
will (i) issue a certificate or certificates in the name of the Holder for the
largest number of whole shares of the Common Stock to which the Holder shall be
entitled and, if this Warrant is exercised in whole, in lieu of any fractional
share of the Common Stock to which the Holder shall be entitled, pay to the
Holder cash in an amount equal to the fair value of such fractional share
(determined in such reasonable
<PAGE>
manner as the Board of Directors of the Company shall determine), and (ii)
deliver the other securities and properties receivable upon the exercise of this
Warrant, if any, or the proportionate part thereof if this Warrant is exercised
in part, pursuant to the provisions of this Warrant.
2. RESERVATION OF WARRANT SHARES; LISTING. The Company agrees that,
prior to the expiration of this Warrant, the Company will at all times (a) have
authorized and in reserve, and will keep available, solely for issuance or
delivery upon the exercise of this Warrant, the shares of the Common Stock and
other securities and properties as from time to time shall be receivable upon
the exercise of this Warrant, free and clear of all restrictions on sale or
transfer, except for the restrictions on sale or transfer set forth in the
Securities Act of 1933, as amended (the "Act"), and restrictions created by or
on behalf of the Holder, and free and clear of all preemptive rights and rights
of first refusal; and (b) when the Company prepares and files a registration
statement covering the shares of Common Stock issued or issuable upon exercise
of this Warrant with the Securities and Exchange Commission (the "SEC") which
registration statement is declared effective by the SEC under the Act and the
Company lists its Common Stock on any national securities exchange or other
quotation system, it will use its reasonable best efforts to cause the shares of
Common Stock subject to this Warrant to be listed on such exchange or quotation
system.
3. PROTECTION AGAINST DILUTION.
(a) If, at any time or from time to time after the date of this
Warrant, the Company shall issue or distribute to the holders of shares of
Common Stock evidence of its indebtedness, any other securities of the Company
or any cash, property or other assets (excluding a subdivision, combination or
reclassification, or dividend or distribution payable in shares of Common Stock,
referred to in Subsection 3(b), and also excluding cash dividends or cash
distributions paid out of net profits legally available therefor in the full
amount thereof, which together with the value of other dividends and
distributions made substantially concurrently therewith or pursuant to a plan
which includes payment thereof, is equivalent to not more than 5% of the
Company's net worth) (any such non-excluded event being herein called a "SPECIAL
DIVIDEND"), the Per Share Warrant Price shall be adjusted by multiplying the Per
Share Warrant Price then in effect by a fraction, the numerator of which shall
be the then current Market Price of the Common Stock less the fair market value
(as determined in good faith by the Company's Board of Directors) of the
evidence of indebtedness, cash, securities or property, or other assets issued
or distributed in such Special Dividend applicable to one share of Common Stock
and the denominator of which shall be the then current Market Price of the
Common Stock. An adjustment made pursuant to this Subsection 3(a) shall become
effective immediately after the record date of any such Special Dividend.
(b) In case the Company shall hereafter (i) pay a dividend or make a
distribution on its capital stock in shares of Common Stock, (ii) subdivide its
outstanding shares of Common Stock into a greater number of shares, (iii)
combine its outstanding shares of Common Stock into a smaller number of shares
or (iv) issue by reclassification of its Common Stock any shares of capital
stock of the Company, the Per Share Warrant Price
<PAGE>
shall be adjusted to be equal to a fraction, the numerator of which shall be the
Aggregate Warrant Price and the denominator of which shall be the number of
shares of Common Stock or other capital stock of the Company which he would have
owned immediately following such action had such Warrant been exercised
immediately prior thereto. An adjustment made pursuant to this Subsection 3(b)
shall become effective immediately after the record date in the case of a
dividend or distribution and shall become effective immediately after the
effective date in the case of a subdivision, combination or reclassification.
(c) Except as provided in Subsections 3(a) and 3(d), in case the
Company shall hereafter issue or sell any Common Stock, any securities
convertible into Common Stock or any rights, options or warrants to purchase
Common Stock or securities convertible into Common Stock, in each case for a
price per share or entitling the holders thereof to purchase Common Stock at a
price per share (determined by dividing (i) the total amount, if any, received
or receivable by the Company in consideration of the issuance or sale of such
securities plus the total consideration, if any, payable to the Company upon
exercise or conversion thereof (the "TOTAL CONSIDERATION") by (ii) the number of
additional shares of Common Stock issuable upon exercise or conversion of such
securities) less than the then either the current Market Price of the Common
Stock or the current Per Share Warrant Price in effect on the date of such
issuance or sale, the Per Share Warrant Price shall be adjusted by multiplying
the Per Share Warrant Price then in effect by a fraction, the numerator of which
shall be (x) the sum of (A) the number of shares of Common Stock outstanding on
the date of such issuance or sale plus (B) the Total Consideration divided by
either the current Market Price of the Common Stock or the current Per Share
Warrant Price, whichever is greater, and the denominator of which shall be (y)
the number of shares of Common Stock outstanding on the date of such issuance or
sale plus the maximum number of additional shares of Common Stock issued, sold
or issuable upon exercise or conversion of such securities.
(d) No adjustment in the Per Share Warrant Price shall be required in
the case of the issuance by the Company of (i) Common Stock pursuant to the
exercise or conversion of any Warrant or any other options, warrants or any
convertible securities currently outstanding or outstanding as a result of
securities issued pursuant to the PPM; provided, that the exercise price or
conversion price at which such options, warrants or convertible securities are
exercised or converted, as the case may be, is equal to the exercise price or
conversion price in effect as of the date of this Warrant or as of the date of
issuance with respect to securities issued pursuant to the PPM (except for
standard anti-dilution adjustments set forth therein) and (ii) shares of Common
Stock issued or sold pursuant to stock purchase or stock option plans or other
similar arrangements that are approved by the Company's Board of Directors.
(e) In case of any capital reorganization or reclassification, or any
consolidation or merger to which the Company is a party other than a merger or
consolidation in which the Company is the continuing corporation, or in case of
any sale or conveyance to another entity of the property of the Company as an
entirety or substantially as an entirety, or in the case of any statutory
exchange of securities with another corporation (including any exchange effected
in connection with a merger of a third corporation into the
<PAGE>
Company), the Holder of this Warrant shall have the right thereafter to receive
on the exercise of this Warrant the kind and amount of securities, cash or other
property which the Holder would have owned or have been entitled to receive
immediately after such reorganization, reclassification, consolidation, merger,
statutory exchange, sale or conveyance had this Warrant been exercised
immediately prior to the effective date of such reorganization,
reclassification, consolidation, merger, statutory exchange, sale or conveyance
and in any such case, if necessary, appropriate adjustment shall be made in the
application of the provisions set forth in this Section 3 with respect to the
rights and interests thereafter of the Holder of this Warrant to the end that
the provisions set forth in this Section 3 shall thereafter correspondingly be
made applicable, as nearly as may reasonably be, in relation to any shares of
stock or other securities or property thereafter deliverable on the exercise of
this Warrant. The above provisions of this Subsection 3(e) shall similarly apply
to successive reorganizations, reclassifications, consolidations, mergers,
statutory exchanges, sales or conveyances. The issuer of any shares of stock or
other securities or property thereafter deliverable on the exercise of this
Warrant shall be responsible for all of the agreements and obligations of the
Company hereunder. Notice of any such reorganization, reclassification,
consolidation, merger, statutory exchange, sale or conveyance and of said
provisions so proposed to be made, shall be mailed to the Holders of the
Warrants not less than 30 days prior to such event. A sale of all or
substantially all of the assets of the Company for a consideration consisting
primarily of securities shall be deemed a consolidation or merger for the
foregoing purposes.
(f) In case any event shall occur as to which the other provisions of
this Section 3 are not strictly applicable but as to which the failure to make
any adjustment would not fairly protect the purchase rights represented by this
Warrant in accordance with the essential intent and principles hereof then, in
each such case, the Holders of Warrants representing the right to purchase a
majority of the Warrant Shares subject to all outstanding Warrants may appoint a
firm of independent public accountants of recognized national standing
reasonably acceptable to the Company, which shall give their opinion as to the
adjustment, if any, on a basis consistent with the essential intent and
principles established herein, necessary to preserve the purchase rights
represented by the Warrants. Upon receipt of such opinion, the Company will
promptly mail a copy thereof to the Holder of this Warrant and shall make the
adjustments described therein. The fees and expenses of such independent public
accountants shall be borne by the Company.
(g) No adjustment in the Per Share Warrant Price shall be required
unless such adjustment would require an increase or decrease of at least $0.05
per share of Common Stock; provided, however, that any adjustments which by
reason of this Subsection 3(g) are not required to be made shall be carried
forward and taken into account in any subsequent adjustment; provided, further,
however, that adjustments shall be required and made in accordance with the
provisions of this Section 3 (other than this Subsection 3(g)) not later than
such time as may be required in order to preserve the tax-free nature of a
distribution to the Holder of this Warrant or Common Stock issuable upon the
exercise hereof. All calculations under this Section 3 shall be made to the
nearest cent or to the nearest 1/100th of a share, as the case may be. Anything
in this Section 3 to the contrary notwithstanding, the Company shall be entitled
to make such reductions in the Per Share
<PAGE>
Warrant Price, in addition to those required by this Section 3, as it in its
discretion shall deem to be advisable in order that any stock dividend,
subdivision of shares or distribution of rights to purchase stock or securities
convertible or exchangeable for stock hereafter made by the Company to its
stockholders shall not be taxable.
