THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE UNITED STATES SECURITIES AND
EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE PURSUANT TO AN
EXEMPTION FROM REGISTRATION UNDER REGULATION D PROMULGATED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"). THIS SUBSCRIPTION AGREEMENT
SHALL NOT CONSTITUTE AN OFFER TO SELL NOR A SOLICITATION OF AN OFFER TO BUY THE
SECURITIES IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION WOULD BE
UNLAWFUL. THE SECURITIES ARE "RESTRICTED" AND MAY NOT BE RESOLD OR TRANSFERRED
EXCEPT AS PERMITTED UNDER THE ACT PURSUANT TO REGISTRATION OR EXEMPTION
THEREFROM.
7% PREFERRED STOCK
SECURITIES PURCHASE AGREEMENT
COMMODORE ENVIRONMENTAL SERVICES, INC.
AND
COMMODORE APPLIED TECHNOLOGIES, INC.
THIS AGREEMENT is made as of the 20th day of May, 1997, by and
between COMMODORE ENVIRONMENTAL SERVICES, INC., traded on the "Pinksheets" under
the symbol "COES" (the "Parent Company"), a corporation, with its principal
office at 000 Xxxx 00xx Xxxxxx, Xxx Xxxx, XX 00000, COMMODORE APPLIED
TECHNOLOGIES INC., AMEX symbol "CXI" (the "Subsidiary Company"), a corporation,
with its principal office at 000 Xxxx 00xx Xxxxxx, Xxx Xxxx, XX 00000 and OKEMO
PARTNERS LIMITED (the "Purchaser"), with its principal office at 00 Xxx Xxxx
Xxxxx Xxxx, Xxxxx X0, Xxxxxxxx, XX 00000.
IN CONSIDERATION of the mutual covenants contained in this
Agreement, the Parent Company, Subsidiary Company and the Purchaser agree as
follows:
Section 1. Certain Definitions. For purposes of this
Agreement:
"Change in Control Transaction" means the date the Parent
Company or the Subsidiary Company (i) sells or otherwise conveys all or
substantially all of its assets or (ii) effects a transaction (by merger or
otherwise) in which more than 50% of the voting power of the Parent Company or
the Subsidiary Company is disposed of, directly or indirectly, or if within any
12 month period there is a change of more than 50% of the members of the Parent
Company's or the Subsidiary Company's Board of Directors, or if any other
person, entity or group (as defined in Section 13(d) of the Exchange Act) and/or
any of their affiliates or associates acquires in excess of 50% of the Common
Stock.
"Closing Date" means the date agreed to by the parties for the
delivery of the stock certificate against a wire transfer of the funds to the
Parent Company.
"Closing" means the completion of the purchase and sale of the
COES Preferred Shares on the Closing Date.
"COES Convertible Preferred Stock" means the 60,000 shares of
Series D Preferred Stock of the Parent Company, $.01 par value, convertible into
CXI Common Stock as hereinafter provided and which has the rights, preferences
and privileges set forth in the Certificate of Designation attached hereto as
Exhibit A (the "Certificate of Designation").
"COES Preferred Shares" means the shares of COES Convertible
Preferred Stock purchased hereunder.
"Conversion Date" means the date on which the Purchaser has
telecopied the Notice of Conversion to counsel for the Parent Company.
"Conversion Price" means an amount equal to a fifteen (15%)
percent discount from the closing bid price of the CXI Common Stock as reported
by Bloomberg, L.P. ("Bloomberg") averaged for the previous five (5) business
days ending on the day before the Conversion Date (the "Average Closing Bid
Price"); provided, however, if the average of the closing bid price of the CXI
Common Stock, as reported by Bloomberg ("Floor Average"), for any consecutive
thirty (30) days is equal or less than $2.00 (such thirtieth (30th) day shall be
the "First Trigger Date"), the conversion price shall equal $2.00; if the Floor
Average for any consecutive thirty (30) days beginning any day after the First
Trigger Date is less than $2.00 ("Second Trigger Date"), the conversion price
shall equal $1.90; if the Floor Average for any thirty (30) days beginning any
day after the Second Trigger Date is less than $1.90 (the "Third Trigger Date"),
the conversion price shall equal $1.80; if the Floor Average for any consecutive
thirty (30) days beginning any day after the Third Trigger Date is less than
$1.80 (the "Fourth Trigger Date"), the conversion price shall equal $1.70; if
the Floor Average for any consecutive thirty (30) days beginning any day after
the Fourth Trigger Date is less than $1.70 (the "Fifth Trigger Date"), the
conversion price shall equal $1.60; if the Floor Average for any consecutive
thirty (30) days beginning any day after the Fifth Trigger Date is less than
$1.60, the conversion price shall equal $1.50. Subject to Section 11.5 herein,
in no event shall the Conversion Price be lower than $1.50 per share of CXI
Common Stock. If the CXI Common Stock is not traded on the American Stock
Exchange, the Average Closing Bid Price shall be the average closing bid price
(and if not available, the mean of the high and low prices) of the Common Stock
on the over-the-counter-market or the principal national securities exchange or
the Nasdaq National Market System or Nasdaq SmallCap Market System on which the
CXI Common Stock is traded for the previous five (5) business days ending on the
day before the Conversion Date.
The Conversion Price shall be equitably adjusted accordingly
on a pro rata basis in the event of the happening of certain events that would
affect the CXI Common Stock or COES Convertible Preferred Stock's value
including, but not limited to, forward and reverse stock splits, issuance of
stock dividends, subdivision of shares, combinations, reclassifications, or the
like (collectively "Reclassifications"). An adjustment made pursuant to this
section shall become effective immediately after the effective date of such
event retroactive to the record date, if any, for such an event.
"Convertible Date" means the date on which the COES Preferred
Shares will become convertible, which is the day following the date that the
Registration Statement for
2
the shares of CXI Common Stock underlying the COES Preferred Stock and COES
Warrants has been declared effective by the Securities and Exchange Commission
("SEC").
"Cumulative Suspension" means the date a Suspension (as
defined in Section 8.7) has occurred and is continuing or the date that is the
15th day in the aggregate that more than one Suspension has occurred since the
effective date of the Registration Statement.
"CXI Common Stock" means the underlying Common Stock of the
Subsidiary Company, $.001 par value.
"Delisting" means the date the CXI Common Stock is delisted
from AMEX and is not otherwise listed on the Nasdaq Stock Market or other
national securities exchange.
"Holder" means a holder of COES Preferred Shares.
"Insufficient CXI Common Stock" means the date the number of
shares of CXI Common Stock held by the Parent Company is not sufficient to
effect the conversion of all outstanding COES Preferred Shares then eligible for
conversion (whether or not the Holders have duly delivered Notices of
Conversion).
"Purchase Price" means the aggregate purchase price of the
COES Preferred Shares purchased.
Section 2. Authorization and Sale of Shares.
2.1 Authorization. Subject to the terms and conditions of this
Agreement, the Parent Company has authorized the sale and issuance of the COES
Preferred Shares.
2.2 Agreement to Sell and Purchase the Shares. The Parent
Company will sell and the Purchaser will buy, in reliance upon the
representations and warranties of the Parent Company, Subsidiary Company and
Purchaser contained in this Agreement, upon the terms and conditions hereinafter
set forth, Ten Thousand (10,000) COES Preferred Shares of COES Convertible
Preferred Stock for an aggregate purchase price of One Million Dollars
($1,000,000) for all such COES Preferred Shares based on U.S. $100 per share.
The COES Preferred Shares shall pay a 7% cumulative dividend, payable in cash or
CXI Common Stock at the Conversion Price, at the discretion of the Parent
Company, at the time of each conversion. Such purchase and sale shall occur on
the Closing Date. In addition, Parent Company will transfer to Purchaser, for no
additional consideration, five-year warrants ("COES Warrants") to purchase ten
(10) shares of CXI Common Stock for each COES Preferred Share purchased,
initially exercisable on the Convertible Date and for a period of five years
thereafter, at an exercise price equal to 110% of the average closing bid prices
of the CXI Common Stock, as reported by Bloomberg, over the 5-day trading period
ending on the day prior to the Closing Date.
2.3 Subsidiary Company. Whereas the Purchaser is purchasing
COES Preferred Shares from the Parent Company, and the Parent Company is
transferring CXI
3
Common Stock to the Purchaser upon conversion of COES Preferred Shares and
exercise of COES Warrants, the Parent Company hereby agrees to immediately remit
2.5% of the Purchase Price ($2.50 per COES Preferred Share which has a
subscription price of $100 per COES Preferred Share) at the Closing to the
Subsidiary Company, representing a portion of the $150,000 of aggregate
consideration for the Subsidiary Company's agreement to perform its obligations
as set forth in this Agreement and the Warrant Agreement, a form of which is
attached hereto as Exhibit B.
2.4 Time and Place of Closing. The Closing shall be held at
the offices of Xxxxxxxxx & Xxxxxx, 000 Xxxxx Xxxxxx, 00xx Xxxxx, Xxx Xxxx, XX
00000 as promptly as practicable as agreed to by the parties to this Agreement,
but no later than May 15, 1997 at which time either party may terminate this
Agreement.
2.5 Payment and Delivery. At or prior to the Closing, the
following shall occur:
(a) Provided that Purchaser has been notified by
Xxxxxxxxx & Zivian that the Parent Company has delivered certificates
representing the COES Preferred Shares and COES Warrants as provided in Section
2.5(b) below, Purchaser shall remit by wire transfer the Purchase Price as
payment in full for the COES Preferred Shares as follows: 89% of the Purchase
Price ($5,340,000) directly to the Parent Company, 9% of the Purchase Price
($540,000) directly to Avalon Research Group, Inc. (the "Finder"), and 2% of the
Purchase Price ($120,000) directly to Xxxxxxx X. Xxxxx.
(b) The Parent Company shall deliver or cause to be
delivered to Xxxxxxxxx & Zivian certificates representing the COES Preferred
Shares and the COES Warrants, registered in the name of Purchaser (or any
nominee designated by Purchaser at or prior to the Closing Date), free and clear
of all liens, claims, charges and encumbrances. Purchaser shall receive such
certificates from Xxxxxxxxx & Xxxxxx, as applicable, after the Parent Company,
Finder and Xxxxxxx X. Xxxxx have received the Purchase Price directly from
Purchaser.
(c) Wire instructions for the Parent Company has been
separately provided to the Purchaser's counsel.
Section 3. General Representations and Warranties of the
Parent Company. The Parent Company hereby represents and warrants to, and
covenants with, the Purchaser that the following are true and correct as of the
date hereof and as of the Closing Date.
3.1 Organization; Qualification. The Parent Company is a
corporation duly organized and validly existing under the laws of the State of
Delaware and is in good standing under such laws. The Parent Company has all
requisite corporate power and authority to own, lease and operate its properties
and assets, and to carry on its business as presently conducted. The Parent
Company is qualified to do business as a foreign corporation in each
jurisdiction in which the ownership of its property or the nature of its
4
business requires such qualification, except where failure to so qualify would
not have a material adverse effect on the Parent Company.
3.2 Capitalization. The authorized capital stock of the Parent
Company is as set forth in footnote 12 of the audited consolidated financial
statements of the Parent Company set forth in its Form 10-K for the fiscal year
ended December 31, 1996, a true copy of which has been supplied to Purchaser.
60,000 shares of the Parent Company's non-voting preferred stock has been
designated Series D Preferred Stock, $.01 par value. The Series D Preferred
Stock, when issued, shall be duly authorized and validly issued and are fully
paid and nonassessable.
3.3 CXI Common Stock Transferable Upon Conversion of COES
Preferred Shares or Exercise of COES Warrants. The Parent Company currently owns
Fifteen Million (15,000,000) shares of CXI Common Stock, all of which have been
duly authorized and validly issued and are fully paid and nonassessable. The
Parent Company will reserve from its holdings of CXI Common Stock a sufficient
number of shares of CXI Common Stock to permit the conversion in full of the
outstanding COES Preferred Shares and the exercise in full of the COES Warrants.
As of the Closing Date, the Parent Company had reserved sufficient shares of CXI
Common Stock for transfer to Purchaser upon exercise of the COES Preferred
Shares which are convertible, at Purchaser's option, at the Conversion Price, as
per Section 10 of this Agreement, and upon exercise of the COES Warrants. If the
Parent Company does not own sufficient shares of CXI Common Stock for transfer
to the Purchaser upon conversion of COES Preferred Shares and/or exercise of
COES Warrants, the Parent Company hereby agrees to promptly purchase or
otherwise acquire the sufficient amount of shares of CXI Common Stock and
transfer such shares to the Purchaser upon conversion of COES Preferred Shares
and/or exercise of COES Warrants.
Except for the consent of National Securities Corporation,
which has been obtained, the Parent Company has all requisite corporate right,
power and authority to transfer the shares of CXI Common Stock in its holdings
to Purchaser upon conversion of the COES Preferred Shares and exercise of the
COES Warrants.
3.4 Authorization. The Parent Company has all requisite
corporate right, power and authority to execute and deliver this Agreement and
to consummate the transactions contemplated hereby. All corporate action on the
part of the Parent Company, its directors and stockholders necessary for the
authorization, execution, delivery and performance of this Agreement by the
Parent Company, the authorization, sale, issuance and delivery of the COES
Preferred Shares and the performance of the Parent Company's obligations
hereunder has been taken. This Agreement has been duly executed and delivered by
the Parent Company and constitutes a legal, valid and binding obligation of the
Parent Company enforceable in accordance with its terms, subject to laws of
general application relating to bankruptcy, insolvency and the relief of debtors
and rules of law governing specific performance, injunctive relief or other
equitable remedies, and to limitations of public policy as they may apply to the
indemnification provisions set forth in Section 8.4 of this Agreement. Upon
their issuance, transfer and delivery pursuant to this Agreement, the COES
Preferred Shares, COES Warrants and shares of CXI Common Stock transferable
5
upon conversion of the COES Preferred Shares (the "Conversion Shares") and
exercise of the COES Warrants (the "Warrant Shares") (collectively, the
"Securities") will be validly issued, fully paid and nonassessable and will be
free of any liens or encumbrances; provided, however, that the COES Preferred
Shares and COES Warrants are subject to restrictions on transfer under state
and/or federal securities laws. The issuance and sale of the COES Preferred
Shares and COES Warrants will not give rise to any preemptive right or right of
first refusal or right of participation on behalf of any person. Upon
registration of the Conversion Shares and the Warrant Shares pursuant to Section
8 of this Agreement, there shall be no restriction on the transferability
thereof other than applicable prospectus delivery requirements.
3.5 No Conflict. The execution and delivery of this Agreement
do not, and the consummation of the transactions contemplated hereby will not,
conflict with, or result in any violation of, or default (with or without notice
or lapse of time, or both), or give rise to a right of termination, cancellation
or acceleration of any obligation or to a loss of a material benefit, under, any
provision of the Articles of Incorporation, and any amendments thereto, Bylaws,
stockholders agreements and any amendments thereto of the Parent Company or any
material mortgage, indenture, lease or other agreement or instrument, permit,
concession, franchise, license, judgment, order, decree statute, law, ordinance,
rule or regulation applicable to the Parent Company, its properties or assets.
3.6 Accuracy of Reports and Information. The Parent Company is
in full compliance, to the extent applicable, with all reporting obligations
under Section 12(b), 12 (g) or 15(d), as applicable, of the Securities Exchange
Act of 1934, as amended (the "Exchange Act").
The Parent Company has filed all material required to be filed
pursuant to all reporting obligations, under either Section 13(a) or 15(d) of
the Exchange Act for a period of at least twelve (12) months immediately
preceding the offer or sale of the COES Preferred Shares (or for such shorter
period that the Parent Company has been required to file such material).
3.7 SEC Filings/Full Disclosure. None of the Parent Company's
filings with the SEC since January 1, 1997 contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein in light of the circumstances under
which they were made, not misleading. The Parent Company has, since January 1,
1997, timely filed all requisite forms, reports and exhibits thereto with the
SEC. The Parent Company's Annual Report on Form 10-K for the year ended December
31, 1996, its Quarterly Reports for the periods ended March 31, 1997 and all
Current Reports on Form 8-K filed by the Parent Company from January 1, 1996 to
date are referred to as the "COES SEC Reports."
There is no fact known to the Parent Company (other than
general economic conditions known to the public generally) that has not been
disclosed in writing to the Purchaser which could reasonably be expected to have
a material adverse effect on the condition (financial or otherwise) or in the
earnings, business affairs, business prospects,
6
properties or assets of the Parent Company, or (ii) could reasonably be expected
to materially and adversely affect the ability of the Parent Company to perform
its obligations pursuant to this Agreement.
3.8 Absence of Undisclosed Liabilities. The Parent Company has
no material liabilities or obligations, absolute or contingent (individually or
in the aggregate), except as set forth in the financial statements included in
the COES SEC Reports (the "COES Financial Statements") or as incurred in the
ordinary course of business after the date of the COES Financial Statements.
3.9 Governmental Consent, etc. No consent, approval or
authorization of or designation, declaration or filing with any governmental
authority on the part of the Parent Company is required in connection with the
valid execution and delivery of this Agreement, or the offer, sale or issuance
of the COES Preferred Shares, or the consummation of any other transaction
contemplated hereby, except the filing with the SEC of a registration statement
on Form S-3 or Form S-1 for the purpose of registering the CXI Common Stock
underlying the COES Preferred Shares and the COES Warrants.
3.10 Intellectual Property Rights. Except as disclosed in the
COES SEC Reports, the Parent Company has sufficient trademarks, trade names,
patent rights, copyrights and licenses to conduct its business as contemplated
therein. To the Parent Company's knowledge, neither the Parent Company nor its
products is infringing or will infringe any trademark, trade name, patent right,
copyright, license, trade secret or other similar right of others currently in
existence; and there is no claim being made against the Parent Company regarding
any trademark, trade name, patent, copyright, license, trade secret or other
intellectual property right which could have a material adverse effect on the
condition (financial or otherwise), business, results of operations or prospects
of the Parent Company.
3.11 Material Contracts. Except as set forth in the COES SEC
Reports, the agreements to which the Parent Company is a party described therein
are valid agreements, in full force and effect, the Parent Company is not in
material breach or material default (with or without notice or lapse of time, or
both) under any of such agreements, and, to the Parent Company's knowledge, the
other contracting party or parties thereto are not in material breach or
material default (with or without notice or lapse of time, or both) under any of
such agreements.
3.12 Litigation. There is no action, proceeding or
investigation pending, or to the Parent Company's knowledge threatened, against
the Parent Company which might result, either individually or in the aggregate,
in any material adverse change in the business, prospects, conditions, affairs
or operations of the Parent Company. The Parent Company is not a party to or
subject to the provisions of any order, writ, injunction, judgment or decree of
any court or government agency or instrumentality. There is no action, suit,
proceeding or investigation by the Parent Company currently pending or which the
Parent Company currently intends to initiate.
7
3.13 Title to Assets. Except as set forth in COES SEC Reports,
the Parent Company has good and marketable title to all properties and material
assets described therein as owned by it, free and clear of any pledge, lien,
security interest, encumbrance, claim or equitable interest other than such as
are not material to the business of the Parent Company.
3.14 Subsidiaries. The Parent Company does not presently own
or control, directly or indirectly, any interest in any other corporation,
partnership, association or other business entity, except as stated in the COES
SEC Reports.
3.15 Required Governmental Permits. The Parent Company is in
possession of and operating in compliance with all authorizations, licenses,
certificates, consents, orders and permits from state, federal and other
regulatory authorities which are material to the conduct of its business, all of
which are valid and in full force and effect.
3.16 Listing. The Parent Company will maintain the listing of
its Common Stock on the "Pinksheets" or other organized, comparable United
States market or quotation system; provided, however, that the sole remedy for
Purchaser for breach of this representation shall be liquidated damages as
provided in Section 10.6.
3.17 Other Outstanding Securities/Financing Restrictions.
Except as set forth on the CXI SEC Reports (as defined herein), there are no
other outstanding debt or equity securities presently convertible into shares of
CXI Common Stock.
The Parent Company cannot, without the prior approval in
writing from the Purchaser, obtain convertible debt or equity financing which is
convertible into securities of the Subsidiary Company for a period of ninety
(90) days following the effective date of the Registration Statement (as defined
herein); however, the Parent Company will not require prior approval if (a) at
least 80% of the net proceeds of the financing is part of an acquisition by the
Parent Company of control of another company or entity, (b) at least 80% of the
net proceeds of the financing is a refinancing of the Parent Company's debt, or
(c) the financing is part of a public offering of the Parent Company's
securities.
3.18 Right of Participation. In the event the Parent Company
wishes to complete a financing similar in structure to the securities issued
hereby within one hundred and eighty (180) days from the Closing Date, the
Purchaser shall have the right to participate in such offering and shall have
three (3) business days to reply in writing after receipt of written notice of
such proposed financing from the Parent Company. In the event a writing is not
received by the Parent Company from the Purchaser specifying the extent of the
Purchaser's interest in so participating, this will be deemed a refusal by the
Purchaser of such right to participate.
3.19 Legal Opinion. Purchaser shall, upon purchase of the COES
Preferred Shares, receive an opinion letter from counsel to the Parent Company,
and the Parent Company represents that it will immediately obtain such an
opinion from counsel to the satisfaction of the Purchaser, to the effect that:
8
(a) The Parent Company is duly incorporated, validly
existing and in good standing in the jurisdiction of its incorporation.
(b)There is no action, proceeding or investigation
pending, or to such counsel's knowledge, threatened against the Parent
Company which might result, either individually or in the aggregate, in
any material adverse change in the business, prospects, conditions,
affairs or operations of the Parent Company.
(c) The Parent Company is not a party to or subject
to the provisions of any order, writ, injunction, judgment or decree of
any court or government agency or instrumentality.
(d) There is no action, suit, proceeding or investigation
by the Parent Company currently pending or, to such counsel's knowledge,
which the Parent Company currently intends to initiate.
(e) All issued and outstanding shares of CXI Common
Stock have been duly authorized and validly issued and are fully paid and
nonassessable.
(f) This Securities Purchase Agreement and the Stock
Purchase Warrant, the issuance of the COES Preferred Shares and COES
Warrants and the transfer of the Conversion Shares and Warrant Shares have
been duly approved by all required corporate action, the requisite consent
of National Securities Corporation for the Parent Company to transfer the
shares of CXI Common Stock in its holdings to the Purchaser upon
conversion of the COES Preferred Shares and exercise of the COES Warrants
has been duly obtained, and that all such Securities, upon delivery, shall
be validly issued and outstanding, fully paid and nonassessable.
(g) The execution, delivery and performance of this
Securities Purchase Agreement and the Stock Purchase Warrant by the Parent
Company, and the consummation of the transactions contemplated thereby,
will not, with or without the giving of notice or the passage of time or
both:
(i) Violate the provisions of any law, rule or
regulation which is material to the assets,
properties or business of the Parent Company;
(ii) Violate the provisions of the charter or bylaws
of the Parent Company; or
(iii) To the best of counsel's knowledge, violate any
judgment, decree, order or award of any court,
governmental body or arbitrator.
(iv) To the best of counsel's knowledge, conflict
with, or result in the breach or termination of any
term or provision of,
9
or constitute a default under, or cause any
acceleration under, or cause the creation of any
lien, charge or encumbrance upon the properties or
assets of the Parent Company pursuant to, any note,
bond, indenture, mortgage, lease, deed of trust or
other instrument, obligation, or agreement to which
the Parent Company is a party and which is material
to Parent Company, or by which the Parent Company,
or any of its material properties is or may be bound.
(h) This Securities Purchase Agreement and the Stock
Purchase Warrant constitute the valid and legally binding obligations of
the Parent Company and are enforceable against the Parent Company in
accordance with their respective terms, subject to laws of general
application relating to bankruptcy, insolvency and the relief of debtors
and rules of law governing specific performance, injunctive relief or
other equitable remedies, and, with respect to the Securities Purchase
Agreement, to limitations of public policy as they may apply to the
indemnification provisions set forth in Section 8.4 thereof.
3.20 Use of Proceeds. Except for payments aggregating $150,000
to the Subsidiary Company as provided herein, the Parent Company represents that
the net proceeds from this offering will be used for general corporate purposes.
3.21 No Poison Pill. The Parent Company represents that it
does not have, and has no current intention to adopt, a stockholder rights plan
("poison pill").
Section 4. General Representations and Warranties of the
Subsidiary Company. The Subsidiary Company hereby represents and warrants to,
and covenants with, the Purchaser that the following are true and correct as of
the date hereof and as of the Closing Date.
4.1 Organization; Qualification. The Subsidiary Company is a
corporation duly organized and validly existing under the laws of the State of
Delaware and is in good standing under such laws. The Subsidiary Company has all
requisite corporate power and authority to own, lease and operate its properties
and assets, and to carry on its business as presently conducted. The Subsidiary
Company is qualified to do business as a foreign corporation in each
jurisdiction in which the ownership of its property or the nature of its
business requires such qualification, except where failure to so qualify would
not have a material adverse effect on the Subsidiary Company.
4.2 Capitalization. The authorized capital stock of the
Subsidiary Company is as set forth in the CXI SEC Reports. All issued and
outstanding shares of Common Stock have been duly authorized and validly issued
and are fully paid and nonassessable.
4.3 CXI Common Stock Transferable Upon Conversion of COES
Preferred Shares or Exercise of COES Warrants. Except for the consent of
National Securities Corporation, which has been obtained, the Subsidiary Company
has all requisite corporate
10
right, power and authority to transfer shares of CXI Common Stock owned by the
Parent Company to the Purchaser upon conversion of the COES Preferred Shares and
exercise of the COES Warrants.
4.4 Authorization. The Subsidiary Company has all requisite
corporate right, power and authority to execute and deliver this Agreement and
to consummate the transactions contemplated hereby. All corporate action on the
part of the Subsidiary Company, its directors and stockholders necessary for the
authorization, execution, delivery and performance of this Agreement by the
Subsidiary Company, and the performance of the Subsidiary Company's obligations
hereunder has been taken. This Agreement has been duly executed and delivered by
the Subsidiary Company and constitutes a legal, valid and binding obligation of
the Subsidiary Company enforceable in accordance with its terms, subject to laws
of general application relating to bankruptcy, insolvency and the relief of
debtors and rules of law governing specific performance, injunctive relief or
other equitable remedies, and to limitations of public policy as they may apply
to the indemnification provisions set forth in Section 8.4 of this Agreement.
Upon their issuance, transfer and delivery pursuant to this Agreement, the
Securities will have been validly issued, fully paid and nonassessable and will
be free of any liens or encumbrances; provided, however, that the COES Preferred
Shares and COES Warrants are subject to restrictions on transfer under state
and/or federal securities laws. Upon registration of the Conversion Shares and
the Warrant Shares pursuant to Section 8 of this Agreement, there shall be no
restriction on the transferability thereof other than applicable prospectus
delivery requirements.
4.5 No Conflict. The execution and delivery of this Agreement
do not, and the consummation of the transactions contemplated hereby will not,
conflict with, or result in any violation of, or default (with or without notice
or lapse of time, or both), or give rise to a right of termination, cancellation
or acceleration of any obligation or to a loss of a material benefit, under, any
provision of the Certificate of Incorporation, and any amendments thereto,
Bylaws, stockholders agreements and any amendments thereto of the Subsidiary
Company or any material mortgage, indenture, lease or other agreement or
instrument, permit, concession, franchise, license, judgment, order, decree
statute, law, ordinance, rule or regulation applicable to the Subsidiary
Company, its properties or assets.
4.6 Accuracy of Reports and Information. The Subsidiary
Company is in full compliance, to the extent applicable, with all reporting
obligations under Section 12(b), 12 (g) or 15(d), as applicable, of the Exchange
Act. The Subsidiary Company has registered its Common Stock pursuant to Section
12 of the Exchange Act and the Common Stock is listed and trades on AMEX.
The Subsidiary Company has filed all material required to be
filed pursuant to all reporting obligations, under either Section 13(a) or 15(d)
of the Exchange Act for a period of at least twelve (12) months immediately
preceding the offer or sale of the COES Preferred Shares (or for such shorter
period that the Subsidiary Company has been required to file such material).
11
4.7 SEC Filings/Full Disclosure. None of the Subsidiary
Company's filings with the SEC since January 1, 1997 contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein in light of the
circumstances under which they were made, not misleading. The Subsidiary Company
has, since January 1, 1997, timely filed all requisite forms, reports and
exhibits thereto with the SEC. The Subsidiary Company's Prospectus declared
effective by the SEC on June 28, 1996, the Annual Report on Form 10-K for the
year ended December 31, 1996, its Quarterly Reports for the periods ended March
31, 1997 and all Current Reports on Form 8-K filed by the Subsidiary Company
from January 1, 1996 to date are referred to as the "CXI SEC Reports."
There is no fact known to the Subsidiary Company (other than
general economic conditions known to the public generally) that has not been
disclosed in writing to the Purchaser which could reasonably be expected to have
a material adverse effect on the condition (financial or otherwise) or in the
earnings, business affairs, business prospects, properties or assets of the
Subsidiary Company, or (ii) could reasonably be expected to materially and
adversely affect the ability of the Subsidiary Company to perform its
obligations pursuant to this Agreement.
4.8 Absence of Undisclosed Liabilities. The Subsidiary Company
has no material liabilities or obligations, absolute or contingent (individually
or in the aggregate), except as set forth in the financial statements included
in the CXI SEC Reports (the "CXI Financial Statements") or as incurred in the
ordinary course of business after the date of the CXI Financial Statements.
4.9 Governmental Consent, etc. No consent, approval or
authorization of or designation, declaration or filing with any governmental
authority on the part of the Subsidiary Company is required in connection with
the valid execution and delivery of this Agreement, or the offer, sale or
issuance of the COES Preferred Shares, or the consummation of any other
transaction contemplated hereby, except the filing with the SEC of a
registration statement on Form S-3 or S-1 for the purpose of registering the CXI
Common Stock underlying the COES Preferred Shares and the COES Warrants.
4.10 Intellectual Property Rights. Except as disclosed in the
CXI SEC Reports, the Subsidiary Company has sufficient trademarks, trade names,
patent rights, copyrights and licenses to conduct its business as contemplated
therein. To the Subsidiary Company's knowledge, neither the Subsidiary Company
nor its products is infringing or will infringe any trademark, trade name,
patent right, copyright, license, trade secret or other similar right of others
currently in existence; and there is no claim being made against the Subsidiary
Company regarding any trademark, trade name, patent, copyright, license, trade
secret or other intellectual property right which could have a material adverse
effect on the condition (financial or otherwise), business, results of
operations or prospects of the Subsidiary Company.
4.11 Material Contracts. Except as set forth in the CXI SEC
Reports, the agreements to which the Subsidiary Company is a party described
therein are valid
12
agreements, in full force and effect, the Subsidiary Company is not in material
breach or material default (with or without notice or lapse of time, or both)
under any of such agreements, and, to the Subsidiary Company's knowledge, the
other contracting party or parties thereto are not in material breach or
material default (with or without notice or lapse of time, or both) under any of
such agreements.
4.12 Litigation. There is no action, proceeding or
investigation pending, or to the Subsidiary Company's knowledge threatened,
against the Subsidiary Company which might result, either individually or in the
aggregate, in any material adverse change in the business, prospects,
conditions, affairs or operations of the Subsidiary Company. The Subsidiary
Company is not a party to or subject to the provisions of any order, writ,
injunction, judgment or decree of any court or government agency or
instrumentality. There is no action, suit, proceeding or investigation by the
Subsidiary Company currently pending or which the Subsidiary Company currently
intends to initiate.
4.13 Title to Assets. Except as set forth in CXI SEC Reports,
the Subsidiary Company has good and marketable title to all properties and
material assets described therein as owned by it, free and clear of any pledge,
lien, security interest, encumbrance, claim or equitable interest other than
such as are not material to the business of the Subsidiary Company.
4.14 Subsidiaries. The Subsidiary Company does not presently
own or control, directly or indirectly, any interest in any other corporation,
partnership, association or other business entity, except as stated in the CXI
SEC Reports.
4.15 Required Governmental Permits. The Subsidiary Company is
in possession of and operating in compliance with all authorizations, licenses,
certificates, consents, orders and permits from state, federal and other
regulatory authorities which are material to the conduct of its business, all of
which are valid and in full force and effect.
4.16 Listing. The Subsidiary Company will maintain the listing
of its Common Stock on AMEX or other organized, comparable United States market
or quotation system; provided, however, that the sole remedy for Purchaser for
breach of this representation shall be liquidated damages as provided in Section
10.6.