(h) Whenever the Per Share Warrant Price is adjusted as provided in
this Section 3 and upon any modification of the rights of a Holder of Warrants
in accordance with this Section 3, the Chief Financial Officer of the Company
shall promptly prepare a certificate setting forth the Per Share Warrant Price
and the number of Warrant Shares after such adjustment or the effect of such
modification and a brief statement of the facts requiring such adjustment or
modification and the manner of computing the same and cause copies of such
certificate to be mailed to the Holders of the Warrants. In the event of a
dispute with respect to any adjustment required pursuant to Section 3, the
Holder may appoint, at the Company's expense, an independent financial advisor
(e.g. an investment banking or accounting firm)reasonably acceptable to the
Company to calculate such adjustment. Such determination shall be binding upon
the Holder and the Company.
(i) If the Board of Directors of the Company shall declare any dividend
or other distribution with respect to the Common Stock, the Company shall mail
notice thereof to the Holders of the Warrants not less than 15 days prior to the
record date fixed for determining stockholders entitled to participate in such
dividend or other distribution.
(j) If, as a result of an adjustment made pursuant to this Section 3,
the Holder of any Warrant thereafter surrendered for exercise shall become
entitled to receive shares of two or more classes of capital stock or shares of
Common Stock and other capital stock of the Company, the Board of Directors
(whose determination shall be conclusive and shall be described in a written
notice to the Holder of any Warrant promptly after such adjustment) shall
determine the allocation of the adjusted Per Share Warrant Price between or
among shares or such classes of capital stock or shares of Common Stock and
other capital stock.
4. FULLY PAID STOCK; TAXES. The Company agrees that the shares of the
Common Stock represented by each and every certificate of Warrant Shares
delivered on the exercise of this Warrant be validly issued and outstanding,
fully paid and nonassessable, and not subject to preemptive rights or rights of
first refusal, and the Company will take all such actions as may be necessary to
assure that the par value or stated value, if any, per share of the Common Stock
is at all times equal to or less than the then Per Share Warrant Price. The
Company further covenants and agrees that it will pay, when due and payable, any
and all Federal and state stamp, original issue or similar taxes which may be
payable in respect of the issue of any Warrant Share or any certificate thereof.
5. REGISTRATION UNDER SECURITIES ACT OF 1933.
(a) The Company shall include the Warrant Shares on the Shelf
Registration Statement (as defined in the PPM) and the Holder shall otherwise
have the registration rights set forth in Section 5 of the subscription
agreement (the "Subscription
<PAGE>
Agreement") to be entered into between the purchasers of units (as described in
the PPM) and the Company. By acceptance of this Warrant, the Holder agrees that
it shall have the same obligations, and otherwise comply with, the provisions in
such Section 5 of the Subscription Agreement to same extent as if it were a
party thereto. To the extent that no Final Closing Date (as defined in the
Subscription Agreement) occurs or the Offering is terminated, the rights granted
to Holder hereunder to have its shares registered shall begin as of November 19,
1997 on the same terms as provided in Section 5 of the Subscription Agreement.
(b) The Company agrees that if, at any time and from time to time
during the Registration Period, the Board of Directors of the Company shall
authorize the filing of a registration statement under the Act (other than
pursuant to the Shelf Registration Statement) in connection with the proposed
offer of any of its securities by it or any of its stockholders, the Company
will (i) promptly notify each Holder of the Warrants and each holder of Warrant
Shares that such registration statement will be filed and that the Warrant
Shares which are then held, and/or may be acquired upon exercise of the Warrants
by the Holder and such holders will be included in such registration statement
at the Holder's and such holders' request, (ii) cause such registration
statement to cover all of such Common Stock which it has been so requested to
include, (iii) use its best efforts to cause such registration statement to
become effective as soon as practicable and (iv) take all other action necessary
under any Federal or state law or regulation of any governmental authority to
permit all such Common Stock which it has been so requested to include in such
registration statement to be sold or otherwise disposed of, and will maintain
such compliance with each such Federal and state law and regulation of any
governmental authority for the period necessary for the Holder and such Holders
to effect the proposed sale or other disposition.
(c) Until all Warrant Shares have been sold under a Registration
Statement or pursuant to Rule 144, the Company shall use its reasonable best
efforts to file with the Securities and Exchange Commission all current reports
and the information as may be necessary to enable the Holder to effect sales of
its shares in reliance upon Rule 144 promulgated under the Act.
6. LIMITED TRANSFERABILITY. This Warrant may not be sold, transferred,
assigned or hypothecated by the Holder except in compliance with the provisions
of the Act and the applicable state securities "blue sky" laws. The Company may
treat the registered Holder of this Warrant as he or it appears on the Company's
books at any time as the Holder for all purposes. The Company shall permit any
Holder of a Warrant or his duly authorized attorney, upon written request during
ordinary business hours, to inspect and copy or make extracts from its books
showing the registered holders of Warrants. All warrants issued upon the
transfer or assignment of this Warrant will be dated the same date as this
Warrant, and all rights of the holder thereof shall be identical to those of the
Holder.
7. LOSS, ETC., OF WARRANT. Upon receipt of evidence satisfactory to the
Company of the loss, theft, destruction or mutilation of this Warrant, and of
indemnity reasonably satisfactory to the Company, if lost, stolen or destroyed,
and upon surrender and
<PAGE>
cancellation of this Warrant, if mutilated, the Company shall execute and
deliver to the Holder a new Warrant of like date, tenor and denomination.
8. WARRANT HOLDER NOT SHAREHOLDER. Except as otherwise provided herein,
this Warrant does not confer upon the Holder any right to vote or to consent to
or receive notice as a stockholder of the Company, as such, in respect of any
matters whatsoever, or any other rights or liabilities as a stockholder, prior
to the exercise hereof.
9. COMMUNICATION. No notice or other communication under this Warrant
shall be effective unless, but any notice or other communication shall be
effective and shall be deemed to have been given if, the same is in writing and
is mailed by first-class mail, postage prepaid, addressed to:
(a) the Company at Conversion Technologies International, Inc., Bethany
Crossing Office Center, 82 Bethany Road Hazlet, New Jersey 07730, Attention:
Chief Executive Officer or other address as the Company has designated in
writing to the Holder, or
(b) the Holder at c/o Paramount Capital Asset Management, Inc., 787
Seventh Avenue, New York, NY, 10019, Attn: Lindsay A. Rosenwald, M.D. or other
such address as the Holder has designated in writing to the Company.
10. HEADINGS. The headings of this Warrant have been inserted as a
matter of convenience and shall not affect the construction hereof.
11. APPLICABLE LAW. This Warrant shall be governed by and construed in
accordance with the law of the State of New York without giving effect to the
principles of conflicts of law thereof.
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant to be
signed by its duly authorized officer and its corporate seal to be hereunto
affixed and attested by its Secretary this __th day of JULY 1997.
CONVERSION TECHNOLOGIES
INTERNATIONAL, INC.
By: -----------------
Eckardt C. Beck
Acting President and
Chief Executive Officer
ATTEST:
- - -------------------------------
Secretary
[Corporate Seal]
<PAGE>
SUBSCRIPTION
The undersigned, ___________________, pursuant to the
provisions of the foregoing Warrant, hereby agrees to subscribe for and purchase
____________________ shares of the Common Stock, par value $.00025 per share, of
Conversion Technologies International, Inc. covered by said Warrant, and makes
payment therefor in full at the price per share provided by said Warrant.
Dated:_______________ Signature:_________________
Address:___________________
CASHLESS EXERCISE
The undersigned ___________________, pursuant to the
provisions of the foregoing Warrant, hereby elects to exchange its Warrant for
___________________ shares of Common Stock, par value $.00025 per share, of
Conversion Technologies International, Inc. pursuant to the Cashless Exercise
provisions of the Warrant.
Dated:_______________ Signature:_________________
Address:___________________
ASSIGNMENT
FOR VALUE RECEIVED _______________ hereby sells, assigns and
transfers unto ____________________ the foregoing Warrant and all rights
evidenced thereby, and does irrevocably constitute and appoint
_____________________, attorney, to transfer said Warrant on the books of
Conversion Technologies International, Inc.
Dated:_______________ Signature:_________________
Address:___________________
<PAGE>
PARTIAL ASSIGNMENT
FOR VALUE RECEIVED _______________ hereby assigns and
transfers unto ____________________ the right to purchase _______ shares of the
Common Stock, par value $.00025 per share, of Conversion Technologies
International, Inc. covered by the foregoing Warrant, and a proportionate part
of said Warrant and the rights evidenced thereby, and does irrevocably
constitute and appoint ____________________, attorney, to transfer that part of
said Warrant on the books of Conversion Technologies International, Inc.
Dated:_______________ Signature:_________________
Address:___________________
<PAGE>
Exhibit I
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR
ANY APPLICABLE STATE SECURITIES LAWS. THEY MAY NOT BE SOLD, OFFERED FOR SALE,
PLEDGED OR HYPOTHECATED OR OTHERWISE TRANSFERRED IN THE ABSENCE OF A
REGISTRATION STATEMENT IN EFFECT WITH RESPECT TO THE SECURITIES UNDER SUCH ACT
OR UNLESS SOLD PURSUANT TO RULE 144 OF SUCH ACT. ANY SUCH TRANSFER MAY ALSO BE
SUBJECT TO APPLICABLE STATE SECURITIES LAWS.