4.17 Other Outstanding Securities/Financing Restrictions.
Except as set forth in the CXI SEC Reports, there are no other outstanding debt
or equity securities presently convertible into shares of CXI Common Stock.
Except as set forth in the CXI SEC Reports, the Subsidiary Company has no
outstanding restricted shares of Common Stock, or shares of Common Stock sold
under Regulation S or Regulation D under the Securities Act of 1933, as amended
(the "Securities Act") or outstanding under any other exemption from
registration, which are available for sale as unrestricted ("free trading")
stock.
The Subsidiary Company cannot, without the prior approval in
writing from the Purchaser, obtain convertible debt or equity financing for a
period of ninety (90) days following the effective date of the Registration
Statement (as defined herein); however, the
13
Subsidiary Company will not require prior approval if (a) at least 80% of the
net proceeds of the financing is part of an acquisition by the Subsidiary
Company of control of another company or entity, (b) at least 80% of the net
proceeds of the financing is a refinancing of the Subsidiary Company's debt, or
(c) the financing is part of a public offering of the Subsidiary Company's
securities.
4.18 Right of Participation. In the event the Subsidiary
Company wishes to complete a financing similar in structure to the securities
issued hereby within one hundred and eighty (180) days from the Closing Date,
the Purchaser shall have the right to participate in such offering and shall
have three (3) business days to reply in writing after receipt of written notice
of such proposed financing from the Subsidiary Company. In the event a writing
is not received by the Subsidiary Company from the Purchaser specifying the
extent of the Purchaser's interest in so participating, this will be deemed a
refusal by the Purchaser of such right to participate.
4.19 Legal Opinion. Purchaser shall, upon purchase of the COES
Preferred Shares, receive an opinion letter from counsel to the Subsidiary
Company, and the Subsidiary Company represents that it will immediately obtain
such an opinion from counsel to the satisfaction of the Purchaser, to the effect
that:
(a) The Subsidiary Company is duly incorporated, validly
existing and in good standing in the jurisdiction of its incorporation.
(b) There is no action, proceeding or investigation
pending, or to such counsel's knowledge, threatened against the Subsidiary
Company which might result, either individually or in the aggregate, in
any material adverse change in the business, prospects, conditions,
affairs or operations of the Subsidiary Company.
(c) The Subsidiary Company is not a party to or subject
to the provisions of any order, writ, injunction, judgment or decree of
any court or government agency or instrumentality.
(d) There is no action, suit, proceeding or investigation
by the Company currently pending, to such counsel's knowledge, or which
the Subsidiary Company currently intends to initiate.
(e) All issued and outstanding shares of CXI Common
Stock have been duly authorized and validly issued and are fully paid and
nonassessable.
(f) This Securities Purchase Agreement and the Stock
Purchase Warrant, the issuance of the COES Preferred Shares and COES
Warrants and the transfer of the Conversion Shares and Warrant Shares have
been duly approved by all required corporate action, the requisite consent
of National Securities Corporation for the Parent Company to transfer the
shares of CXI Common Stock in its holdings to the Purchaser upon
conversion of the COES Preferred Shares and exercise of the
14
COES Warrants has been duly obtained, and that all such Securities, upon
delivery, shall be validly issued and outstanding, fully paid and
nonassessable.
(g) The execution, delivery and performance of this
Securities Purchase Agreement and the Stock Purchase Warrant by the
Subsidiary Company, and the consummation of the transactions contemplated
thereby, will not, with or without the giving of notice or the passage of
time or both:
(i) Violate the provisions of any law, rule or
regulation which is material to the assets,
properties or business of the Subsidiary Company;
(ii) Violate the provisions of the charter or
bylaws of the Subsidiary Company; or
(iii) To the best of counsel's knowledge, violate
any judgment, decree, order or award of any court,
governmental body or arbitrator.
(iv) To the best of counsel's knowledge, conflict
with, or result in the breach or termination of any
term or provision of, or constitute a default under,
or cause any acceleration under, or cause the
creation of any lien, charge or encumbrance upon the
properties or assets of the Subsidiary Company
pursuant to, any note, bond, indenture, mortgage,
lease, deed of trust or other instrument,
obligation, or agreement to which the Subsidiary
Company is a party and which is material to the
Subsidiary Company or by which the Subsidiary
Company, or any of its material properties is or may
be bound.
(h) This Securities Purchase Agreement and the Stock
Purchase Warrant constitute the valid and legally binding obligations of
the Subsidiary Company and are enforceable against the Subsidiary Company
in accordance with their respective terms, subject to laws of general
application relating to bankruptcy, insolvency and the relief of debtors
and rules of law governing specific performance, injunctive relief or
other equitable remedies, and, with respect to the Securities Purchase
Agreement, to limitations of public policy as they may apply to the
indemnification provisions set forth in Section 8.4 thereof.
4.20 No Poison Pill. The Subsidiary Company represents that it
does not have, and has no current intention to adopt, a stockholder rights plan
("poison pill").
Section 5. Representations, Warranties and Covenants of the
Purchaser. The Purchaser represents and warrants to, and covenants with, the
Parent Company and the Subsidiary Company that the following are true and
correct as of the date hereof and as of the Closing Date.
15
5.1 Authority. The Purchaser's signatory has all right, power,
authority and capacity to execute and deliver this Agreement and to consummate
the transactions contemplated hereby. This Agreement has been duly executed and
delivered by the Purchaser and will constitute the legal, valid and binding
obligations of the Purchaser, enforceable in accordance with its terms, subject
to laws of general application relating to bankruptcy, insolvency and the relief
of debtors and rules of law governing specific performance, injunctive relief or
other equitable remedies, and to limitations of public policy as they may apply
to the indemnification provisions set forth in Section 8.4 of this Agreement.
5.2 Investment Experience. Purchaser is an "accredited
investor" as defined in Rule 501(a) under the Securities Act. Purchaser is aware
of the Parent Company's and Subsidiary Company's business affairs and financial
conditions and has had access to and has acquired sufficient information about
the Parent Company and the Subsidiary Company, including the COES and CXI SEC
Reports, to reach an informed and knowledgeable decision to acquire the COES
Preferred Shares. Purchaser has such business and financial experience as is
required to give it the capacity to protect its own interests in connection with
the purchase of the COES Preferred Shares and the acquisition of the COES
Warrants.
5.3 Investment Intent. Without limiting its ability to resell
the COES Preferred Shares and the COES Warrants and underlying CXI Common Stock
pursuant to an effective registration statement, Purchaser represents that it is
purchasing the COES Preferred Shares for investment purposes. Purchaser
understands that its acquisition of the COES Preferred Shares and the COES
Warrants has not been registered under the Securities Act or registered or
qualified under any state securities law in reliance on specific exemptions
therefrom, which exemptions may depend upon, among other things, the bona fide
nature of Purchaser's investment intent as expressed herein. Purchaser will not,
directly or indirectly, offer, sell, pledge, transfer or otherwise dispose of
(or solicit any offers to buy, purchase or otherwise acquire or take a pledge
of) any of the COES Preferred Shares or the COES Warrants except in compliance
with the Securities Act and any applicable state securities laws, and the rules
and regulations promulgated thereunder.
5.4 Registration or Exemption Requirements. Purchaser further
acknowledges and understands that the COES Preferred Shares and the COES
Warrants may not be resold or otherwise transferred except in a transaction
registered under the Securities Act and any applicable state securities laws or
unless an exemption from such registration is available. Purchaser understands
that the certificate(s) evidencing the COES Preferred Shares and the COES
Warrants will be imprinted with a legend, subject to Section 5.7 below, that
prohibits the transfer thereof unless (i) they are registered or such
registration is not required, and (ii) if the transfer is pursuant to an
exemption from registration other than Rule 144 under the Securities Act and, if
the Parent Company shall so request in writing, an opinion of counsel reasonably
satisfactory to the Parent Company is obtained to the effect that the
transaction is so exempt.
5.5 No Legal, Tax or Investment Advice. Purchaser understands
that nothing in this Agreement or any other materials presented to Purchaser in
connection with
16
the purchase and sale of the COES Preferred Shares and the acquisition and
issuance of the COES Warrants constitutes legal, tax or investment advice.
Purchaser has consulted such legal, tax and investment advisors as it, in its
sole discretion, has deemed necessary or appropriate in connection with its
purchase of the COES Preferred Shares and acquisition of the COES Warrants.
5.6 Purchaser Review. Purchaser hereby represents and warrants
that the Purchaser has carefully examined the COES SEC Reports and CXI SEC
Reports and the COES and CXI Financial Statements contained therein. The
Purchaser acknowledges that the Parent Company and Subsidiary Company has made
available to the Purchaser all documents and information that it has requested
relating to the Parent Company and the Subsidiary Company and has provided
answers to all of its questions concerning the Parent Company and the Subsidiary
Company, the COES Preferred Shares and the COES Warrants. Nothing stated in the
previous two sentences, however, shall be deemed to affect the representations
and warranties of the Parent Company and the Subsidiary Company contained in
this Agreement.
5.7 Legend. The certificate or certificates representing the
Securities shall be subject to a legend restricting transfer under the
Securities Act, such legend to be substantially as follows:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED
FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933. SUCH SHARES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT WHICH, EXCEPT IN
THE CASE OF AN EXEMPTION PURSUANT TO RULE 144 UNDER SAID ACT, IS
CONFIRMED IN A LEGAL OPINION SATISFACTORY TO THE COMPANY."
The certificates shall also include any legends required by any applicable state
securities laws.
The legend(s) endorsed on a stock certificate pursuant to this
Section 5.7 or on any certificate representing any of the Securities shall be
removed and the Parent Company or the Subsidiary Company shall issue a
replacement certificate without such legend to the holder of such certificate if
the Securities represented by such certificate are registered under the
Securities Act or if such holder provides to the Parent Company or the
Subsidiary Company an opinion of counsel to the effect that a public sale,
transfer or assignment of such Securities may be made without registration.
5.8 Restrictions on Conversion of Shares. Notwithstanding
anything to the contrary contained herein, no COES Preferred Shares may be
converted by a Holder to the extent that, after giving effect to the Conversion
Shares issued pursuant to a Notice of Conversion, the total number of shares of
CXI Common Stock deemed beneficially owned by such Holder (other than by virtue
of the ownership of COES Preferred Shares or COES Warrants or ownership of other
securities that have limitations on a Holder's rights to convert
17
or exercise similar to those limitations set forth herein), together with all
shares of CXI Common Stock deemed beneficially owned by Holder's "affiliates"
(as defined in Rule 144 under the Securities Act) that would be aggregated for
purposes of determining whether a group under Section 13(d) of the Exchange Act
exists, would exceed 4.99% of the total issued and outstanding shares of CXI
Common Stock, provided that each Holder shall have the right to waive this
restriction, in whole or in part, immediately in case of a pending Change in
Control Transaction and in any other case upon 61 days prior notice to the
Parent Company and the Subsidiary Company. The delivery of a Notice of
Conversion by any Holder shall be deemed a representation by such Holder it is
in compliance with this Section 5.8. A transferee of COES Preferred Shares shall
not be bound by this provision unless it expressly agrees to be so bound. The
term "deemed beneficially owned" as used in this Section 5.8 shall exclude
shares that might otherwise be deemed beneficially owned by reason of the
convertibility of the COES Preferred Shares.
Section 6. Conditions to the Purchaser's Obligation to
Purchase. The Parent Company and the Subsidiary Company understand that the
Purchaser's obligation to purchase the COES Preferred Shares is conditioned
upon:
(a) Acceptance by Purchaser of this Agreement
for the sale of the COES Preferred Shares, as evidenced by the execution of this
Agreement by its authorized officers;
(b) Delivery of the COES Preferred Shares and
COES Warrants to Xxxxxxxxx & Xxxxxx;
(c)(i) The delivery at the Closing of a certificate
from an authorized officer of the Parent Company certifying that all
representations and warranties of the Parent Company are true and correct as of
the Closing Date (in the form annexed hereto as Exhibit C1); (c)(ii) The
delivery at the Closing of a certificate from an authorized officer of the
Subsidiary Company certifying that all representations and warranties of the
Subsidiary Company are true and correct as of the Closing Date (in the form
annexed hereto as Exhibit C2); and
(d) A filed Certificate of Designation.
Section 7. Conditions to Parent Company's Obligation to Sell.
Purchaser understands that the Parent Company's obligation to sell the COES
Preferred Shares is conditioned upon:
(a) The receipt and acceptance by the Parent C
ompany of this Agreement to issue the COES Preferred Shares as evidenced by
execution of this Agreement by the President or any Vice President of the Parent
Company;
18
(b) Delivery to the Company, the Finder and
Counsel for Parent by Purchaser of good funds as payment in full for the
purchase of the COES Preferred Shares; and
(c) The delivery at the Closing of a certificate
from an authorized officer or representative of Purchaser certifying that all
representations and warranties of the Purchaser are true and correct as of the
Closing Date (in the form annexed hereto as Exhibit C3).
Section 8. Registration of the Shares; Compliance with the
Securities Act.
8.1 Definitions. For the purpose of this Section 8:
(a) the term "Registration Statement" shall mean
any registration statement required to be filed by Section 8.2 below, and shall
include any preliminary prospectus, final prospectus, exhibit or amendment
included in or relating to such registration statement; and
(b) the term "untrue statement" shall include
any untrue statement or alleged untrue statement, or any omission or alleged
omission to state in the Registration Statement a material fact required to be
stated therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
8.2 Registration Procedures and Expenses. The Parent
Company shall cause the Subsidiary Company to, and the Subsidiary Company shall:
(a) file with the SEC a registration statement
under the Securities Act on Form S-3, if the Subsidiary Company is eligible to
file a registration statement under such form, to register the Conversion Shares
and the Warrant Shares within thirty (30) days after the Closing Date and in
sufficient time to have such registration effective ninety (90) days from the
Closing Date; and if the Subsidiary Company is not eligible to file a
registration statement under Form S-3, to file with the SEC a registration
statement under the Securities Act on Form S-1 or any other form which is
appropriate, to register the Conversion Shares and the Warrant Shares within
sixty (60) days after the Closing Date and in sufficient time to have such
registration effective one hundred and twenty (120) days from the Closing Date.
(b) use its best efforts, subject to receipt of
necessary information from the Purchaser, to cause such Registration Statement
to become effective as promptly after filing as practicable;
(c) prepare and file with the SEC such
amendments and supplements to such Registration Statement and the prospectus
used in connection therewith as may be necessary to keep such Registration
Statement effective until termination of such obligation as provided in Section
8.9 below;
19
(d) furnish to the Purchaser with respect to the
CXI Common Stock registered on the Registration Statement (and to each
underwriter, if any, of such CXI Common Stock) such number of copies of
prospectuses in conformity with the requirements of the Securities Act and such
other documents as the Purchaser may reasonably request, in order to facilitate
the public sale or other disposition of all or any of the CXI Common Stock by
the Purchaser; provided, however, that the obligation of the Subsidiary Company
to deliver copies of prospectuses to the Purchaser shall be subject to the
receipt by the Subsidiary Company of reasonable assurances from the Purchaser
that the Purchaser will comply with the applicable provisions of the Securities
Act and of such other securities laws as may be applicable in connection with
any use of such prospectuses;
(e) file such documents as may be required of
the Subsidiary Company for normal securities law clearance for the resale of the
Common Stock in which states of the United States as may be reasonably requested
by the Purchaser; provided, however, that the Subsidiary Company shall not be
required in connection with this paragraph (e) to qualify as a foreign
corporation or execute a general consent to service of process in any
jurisdiction;
(f) bear all expenses in connection with the
procedures in paragraphs (a) through (e) of this Section 8.2 and the
registration of the CXI Common Stock on such Registration Statement and the
satisfaction of the blue sky laws of such states, including the reasonable fees
and expenses of legal counsel to the Purchaser in connection with the procedures
in paragraph (a) through (e) of this Section 8.2, other than underwriting
discounts and selling commissions or expenses required by law to be borne by
Purchaser; and
(g) in the event of the failure of Company to
procure registration of the CXI Common Stock underlying the COES Preferred
Shares within ninety (90) days from the Closing Date if the Registration
Statement is filed under Form S-3, or within one hundred (120) days from the
Closing Date if the Registration Statement is filed under Form S-1 or any other
appropriate forms, the Parent Company will pay Purchaser by wire transfer, as
liquidated damages for such failure and not as a penalty, one (1%) percent of
the Liquidation Preference (as defined below) of the COES Preferred Shares that
have not been converted, for each month, or any part thereof, that the
Registration Statement is not effective, or in the event of a Suspension (as
defined in Section 8.7) after such date. If the Parent Company does not remit
the damages to the Purchaser as set forth above, the Parent Company will pay the
Purchaser reasonable costs of collection, including attorneys fees, in addition
to the liquidated damages. Such payment shall be made to the Purchaser
immediately if the registration of the Conversion Shares and Warrant Shares is
not effected; provided, however, that the payment of such liquidated damages
shall not relieve the Subsidiary Company from its obligations to register the
Conversion Shares and Warrant Shares pursuant to this Section. The registration
of the Conversion Shares and Warrant Shares pursuant to this provision shall not
affect or limit Purchaser's other rights or remedies as set forth in this
Agreement. The "Liquidation Preference" for a Share shall equal $100 (subject to
adjustments for Reclassifications), plus all accrued and unpaid dividends (which
shall accrue through the Conversion Date, Redemption Date or the date liquidated
damages are paid, as applicable)
20
and any then unpaid liquidated damages (interest on which shall accrue at a rate
of 2% per month) arising under Sections 8.2(g), 10.2 or 10.6.
8.3 Underwriter. The Parent Company and the Subsidiary Company
understand that the Purchaser disclaims being an "underwriter" (as such term is
defined under the Securities Act and the rules and regulations promulgated
thereunder (an "Underwriter")), but Purchaser being deemed an Underwriter shall
not relieve the Parent Company and the Subsidiary Company of any obligation it
has hereunder.
8.4 Indemnification.
(a) General Indemnification. The Parent Company and the
Subsidiary Company together and the Purchaser agree to indemnify the other and
to hold the other harmless from and against any and all losses, damages,
liabilities, costs and expenses (including reasonable attorneys' fees) which the
other may sustain or incur in connection with the breach by the indemnifying
party of any representation, warranty or covenant made by it in this Agreement.
(b) Indemnification for Registration Statement.
(i) By Parent Company and Subsidiary Company. To
the extent permitted by law, the Parent Company and Subsidiary Company together
will indemnify and hold harmless each Holder, the directors, if any, of such
Holder, the officers, if any, of such Holder who sign the Registration
Statement, each person, if any, who controls such Holder, any underwriter (as
defined in the Securities Act) for the Holders and each person, if any, who
controls any such underwriter within the meaning of the Securities Act or the
Exchange Act, against any losses, claims, damages, expenses or liabilities
(joint or several) to which any of them may become subject under the Securities
Act, the Exchange Act or otherwise, insofar as such losses, claims, damages,
expenses or liabilities (or actions or proceedings, whether commenced or
threatened, in respect thereof) arise out of or are based upon any of the
following statements, omissions or violations (collectively, a "Violation"): (i)
any untrue statement or alleged untrue statement of a material fact contained in
the Registration Statement including any preliminary prospectus or final
prospectus contained therein or any amendments or supplements thereto, (ii) the
omission or alleged omission to state therein a material fact required to be
stated therein, or necessary to make the statements therein, in light of the
circumstance in which they are made, not misleading or (iii) any violation or
alleged violation by the Company of the Securities Act, the Exchange Act, any
state securities law or any rule or regulation promulgated under the Securities
Act, the Exchange Act or any state securities law; and the Company will
reimburse the Holders and each such underwriter or controlling person, promptly
as such expenses are incurred, for any legal or other expenses reasonably
incurred by them in connection with investigating or defending any such loss,
claim, damage, liability action or proceeding; provided, however, that the
indemnity agreement contained in this Section 8.4(b) shall not apply to amounts
paid in settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of the Parent Company and the
Subsidiary Company, which consents shall not be unreasonably withheld, nor shall
the Parent Company and Subsidiary Company
21
be liable in any such case for any such loss, claim, damage, liability or action
to the extent that it arises out of or is based upon a Violation which occurs in
reliance upon and in conformity with written information furnished expressly for
use in connection with such registration by the Holders or any such underwriter
or controlling person, as the case may be. Such indemnity shall remain in full
force and effect regardless of any investigation made by or on behalf of the
Holders or any such underwriter or controlling person and shall survive the
transfer of the Securities by Holders.
(ii) By Holders. To the extent permitted by law,
each Holder, severally and not jointly, will indemnify and hold harmless the
Subsidiary Company, each of its directors, each of its officers who have signed
the Registration Statement, each person, if any, who controls the Subsidiary
Company within the meaning of the Securities Act or the Exchange Act, any
underwriter and any other stockholder selling securities pursuant to the
Registration Statement or any of its directors or officers or any person who
controls such holder or underwriter, against any losses, claims, damages or
liabilities (joint or several) to which any of them may become subject, under
the Securities Act, the Exchange Act or other federal state law, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon any Violation, in each case to the extent (and only to the
extent) that such Violation occurs in reliance upon and in conformity with
written information furnished by such Holder expressly for use in connection
with such registration, and such Holder will reimburse any legal or other
expenses reasonably incurred by any of them in connection with investigating or
defending any such loss, claim, damage, liability or action; provided, however,
that the indemnity agreement contained in this subsection 8.4(b) shall not apply
to amounts paid in settlement of such loss, claim, damage, liability or action
if such settlement is effected without the consent of such Holder, which consent
shall not be unreasonably withheld; and provided further, that the Holder shall
be liable under this paragraph for only that amount of losses, claims, damages
and liabilities as does not exceed the net proceeds to such Holder as a result
of the sale of the Securities pursuant to such registration.
(c) Procedure for Indemnification. Promptly after
receipt by an indemnified party under this Section 8.4 of notice of the
commencement of any action (including any governmental action), such indemnified
party will, if a claim in respect thereof is to be made against any indemnifying
party under this Section 8.4, deliver to the indemnifying party a written notice
of commencement thereof and the indemnifying party shall have the right to
participate in, and, to the extent the indemnifying party so desires, jointly
with any other indemnifying party similarly noticed, to assume control of the
defense thereof with counsel mutually satisfactory to the parties; provided,
however, that an indemnified party shall have the right to retain its own
counsel, with the fees and expenses to be paid by the indemnifying party, if, in
the reasonable opinion of counsel for the indemnifying party, representation of
such indemnified party by the counsel retained by the indemnifying party would
be inappropriate due to actual or potential differing interests between such
indemnified party and any other party represented by such counsel in such
proceeding. The failure to deliver written notice to the indemnifying party
within a reasonable time of the commencement of any such action shall relieve
such indemnifying party of any liability to the indemnified party under this
Section 8.4 only to the extent
22
prejudicial to its ability to defend such action, but the omission so to deliver
written notice to the indemnifying party will not relieve it of any liability
that it may have to any indemnified party other than under this Section 8.4. The
indemnification required by this Section 8.4 shall be made by periodic payments
of the amount thereof during the course of the investigation or defense,
promptly as such expense, loss, damage or liability is incurred.
(d) Contribution. To the extent any indemnification by
an indemnifying party is prohibited or limited by law, the indemnifying party
agrees to make the maximum contribution with respect to any amounts for which it
otherwise would be liable under this Section 8.4 to the extent permitted by law,
provided that (i) no contribution shall be made under the circumstances where
the maker would not have been liable for indemnification under the fault
standards set forth in this Section 8.4, (ii) no seller of the Securities guilty
of fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any seller of the
Securities who was not guilty of such fraudulent misrepresentation and (iii)
contribution by any seller of the Securities shall be limited in amount to the
net amount of proceeds received by such seller from the sale of such Securities.
8.5 Information Available. So long as any registration
statement is effective covering the resale of the Conversion Shares or Warrant
Shares, the Parent Company and the Subsidiary Company will each furnish to
Purchaser:
(a) as soon as possible after available, one copy of
(i) each of its Annual Report to Stockholders (which Annual Report shall contain
financial statements audited in accordance with generally accepted accounting
principles in the United States of America by a national firm of certified
public accountants); (ii) if not included in substance in the Annual Report to
Stockholders, each of its annual report on Form 10-K within 100 days after the
end of each fiscal year of each Company, (iii) each of its Quarterly Reports to
Stockholders, and its quarterly report on Form 10-Q within sixty (60) days, and
(iv) a full copy of the registration statement covering the Conversion Shares
and Warrant Shares (the foregoing, in each case, excluding exhibits); and
(b) upon the reasonable request of Purchaser, such other
information that is generally available to the public.
8.6 Rule 144 Reporting. With a view to making available the
benefits of certain rules and regulations of the SEC which may at any time
permit the sale of the Conversion Shares and the Warrant Shares to the public
without registration, the Parent Company and the Subsidiary Company agrees to
use its best efforts to:
(a) make and keep public information available, as those
terms are understood and defined in Rule 144 under the Securities Act, at all
times after the effective date on which the Company becomes subject to the
reporting requirements of the Securities Act or the Exchange Act;
23
(b) use its best efforts to file with the SEC in a
timely manner all reports and other documents required of the Company under the
Securities Act and the Exchange Act;
(c) to furnish to Purchaser forthwith upon request a
written statement by the Parent Company or the Subsidiary Company as to its
compliance with the reporting requirements of said Rule 144, and of the
Securities Act and the Exchange Act, a copy of the most recent annual or
quarterly report of the Company, and such other reports and documents of the
Parent Company or the Subsidiary Company and other information in the possession
of or reasonably obtainable by the Parent Company or the Subsidiary Company as
Purchaser may reasonably request in availing itself of any rule or regulation of
the SEC allowing Purchaser to sell any such Conversion Shares or Warrant Shares
without registration.
8.7 Temporary Cessation of Offers and Sales by Purchaser. The
Purchaser acknowledges that there may occasionally be times when the Subsidiary
Company may be required to suspend the use of the prospectus forming part of the
Registration Statement (a "Suspension") until such time as an amendment to the
Registration Statement has been filed by the Company and declared effective by
the Commission, until the prospectus is supplemented or amended to comply with
the Securities Act, or until such time as the Subsidiary Company has filed an
appropriate report with the Commission pursuant to the Exchange Act. The
Subsidiary Company agrees to file any necessary amendments, supplements and
reports as soon as practicable under the circumstances. The Subsidiary Company
agrees to use its best efforts to cause a Suspension to be lifted within 10
business days during which time Purchaser agrees that it will not sell any
shares of Common Stock pursuant to such prospectus.
8.8 Transfer of Conversion Shares or Warrant Shares Stock
After Registration. Purchaser hereby covenants with the Parent Company and the
Subsidiary Company not to make any sale of the Conversion Shares or Warrant
Shares except either (i) in accordance with the Registration Statement, in which
case Purchaser covenants to comply with the requirement of delivering a current
prospectus, (ii) in accordance with Rule 144, in which case Purchaser covenants
to comply with Rule 144, or (iii) as otherwise permitted by applicable law.
8.9 Termination of Obligations. The obligations of the Parent
Company and Subsidiary Company pursuant to Sections 8.2, 8.3 and 8.6 hereof
shall cease and terminate upon the earlier to occur of (i) such time as all of
the Conversion Shares or Warrant Shares have been re-sold, or (ii) such time as
all of the Common Stock may be resold pursuant to Rule 144(k) under the
Securities Act.
Section 9. Legal Fees and Expenses. Each of the parties shall
pay its own fees and expenses (including the fees of any attorneys, accountants,
appraisers or others engaged by such party) in connection with this Agreement
and the transactions contemplated hereby.
24
Section 10. Conversion; Liquidated Damages.
10.1 Restrictions on Conversion. Conversion of all the COES
Preferred Shares may be made at the Conversion Price, the day following the date
that the Registration Statement for the CXI Common Stock underlying the COES
Preferred Stock and COES Warrants was declared effective by the SEC.
10.2 Notice of Conversion. Conversion of the COES Preferred
Shares to CXI Common Stock may be exercised in whole or in part by Purchaser
telecopying an executed and completed Notice of Conversion (in the form annexed
hereto as Exhibit D) to counsel for the Parent Company, with a copy to the
Parent Company and Subsidiary Company, and delivering the original Notice of
Conversion and the certificate representing the COES Preferred Shares to counsel
by hand or by express courier within three (3) business days of exercise. Each
date on which a Notice of Conversion is telecopied to and received by the Parent
Company in accordance with the provisions hereof shall be deemed a Conversion
Date. The Subsidiary Company will reissue and transmit the certificates in the
name of the Purchaser, or any other name as instructed by the Purchaser,
representing the CXI Common Stock transferable upon conversion of all or any
part of the COES Preferred Shares and COES Warrant Shares (and the Parent
Company will transmit any certificates for replacement COES Preferred Shares not
previously converted but included in the original certificate presented for
conversion) to the Purchaser via express courier within three (3) business days
after counsel for the Parent Company has received the original Notice of
Conversion and the certificate representing the COES Preferred Shares being so
converted. The Notice of Conversion and certificate representing the portion of
the COES Preferred Shares converted shall be delivered as follows:
To counsel of Parent Company:
Greenberg, Traurig, Hoffman, Lipoff, Xxxxx & Xxxxxxx
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, XX 00000
Attn: Xxxxxxx X. Xxxxx, Esq.
Telephone: 000-000-0000
Facsimile: 000-000-0000
To the Parent Company:
Commodore Environmental Services, Inc.
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, XX 00000
Attn.: Bentley X. Xxxx
Telephone: 000-000-0000
Facsimile: 000-000-0000
25
To the Subsidiary Company:
Commodore Applied Technologies, Inc.
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, XX 00000
Attn.: Bentley X. Xxxx
Telephone: 000-000-0000
Facsimile: 000-000-0000
or to such other person at such other place as the Parent Company shall
designate to the Purchaser in writing.
In the event that the COES Preferred Shares are not converted
within three (3) business days of the Conversion Date, the Parent Company shall
be liable to Purchaser for actual damages incurred from the fourth business day
following the Conversion Date through the ninth business day following the
Conversion Date for such failure (provided that Purchaser has delivered the
original valid Notice of Conversion and the original certificate(s) representing
the COES Preferred Shares to be converted, or an affidavit and indemnity
agreement as to lost certificates reasonably satisfactory to the Company). In
the event the COES Preferred Shares are not converted by the tenth (10th)
business day following the Conversion Date, the Parent Company shall pay to the
Purchaser, by wire transfer, as liquidated damages for such failure and not as a
penalty, an amount in cash equal to one (1%) percent per day of the Liquidation
Preference for the COES Preferred Shares to be converted which shall run from
the tenth (10th) business day following the Conversion Date; provided, however,
that actual damages and liquidated damages for a failure to deliver certificates
of CXI Common Stock shall be determined in accordance with Section 10.6, if both
of the following conditions are satisfied by the Parent Company: (i) the failure
to deliver certificates of CXI Common Stock is the result of a lack of available
shares of CXI Common Stock and (ii) the Parent Company commences, within ten
(10) business days after the initial Conversion Date to purchase or otherwise
acquire the number of shares of CXI Common Stock which is sufficient to permit
conversion of all COES Preferred Shares then outstanding at the Hypothetical
Conversion Price (as hereinafter defined) then in effect.
10.3 Mandatory Conversion. The COES Preferred Shares are
subject to mandatory conversion after five (5) years from the Closing Date, at
which time all COES Preferred Shares will automatically be converted at the
Conversion Price, upon the terms set forth in this section. Such five year
period will be extended by the number of days during such period that (i) the
Subsidiary Company's Common Stock has been Delisted and/or (ii) a Suspension has
been in effect and by the number of days after the 90th day or the 120th day,
whichever date is applicable as provided in Section 8.2(g) herein, that
Registration Statement was not declared effective. Any particular day in which
more than one of the foregoing condition events shall have been in effect shall
only be counted once in determining the number of days by which to extend the
five year period prior to mandatory conversion. In addition, mandatory
conversion shall not occur for so long as certain default events specified in
Section 5(e) of the Certificate of Designation are continuing.