CONVERSION TECHNOLOGIES
INTERNATIONAL, INC.
WARRANT FOR THE PURCHASE OF SHARES OF
COMMON STOCK
NO. [ ] [ ] SHARES
FOR VALUE RECEIVED, CONVERSION TECHNOLOGIES
INTERNATIONAL, INC., a Delaware corporation (the "COMPANY"), hereby certifies
that [ ], or its permitted assigns, is entitled to purchase from the Company, at
any time or from time to time commencing on MAY 8, 1998, and prior to 5:00 P.M.,
New York City time, on MAY 8, 2003 (the "TERMINATION DATE"), [ ] fully paid and
non-assessable shares of the Common Stock, $.00025 par value per share, of the
Company (the "Common Stock") at an exercise price equal to the representative
closing bid price of the Common Stock on May 8, 1998, which it is agreed and
acknowledged to be equal to $1.00 per share of Common Stock (the "EXERCISE
PRICE"). (Hereinafter, (i) said Common Stock, together with any other equity
securities which may be issued by the Company with respect thereto or in
substitution therefor, is referred to as the "COMMON STOCK", (ii) the shares of
the Common Stock purchasable hereunder or under any other Warrant (as
hereinafter defined) are referred to as the "WARRANT SHARES", (iii) the
aggregate purchase price payable for the Warrant Shares hereunder is referred to
as the "AGGREGATE WARRANT PRICE", (iv) the price payable for each of the Warrant
Shares hereunder is referred to as the "PER SHARE WARRANT PRICE", (v) this
Warrant, all similar Warrants issued on the date hereof and all warrants
hereafter issued in exchange or substitution for this Warrant or such similar
Warrants are referred to as the "WARRANTS" and (vi) the holder of this Warrant
is referred to as the "HOLDER" and the holder of this Warrant and all other
Warrants or Warrant Shares issued upon the exercise of any Warrant are referred
to as the "HOLDERS"). The Aggregate Warrant Price is not subject to adjustment.
The Per Share Warrant Price is subject to adjustment as hereinafter provided; in
the event of any such adjustment, the number of Warrant Shares shall be adjusted
by dividing
<PAGE>
the Aggregate Warrant Price by the Per Share Warrant Price in effect immediately
after such adjustment.
1. EXERCISE OF WARRANT.
(a) This Warrant may be exercised by the Holder, in whole at any time
or in part from time to time, commencing on May 8, 1998 and prior to the
Termination Date:
(i) by the surrender of this Warrant (with the subscription form
at the end hereof duly executed) at the address set forth in
Subsection 10(a) hereof, together with proper payment of the Aggregate
Warrant Price, or the proportionate part thereof if this Warrant is
exercised in part, with payment for Warrant Shares made by certified
or official bank check payable to the order of the Company; or
(ii) by the surrender of this Warrant (with the cashless exercise
form at the end hereof duly executed) (a "CASHLESS EXERCISE") at the
address set forth in Subsection 10(a) hereof. Such presentation and
surrender shall be deemed a waiver of the Holder's obligation to pay
the Aggregate Warrant Price, or the proportionate part thereof if this
Warrant is exercised in part. In the event of a Cashless Exercise, the
Holder shall exchange its Warrant for that number of Warrant Shares
subject to such Cashless Exercise multiplied by a fraction, the
numerator of which shall be the difference between the then current
Market Price per share (as hereinafter defined) of Common Stock and
the Per Share Warrant Price, and the denominator of which shall be the
then current Market Price per share of Common Stock. The then current
market price per share of the Common Stock at any date (the "MARKET
PRICE") shall be deemed to be the last sale price of the Common Stock
on the business day prior to the date of the Cashless Exercise or, in
case no such reported sales take place on such day, the average of the
last reported bid and asked prices of the Common Stock on such day, in
either case on the principal national securities exchange on which the
Common Stock is admitted to trading or listed, or if not listed or
admitted to trading on any such exchange, the representative closing
bid price of the Common Stock as reported by the NASDAQ Bulletin Board
("NASDAQ"), or other similar organization if NASDAQ is no longer
reporting such information, or if not so available, the fair market
price of the Common Stock as determined in good faith by the Board of
Directors.
(b) If this Warrant is exercised in part, this Warrant must be
exercised for a number of whole shares of the Common Stock and the Holder is
entitled to receive a new Warrant covering the Warrant Shares which have not
been exercised and setting forth the proportionate part of the Aggregate Warrant
Price applicable to such Warrant Shares. Upon surrender of this Warrant, the
Company will (i) issue a certificate or certificates in the name of the Holder
for the largest number of whole shares of the Common Stock to which the Holder
shall be entitled and, if this Warrant is exercised in whole, in lieu of any
fractional share of the Common Stock to which the Holder shall be entitled, pay
to the Holder cash in an amount equal to the fair value of such fractional share
(determined in such reasonable manner as the Board of Directors of the Company
shall determine), and (ii) deliver the other
<PAGE>
securities and properties receivable upon the exercise of this Warrant, if any,
or the proportionate part thereof if this Warrant is exercised in part, pursuant
to the provisions of this Warrant.
2. RESERVATION OF WARRANT SHARES; LISTING. The Company agrees that,
prior to the expiration of this Warrant, the Company will at all times (a) have
authorized and in reserve, and will keep available, solely for issuance or
delivery upon the exercise of this Warrant, the shares of the Common Stock and
other securities and properties as from time to time shall be receivable upon
the exercise of this Warrant, free and clear of all restrictions on sale or
transfer, except for the restrictions on sale or transfer set forth in the
Securities Act of 1933, as amended (the "Act"), and restrictions created by or
on behalf of the Holder, and free and clear of all preemptive rights and rights
of first refusal and (b) when the Company prepares and files a registration
statement covering the shares of Common Stock issued or issuable upon exercise
of this Warrant with the Securities and Exchange Commission (the "SEC") which
registration statement is declared effective by the SEC under the Act and the
Company lists its Common Stock on any national securities exchange or other
quotation system, it will use its reasonable best efforts to cause the shares of
Common Stock subject to this Warrant to be listed on such exchange or quotation
system.
3. PROTECTION AGAINST DILUTION.
(a) If, at any time or from time to time after the date of issuance of
this Warrant, the Company shall issue or distribute to the holders of shares of
Common Stock evidence of its indebtedness, any other securities of the Company
or any cash, property or other assets (excluding a subdivision, combination or
reclassification, or dividend or distribution payable in shares of Common Stock,
referred to in Subsection 3(b), and also excluding cash dividends or cash
distributions paid out of net profits legally available therefor in the full
amount thereof, which together with the value of other dividends and
distributions made substantially concurrently therewith or pursuant to a plan
which includes payment thereof, is equivalent to not more than 5% of the
Company's net worth) (any such non-excluded event being herein called a "SPECIAL
DIVIDEND"), the Per Share Warrant Price shall be adjusted by multiplying the Per
Share Warrant Price then in effect by a fraction, the numerator of which shall
be the then current Market Price of the Common Stock less the fair market value
(as determined in good faith by the Company's Board of Directors) of the
evidence of indebtedness, cash, securities or property, or other assets issued
or distributed in such Special Dividend applicable to one share of Common Stock
and the denominator of which shall be the then current Market Price of the
Common Stock. An adjustment made pursuant to this Subsection 3(a) shall become
effective immediately after the record date of any such Special Dividend.
(b) In case the Company shall hereafter (i) pay a dividend or make a
distribution on its capital stock in shares of Common Stock, (ii) subdivide its
outstanding shares of Common Stock into a greater number of shares, (iii)
combine its outstanding shares of Common Stock into a smaller number of shares
or (iv) issue by reclassification of its Common Stock any shares of capital
stock of the Company, the Per Share Warrant Price shall be adjusted to be equal
to a fraction, the numerator of which shall be the Aggregate
<PAGE>
Warrant Price and the denominator of which shall be the number of shares of
Common Stock or other capital stock of the Company which the Holder would have
owned immediately following such action had such Warrant been exercised
immediately prior thereto. An adjustment made pursuant to this Subsection 3(b)
shall become effective immediately after the record date in the case of a
dividend or distribution and shall become effective immediately after the
effective date in the case of a subdivision, combination or reclassification.
(c) Except as provided in subsections 3(a) and 3(d), in case the
Company shall hereafter issue or sell any Common Stock, any securities
convertible into Common Stock or any rights, options or warrants to purchase
Common Stock or securities convertible into Common Stock, in each case for a
price per share or entitling the holders thereof to purchase Common Stock at a
price per share (determined by dividing (i) the total amount, if any, received
or receivable by the Company in consideration of the issuance or sale of such
securities plus the total consideration, if any, payable to the Company upon
exercise or conversion thereof (the "TOTAL CONSIDERATION") by (ii) the number of
additional shares of Common Stock issued, sold or issuable upon exercise or
conversion of such securities) which is less than the then current Market Price
of the Common Stock or the current Per Share Warrant Price in effect on the date
of such issuance or sale, the Per Share Warrant Price shall be adjusted by
multiplying the Per Share Warrant Price then in effect by a fraction, the
numerator of which shall be (x) the sum of (A) the number of shares of Common
Stock outstanding on the record date of such issuance or sale plus (B) the Total
Consideration divided by either the current Market Price of the Common Stock or
the current Per Share Warrant Price, whichever is greater, and the denominator
of which shall be (y) the number of shares of Common Stock outstanding on the
record date of such issuance or sale plus the maximum number of additional
shares of Common Stock issued, sold or issuable upon exercise or conversion of
such securities.