26
10.4 Reservation of CXI Common Stock Transferable Upon
Conversion. The Parent Company shall at all times reserve and keep available out
of its holdings of shares of CXI Common Stock, such number of shares of CXI
Common Stock as shall from time to time be sufficient to effect the conversion
of all then outstanding COES Preferred Shares and COES Warrants, the sufficiency
of which shall be determined (in the case of the COES Preferred Shares) by using
a Conversion Price (the "Hypothetical Conversion Price") derived from a
hypothetical closing market price that is 75% of either (i) the actual Average
Closing Bid Price on the Closing Date or (ii) the actual Average Closing Bid
Price from time to time, whichever is lower, and in the case of the COES
Warrants, by the exercise price thereof. The Parent Company hereby covenants and
agrees that if at any time the Hypothetical Conversion Price falls to a level
that would not enable all outstanding COES Preferred Shares to be fully
converted and the outstanding COES Warrants to be fully exercised, the Parent
Company will promptly purchase or otherwise acquire the number of shares of CXI
Common Stock sufficient to permit the conversion of all COES Preferred Shares
then outstanding at the Hypothetical Conversion Price then in effect and the
exercise of all outstanding COES Warrants.
10.5 Liquidated Damages. In the event of a Delisting, a
Cumulative Suspension or Insufficient CXI Common Stock (each a "Damage Event"),
the Parent Company will pay to Purchaser (and to all other holders of the
Shares), by wire transfer, as liquidated damages for such non-availability and
not as a penalty, an amount in cash equal to 2% per month of the Liquidation
Preference of only those COES Preferred Shares then eligible for conversion,
without regard to Section 5.8, for the first two months after the occurrence of
a Damage Event, and 3% per month for each month thereafter. Similar liquidated
damages shall be paid with respect to any COES Preferred Shares not initially
eligible for conversion when the Damage Event first occurred but which
subsequently become eligible for conversion, without regard to Section 5.8,
commencing in the first month that such COES Preferred Shares become eligible
for such conversion. Such liquidated damages shall continue to accrue and shall
be payable until the Damage Event has been cured, and, if not paid, interest
thereon shall accrue at a rate of 2% per month. At the Purchaser's election,
such liquidated damages may be paid in cash or may be added to the principal of
the COES Preferred Shares for subsequent conversion purposes. Notwithstanding
the foregoing, in the case of a Delisting, after six months from the date of
such Delisting, the Parent Company shall have the option to force Purchaser to
as promptly as possible convert (in increments of no less than $50,000) all or
part of its COES Preferred Shares, subject to Purchaser being able to sell the
underlying Conversion Shares, and simultaneously sell such Conversion Shares
(where the conversion price therefor shall not be the Conversion Price but
instead shall equal 85% of the Purchaser's sale price of the Conversion Shares,
all as determined by Purchaser's actual trading records (to be provided to the
Company). In no event may the Company force Purchaser to convert less than
$50,000 of COES Preferred Shares at any one time.
Section 11. Redemption By Parent Company.
11.1 Parent Company's Right to Redeem. The Parent Company
shall have the right, at any time and from time to time, in its sole discretion,
to redeem in whole or in
27
part the COES Preferred Shares then outstanding, except that if the Purchaser or
any Holder of the COES Preferred Shares has submitted a Notice of Conversion,
the Parent Company shall not have the right to redeem the COES Preferred Shares
which were submitted for conversion and the certificates representing Conversion
Shares should be delivered promptly according to Section 10.2 herein. If the
Parent Company elects to redeem some, but not all, of the COES Preferred Shares,
the Parent Company shall redeem the COES Preferred Shares pro rata among the
Holders of all the COES Preferred Shares then outstanding. The date of the
Parent Company's redemption of COES Preferred Shares shall be referred to as the
"Redemption Date."
11.2 Redemption Price. The redemption price per COES
Preferred Share shall equal $125.
11.3 Mechanics of Redemption; Purchaser's Conversion Rights.
The Parent Company shall effect each such redemption by giving notice of its
election to redeem ("Redemption Notice"), by facsimile, by 5 P.M. New York City
time on the Redemption Date and shall provide a copy of such redemption notice
by overnight or 2-day courier, to Purchaser, all other Holders of COES Preferred
Shares and the Parent Company's Transfer Agent. Such redemption notice shall
indicate whether the Parent Company will redeem all or part of the COES
Preferred Shares. Upon the giving of any such Redemption Notice, and until the
earlier of either payment of the applicable redemption price or fifteen (15)
business days after the Redemption Date (or later as provided in Section 6(d)
below), the conversion rights in respect of the COES Preferred Shares and any
other outstanding shares of COES Convertible Preferred Stock called for
redemptions shall be suspended. Subject to the Parent Company's payment of the
applicable redemption price, the accrual of dividends in connection with the
shares of COES Convertible Preferred Stock called for redemption will suspend on
the Redemption Date.
11.4 Payment of Redemption Price. Upon receipt of a
Redemption Notice, Purchaser shall send its COES Preferred Shares being redeemed
to the Parent Company or its Transfer Agent within three (3) business days of
the receipt of such Redemption Notice, and the Parent Company shall pay the
applicable redemption price within fifteen (15) business days of the Redemption
Date (such fifteen (15) business day period shall be extended for each day the
COES Preferred Shares being redeemed have not been delivered to the Parent or
its Transfer Agent beyond the third (3rd) business day after receipt of the
Redemption Notice). The Parent Company shall not be obligated to deliver the
redemption price unless the COES Preferred Shares so redeemed are delivered to
the Parent Company or its Transfer Agent, or, in the event one or more
certificates have been lost, stolen, mutilated or destroyed, Purchaser delivers
to the Parent Company a lost certificate affidavit reasonably satisfactory to
Parent Company and its Transfer Agent.
11.5 Default of Parent Company's Redemption. If the Parent
Company fails to pay the applicable redemption price to the Purchaser and/or
other Holders of the COES Preferred Shares being redeemed by the Parent Company
within fifteen (15) business days of the Redemption Date (such fifteen (15)
business day period shall be extended for each day the COES Preferred Shares
being redeemed have not been delivered to the Parent or its
28
Transfer Agent beyond the third (3rd) business day after receipt of the
Redemption Notice), the Parent Company shall be deemed to have defaulted on
their right to redeem such COES Preferred Shares. Such COES Preferred Shares
shall thereafter become immediately convertible and the Conversion Price for
such COES Preferred Shares shall be equal to 75% of the Average Closing Bid
Price. The Conversion Price for such COES Preferred Shares shall not be subject
to a floor.
11.6 Blackout Period. Notwithstanding the foregoing, the
Parent Company may not either send out a redemption notice or effect a
redemption during a Blackout Period (defined as a period during which the Parent
Company's or the Subsidiary Company's officers or directors would not be
entitled to buy or sell stock because of their holding of material non-public
information). In the event the Parent Company initiates a redemption during a
Blackout Period without having first made public material non-public
information, the Parent Company or the Subsidiary Company shall disclose the
non-public information that resulted in the Blackout Period, and no redemption
shall be effected until at least 10 days after the Company or the Subsidiary
Company shall have given the Holder written notice that the Blackout Period has
been lifted.
Section 12. Notices. All notices, requests, consents and other
communications hereunder shall be in writing, shall be mailed by first class
registered or certified airmail, postage prepaid, or shall be sent by overnight
courier or by facsimile, and shall be deemed given when received:
(a) if to the Parent Company, to
Commodore Environmental Services, Inc.
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, XX 00000
Attn.: Bentley X. Xxxx
Telephone: 000-000-0000
Facsimile: 000-000-0000
copy to:
Greenberg, Traurig, Hoffman, Lipoff, Xxxxx & Quentel
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, XX 00000
Attn: Xxxxxxx X. Xxxxx, Esq.
Telephone: 000-000-0000
Facsimile: 000-000-0000
or to such other person at such other place as the Parent Company shall
designate to the Purchaser in writing;
29
(b) if to the Subsidiary Company:
Commodore Applied Technologies, Inc.
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, XX 00000
Attn.: Bentley X. Xxxx
Telephone: 000-000-0000
Facsimile: 000-000-0000
copy to:
Greenberg, Traurig, Hoffman, Lipoff, Xxxxx & Quentel
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, XX 00000
Attn: Xxxxxxx X. Xxxxx, Esq.
Telephone: 000-000-0000
Facsimile: 000-000-0000
or to such other person at such other place as the Subsidiary Company shall
designate to the Purchaser in writing;
(c) if to the Purchaser, to
Okemo Partners Limited
00 Xxx Xxxx Xxxxx Xxxx, Xxxxx X0
Xxxxxxxx, XX 00000
Attn.: Xxx Xxxxxxx
Telephone: 000-000-0000
Facsimile: 000-000-0000
copy to:
Xxxxxxxxx & Xxxxxx
000 Xxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Attn.: Xxxxxxx X. Xxxxx, Esq.
Telephone: 000-000-0000
Facsimile: 212-986-2399
or at such other address or addresses as may have been furnished to the Parent
Company and the Subsidiary Company in writing; or
(c) if to any transferee or transferees of a Purchaser,
at such address or addresses as shall have been furnished to the Parent Company
and the Subsidiary Company at the time of the transfer or transfers, or at such
other address or addresses as
30
may have been furnished by such transferee or transferees to the Parent Company
and the Subsidiary Company in writing.
Section 13. Miscellaneous.
13.1 Entire Agreement. This Agreement and the Exhibits hereto
embodies the entire agreement and understanding between the parties hereto with
respect to the subject matter hereof and supersedes all prior oral or written
agreements and understandings relating to the subject matter hereof. No
statement, representation, warranty, covenant or agreement or any kind not
expressly set forth in this Agreement or the Exhibits hereto shall affect, or be
used to interpret, change or restrict, the express terms and provisions of this
Agreement.
13.2 Amendments. This Agreement may not be modified or amended
except pursuant to an instrument in writing signed by the Parent Company, the
Subsidiary Company and by Purchaser.
13.3 Headings. The headings of the various sections of this
Agreement have been inserted for convenience of reference only and shall not be
deemed to be part of this Agreement.
13.4 Severability. In case any provision contained in this
Agreement should be invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein shall not in any way be affected or impaired thereby.
13.5 Governing Law/Jurisdiction. This Agreement will be
construed and enforced in accordance with and governed by the laws of the State
of New York, except for matters arising under the Securities Act, without
reference to principles of conflicts of law. Each of the parties consents to the
jurisdiction of the courts of or located in the State of New York, specifically
the Southern District of New York and/or the Supreme Court of the State of New
York in connection with any dispute arising under this Agreement and hereby
waives, to the maximum extent permitted by law, any objection, including any
objection based on forum non conveniens, to the bringing of any such proceeding
in such jurisdictions. Each party hereby agrees that if another party to this
Agreement obtains a judgment against it in such a proceeding, the party which
obtained such judgment may enforce same by summary judgment in the courts of any
country having jurisdiction over the party against whom such judgment was
obtained, and each party hereby waives any defenses available to it under local
law and agrees to the enforcement of such a judgment. In addition, the parties
agree that the party against whom such judgment was obtained will pay the legal
fees of the party obtaining such judgment. Each party to this Agreement
irrevocably consents to the service of process in any such proceeding by the
mailing of copies thereof by registered or certified mail, postage prepaid, to
such party at its address set forth herein. Nothing herein shall affect the
right of any party to serve process in any other manner permitted by law.
13.6 Recovery of Attorney's Fees. Should any party bring an
action to enforce the terms of this Agreement then, if Purchaser prevails in
such action it should be
31
entitled to recovery of its attorney's fees from the Parent Company or the
Subsidiary Company, and if the Parent Company or the Subsidiary Company prevails
in such action it shall be entitled to recovery of its attorney's fees from the
Purchaser.
13.7 Fees. Notwithstanding Section 13.6, the Parent Company
and the Subsidiary Company acknowledge that Purchaser shall have no
responsibility for the payment of any of its fees in connection with this
offering.
13.8 Counterparts/Facsimile. This Agreement may be executed
in two or more counterparts, each of which shall constitute an original, but
all of which, when taken together, shall constitute but one instrument, and
shall become effective when one or more counterparts have been signed by each
party hereto and delivered to the other party. In lieu of the original, a
facsimile transmission or copy of the original shall be as effective and
enforceable as the original.
13.9 Publicity. The Purchaser shall not issue any press
releases or otherwise make any public statement with respect to the transactions
contemplated by this Agreement without the prior written consent of the Parent
Company and the Subsidiary Company, except as may be required by applicable law
or regulation.
13.10 Survival. The representations and warranties in this
Agreement shall survive Closing.
32
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be signed by their duly authorized representatives the day and year
first above written.
COMMODORE ENVIRONMENTAL SERVICES, INC.
By /s/ XXXXXXXXXXXXXXXXXXXXX
-------------------------------------------
Officer
COMMODORE APPLIED TECHNOLOGIES, INC.
By /s/ XXXXXXXXXXXXXXXXXXXXX
------------------------------------------
Officer
PURCHASER: OKEMO PARTNERS LIMITED
By ___________________________________________
Officer
33
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be signed by their duly authorized representatives the day and year
first above written.
COMMODORE ENVIRONMENTAL SERVICES, INC.
By
-------------------------------------------
Officer
COMMODORE APPLIED TECHNOLOGIES, INC.
By
------------------------------------------
Officer
PURCHASER: OKEMO PARTNERS LIMITED
By /s/ XXXXXXXXXXXXXXXXXXXXX
-------------------------------------------
Officer
33
EXHIBIT A
CERTIFICATE OF DESIGNATION
EXHIBIT B
FORM OF STOCK PURCHASE WARRANT
EXHIBIT C1
COMMODORE ENVIRONMENTAL SERVICES, INC.
COMPLIANCE CERTIFICATE
The undersigned, an executive officer of COMMODORE ENVIRONMENTAL
SERVICES, INC., hereby certifies that the representations and warranties made by
Commodore Environmental Services, Inc. in the 7% Preferred Stock Securities
Purchase Agreement dated May 20, 1997 by and between Commodore Environmental
Services, Inc., Commodore Applied Technologies, Inc. and Okemo Partners Limited
were true and correct as of the date such representations and warranties were
made and are true and correct in all material respects as of the date hereof
with the same force and effect as through such representations and warranties
had been made on and as of the date hereof.
IN WITNESS WHEREOF, the undersigned has signed this
Certificate as of this 20th day of May 1997.
COMMODORE ENVIRONMENTAL SERVICES, INC.
By __________________________________________
Name ________________________________________
Title _______________________________________
EXHIBIT C2
COMMODORE APPLIED TECHNOLOGIES, INC.
COMPLIANCE CERTIFICATE
The undersigned, an executive officer of COMMODORE APPLIED
TECHNOLOGIES, INC., hereby certifies that the representations and warranties
made by Commodore Applied Technologies, Inc. in the 7% Preferred Stock
Securities Purchase Agreement dated May 20, 1997 by and between Commodore
Environmental Services, Inc., Commodore Applied Technologies, Inc. and Okemo
Partners Limited were true and correct as of the date such representations and
warranties were made and are true and correct in all material respects as of the
date hereof with the same force and effect as through such representations and
warranties had been made on and as of the date hereof.
IN WITNESS WHEREOF, the undersigned has signed this
Certificate as of this 20th day of May 1997.
COMMODORE APPLIED TECHNOLOGIES, INC.
By __________________________________________
Name ________________________________________
Title _______________________________________
EXHIBIT C3
PURCHASER
COMPLIANCE CERTIFICATE
The undersigned, _________, __________________________________
of OKEMO PARTNERS LIMITED ("Purchaser"), hereby certifies that the
representations and warranties made by Purchaser in the 7% Preferred Stock
Securities Purchase Agreement dated May 20, 1997 between Commodore Environmental
Services, Inc., Commodore Applied Technologies, Inc. and Purchaser were true and
correct as of the date such representations and warranties were made and are
true and correct in all material respects as of the date hereof with the same
force and effect as through such representations and warranties had been made on
and as of the date hereof.
IN WITNESS WHEREOF, the undersigned has signed this
Certificate as of this 20th day of May 1997.
PURCHASER
OKEMO PARTNERS LIMITED
By __________________________________________
Name ________________________________________
Title _______________________________________
EXHIBIT D
NOTICE OF CONVERSION
(To be Executed by the Registered Holder in order to Convert the
7% Preferred Stock)
The undersigned hereby irrevocably elects to convert ___________shares
of COES Preferred Stock represented by above Certificate No. into shares of
common stock of COMMODORE APPLIED TECHNOLOGIES, INC. (the "Subsidiary")
according to the conditions hereof, as of the date written below.
The undersigned represents and warrants that:
All offers and sales by the undersigned of the shares of Common Stock
issuable to the undersigned upon conversion of the COES Preferred
Shares shall be made pursuant to an exemption from registration under
the Act, or pursuant to registration of the Common Stock under the
Securities Act of 1933, as amended.
________________________________ ________________________________
Date of Conversion Applicable Conversion Price
________________________________ ________________________________
Number of Shares of Common Stock $ Amount of Conversion
upon Conversion
________________________________ ________________________________
Signature Name
Address: Delivery of Shares to:
THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE UNITED STATES SECURITIES AND
EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE PURSUANT TO AN
EXEMPTION FROM REGISTRATION UNDER REGULATION D PROMULGATED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"). THIS SUBSCRIPTION AGREEMENT
SHALL NOT CONSTITUTE AN OFFER TO SELL NOR A SOLICITATION OF AN OFFER TO BUY THE
SECURITIES IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION WOULD BE
UNLAWFUL. THE SECURITIES ARE "RESTRICTED" AND MAY NOT BE RESOLD OR TRANSFERRED
EXCEPT AS PERMITTED UNDER THE ACT PURSUANT TO REGISTRATION OR EXEMPTION
THEREFROM.
7% PREFERRED STOCK
SECURITIES PURCHASE AGREEMENT
COMMODORE ENVIRONMENTAL SERVICES, INC.
AND
COMMODORE APPLIED TECHNOLOGIES, INC.
THIS AGREEMENT is made as of the 20th day of May, 1997, by and
between COMMODORE ENVIRONMENTAL SERVICES, INC., traded on the "Pinksheets" under
the symbol "COES" (the "Parent Company"), a corporation, with its principal
office at 000 Xxxx 00xx Xxxxxx, Xxx Xxxx, XX 00000, COMMODORE APPLIED
TECHNOLOGIES INC., AMEX symbol "CXI" (the "Subsidiary Company"), a corporation,
with its principal office at 000 Xxxx 00xx Xxxxxx, Xxx Xxxx, XX 00000 and
AMERICAN INVESTMENT GROUP OF NEW YORK, L.P. (the "Purchaser"), with its
principal office at 00 Xxx Xxxx Xxxxx Xxxx, Xxxxx X0, Xxxxxxxx, XX 00000.
IN CONSIDERATION of the mutual covenants contained in this
Agreement, the Parent Company, Subsidiary Company and the Purchaser agree as
follows:
Section 1. Certain Definitions. For purposes of this Agreement:
"Change in Control Transaction" means the date the Parent
Company or the Subsidiary Company (i) sells or otherwise conveys all or
substantially all of its assets or (ii) effects a transaction (by merger or
otherwise) in which more than 50% of the voting power of the Parent Company or
the Subsidiary Company is disposed of, directly or indirectly, or if within any
12 month period there is a change of more than 50% of the members of the Parent
Company's or the Subsidiary Company's Board of Directors, or if any other
person, entity or group (as defined in Section 13(d) of the Exchange Act) and/or
any of their affiliates or associates acquires in excess of 50% of the Common
Stock.
"Closing Date" means the date agreed to by the parties for the
delivery of the stock certificate against a wire transfer of the funds to the
Parent Company.
"Closing" means the completion of the purchase and sale of the
COES Preferred Shares on the Closing Date.
"COES Convertible Preferred Stock" means the 60,000 shares of
Series D Preferred Stock of the Parent Company, $.01 par value, convertible into
CXI Common Stock as hereinafter provided and which has the rights, preferences
and privileges set forth in the Certificate of Designation attached hereto as
Exhibit A (the "Certificate of Designation").
"COES Preferred Shares" means the shares of COES Convertible
Preferred Stock purchased hereunder.
"Conversion Date" means the date on which the Purchaser has
telecopied the Notice of Conversion to counsel for the Parent Company.
"Conversion Price" means an amount equal to a fifteen (15%)
percent discount from the closing bid price of the CXI Common Stock as reported
by Bloomberg, L.P. ("Bloomberg") averaged for the previous five (5) business
days ending on the day before the Conversion Date (the "Average Closing Bid
Price"); provided, however, if the average of the closing bid price of the CXI
Common Stock, as reported by Bloomberg ("Floor Average"), for any consecutive
thirty (30) days is equal or less than $2.00 (such thirtieth (30th) day shall be
the "First Trigger Date"), the conversion price shall equal $2.00; if the Floor
Average for any consecutive thirty (30) days beginning any day after the First
Trigger Date is less than $2.00 ("Second Trigger Date"), the conversion price
shall equal $1.90; if the Floor Average for any thirty (30) days beginning any
day after the Second Trigger Date is less than $1.90 (the "Third Trigger Date"),
the conversion price shall equal $1.80; if the Floor Average for any consecutive
thirty (30) days beginning any day after the Third Trigger Date is less than
$1.80 (the "Fourth Trigger Date"), the conversion price shall equal $1.70; if
the Floor Average for any consecutive thirty (30) days beginning any day after
the Fourth Trigger Date is less than $1.70 (the "Fifth Trigger Date"), the
conversion price shall equal $1.60; if the Floor Average for any consecutive
thirty (30) days beginning any day after the Fifth Trigger Date is less than
$1.60, the conversion price shall equal $1.50. Subject to Section 11.5 herein,
in no event shall the Conversion Price be lower than $1.50 per share of CXI
Common Stock. If the CXI Common Stock is not traded on the American Stock
Exchange, the Average Closing Bid Price shall be the average closing bid price
(and if not available, the mean of the high and low prices) of the Common Stock
on the over-the-counter-market or the principal national securities exchange or
the Nasdaq National Market System or Nasdaq SmallCap Market System on which the
CXI Common Stock is traded for the previous five (5) business days ending on the
day before the Conversion Date.
The Conversion Price shall be equitably adjusted accordingly
on a pro rata basis in the event of the happening of certain events that would
affect the CXI Common Stock or COES Convertible Preferred Stock's value
including, but not limited to, forward and reverse stock splits, issuance of
stock dividends, subdivision of shares, combinations, reclassifications, or the
like (collectively "Reclassifications"). An adjustment made pursuant to this
section shall become effective immediately after the effective date of such
event retroactive to the record date, if any, for such an event.
"Convertible Date" means the date on which the COES Preferred
Shares will become convertible, which is the day following the date that the
Registration Statement for
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the shares of CXI Common Stock underlying the COES Preferred Stock and COES
Warrants has been declared effective by the Securities and Exchange Commission
("SEC").
"Cumulative Suspension" means the date a Suspension (as
defined in Section 8.7) has occurred and is continuing or the date that is the
15th day in the aggregate that more than one Suspension has occurred since the
effective date of the Registration Statement.
"CXI Common Stock" means the underlying Common Stock of the
Subsidiary Company, $.001 par value.
"Delisting" means the date the CXI Common Stock is delisted
from AMEX and is not otherwise listed on the Nasdaq Stock Market or other
national securities exchange.
"Holder" means a holder of COES Preferred Shares.
"Insufficient CXI Common Stock" means the date the number of
shares of CXI Common Stock held by the Parent Company is not sufficient to
effect the conversion of all outstanding COES Preferred Shares then eligible for
conversion (whether or not the Holders have duly delivered Notices of
Conversion).
"Purchase Price" means the aggregate purchase price of the
COES Preferred Shares purchased.
Section 2. Authorization and Sale of Shares.
2.1 Authorization. Subject to the terms and conditions of this
Agreement, the Parent Company has authorized the sale and issuance of the COES
Preferred Shares.
2.2 Agreement to Sell and Purchase the Shares. The Parent
Company will sell and the Purchaser will buy, in reliance upon the
representations and warranties of the Parent Company, Subsidiary Company and
Purchaser contained in this Agreement, upon the terms and conditions hereinafter
set forth, Thirty Thousand (30,000) COES Preferred Shares of COES Convertible
Preferred Stock for an aggregate purchase price of Three Million Dollars
($3,000,000) for all such COES Preferred Shares based on U.S. $100 per share.
The COES Preferred Shares shall pay a 7% cumulative dividend, payable in cash or
CXI Common Stock at the Conversion Price, at the discretion of the Parent
Company, at the time of each conversion. Such purchase and sale shall occur on
the Closing Date. In addition, Parent Company will transfer to Purchaser, for no
additional consideration, five-year warrants ("COES Warrants") to purchase ten
(10) shares of CXI Common Stock for each COES Preferred Share purchased,
initially exercisable on the Convertible Date and for a period of five years
thereafter, at an exercise price equal to 110% of the average closing bid prices
of the CXI Common Stock, as reported by Bloomberg, over the 5-day trading period
ending on the day prior to the Closing Date.
2.3 Subsidiary Company. Whereas the Purchaser is purchasing
COES Preferred Shares from the Parent Company, and the Parent Company is
transferring CXI
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Common Stock to the Purchaser upon conversion of COES Preferred Shares and
exercise of COES Warrants, the Parent Company hereby agrees to immediately remit
2.5% of the Purchase Price ($2.50 per COES Preferred Share which has a
subscription price of $100 per COES Preferred Share) at the Closing to the
Subsidiary Company, representing a portion of the $150,000 of aggregate
consideration for the Subsidiary Company's agreement to perform its obligations
as set forth in this Agreement and the Warrant Agreement, a form of which is
attached hereto as Exhibit B.
2.4 Time and Place of Closing. The Closing shall be held at
the offices of Xxxxxxxxx & Xxxxxx, 000 Xxxxx Xxxxxx, 00xx Xxxxx, Xxx Xxxx, XX
00000 as promptly as practicable as agreed to by the parties to this Agreement,
but no later than May 15, 1997 at which time either party may terminate this
Agreement.
2.5 Payment and Delivery. At or prior to the Closing, the
following shall occur:
(a) Provided that Purchaser has been notified
by Xxxxxxxxx & Zivian that the Parent Company has delivered certificates
representing the COES Preferred Shares and COES Warrants as provided in Section
2.5(b) below, Purchaser shall remit by wire transfer the Purchase Price as
payment in full for the COES Preferred Shares as follows: 89% of the Purchase
Price ($5,340,000) directly to the Parent Company, 9% of the Purchase Price
($540,000) directly to Avalon Research Group, Inc. (the "Finder"), and 2% of the
Purchase Price ($120,000) directly to Xxxxxxx X. Xxxxx.
(b) The Parent Company shall deliver or cause
to be delivered to Xxxxxxxxx & Zivian certificates representing the COES
Preferred Shares and the COES Warrants, registered in the name of Purchaser (or
any nominee designated by Purchaser at or prior to the Closing Date), free and
clear of all liens, claims, charges and encumbrances. Purchaser shall receive
such certificates from Xxxxxxxxx & Xxxxxx, as applicable, after the Parent
Company, Finder and Xxxxxxx X. Xxxxx have received the Purchase Price directly
from Purchaser.
(c) Wire instructions for the Parent Company
has been separately provided to the Purchaser's counsel.
Section 3. General Representations and Warranties of the
Parent Company. The Parent Company hereby represents and warrants to, and
covenants with, the Purchaser that the following are true and correct as of the
date hereof and as of the Closing Date.
3.1 Organization; Qualification. The Parent Company is a
corporation duly organized and validly existing under the laws of the State of
Delaware and is in good standing under such laws. The Parent Company has all
requisite corporate power and authority to own, lease and operate its properties
and assets, and to carry on its business as presently conducted. The Parent
Company is qualified to do business as a foreign corporation in each
jurisdiction in which the ownership of its property or the nature of its
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business requires such qualification, except where failure to so qualify would
not have a material adverse effect on the Parent Company.
3.2 Capitalization. The authorized capital stock of the Parent
Company is as set forth in footnote 12 of the audited consolidated financial
statements of the Parent Company set forth in its Form 10-K for the fiscal year
ended December 31, 1996, a true copy of which has been supplied to Purchaser.
60,000 shares of the Parent Company's non-voting preferred stock has been
designated Series D Preferred Stock, $.01 par value. The Series D Preferred
Stock, when issued, shall be duly authorized and validly issued and are fully
paid and nonassessable.
3.3 CXI Common Stock Transferable Upon Conversion of COES
Preferred Shares or Exercise of COES Warrants. The Parent Company currently owns
Fifteen Million (15,000,000) shares of CXI Common Stock, all of which have been
duly authorized and validly issued and are fully paid and nonassessable. The
Parent Company will reserve from its holdings of CXI Common Stock a sufficient
number of shares of CXI Common Stock to permit the conversion in full of the
outstanding COES Preferred Shares and the exercise in full of the COES Warrants.
As of the Closing Date, the Parent Company had reserved sufficient shares of CXI
Common Stock for transfer to Purchaser upon exercise of the COES Preferred
Shares which are convertible, at Purchaser's option, at the Conversion Price, as
per Section 10 of this Agreement, and upon exercise of the COES Warrants. If the
Parent Company does not own sufficient shares of CXI Common Stock for transfer
to the Purchaser upon conversion of COES Preferred Shares and/or exercise of
COES Warrants, the Parent Company hereby agrees to promptly purchase or
otherwise acquire the sufficient amount of shares of CXI Common Stock and
transfer such shares to the Purchaser upon conversion of COES Preferred Shares
and/or exercise of COES Warrants.
Except for the consent of National Securities Corporation,
which has been obtained, the Parent Company has all requisite corporate right,
power and authority to transfer the shares of CXI Common Stock in its holdings
to Purchaser upon conversion of the COES Preferred Shares and exercise of the
COES Warrants.
3.4 Authorization. The Parent Company has all requisite
corporate right, power and authority to execute and deliver this Agreement and
to consummate the transactions contemplated hereby. All corporate action on the
part of the Parent Company, its directors and stockholders necessary for the
authorization, execution, delivery and performance of this Agreement by the
Parent Company, the authorization, sale, issuance and delivery of the COES
Preferred Shares and the performance of the Parent Company's obligations
hereunder has been taken. This Agreement has been duly executed and delivered by
the Parent Company and constitutes a legal, valid and binding obligation of the
Parent Company enforceable in accordance with its terms, subject to laws of
general application relating to bankruptcy, insolvency and the relief of debtors
and rules of law governing specific performance, injunctive relief or other
equitable remedies, and to limitations of public policy as they may apply to the
indemnification provisions set forth in Section 8.4 of this Agreement. Upon
their issuance, transfer and delivery pursuant to this Agreement, the COES
Preferred Shares, COES Warrants and shares of CXI Common Stock transferable
5
upon conversion of the COES Preferred Shares (the "Conversion Shares") and
exercise of the COES Warrants (the "Warrant Shares") (collectively, the
"Securities") will be validly issued, fully paid and nonassessable and will be
free of any liens or encumbrances; provided, however, that the COES Preferred
Shares and COES Warrants are subject to restrictions on transfer under state
and/or federal securities laws. The issuance and sale of the COES Preferred
Shares and COES Warrants will not give rise to any preemptive right or right of
first refusal or right of participation on behalf of any person. Upon
registration of the Conversion Shares and the Warrant Shares pursuant to Section
8 of this Agreement, there shall be no restriction on the transferability
thereof other than applicable prospectus delivery requirements.
3.5 No Conflict. The execution and delivery of this Agreement
do not, and the consummation of the transactions contemplated hereby will not,
conflict with, or result in any violation of, or default (with or without notice
or lapse of time, or both), or give rise to a right of termination, cancellation
or acceleration of any obligation or to a loss of a material benefit, under, any
provision of the Articles of Incorporation, and any amendments thereto, Bylaws,
stockholders agreements and any amendments thereto of the Parent Company or any
material mortgage, indenture, lease or other agreement or instrument, permit,
concession, franchise, license, judgment, order, decree statute, law, ordinance,
rule or regulation applicable to the Parent Company, its properties or assets.
3.6 Accuracy of Reports and Information. The Parent Company is
in full compliance, to the extent applicable, with all reporting obligations
under Section 12(b), 12 (g) or 15(d), as applicable, of the Securities Exchange
Act of 1934, as amended (the "Exchange Act").
The Parent Company has filed all material required to be filed
pursuant to all reporting obligations, under either Section 13(a) or 15(d) of
the Exchange Act for a period of at least twelve (12) months immediately
preceding the offer or sale of the COES Preferred Shares (or for such shorter
period that the Parent Company has been required to file such material).
3.7 SEC Filings/Full Disclosure. None of the Parent Company's
filings with the SEC since January 1, 1997 contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein in light of the circumstances under
which they were made, not misleading. The Parent Company has, since January 1,
1997, timely filed all requisite forms, reports and exhibits thereto with the
SEC. The Parent Company's Annual Report on Form 10-K for the year ended December
31, 1996, its Quarterly Reports for the periods ended March 31, 1997 and all
Current Reports on Form 8-K filed by the Parent Company from January 1, 1996 to
date are referred to as the "COES SEC Reports."