(d) Except as otherwise provided herein, no adjustment in the Per Share
Warrant Price shall be required in the case of the issuance by the Company of
(i) Common Stock pursuant to the exercise or conversion of any Warrant or any
other options, warrants or any convertible securities currently outstanding or
outstanding as a result of securities hereafter issued; provided, that the
exercise price or conversion price at which such securities are exercised or
converted, as the case may be, is equal to the exercise price or conversion
price in effect as of the date of this Warrant or as of the date of issuance
with respect to securities hereafter issued (except for standard anti-dilution
adjustments) and (ii) shares of Common Stock issued or sold pursuant to stock
purchase or stock option plans or other similar arrangements that are approved
by the Company's Board of Directors.
(e) In case of any capital reorganization or reclassification, or any
consolidation or merger to which the Company is a party other than a merger or
consolidation in which the Company is the continuing corporation, or in case of
any sale or conveyance to another entity of the property of the Company as an
entirety or substantially as an entirety, or in the case of any statutory
exchange of securities with another corporation (including any exchange effected
in connection with a merger of a third corporation into the Company), the Holder
of this Warrant shall have the right thereafter to receive on the exercise of
this Warrant the kind and amount of securities, cash or other property which the
<PAGE>
Holder would have owned or have been entitled to receive immediately after such
reorganization, reclassification, consolidation, merger, statutory exchange,
sale or conveyance had this Warrant been exercised immediately prior to the
effective date of such reorganization, reclassification, consolidation, merger,
statutory exchange, sale or conveyance and in any such case, if necessary,
appropriate adjustment shall be made in the application of the provisions set
forth in this Section 3 with respect to the rights and interests thereafter of
the Holder of this Warrant to the end that the provisions set forth in this
Section 3 shall thereafter correspondingly be made applicable, as nearly as may
reasonably be, in relation to any shares of stock or other securities or
property thereafter deliverable on the exercise of this Warrant. The above
provisions of this subsection 3(e) shall similarly apply to successive
reorganizations, reclassifications, consolidations, mergers, statutory
exchanges, sales or conveyances. The issuer of any shares of stock or other
securities or property thereafter deliverable on the exercise of this Warrant
shall be responsible for all of the agreements and obligations of the Company
hereunder. Notice of any such reorganization, reclassification, consolidation,
merger, statutory exchange, sale or conveyance and of said provisions so
proposed to be made, shall be mailed to the Holders of the Warrants not less
than 30 days prior to such event. A sale of all or substantially all of the
assets of the Company for a consideration consisting primarily of securities
shall be deemed a consolidation or merger for the foregoing purposes.
(f) In case any event shall occur as to which the other provisions of
this Section 3 are not strictly applicable but as to which the failure to make
any adjustment would not fairly protect the purchase rights represented by this
Warrant in accordance with the essential intent and principles hereof then, in
each such case, the Holders of Warrants representing the right to purchase a
majority of the Warrant Shares subject to all outstanding Warrants may appoint a
firm of independent public accountants of recognized national standing
reasonably acceptable to the Company, which shall give their opinion as to the
adjustment, if any, on a basis consistent with the essential intent and
principles established herein, necessary to preserve the purchase rights
represented by the Warrants. Upon receipt of such opinion, the Company will
promptly mail a copy thereof to the Holder of this Warrant and shall make the
adjustments described therein. The fees and expenses of such independent public
accountants shall be borne by the Company.
(g) No adjustment in the Per Share Warrant Price shall be required
unless such adjustment would require an increase or decrease of at least $0.05
per share of Common Stock; provided, however, that any adjustments which by
reason of this Subsection 3(g) are not required to be made shall be carried
forward and taken into account in any subsequent adjustment. provided, further,
however, that adjustments shall be required and made in accordance with the
provisions of this Section 3 (other than this Subsection 3(g)) not later than
such time as may be required in order to preserve the tax-free nature of a
distribution to the Holder of this Warrant or Common Stock issuable upon the
exercise hereof. All calculations under this Section 3 shall be made to the
nearest cent or to the nearest 1/100th of a share, as the case may be. Anything
in this Section 3 to the contrary notwithstanding, the Company shall be entitled
to make such reductions in the Per Share Warrant Price, in addition to those
required by this Section 3, as it in its discretion shall deem to be advisable
in order that any stock dividend, subdivision of shares or distribution of
<PAGE>
rights to purchase stock or securities convertible or exchangeable for stock
hereafter made by the Company to its stockholders shall not be taxable.
(h) Whenever the Per Share Warrant Price is adjusted as provided in
this Section 3 and upon any modification of the rights of a Holder of Warrants
in accordance with this Section 3, the Chief Financial Officer of the Company
shall promptly prepare a certificate setting forth the Per Share Warrant Price
and the number of Warrant Shares after such adjustment or the effect of such
modification and a brief statement of the facts requiring such adjustment or
modification and the manner of computing the same and cause copies of such
certificate to be mailed to the Holders of the Warrants. In the event of a
dispute with respect to any adjustment required pursuant to Section 3, the
Holder may appoint, at the Company's expense, an independent financial advisor
(e.g. an investment banking or accounting firm) reasonably acceptable to the
Company to calculate such adjustment. Such determination shall be binding upon
the Holder and the Company.
(i) If the Board of Directors of the Company shall declare any dividend
or other distribution with respect to the Common Stock, the Company shall mail
notice thereof to the Holders of the Warrants not less than 15 days prior to the
record date fixed for determining stockholders entitled to participate in such
dividend or other distribution.
(j) If, as a result of an adjustment made pursuant to this Section 3,
the Holder of any Warrant thereafter surrendered for exercise shall become
entitled to receive shares of two or more classes of capital stock or shares of
Common Stock and other capital stock of the Company, the Board of Directors
(whose determination shall be conclusive and shall be described in a written
notice to the Holder of any Warrant promptly after such adjustment) shall
determine the allocation of the adjusted Per Share Warrant Price between or
among shares or such classes of capital stock or shares of Common Stock and
other capital stock.
(k) To the extent that the Notes (as defined in the Line of Credit) are
not repaid by the Maturity Date (as defined in the Note), then the Exercise
Price of this Warrant thereafter shall equal the lesser of: (a) the then
Exercise Price on such date (subject to adjustment as contained this Section 3)
and (b) the Market Price on the date of exercise.
4. FULLY PAID STOCK; TAXES. The Company agrees that the shares of the
Common Stock represented by each and every certificate of Warrant Shares
delivered on the exercise of this Warrant be validly issued and outstanding,
fully paid and nonassessable, and not subject to preemptive rights or rights of
first refusal, and the Company will take all such actions as may be necessary to
assure that the par value or stated value, if any, per share of the Common Stock
is at all times equal to or less than the then Per Share Warrant Price. The
Company further covenants and agrees that it will pay, when due and payable, any
and all Federal and state stamp, original issue or similar taxes which may be
payable in respect of the issue of any Warrant Share or any certificate thereof.
<PAGE>
5. REGISTRATION UNDER SECURITIES ACT OF 1933.
(a) The Company agrees that if, at any time and from time to time
during the Registration Period, the Board of Directors of the Company shall
authorize the filing of a registration statement under the Act (other than a
registration statement on Form S-8, Form S- 4 or any other form that does not
include substantially the same information as would be required in a form for
the general registration of securities) in connection with the proposed offer of
any of its securities by it or any of its stockholders, the Company will (i)
promptly notify each Holder of the Warrants and each holder of Warrant Shares
that such registration statement will be filed and that the Warrant Shares which
are then held, and/or may be acquired upon exercise of the Warrants by the
Holder and such holders will be included in such registration statement at the
Holder's and such holders' request, (ii) cause such registration statement to
cover all of such Common Stock which it has been so requested to include, (iii)
use its best efforts to cause such registration statement to become effective as
soon as practicable and (iv) take all other action necessary under any Federal
or state law or regulation of any governmental authority to permit all such
Common Stock which it has been so requested to include in such registration
statement to be sold or otherwise disposed of, and will maintain such compliance
with each such Federal and state law and regulation of any governmental
authority for the period necessary for the Holder and such Holders to effect the
proposed sale or other disposition.
(b) Until all Warrant Shares have been sold under a Registration
Statement or pursuant to Rule 144, the Company shall use its reasonable best
efforts to file with the Securities and Exchange Commission all current reports
and the information as may be necessary to enable the Holder to effect sales of
its shares in reliance upon Rule 144 promulgated under the Act.
6. LIMITED TRANSFERABILITY. This Warrant may not be sold, transferred,
assigned or hypothecated by the Holder except in compliance with the provisions
of the Act and the applicable state securities "blue sky" laws. The Company may
treat the registered Holder of this Warrant as he or it appears on the Company's
books at any time as the Holder for all purposes. The Company shall permit any
Holder of a Warrant or his duly authorized attorney, upon written request during
ordinary business hours, to inspect and copy or make extracts from its books
showing the registered holders of Warrants. All warrants issued upon the
transfer or assignment of this Warrant will be dated the same date as this
Warrant, and all rights of the holder thereof shall be identical to those of the
Holder.
7. LOSS, ETC., OF WARRANT. Upon receipt of evidence satisfactory to the
Company of the loss, theft, destruction or mutilation of this Warrant, and of
indemnity reasonably satisfactory to the Company, if lost, stolen or destroyed,
and upon surrender and cancellation of this Warrant, if mutilated, the Company
shall execute and deliver to the Holder a new Warrant of like date, tenor and
denomination.