There is no fact known to the Parent Company (other than
general economic conditions known to the public generally) that has not been
disclosed in writing to the Purchaser which could reasonably be expected to have
a material adverse effect on the condition (financial or otherwise) or in the
earnings, business affairs, business prospects,
6
properties or assets of the Parent Company, or (ii) could reasonably be expected
to materially and adversely affect the ability of the Parent Company to perform
its obligations pursuant to this Agreement.
3.8 Absence of Undisclosed Liabilities. The Parent Company has
no material liabilities or obligations, absolute or contingent (individually or
in the aggregate), except as set forth in the financial statements included in
the COES SEC Reports (the "COES Financial Statements") or as incurred in the
ordinary course of business after the date of the COES Financial Statements.
3.9 Governmental Consent, etc. No consent, approval or
authorization of or designation, declaration or filing with any governmental
authority on the part of the Parent Company is required in connection with the
valid execution and delivery of this Agreement, or the offer, sale or issuance
of the COES Preferred Shares, or the consummation of any other transaction
contemplated hereby, except the filing with the SEC of a registration statement
on Form S-3 or Form S-1 for the purpose of registering the CXI Common Stock
underlying the COES Preferred Shares and the COES Warrants.
3.10 Intellectual Property Rights. Except as disclosed in the
COES SEC Reports, the Parent Company has sufficient trademarks, trade names,
patent rights, copyrights and licenses to conduct its business as contemplated
therein. To the Parent Company's knowledge, neither the Parent Company nor its
products is infringing or will infringe any trademark, trade name, patent right,
copyright, license, trade secret or other similar right of others currently in
existence; and there is no claim being made against the Parent Company regarding
any trademark, trade name, patent, copyright, license, trade secret or other
intellectual property right which could have a material adverse effect on the
condition (financial or otherwise), business, results of operations or prospects
of the Parent Company.
3.11 Material Contracts. Except as set forth in the COES SEC
Reports, the agreements to which the Parent Company is a party described therein
are valid agreements, in full force and effect, the Parent Company is not in
material breach or material default (with or without notice or lapse of time, or
both) under any of such agreements, and, to the Parent Company's knowledge, the
other contracting party or parties thereto are not in material breach or
material default (with or without notice or lapse of time, or both) under any of
such agreements.
3.12 Litigation. There is no action, proceeding or
investigation pending, or to the Parent Company's knowledge threatened, against
the Parent Company which might result, either individually or in the aggregate,
in any material adverse change in the business, prospects, conditions, affairs
or operations of the Parent Company. The Parent Company is not a party to or
subject to the provisions of any order, writ, injunction, judgment or decree of
any court or government agency or instrumentality. There is no action, suit,
proceeding or investigation by the Parent Company currently pending or which the
Parent Company currently intends to initiate.
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3.13 Title to Assets. Except as set forth in COES SEC Reports,
the Parent Company has good and marketable title to all properties and material
assets described therein as owned by it, free and clear of any pledge, lien,
security interest, encumbrance, claim or equitable interest other than such as
are not material to the business of the Parent Company.
3.14 Subsidiaries. The Parent Company does not presently own
or control, directly or indirectly, any interest in any other corporation,
partnership, association or other business entity, except as stated in the COES
SEC Reports.
3.15 Required Governmental Permits. The Parent Company is in
possession of and operating in compliance with all authorizations, licenses,
certificates, consents, orders and permits from state, federal and other
regulatory authorities which are material to the conduct of its business, all of
which are valid and in full force and effect.
3.16 Listing. The Parent Company will maintain the listing of
its Common Stock on the "Pinksheets" or other organized, comparable United
States market or quotation system; provided, however, that the sole remedy for
Purchaser for breach of this representation shall be liquidated damages as
provided in Section 10.6.
3.17 Other Outstanding Securities/Financing Restrictions.
Except as set forth on the CXI SEC Reports (as defined herein), there are no
other outstanding debt or equity securities presently convertible into shares of
CXI Common Stock.
The Parent Company cannot, without the prior approval in
writing from the Purchaser, obtain convertible debt or equity financing which is
convertible into securities of the Subsidiary Company for a period of ninety
(90) days following the effective date of the Registration Statement (as defined
herein); however, the Parent Company will not require prior approval if (a) at
least 80% of the net proceeds of the financing is part of an acquisition by the
Parent Company of control of another company or entity, (b) at least 80% of the
net proceeds of the financing is a refinancing of the Parent Company's debt, or
(c) the financing is part of a public offering of the Parent Company's
securities.
3.18 Right of Participation. In the event the Parent Company
wishes to complete a financing similar in structure to the securities issued
hereby within one hundred and eighty (180) days from the Closing Date, the
Purchaser shall have the right to participate in such offering and shall have
three (3) business days to reply in writing after receipt of written notice of
such proposed financing from the Parent Company. In the event a writing is not
received by the Parent Company from the Purchaser specifying the extent of the
Purchaser's interest in so participating, this will be deemed a refusal by the
Purchaser of such right to participate.
3.19 Legal Opinion. Purchaser shall, upon purchase of the COES
Preferred Shares, receive an opinion letter from counsel to the Parent Company,
and the Parent Company represents that it will immediately obtain such an
opinion from counsel to the satisfaction of the Purchaser, to the effect that:
8
(a) The Parent Company is duly incorporated,
validly existing and in good standing in the jurisdiction of its
incorporation.
(b) There is no action, proceeding or investigation
pending, or to such counsel's knowledge, threatened against the Parent
Company which might result, either individually or in the aggregate, in
any material adverse change in the business, prospects, conditions,
affairs or operations of the Parent Company.
(c) The Parent Company is not a party to or subject
to the provisions of any order, writ, injunction, judgment or decree of
any court or government agency or instrumentality.
(d) There is no action, suit, proceeding or
investigation by the Parent Company currently pending or, to such
counsel's knowledge, which the Parent Company currently intends to
initiate.
(e) All issued and outstanding shares of CXI Common
Stock have been duly authorized and validly issued and are fully paid
and nonassessable.
(f) This Securities Purchase Agreement and the Stock
Purchase Warrant, the issuance of the COES Preferred Shares and COES
Warrants and the transfer of the Conversion Shares and Warrant Shares
have been duly approved by all required corporate action, the requisite
consent of National Securities Corporation for the Parent Company to
transfer the shares of CXI Common Stock in its holdings to the
Purchaser upon conversion of the COES Preferred Shares and exercise of
the COES Warrants has been duly obtained, and that all such Securities,
upon delivery, shall be validly issued and outstanding, fully paid and
nonassessable.
(g) The execution, delivery and performance of this
Securities Purchase Agreement and the Stock Purchase Warrant by the
Parent Company, and the consummation of the transactions contemplated
thereby, will not, with or without the giving of notice or the passage
of time or both:
(i) Violate the provisions of any law,
rule or regulation which is material to the
assets, properties or business of the Parent
Company;
(ii) Violate the provisions of the
charter or bylaws of the Parent Company; or
(iii) To the best of counsel's knowledge,
violate any judgment, decree, order or award
of any court, governmental body or
arbitrator.
(iv) To the best of counsel's knowledge,
conflict with, or result in the breach or
termination of any term or provision of,
9
or constitute a default under, or cause any
acceleration under, or cause the creation of
any lien, charge or encumbrance upon the
properties or assets of the Parent Company
pursuant to, any note, bond, indenture,
mortgage, lease, deed of trust or other
instrument, obligation, or agreement to
which the Parent Company is a party and
which is material to Parent Company, or by
which the Parent Company, or any of its
material properties is or may be bound.
(h) This Securities Purchase Agreement and the Stock
Purchase Warrant constitute the valid and legally binding obligations
of the Parent Company and are enforceable against the Parent Company in
accordance with their respective terms, subject to laws of general
application relating to bankruptcy, insolvency and the relief of
debtors and rules of law governing specific performance, injunctive
relief or other equitable remedies, and, with respect to the Securities
Purchase Agreement, to limitations of public policy as they may apply
to the indemnification provisions set forth in Section 8.4 thereof.
3.20 Use of Proceeds. Except for payments aggregating $150,000
to the Subsidiary Company as provided herein, the Parent Company represents that
the net proceeds from this offering will be used for general corporate purposes.
3.21 No Poison Pill. The Parent Company represents that
it does not have, and has no current intention to adopt, a stockholder rights
plan ("poison pill").
Section 4. General Representations and Warranties of the
Subsidiary Company. The Subsidiary Company hereby represents and warrants to,
and covenants with, the Purchaser that the following are true and correct as of
the date hereof and as of the Closing Date.
4.1 Organization; Qualification. The Subsidiary Company is a
corporation duly organized and validly existing under the laws of the State of
Delaware and is in good standing under such laws. The Subsidiary Company has all
requisite corporate power and authority to own, lease and operate its properties
and assets, and to carry on its business as presently conducted. The Subsidiary
Company is qualified to do business as a foreign corporation in each
jurisdiction in which the ownership of its property or the nature of its
business requires such qualification, except where failure to so qualify would
not have a material adverse effect on the Subsidiary Company.
4.2 Capitalization. The authorized capital stock of the
Subsidiary Company is as set forth in the CXI SEC Reports. All issued and
outstanding shares of Common Stock have been duly authorized and validly issued
and are fully paid and nonassessable.
4.3 CXI Common Stock Transferable Upon Conversion of
COES Preferred Shares or Exercise of COES Warrants. Except for the consent of
National Securities Corporation, which has been obtained, the Subsidiary Company
has all requisite corporate
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right, power and authority to transfer shares of CXI Common Stock owned by the
Parent Company to the Purchaser upon conversion of the COES Preferred Shares and
exercise of the COES Warrants.
4.4 Authorization. The Subsidiary Company has all requisite
corporate right, power and authority to execute and deliver this Agreement and
to consummate the transactions contemplated hereby. All corporate action on the
part of the Subsidiary Company, its directors and stockholders necessary for the
authorization, execution, delivery and performance of this Agreement by the
Subsidiary Company, and the performance of the Subsidiary Company's obligations
hereunder has been taken. This Agreement has been duly executed and delivered by
the Subsidiary Company and constitutes a legal, valid and binding obligation of
the Subsidiary Company enforceable in accordance with its terms, subject to laws
of general application relating to bankruptcy, insolvency and the relief of
debtors and rules of law governing specific performance, injunctive relief or
other equitable remedies, and to limitations of public policy as they may apply
to the indemnification provisions set forth in Section 8.4 of this Agreement.
Upon their issuance, transfer and delivery pursuant to this Agreement, the
Securities will have been validly issued, fully paid and nonassessable and will
be free of any liens or encumbrances; provided, however, that the COES Preferred
Shares and COES Warrants are subject to restrictions on transfer under state
and/or federal securities laws. Upon registration of the Conversion Shares and
the Warrant Shares pursuant to Section 8 of this Agreement, there shall be no
restriction on the transferability thereof other than applicable prospectus
delivery requirements.
4.5 No Conflict. The execution and delivery of this Agreement
do not, and the consummation of the transactions contemplated hereby will not,
conflict with, or result in any violation of, or default (with or without notice
or lapse of time, or both), or give rise to a right of termination, cancellation
or acceleration of any obligation or to a loss of a material benefit, under, any
provision of the Certificate of Incorporation, and any amendments thereto,
Bylaws, stockholders agreements and any amendments thereto of the Subsidiary
Company or any material mortgage, indenture, lease or other agreement or
instrument, permit, concession, franchise, license, judgment, order, decree
statute, law, ordinance, rule or regulation applicable to the Subsidiary
Company, its properties or assets.
4.6 Accuracy of Reports and Information. The Subsidiary
Company is in full compliance, to the extent applicable, with all reporting
obligations under Section 12(b), 12 (g) or 15(d), as applicable, of the Exchange
Act. The Subsidiary Company has registered its Common Stock pursuant to Section
12 of the Exchange Act and the Common Stock is listed and trades on AMEX.
The Subsidiary Company has filed all material required to be
filed pursuant to all reporting obligations, under either Section 13(a) or 15(d)
of the Exchange Act for a period of at least twelve (12) months immediately
preceding the offer or sale of the COES Preferred Shares (or for such shorter
period that the Subsidiary Company has been required to file such material).
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4.7 SEC Filings/Full Disclosure. None of the Subsidiary
Company's filings with the SEC since January 1, 1997 contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein in light of the
circumstances under which they were made, not misleading. The Subsidiary Company
has, since January 1, 1997, timely filed all requisite forms, reports and
exhibits thereto with the SEC. The Subsidiary Company's Prospectus declared
effective by the SEC on June 28, 1996, the Annual Report on Form 10-K for the
year ended December 31, 1996, its Quarterly Reports for the periods ended March
31, 1997 and all Current Reports on Form 8-K filed by the Subsidiary Company
from January 1, 1996 to date are referred to as the "CXI SEC Reports."
There is no fact known to the Subsidiary Company (other than
general economic conditions known to the public generally) that has not been
disclosed in writing to the Purchaser which could reasonably be expected to have
a material adverse effect on the condition (financial or otherwise) or in the
earnings, business affairs, business prospects, properties or assets of the
Subsidiary Company, or (ii) could reasonably be expected to materially and
adversely affect the ability of the Subsidiary Company to perform its
obligations pursuant to this Agreement.
4.8 Absence of Undisclosed Liabilities. The Subsidiary Company
has no material liabilities or obligations, absolute or contingent (individually
or in the aggregate), except as set forth in the financial statements included
in the CXI SEC Reports (the "CXI Financial Statements") or as incurred in the
ordinary course of business after the date of the CXI Financial Statements.
4.9 Governmental Consent, etc. No consent, approval or
authorization of or designation, declaration or filing with any governmental
authority on the part of the Subsidiary Company is required in connection with
the valid execution and delivery of this Agreement, or the offer, sale or
issuance of the COES Preferred Shares, or the consummation of any other
transaction contemplated hereby, except the filing with the SEC of a
registration statement on Form S-3 or S-1 for the purpose of registering the CXI
Common Stock underlying the COES Preferred Shares and the COES Warrants.
4.10 Intellectual Property Rights. Except as disclosed in the
CXI SEC Reports, the Subsidiary Company has sufficient trademarks, trade names,
patent rights, copyrights and licenses to conduct its business as contemplated
therein. To the Subsidiary Company's knowledge, neither the Subsidiary Company
nor its products is infringing or will infringe any trademark, trade name,
patent right, copyright, license, trade secret or other similar right of others
currently in existence; and there is no claim being made against the Subsidiary
Company regarding any trademark, trade name, patent, copyright, license, trade
secret or other intellectual property right which could have a material adverse
effect on the condition (financial or otherwise), business, results of
operations or prospects of the Subsidiary Company.
4.11 Material Contracts. Except as set forth in the CXI SEC
Reports, the agreements to which the Subsidiary Company is a party described
therein are valid
12
agreements, in full force and effect, the Subsidiary Company is not in material
breach or material default (with or without notice or lapse of time, or both)
under any of such agreements, and, to the Subsidiary Company's knowledge, the
other contracting party or parties thereto are not in material breach or
material default (with or without notice or lapse of time, or both) under any of
such agreements.
4.12 Litigation. There is no action, proceeding or
investigation pending, or to the Subsidiary Company's knowledge threatened,
against the Subsidiary Company which might result, either individually or in the
aggregate, in any material adverse change in the business, prospects,
conditions, affairs or operations of the Subsidiary Company. The Subsidiary
Company is not a party to or subject to the provisions of any order, writ,
injunction, judgment or decree of any court or government agency or
instrumentality. There is no action, suit, proceeding or investigation by the
Subsidiary Company currently pending or which the Subsidiary Company currently
intends to initiate.
4.13 Title to Assets. Except as set forth in CXI SEC Reports,
the Subsidiary Company has good and marketable title to all properties and
material assets described therein as owned by it, free and clear of any pledge,
lien, security interest, encumbrance, claim or equitable interest other than
such as are not material to the business of the Subsidiary Company.
4.14 Subsidiaries. The Subsidiary Company does not presently
own or control, directly or indirectly, any interest in any other corporation,
partnership, association or other business entity, except as stated in the CXI
SEC Reports.
4.15 Required Governmental Permits. The Subsidiary Company is
in possession of and operating in compliance with all authorizations, licenses,
certificates, consents, orders and permits from state, federal and other
regulatory authorities which are material to the conduct of its business, all of
which are valid and in full force and effect.