8. WARRANT HOLDER NOT SHAREHOLDER. Except as otherwise provided herein,
this Warrant does not confer upon the Holder any right to vote or to consent to
or receive notice as a stockholder of the Company, as such, in respect of any
matters whatsoever, or any other rights or liabilities as a stockholder, prior
to the exercise hereof.
<PAGE>
9. MODIFICATION. This Agreement may not be modified, amended or waived
in any manner except by an instrument in writing signed by Paramount Capital
Asset Management, Inc. [ ], and the Company. The waiver by either party of
compliance with any provision of this Agreement by the other party shall not
operate or be construed as a waiver of such party of a provision of this
Agreement.
10. COMMUNICATION. No notice or other communication under this Warrant
shall be effective unless, but any notice or other communication shall be
effective and shall be deemed to have been given if, the same is in writing and
is mailed by first-class mail, postage prepaid, addressed to:
(a) the Company at 3452 Lake Lynda Drive, Orlando, FL 32817, Attention:
President or other address as the Company has designated in writing to the
Holder; or
(b) the Holder at c/o Paramount Capital Asset Management, Inc., 787
Seventh Avenue, New York, NY, 10019, Attn: Lindsay A. Rosenwald, M.D. or other
such address as the Holder has designated in writing to the Company.
11. HEADINGS. The headings of this Warrant have been inserted as a
matter of convenience and shall not affect the construction hereof.
12. APPLICABLE LAW. This Warrant shall be governed by and construed in
accordance with the law of the State of New York without giving effect to the
principles of conflicts of law thereof.
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant to be
signed by its President and its corporate seal to be hereunto affixed and
attested by its Secretary this 8TH day of MAY, 1998.
CONVERSION TECHNOLOGIES
INTERNATIONAL, INC.
By: _______________________
Name:
Title: President
ATTEST:
- - -------------------------------
Secretary
[Corporate Seal]
<PAGE>
SUBSCRIPTION
The undersigned, ___________________, pursuant to the
provisions of the foregoing Warrant, hereby agrees to subscribe for and purchase
____________________ shares of the Common Stock, par value $.00025 per share, of
Conversion Technologies International, Inc. covered by said Warrant, and makes
payment therefor in full at the price per share provided by said Warrant.
Dated:_______________ Signature:_________________
Address:___________________
CASHLESS EXERCISE
The undersigned ___________________, pursuant to the
provisions of the foregoing Warrant, hereby elects to exchange its Warrant for
___________________ shares of Common Stock, par value $.00025 per share, of
Conversion Technologies International, Inc. pursuant to the Cashless Exercise
provisions of the Warrant.
Dated:_______________ Signature:_________________
Address:___________________
ASSIGNMENT
FOR VALUE RECEIVED _______________ hereby sells, assigns and
transfers unto ____________________ the foregoing Warrant and all rights
evidenced thereby, and does irrevocably constitute and appoint
_____________________, attorney, to transfer said Warrant on the books of
Conversion Technologies International, Inc.
Dated:_______________ Signature:_________________
Address:___________________
<PAGE>
PARTIAL ASSIGNMENT
FOR VALUE RECEIVED _______________ hereby assigns and
transfers unto ____________________ the right to purchase _______ shares of the
Common Stock, par value $.00025 per share, of Conversion Technologies
International, Inc. covered by the foregoing Warrant, and a proportionate part
of said Warrant and the rights evidenced thereby, and does irrevocably
constitute and appoint ____________________, attorney, to transfer that part of
said Warrant on the books of Conversion Technologies International, Inc.
Dated:_______________ Signature:_________________
Address:___________________
<PAGE>
Exhibit J
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT
AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
ANY STATE SECURITIES LAW. SUCH SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN THE
ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH SALE OR TRANSFER IS EXEMPT FROM THE
REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF SAID ACT.
CONVERSION TECHNOLOGIES INTERNATIONAL, INC.
WARRANT FOR THE PURCHASE OF SHARES OF
PREFERRED STOCK
No. 1 [ ] Shares
FOR VALUE RECEIVED, CONVERSION TECHNOLOGIES INTERNATIONAL, INC., a
Delaware corporation (the "COMPANY"), hereby certifies that [ ], its designee or
its permitted assigns is entitled to purchase from the Company, at any time or
from time to time commencing on June 8, 1998 and prior to 5:00 P.M., New York
City time, on June 8, 2008, [ ] fully paid and non-assessable shares of Series A
Convertible Preferred Stock, $.001 par value per share, of the Company for an
aggregate purchase price of $[ ] (computed on the basis of $11.00 per share).
Hereinafter, (i) said Series A Convertible Preferred Stock, together with any
other equity securities which may be issued by the Company with respect thereto
(other than on conversion thereof) or in substitution therefor, is referred to
as the "PREFERRED STOCK", (ii) the Common Stock, $.001 par value per share, of
the Company, into which the Preferred Stock is convertible, is referred to as
the "COMMON STOCK", (iii) the shares of the Preferred Stock purchasable
hereunder or under any other Warrant (as hereinafter defined) are referred to as
the "WARRANT SHARES", (iv) the shares of Common Stock purchasable hereunder or
under any other Warrant (as hereinafter defined) following the conversion of all
shares of Preferred Stock into Common Stock and each share of Common Stock
receivable upon the conversion of the Warrant Shares receivable upon the
exercise of this Warrant are referred to as the "CONVERSION SHARES", (v) the
aggregate purchase price payable for the Warrant Shares or the Conversion
Shares, as the case may be, hereunder is referred to as the "AGGREGATE WARRANT
PRICE", (vi) the price payable (initially $11.00 per share, subject to
adjustment) for each of the Warrant Shares or the Conversion Shares, as the case
may be, hereunder is referred to as the "PER SHARE WARRANT PRICE", (vii) this
Warrant, all similar Warrants issued on the date hereof and all warrants
hereafter issued in exchange or substitution for this Warrant or such similar
Warrants are referred to as the "WARRANTS", (viii) the holder of this Warrant is
referred to as
<PAGE>
the "HOLDER" and the holder of this Warrant and all other Warrants, Warrant
Shares and Conversion Shares are referred to as the "HOLDERS" and Holders of
more than fifty percent (50%) of the outstanding Warrants, Warrant Shares and
Conversion Shares are referred to as the "MAJORITY OF THE HOLDERS") and (ix) the
then Current Market Price per share (the "CURRENT MARKET PRICE") shall be deemed
to be the last sale price of the Common Stock on the trading day prior to such
date or, in case no such reported sales take place on such day, the average of
the last reported bid and asked prices of the Common Stock on such day, in
either case on the principal national securities exchange on which the Common
Stock is admitted to trading or listed, or if not listed or admitted to trading
on any such exchange, the representative closing sale price of the Common Stock
as reported by the National Association of Securities Dealers, Inc. Automated
Quotations System ("NASDAQ"), or other similar organization if Nasdaq is no
longer reporting such information, or, if the Common Stock is not reported on
Nasdaq, the high per share sale price for the Common Stock in the
over-the-counter market as reported by the National Quotation Bureau or similar
organization, or if not so available, the fair market value of the Common Stock
as determined in good faith by the Board of Directors. The then "CURRENT MARKET
PRICE PER SHARE OF PREFERRED STOCK" shall equal the then Current Market Price
multiplied by the then effective "conversion rate" (as defined and used in the
Certificate of Designation for the Preferred Stock) or if the Current Market
Price is not so available, the fair market value of the Preferred Stock as
determined in good faith by agreement among the Majority of the Holders and the
Company's Board of Directors. The Aggregate Warrant Price is not subject to
adjustment. The Per Share Warrant Price is subject to adjustment as hereinafter
provided; in the event of any such adjustment, the number of Warrant Shares or
Conversion Shares, as the case may be, deliverable upon exercise of this Warrant
shall be adjusted by dividing the Aggregate Warrant Price by the Per Share
Warrant Price in effect immediately after such adjustment. The Warrants shall
not be subject to redemption by the Company nor will they be callable or
mandatorily convertible by the Company.
1. EXERCISE OF WARRANT.
(a) This Warrant may be exercised, in whole at any time or in part from
time to time, commencing on June 8, 1998 and prior to 5:00 P.M., New York City
time, on June 8, 2008 by the Holder:
(i) by the surrender of this Warrant (with the subscription form at the
end hereof duly executed) at the address set forth in Section 9(a) hereof,
together with proper payment of the Aggregate Warrant Price, or the
proportionate part thereof if this Warrant is exercised in part, with payment
for Warrant Shares or Conversion Shares, as the case may be, made by certified
or official bank check payable to the order of the Company; or
(ii) by the surrender of this Warrant (with the cashless exercise form
at the end hereof duly executed) (a "CASHLESS EXERCISE") at the address set
forth in Section 9(a) hereof. Such presentation and surrender shall be deemed a
waiver of the Holder's obligation to pay the Aggregate Warrant Price, or the
proportionate part
<PAGE>
thereof if this Warrant is exercised in part. In the event of a Cashless
Exercise, the Holder shall exchange its Warrant for that number of Warrant
Shares or Conversion Shares, as the case may be, subject to such Cashless
Exercise multiplied by a fraction, the numerator of which shall be the
difference between the then Current Market Price Per Share of Preferred Stock
(or the Current Market Price if exercised after the Conversion Date (as defined
below)) and the Per Share Warrant Price, and the denominator of which shall be
the then Current Market Price Per Share of Preferred Stock (or the Current
Market Price if exercised after the Conversion Date (as defined below)). For
purposes of any computation under this Section 1(a), the then Current Market
Price shall be based on the trading day prior to the Cashless Exercise.
(iii) by the surrender of this Warrant (with the subscription
(promissory note) form at the end hereof duly executed) at the address set forth
in Subsection 9(a) hereof, together with the presentation of a promissory note
made payable to the corporation, duly executed and in the form at the end
hereof. Such promissory note shall be secured by the securities underlying this
Warrant, which shall be held in safe-keeping by the Company as collateral for
such indebtedness.
(b) If this Warrant is exercised in part, this Warrant must be
exercised for a number of whole shares of the Preferred Stock, (or the Common
Stock following the Conversion Date) and the Holder is entitled to receive a new
Warrant covering the Warrant Shares or Conversion Shares, as the case may be,
which have not been exercised and setting forth the proportionate part of the
Aggregate Warrant Price applicable to such Warrant Shares or Conversion Shares,
as the case may be. Upon surrender of this Warrant, the Company will (i) issue a
certificate or certificates in the name of the Holder for the largest number of
whole shares of the Preferred Stock (or the Common Stock following the
Conversion Date) to which the Holder shall be entitled and, if this Warrant is
exercised in whole, in lieu of any fractional share of the Preferred Stock (or
the Common Stock following the Conversion Date) to which the Holder shall be
entitled, pay to the Holder cash in an amount equal to the fair value of such
fractional share (determined in such reasonable manner as the Board of Directors
of the Company shall determine), and (ii) deliver the other securities and
properties receivable upon the exercise of this Warrant, or the proportionate
part thereof if this Warrant is exercised in part, pursuant to the provisions of
this Warrant; provided, however that if this Warrant is exercised pursuant to
paragraph 1(a)(iii), the Company will issue but shall not deliver such shares
until such time as the promissory note and all accrued interest thereon shall
have been paid in full.
(c) If this Warrant is exercised on or after the date on which all
shares of Preferred Stock have been converted into shares of Common Stock (the
"Conversion Date"), then this Warrant shall be exercisable only for Conversion
Shares, each at the then applicable Per Share Warrant Price (including any
adjustment pursuant to Section 3(f) below).
2. RESERVATION OF WARRANT SHARES AND CONVERSION SHARES; LISTING. The
Company agrees that, prior to the expiration of this Warrant, the Company shall
at all times (a) have authorized and in reserve, and shall keep available,
solely for issuance and
<PAGE>
delivery upon the exercise of this Warrant, the shares of the Preferred Stock
and other securities and properties as from time to time shall be receivable
upon the exercise of this Warrant, free and clear of all restrictions on sale or
transfer, other than under Federal or state securities laws, and free and clear
of all preemptive rights and rights of first refusal and (b) subject to the
Company's obligation to increase the number of authorized shares of Common
Stock, as described in the Confidential Term Sheet dated August 8, 1997, as
supplemented and amended, have authorized and in reserve, and shall keep
available, solely for issuance or delivery upon conversion of the Warrant Shares
or the exercise of this Warrant for Conversion Shares, the shares of Common
Stock and other securities and properties as from time to time shall be
receivable upon such conversion, free and clear of all restrictions on sale or
transfer, other than under Federal or state securities laws, and free and clear
of all preemptive rights and rights of first refusal; and (c) if the Company
hereafter lists its Common Stock on any national securities exchange or the
Nasdaq National Market or the Nasdaq SmallCap Market use its best efforts to
keep the Conversion Shares authorized for listing on such exchange upon notice
of issuance.
3. PROTECTION AGAINST DILUTION.
(a) If, at any time or from time to time after the date of this
Warrant, the Company shall issue or distribute to the holders of shares of
Preferred Stock evidence of its indebtedness, any other securities of the
Company or any cash, property or other assets (excluding a subdivision,
combination or reclassification, or dividend or distribution payable in shares
of Preferred Stock, referred to in Section 3(b), and also excluding cash
dividends or cash distributions paid out of net profits legally available
therefor in the full amount thereof (any such non-excluded event being herein
called a "SPECIAL DIVIDEND")), the Per Share Warrant Price shall be adjusted by
multiplying the Per Share Warrant Price then in effect by a fraction, the
numerator of which shall be the then Current Market Price Per Share of the
Preferred Stock in effect on the record date of such issuance or distribution
less the fair market value (as determined in good faith by the Company's Board
of Directors) of the evidence of indebtedness, cash, securities or property, or
other assets issued or distributed in such Special Dividend applicable to one
share of Preferred Stock and the denominator of which shall be the then Current
Market Price Per Share of the Preferred Stock in effect on the record date of
such issuance or distribution. An adjustment made pursuant to this Subsection
3(a) shall become effective immediately after the record date of any such
Special Dividend.
(b) In case the Company shall hereafter (i) pay a dividend or make a
distribution on its capital stock in shares of Preferred Stock, (ii) subdivide
its outstanding shares of Preferred Stock into a greater number of shares, (iii)
combine its outstanding shares of Preferred Stock into a smaller number of
shares or (iv) issue by reclassification of its Preferred Stock any shares of
capital stock of the Company (other than the Conversion Shares), the Per Share
Warrant Price shall be adjusted to be equal to a fraction, the numerator of
which shall be the Aggregate Warrant Price and the denominator of which shall be
the number of shares of Preferred Stock or other capital stock of the Company
which he would have owned immediately following such action had such Warrant
been exercised immediately prior thereto. An adjustment made pursuant to this
Subsection 3(b) shall
<PAGE>
become effective immediately after the record date in the case of a dividend or
distribution and shall become effective immediately after the effective date in
the case of a subdivision, combination or reclassification.
(c) Except as provided in Subsections 3(a), 3(b) and 3(d), in case the
Company shall hereafter issue or sell any Preferred Stock, any securities
convertible into Preferred Stock, any rights, options or warrants to purchase
Preferred Stock or any securities convertible into Preferred Stock, in each case
for a price per share or entitling the holders thereof to purchase Preferred
Stock at a price per share (determined by dividing (i) the total amount, if any,
received or receivable by the Company in consideration of the issuance or sale
of such securities plus the total consideration, if any, payable to the Company
upon exercise or conversion thereof (the "TOTAL CONSIDERATION") by (ii) the
number of additional shares of Preferred Stock issued, sold or issuable upon
exercise or conversion of such securities) which is less than either the then
Current Market Price Per Share of Preferred Stock in effect on the date of such
issuance or sale or the Per Share Warrant Price, the Per Share Warrant Price
shall be adjusted as of the date of such issuance or sale by multiplying the Per
Share Warrant Price then in effect by a fraction, the numerator of which shall
be (x) the sum of (A) the number of shares of Preferred Stock outstanding on the
record date of such issuance or sale plus (B) the Total Consideration divided by
the Current Market Price Per Share of the Preferred Stock or the current Per
Share Warrant Price, whichever is greater, and the denominator of which shall be
(y) the number of shares of Preferred Stock outstanding on the record date of
such issuance or sale plus the maximum number of additional shares of Preferred
Stock issued, sold or issuable upon exercise or conversion of such securities.
(d) No adjustment in the Per Share Warrant Price shall be required in
the case of the issuance by the Company of Preferred Stock (i) pursuant to the
exercise of any Warrant or (ii) pursuant to the exercise of any stock options or
warrants currently outstanding or securities issued after the date hereof
pursuant to any Company benefit plan.
(e) In case of any capital reorganization or reclassification, or any
consolidation or merger to which the Company is a party other than a merger or
consolidation in which the Company is the continuing corporation, or in case of
any sale or conveyance to another entity of the property of the Company as an
entirety or substantially as a entirety, or in the case of any statutory
exchange of securities with another corporation (including any exchange effected
in connection with a merger of a third corporation into the Company), the Holder
of this Warrant shall have the right thereafter to receive on the exercise of
this Warrant the kind and amount of securities, cash or other property which the
Holder would have owned or have been entitled to receive immediately after such
reorganization, reclassification, consolidation, merger, statutory exchange,
sale or conveyance had this Warrant been exercised immediately prior to the
effective date of such reorganization, reclassification, consolidation, merger,
statutory exchange, sale or conveyance and in any such case, if necessary,
appropriate adjustment shall be made in the application of the provisions set
forth in this Section 3 with respect to the rights and interests thereafter of
the Holder of this Warrant to the end that the provisions set forth in this
Section 3 shall thereafter correspondingly be made applicable, as nearly as may
reasonably be, in
<PAGE>
relation to any shares of stock or other securities or property thereafter
deliverable on the exercise of this Warrant. The above provisions of this
Section 3(e) shall similarly apply to successive reorganizations,
reclassifications, consolidations, mergers, statutory exchanges, sales or
conveyances. The Company shall require the issuer of any shares of stock or
other securities or property thereafter deliverable on the exercise of this
Warrant to be responsible for all of the agreements and obligations of the
Company hereunder. Notice of any such reorganization, reclassification,
consolidation, merger, statutory exchange, sale or conveyance and of said
provisions so proposed to be made, shall be mailed to the Holders of the
Warrants not less than thirty (30) days prior to such event. A sale of all or
substantially all of the assets of the Company for a consideration consisting
primarily of securities shall be deemed a consolidation or merger for the
foregoing purposes.
(f) Upon the Conversion Date, the Per Share Warrant Price shall be
adjusted to be equal to a fraction, the numerator of which shall be the
Aggregate Warrant Price and the denominator of which shall be the number of
shares of Common Stock or other capital stock of the Company which the Holder
would have owned immediately following such conversion had this Warrant been
exercised for Preferred Stock (assuming a cash exercise) immediately prior
thereto.
(g) No adjustment in the Per Share Warrant Price shall be required
unless such adjustment would require an increase or decrease of at least $0.05
per share of Preferred Stock; provided, however, that any adjustments which by
reason of this Subsection 3(g) are not required to be made shall be carried
forward and taken into account in any subsequent adjustment; provided, further,
however, that adjustments shall be required and made in accordance with the
provisions of this Section 3 (other than this Subsection 3(g)) not later than
such time as may be required in order to preserve the tax-free nature of a
distribution to the Holder of this Warrant or Preferred Stock issuable upon the
exercise hereof. All calculations under this Section 3 shall be made to the
nearest cent or to the nearest 1/100th of a share, as the case may be. Anything
in this Section 3 to the contrary notwithstanding, the Company shall be entitled
to make such reductions in the Per Share Warrant Price, in addition to those
required by this Section 3, as it in its discretion shall deem to be advisable
in order that any stock dividend, subdivision of shares or distribution of
rights to purchase stock or securities convertible or exchangeable for stock
hereafter made by the Company to its stockholders shall not be taxable.
(h) Whenever the Per Share Warrant Price is adjusted as provided in
this Section 3 and upon any modification of the rights of a Holder of Warrants
in accordance with this Section 3, the Company shall promptly prepare a brief
statement of the facts requiring such adjustment or modification and the manner
of computing the same and cause copies of such certificate to be mailed to the
Holders of the Warrants. The Company may, but shall not be obligated to unless
requested by a Majority of the Holders, obtain, at its expense, a certificate of
a firm of independent public accountants of recognized standing selected by the
Board of Directors (who may be the regular auditors of the Company) setting
forth the Per Share Warrant Price and the number of Warrant Shares or Conversion
Shares, as the case may be, after such adjustment or the effect of such
modification, a brief statement
<PAGE>
of the facts requiring such adjustment or modification and the manner of
computing the same and cause copies of such certificate to be mailed to the
Holders of the Warrants.
(i) If the Board of Directors of the Company shall declare any dividend
or other distribution with respect to the Preferred Stock or Common Stock other
than a cash distribution out of earned surplus, the Company shall mail notice
thereof to the Holders of the Warrants not less than ten (10) days prior to the
record date fixed for determining stockholders entitled to participate in such
dividend or other distribution.
(j) If, as a result of an adjustment made pursuant to this Section 3,
the Holder of any Warrant thereafter surrendered for exercise shall become
entitled to receive shares of two or more classes of capital stock or shares of
Preferred Stock and other capital stock of the Company, the Company's Board of
Directors (whose determination shall be conclusive and shall be described in a
written notice to the Holder of any Warrant promptly after such adjustment)
shall determine the allocation of the adjusted Per Share Warrant Price between
or among shares or such classes of capital stock or shares of Preferred Stock
and other capital stock.
(k) For purposes of the anti-dilution protection contained in this
Section 3, at all times following the conversion of all shares of Preferred
Stock into shares of Common Stock, the term Preferred Stock shall be read to be
Common Stock, context permitting, so that the anti-dilution provisions will
continue to protect the purchase rights represented by this Warrant after the
conversion of all the Preferred Stock into the Common Stock in accordance with
the essential intent and principles of this Section 3 (it being understood that
prior to such conversion, the anti-dilution provisions of the Preferred Stock
shall protect the Holder from dilution of the Common Stock).
(l) Upon the expiration of any rights, options, warrants or conversion
privileges, if such shall not have been exercised, the number of Warrant Shares
purchasable upon exercise of this Warrant, to the extent this Warrant has not
then been exercised, shall, upon such expiration, be readjusted and shall
thereafter be such as they would have been had they been originally adjusted (or
had the original adjustment not been required, as the case may be) on the basis
of (A) the fact that Preferred Stock, if any, actually issued or sold upon the
exercise of such rights, options, warrants or conversion privileges, and (B) the
fact that such shares of Preferred Stock, if any, were issued or sold for the
consideration actually received by the Company upon such exercise plus the
consideration, if any, actually received by the Company for the issuance, sale
or grant of all such rights, options, warrants or conversion privileges whether
or not exercised; provided, however, that no such readjustment shall have the
effect of decreasing the number of Conversion Shares purchasable upon exercise
of this Warrant by an amount in excess of the amount of the adjustment initially
made in respect of the issuance, sale or grant of such rights, options, warrants
or conversion privileges.
4. FULLY PAID STOCK; TAXES. The Company agrees that the shares of
Preferred Stock represented by each and every certificate for Warrant Shares
delivered on the exercise of this Warrant and the shares of Common Stock
delivered upon the conversion of
<PAGE>
the Warrant Shares or the exercise of this Warrant following the conversion of
all shares of Preferred Stock into Common Stock, shall at the time of such
delivery, be validly issued and outstanding, fully paid and nonassessable, and
not subject to preemptive rights or rights of first refusal, and the Company
will take all such actions as may be necessary to assure that the par value or
stated value, if any, per share of the Preferred Stock and the Common Stock is
at all times equal to or less than the then Per Share Warrant Price. The Company
further covenants and agrees that it will pay, when due and payable, any and all
Federal and state stamp, original issue or similar taxes which may be payable in
respect of the issue of any Warrant Share, Conversion Share or any certificate
thereof to the extent required because of the issuance by the Company of such
security.
5. REGISTRATION UNDER SECURITIES ACT OF 1933. (a) The Holder shall with
respect to the Conversion Shares only, have the right to participate in the
registration rights granted to purchasers of Preferred Stock pursuant to Article
5 of the subscription agreements (the "Subscription Agreements") between such
purchasers and the Company that were entered into at the time of the initial
sale by the Company of the Preferred Stock. By acceptance of this Warrant, the
Holder agrees to comply with the provisions in Article 5 of the Subscription
Agreement to same extent as if it were a party thereto.
(b) Until all Conversion Shares have been sold under a Registration
Statement or pursuant to Rule 144 ("Rule 144") as promulgated under the
Securities Act of 1933, as amended (the "Securities Act"), the Company shall use
its reasonable best efforts to file with the Securities and Exchange Commission
all current reports and the information as may be necessary to enable the Holder
to effect sales of its shares in reliance upon Rule 144 promulgated under the
Act.
6. INVESTMENT INTENT; LIMITED TRANSFERABILITY.
(a) The Holder represents, by accepting this Warrant, that it
understands that this Warrant and any securities obtainable upon exercise of
this Warrant or upon conversion of such securities have not been registered for
sale under Federal or state securities laws and are being offered and sold to
the Holder pursuant to one or more exemptions from the registration requirements
of such securities laws. In the absence of an effective registration of such
securities or an exemption therefrom, any certificates for such securities shall
bear the legend set forth on the first page hereof. The Holder understands that
it must bear the economic risk of its investment in this Warrant and any
securities obtainable upon exercise of this Warrant or upon conversion of such
securities for an indefinite period of time, as this Warrant and such securities
have not been registered under Federal or state securities laws and therefore
cannot be sold unless subsequently registered under such laws, unless an
exemption from such registration is available.
(b) The Holder, by his acceptance of its Warrant, represents to the
Company that it is acquiring this Warrant and will acquire any securities
obtainable upon exercise of this Warrant for its own account for investment and
not with a view to, or for sale in connection with, any distribution thereof in
violation of the Securities Act of 1933, as amended (the "Act"). The Holder
agrees that this Warrant and any such securities will not
<PAGE>
be sold or otherwise transferred unless (i) a registration statement with
respect to such transfer is effective under the Act and any applicable state
securities laws or (ii) such sale or transfer is made pursuant to one or more
exemptions from the Act.
(c) This Warrant may not be sold, transferred, assigned or hypothecated
for six (6) months from the date hereof except (i) to any firm or corporation
that succeeds to all or substantially all of the business of Paramount Capital,
Inc., (ii) to any of the officers, employees, associates or affiliated companies
of Paramount Capital, Inc., or of any such successor firm, (iii) to any NASD
member participating in the Offering or any officer or employee of any such NASD
member or (iv) in the case of an individual, pursuant to such individual's last
will and testament or the laws of descent and distribution, and is so
transferable only upon the books of the Company which it shall cause to be
maintained for such purpose. The Company may treat the registered Holder of this
Warrant as he or it appears on the Company's books at any time as the Holder for
all purposes. The Company shall permit any Holder of a Warrant or its duly
authorized attorney, upon written request during ordinary business hours, to
inspect and copy or make extracts from its books showing the registered holders
of Warrants. All Warrants issued upon the transfer or assignment of this Warrant
will be dated the same date as this Warrant, and all rights of the holder
thereof shall be identical to those of the Holder.
7. LOSS, ETC., OF WARRANT. Upon receipt of evidence satisfactory to the
Company of the loss, theft, destruction or mutilation of this Warrant, and of
indemnity reasonably satisfactory to the Company, if lost, stolen or destroyed,
and upon surrender and cancellation of this Warrant, if mutilated, the Company
shall execute and deliver to the Holder, a new Warrant of like date, tenor and
denomination.
8. WARRANT HOLDER NOT STOCKHOLDER. This Warrant does not confer upon
the Holder any right to vote or to consent to or receive notice as a stockholder
of the Company, as such, in respect of any matters whatsoever, or any other
rights or liabilities as a stockholder, prior to the exercise hereof; this
Warrant does, however, require certain notices to Holders as set forth herein.
9. COMMUNICATION. No notice or other communication under this Warrant
shall be effective unless, but any notice or other communication shall be
effective and shall be deemed to have been given if, the same is in writing and
is mailed by first-class mail, postage prepaid, addressed to:
(a) the Company at Conversion Technologies International, Inc., 3452
Lake Lynda Drive, Suite 280, Orlando, Florida 32817, Attn: President, or at such
other address as the Company has designated in writing to the Holder, or
(b) the Holder at c/o Paramount Capital Incorporated, 787 Seventh
Avenue, New York, New York 10019, or at other such address as the Holder has
designated in writing to the Company.
<PAGE>
10. HEADINGS. The headings of this Warrant have been inserted as a
matter of convenience and shall not affect the construction hereof.
11. APPLICABLE LAW. This Warrant shall be governed by and construed in
accordance with the law of the State of New York without giving effect to the
principles of conflicts of law thereof.
12. AMENDMENT, WAIVER, ETC. Except as expressly provided herein,
neither this Warrant nor any term hereof may be amended, waived, discharged or
terminated other than by a written instrument signed by the party against whom
enforcement of any such amendment, waiver, discharge or termination is sought;
provided, however, that any provisions hereof may be amended, waived, discharged
or terminated upon the written consent of the Company and the Majority of the
Holders of the Warrants only.
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by
its President and its corporate seal to be hereunto affixed and attested by its
Secretary this ___th day of ____________ , 1997.
CONVERSION TECHNOLOGIES
INTERNATIONAL, INC.
By:_____________________________
Name:
Title:
ATTEST:
- - -----------------------------
Secretary
[Corporate Seal]
<PAGE>
SUBSCRIPTION (cash)
The undersigned, ___________________, pursuant to the provisions of the
foregoing Warrant, hereby agrees to subscribe for and purchase
____________________ shares of the Series A Preferred Stock, par value $.01 per
share, of Conversion Technologies International, Inc. covered by said Warrant,
and makes payment therefor in full at the price per share provided by said
Warrant.
Dated:_______________ Signature:____________________
Address:______________________
SUBSCRIPTION (promissory note)
The undersigned, ___________________, pursuant to the provisions of the
foregoing Warrant, hereby agrees to subscribe for and purchase
____________________ shares of the Series A Preferred Stock, par value $.01 per
share, of Conversion Technologies International, Inc. covered by said Warrant,
and makes payment therefor in full at the price per share provided by said
Warrant by delivery of the attached Promissory Note. The undersigned hereby
confirms the representations and warranties made by it in the Warrant and in the
attached Promissory Note.
Dated:_______________ Signature:____________________
Address:______________________
CASHLESS EXERCISE
The undersigned ___________________, pursuant to the provisions of the
foregoing Warrant, hereby elects to exchange its Warrant for ___________________
shares of Series A Preferred Stock, par value $.01 per share, of Conversion
Technologies International, Inc. pursuant to the Cashless Exercise provisions of
the Warrant.
Dated:_______________ Signature:____________________
Address:______________________
<PAGE>
ASSIGNMENT
FOR VALUE RECEIVED _______________ hereby sells, assigns and transfers
unto ____________________ the foregoing Warrant and all rights evidenced
thereby, and does irrevocably constitute and appoint _____________________,
attorney, to transfer said Warrant on the books of Conversion Technologies
International, Inc.
Dated:_______________ Signature:____________________
Address:______________________
PARTIAL ASSIGNMENT
FOR VALUE RECEIVED _______________ hereby assigns and transfers unto
____________________ the right to purchase _______ shares of the Preferred
Stock, par value $.001 per share, of Conversion Technologies International, Inc.
covered by the foregoing Warrant, and a proportionate part of said Warrant and
the rights evidenced thereby, and does irrevocably constitute and appoint
____________________, attorney, to transfer that part of said Warrant on the
books of Conversion Technologies International, Inc.
Dated:_______________ Signature:____________________
Address:______________________
<PAGE>
PROMISSORY NOTE
$[ ] NEW YORK, NEW YORK
[ ]
[WARRANTHOLDER] ("Borrower"), for value received, hereby promises to
pay to the order of CONVERSION TECHNOLOGIES INTERNATIONAL, INC. (together with
any such subsequent holder of the Note, the "Holder") the sum of [ ]($ ), or
such lesser amount as shall then equal the outstanding principal amount hereof.
Such amount shall be due and payable on December 8, 2007 (the "Maturity Date"),
together with interest thereon at a rate per annum equal to the prime rate as
stated by Citibank, N.A. as of the date hereof, (the "Interest Rate"), and which
shall be calculated on the basis of a 360-day year for actual days elapsed, on
the terms and conditions set forth hereinafter. Payment for all amounts due
hereunder shall be made by certified check or wire transfer to the Holder at c/o
Conversion Technologies International, Inc. Attn: William Amt, President, or
other such address as the Holder may designate by notice to Borrower. If this
Promissory Note is prepaid in whole or in part by the tendering of shares
pursuant to Paragraph 2 below, the repayment date shall be the date on which the
Borrower delivers a notice to the Company in accordance with Paragraph 4
irrevocably stating the Borrower's intention to repay the Promissory Note by
tendering such shares. The Borrower is delivering this Promissory Note as
payment of the exercise price for the purchase of the shares of preferred stock
(the "Stock") underlying the Warrant dated December 8, 1997 (the "Warrant")
issued to the Borrower. The Promissory Note shall be secured by the Stock which
the Holder shall hold in safe-keeping as collateral for the indebtedness
represented by this Promissory Note.
1. Prepayment; Repayment. The Borrower may at any time prepay in whole
or in part the principal sum, plus accrued interest to date of payment, of this
Note, without penalty or premium. All sums paid hereon shall be applied first to
accrued, unpaid interest on this Note and the balance, if any, to the reduction
of the principal hereof. This Note shall not be due and payable until the
Maturity Date. On the Maturity Date, the entire principal amount of, and all
accrued interest on, this Note shall automatically become immediately due and
payable without presentment, demand, protest or other formalities of any kind,
all of which are hereby expressly waived by the Company.
2. Prepayment or Repayment by Tendering of Shares. Any prepayment or
repayment may be made by instructing the Company to withhold that number of
shares of Stock currently held by the Company as collateral for this Promissory
Note in accordance with Paragraph 1(a)(iii) of the Warrant and having a value,
based upon the Current Market Price (as defined in the introductory paragraph of
the Warrant) of the Common Stock, equal to the outstanding principal sum plus
accrued interest. The Company will deliver the balance of the shares not
withheld pursuant to the immediately preceding sentence of this Paragraph 2 to
the Borrower at the address set forth in Paragraph 3 below within five (5) days
of the date of such prepayment or repayment, as the case may be.
<PAGE>
3. Events of Default. If any events specified in this Paragraph 3 shall
occur and continue uncured for a period of 90 days following notice from the
lender such event has occurred(herein individually referred to as an "Event of
Default"), the Holder of the Note may, so long as such condition exists, declare
the entire principal and unpaid accrued interest hereon immediately due and
payable, by notice in writing to Borrower:
3.1. Default in the payment of the principal and unpaid accrued
interest of the Note when due and payable; or
3.2. The institution by Borrower of proceedings to be adjudicated
as bankrupt or insolvent, or the consent by Borrower to institution of
bankruptcy or insolvency proceedings against Borrower or the filing by Borrower
of a petition or answer or consent seeking reorganization or release under the
federal Bankruptcy Act, or any other applicable federal or state law, or the
consent by Borrower to the filing of any such petition or the appointment of a
receiver, liquidator, assignee, trustee or other similar official for all or any
substantial part of its property, of the taking of any action by Borrower in
furtherance of any such action; or
3.3. If, within sixty (60) days after the commencement of an
action against Borrower (and service of process in connection therewith on
Borrower) seeking any bankruptcy, insolvency, reorganization, liquidation or
similar relief under any present or future statute, law of regulation, such
action shall not have been resolved in favor of Borrower of all orders or
proceedings thereunder affecting the property of Borrower stayed, or if the stay
of any such order or proceeding shall thereafter be set aside, or if, within
sixty (60) days after the appointment without the consent or acquiescence of
Borrower of any trustee or receiver for all or any substantial part of the
property of Borrower, such appointment shall not have been vacated.
4. Notices. Any notice required, desired or permitted to be given
hereunder shall be in writing and shall be delivered personally, sent certified
or registered United States mail, return receipt requested or sent by overnight
courier service addressed to:
If to the Holder:
c/o Conversion Technologies International, Inc.
3452 Lake Lynda Drive, Suite 280
Orlando, FL 32817
Attn: William Amt, President
If to Borrower:
[name and address]
Such notices shall be deemed given (i) if delivered personally, upon delivery,
(ii) if mailed as aforesaid, two (2) business days after deposit in the United
States mail and (iii) if sent by
<PAGE>
overnight courier service one (1) business day after deposit with the courier
service. Any party may change its address by notice to the other parties.
IN WITNESS WHEREOF, the Borrower has caused this Note to be issued this
[ ] day of [ ] 199[ ].
BORROWER:
---------------------------
Name:
Address:
---------------------------
<PAGE>