4.16 Listing. The Subsidiary Company will maintain the listing
of its Common Stock on AMEX or other organized, comparable United States market
or quotation system; provided, however, that the sole remedy for Purchaser for
breach of this representation shall be liquidated damages as provided in Section
10.6.
4.17 Other Outstanding Securities/Financing Restrictions.
Except as set forth in the CXI SEC Reports, there are no other outstanding debt
or equity securities presently convertible into shares of CXI Common Stock.
Except as set forth in the CXI SEC Reports, the Subsidiary Company has no
outstanding restricted shares of Common Stock, or shares of Common Stock sold
under Regulation S or Regulation D under the Securities Act of 1933, as amended
(the "Securities Act") or outstanding under any other exemption from
registration, which are available for sale as unrestricted ("free trading")
stock.
The Subsidiary Company cannot, without the prior approval in
writing from the Purchaser, obtain convertible debt or equity financing for a
period of ninety (90) days following the effective date of the Registration
Statement (as defined herein); however, the
13
Subsidiary Company will not require prior approval if (a) at least 80% of the
net proceeds of the financing is part of an acquisition by the Subsidiary
Company of control of another company or entity, (b) at least 80% of the net
proceeds of the financing is a refinancing of the Subsidiary Company's debt, or
(c) the financing is part of a public offering of the Subsidiary Company's
securities.
4.18 Right of Participation. In the event the Subsidiary
Company wishes to complete a financing similar in structure to the securities
issued hereby within one hundred and eighty (180) days from the Closing Date,
the Purchaser shall have the right to participate in such offering and shall
have three (3) business days to reply in writing after receipt of written notice
of such proposed financing from the Subsidiary Company. In the event a writing
is not received by the Subsidiary Company from the Purchaser specifying the
extent of the Purchaser's interest in so participating, this will be deemed a
refusal by the Purchaser of such right to participate.
4.19 Legal Opinion. Purchaser shall, upon purchase of the COES
Preferred Shares, receive an opinion letter from counsel to the Subsidiary
Company, and the Subsidiary Company represents that it will immediately obtain
such an opinion from counsel to the satisfaction of the Purchaser, to the effect
that:
(a) The Subsidiary Company is duly incorporated,
validly existing and in good standing in the jurisdiction of its
incorporation.
(b) There is no action, proceeding or investigation
pending, or to such counsel's knowledge, threatened against the
Subsidiary Company which might result, either individually or in the
aggregate, in any material adverse change in the business, prospects,
conditions, affairs or operations of the Subsidiary Company.
(c) The Subsidiary Company is not a party to or
subject to the provisions of any order, writ, injunction, judgment or
decree of any court or government agency or instrumentality.
(d) There is no action, suit, proceeding or
investigation by the Company currently pending, to such counsel's
knowledge, or which the Subsidiary Company currently intends to
initiate.
(e) All issued and outstanding shares of CXI Common
Stock have been duly authorized and validly issued and are fully paid
and nonassessable.
(f) This Securities Purchase Agreement and the Stock
Purchase Warrant, the issuance of the COES Preferred Shares and COES
Warrants and the transfer of the Conversion Shares and Warrant Shares
have been duly approved by all required corporate action, the requisite
consent of National Securities Corporation for the Parent Company to
transfer the shares of CXI Common Stock in its holdings to the
Purchaser upon conversion of the COES Preferred Shares and exercise of
the
14
COES Warrants has been duly obtained, and that all such Securities,
upon delivery, shall be validly issued and outstanding, fully paid and
nonassessable.
(g) The execution, delivery and performance of this
Securities Purchase Agreement and the Stock Purchase Warrant by the
Subsidiary Company, and the consummation of the transactions
contemplated thereby, will not, with or without the giving of notice or
the passage of time or both:
(i) Violate the provisions of any law,
rule or regulation which is material to the
assets, properties or business of the
Subsidiary Company;
(ii) Violate the provisions of the
charter or bylaws of the Subsidiary Company;
or
(iii) To the best of counsel's knowledge,
violate any judgment, decree, order or award
of any court, governmental body or
arbitrator.
(iv) To the best of counsel's knowledge,
conflict with, or result in the breach or
termination of any term or provision of, or
constitute a default under, or cause any
acceleration under, or cause the creation of
any lien, charge or encumbrance upon the
properties or assets of the Subsidiary
Company pursuant to, any note, bond,
indenture, mortgage, lease, deed of trust or
other instrument, obligation, or agreement
to which the Subsidiary Company is a party
and which is material to the Subsidiary
Company or by which the Subsidiary Company,
or any of its material properties is or may
be bound.
(h) This Securities Purchase Agreement and the Stock
Purchase Warrant constitute the valid and legally binding obligations
of the Subsidiary Company and are enforceable against the Subsidiary
Company in accordance with their respective terms, subject to laws of
general application relating to bankruptcy, insolvency and the relief
of debtors and rules of law governing specific performance, injunctive
relief or other equitable remedies, and, with respect to the Securities
Purchase Agreement, to limitations of public policy as they may apply
to the indemnification provisions set forth in Section 8.4 thereof.
4.20 No Poison Pill. The Subsidiary Company represents
that it does not have, and has no current intention to adopt, a stockholder
rights plan ("poison pill").
Section 5. Representations, Warranties and Covenants of the
Purchaser. The Purchaser represents and warrants to, and covenants with, the
Parent Company and the Subsidiary Company that the following are true and
correct as of the date hereof and as of the Closing Date.
15
5.1 Authority. The Purchaser's signatory has all right, power,
authority and capacity to execute and deliver this Agreement and to consummate
the transactions contemplated hereby. This Agreement has been duly executed and
delivered by the Purchaser and will constitute the legal, valid and binding
obligations of the Purchaser, enforceable in accordance with its terms, subject
to laws of general application relating to bankruptcy, insolvency and the relief
of debtors and rules of law governing specific performance, injunctive relief or
other equitable remedies, and to limitations of public policy as they may apply
to the indemnification provisions set forth in Section 8.4 of this Agreement.
5.2 Investment Experience. Purchaser is an "accredited
investor" as defined in Rule 501(a) under the Securities Act. Purchaser is aware
of the Parent Company's and Subsidiary Company's business affairs and financial
conditions and has had access to and has acquired sufficient information about
the Parent Company and the Subsidiary Company, including the COES and CXI SEC
Reports, to reach an informed and knowledgeable decision to acquire the COES
Preferred Shares. Purchaser has such business and financial experience as is
required to give it the capacity to protect its own interests in connection with
the purchase of the COES Preferred Shares and the acquisition of the COES
Warrants.
5.3 Investment Intent. Without limiting its ability to resell
the COES Preferred Shares and the COES Warrants and underlying CXI Common Stock
pursuant to an effective registration statement, Purchaser represents that it is
purchasing the COES Preferred Shares for investment purposes. Purchaser
understands that its acquisition of the COES Preferred Shares and the COES
Warrants has not been registered under the Securities Act or registered or
qualified under any state securities law in reliance on specific exemptions
therefrom, which exemptions may depend upon, among other things, the bona fide
nature of Purchaser's investment intent as expressed herein. Purchaser will not,
directly or indirectly, offer, sell, pledge, transfer or otherwise dispose of
(or solicit any offers to buy, purchase or otherwise acquire or take a pledge
of) any of the COES Preferred Shares or the COES Warrants except in compliance
with the Securities Act and any applicable state securities laws, and the rules
and regulations promulgated thereunder.
5.4 Registration or Exemption Requirements. Purchaser further
acknowledges and understands that the COES Preferred Shares and the COES
Warrants may not be resold or otherwise transferred except in a transaction
registered under the Securities Act and any applicable state securities laws or
unless an exemption from such registration is available. Purchaser understands
that the certificate(s) evidencing the COES Preferred Shares and the COES
Warrants will be imprinted with a legend, subject to Section 5.7 below, that
prohibits the transfer thereof unless (i) they are registered or such
registration is not required, and (ii) if the transfer is pursuant to an
exemption from registration other than Rule 144 under the Securities Act and, if
the Parent Company shall so request in writing, an opinion of counsel reasonably
satisfactory to the Parent Company is obtained to the effect that the
transaction is so exempt.
5.5 No Legal, Tax or Investment Advice. Purchaser
understands that nothing in this Agreement or any other materials presented to
Purchaser in connection with
16
the purchase and sale of the COES Preferred Shares and the acquisition and
issuance of the COES Warrants constitutes legal, tax or investment advice.
Purchaser has consulted such legal, tax and investment advisors as it, in its
sole discretion, has deemed necessary or appropriate in connection with its
purchase of the COES Preferred Shares and acquisition of the COES Warrants.
5.6 Purchaser Review. Purchaser hereby represents and warrants
that the Purchaser has carefully examined the COES SEC Reports and CXI SEC
Reports and the COES and CXI Financial Statements contained therein. The
Purchaser acknowledges that the Parent Company and Subsidiary Company has made
available to the Purchaser all documents and information that it has requested
relating to the Parent Company and the Subsidiary Company and has provided
answers to all of its questions concerning the Parent Company and the Subsidiary
Company, the COES Preferred Shares and the COES Warrants. Nothing stated in the
previous two sentences, however, shall be deemed to affect the representations
and warranties of the Parent Company and the Subsidiary Company contained in
this Agreement.
5.7 Legend. The certificate or certificates representing the
Securities shall be subject to a legend restricting transfer under the
Securities Act, such legend to be substantially as follows:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED
FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933. SUCH SHARES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT WHICH, EXCEPT IN
THE CASE OF AN EXEMPTION PURSUANT TO RULE 144 UNDER SAID ACT, IS
CONFIRMED IN A LEGAL OPINION SATISFACTORY TO THE COMPANY."
The certificates shall also include any legends required by any applicable state
securities laws.
The legend(s) endorsed on a stock certificate pursuant to this
Section 5.7 or on any certificate representing any of the Securities shall be
removed and the Parent Company or the Subsidiary Company shall issue a
replacement certificate without such legend to the holder of such certificate if
the Securities represented by such certificate are registered under the
Securities Act or if such holder provides to the Parent Company or the
Subsidiary Company an opinion of counsel to the effect that a public sale,
transfer or assignment of such Securities may be made without registration.
5.8 Restrictions on Conversion of Shares. Notwithstanding
anything to the contrary contained herein, no COES Preferred Shares may be
converted by a Holder to the extent that, after giving effect to the Conversion
Shares issued pursuant to a Notice of Conversion, the total number of shares of
CXI Common Stock deemed beneficially owned by such Holder (other than by virtue
of the ownership of COES Preferred Shares or COES Warrants or ownership of other
securities that have limitations on a Holder's rights to convert
17
or exercise similar to those limitations set forth herein), together with all
shares of CXI Common Stock deemed beneficially owned by Holder's "affiliates"
(as defined in Rule 144 under the Securities Act) that would be aggregated for
purposes of determining whether a group under Section 13(d) of the Exchange Act
exists, would exceed 4.99% of the total issued and outstanding shares of CXI
Common Stock, provided that each Holder shall have the right to waive this
restriction, in whole or in part, immediately in case of a pending Change in
Control Transaction and in any other case upon 61 days prior notice to the
Parent Company and the Subsidiary Company. The delivery of a Notice of
Conversion by any Holder shall be deemed a representation by such Holder it is
in compliance with this Section 5.8. A transferee of COES Preferred Shares shall
not be bound by this provision unless it expressly agrees to be so bound. The
term "deemed beneficially owned" as used in this Section 5.8 shall exclude
shares that might otherwise be deemed beneficially owned by reason of the
convertibility of the COES Preferred Shares.
Section 6. Conditions to the Purchaser's Obligation to
Purchase. The Parent Company and the Subsidiary Company understand that the
Purchaser's obligation to purchase the COES Preferred Shares is conditioned
upon:
(a) Acceptance by Purchaser of this Agreement
for the sale of the COES Preferred Shares, as evidenced by the execution of this
Agreement by its authorized officers;
(b) Delivery of the COES Preferred Shares and
COES Warrants to Xxxxxxxxx & Xxxxxx;
(c)(i) The delivery at the Closing of a certificate
from an authorized officer of the Parent Company certifying that all
representations and warranties of the Parent Company are true and correct as of
the Closing Date (in the form annexed hereto as Exhibit C1);
(c)(ii) The delivery at the Closing of a certificate
from an authorized officer of the Subsidiary Company certifying that all
representations and warranties of the Subsidiary Company are true and correct as
of the Closing Date (in the form annexed hereto as Exhibit C2); and
(d) A filed Certificate of Designation.
Section 7. Conditions to Parent Company's Obligation to Sell.
Purchaser understands that the Parent Company's obligation to sell the COES
Preferred Shares is conditioned upon:
(a) The receipt and acceptance by the Parent
Company of this Agreement to issue the COES Preferred Shares as evidenced by
execution of this Agreement by the President or any Vice President of the Parent
Company;
18
(b) Delivery to the Company, the Finder and
Counsel for Parent by Purchaser of good funds as payment in full for the
purchase of the COES Preferred Shares; and
(c) The delivery at the Closing of a certificate
from an authorized officer or representative of Purchaser certifying that all
representations and warranties of the Purchaser are true and correct as of the
Closing Date (in the form annexed hereto as Exhibit C3).
Section 8. Registration of the Shares; Compliance with the
Securities Act.
8.1 Definitions. For the purpose of this Section 8:
(a) the term "Registration Statement" shall mean
any registration statement required to be filed by Section 8.2 below, and shall
include any preliminary prospectus, final prospectus, exhibit or amendment
included in or relating to such registration statement; and
(b) the term "untrue statement" shall include
any untrue statement or alleged untrue statement, or any omission or alleged
omission to state in the Registration Statement a material fact required to be
stated therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
8.2 Registration Procedures and Expenses. The Parent
Company shall cause the Subsidiary Company to, and the Subsidiary Company shall:
(a) file with the SEC a registration statement
under the Securities Act on Form S-3, if the Subsidiary Company is eligible to
file a registration statement under such form, to register the Conversion Shares
and the Warrant Shares within thirty (30) days after the Closing Date and in
sufficient time to have such registration effective ninety (90) days from the
Closing Date; and if the Subsidiary Company is not eligible to file a
registration statement under Form S-3, to file with the SEC a registration
statement under the Securities Act on Form S-1 or any other form which is
appropriate, to register the Conversion Shares and the Warrant Shares within
sixty (60) days after the Closing Date and in sufficient time to have such
registration effective one hundred and twenty (120) days from the Closing Date.
(b) use its best efforts, subject to receipt of
necessary information from the Purchaser, to cause such Registration Statement
to become effective as promptly after filing as practicable;
(c) prepare and file with the SEC such
amendments and supplements to such Registration Statement and the prospectus
used in connection therewith as may be necessary to keep such Registration
Statement effective until termination of such obligation as provided in Section
8.9 below;
19
(d) furnish to the Purchaser with respect to
the CXI Common Stock registered on the Registration Statement (and to each
underwriter, if any, of such CXI Common Stock) such number of copies of
prospectuses in conformity with the requirements of the Securities Act and such
other documents as the Purchaser may reasonably request, in order to facilitate
the public sale or other disposition of all or any of the CXI Common Stock by
the Purchaser; provided, however, that the obligation of the Subsidiary Company
to deliver copies of prospectuses to the Purchaser shall be subject to the
receipt by the Subsidiary Company of reasonable assurances from the Purchaser
that the Purchaser will comply with the applicable provisions of the Securities
Act and of such other securities laws as may be applicable in connection with
any use of such prospectuses;
(e) file such documents as may be required of
the Subsidiary Company for normal securities law clearance for the resale of the
Common Stock in which states of the United States as may be reasonably requested
by the Purchaser; provided, however, that the Subsidiary Company shall not be
required in connection with this paragraph (e) to qualify as a foreign
corporation or execute a general consent to service of process in any
jurisdiction;
(f) bear all expenses in connection with the
procedures in paragraphs (a) through (e) of this Section 8.2 and the
registration of the CXI Common Stock on such Registration Statement and the
satisfaction of the blue sky laws of such states, including the reasonable fees
and expenses of legal counsel to the Purchaser in connection with the procedures
in paragraph (a) through (e) of this Section 8.2, other than underwriting
discounts and selling commissions or expenses required by law to be borne by
Purchaser; and
(g) in the event of the failure of Company to
procure registration of the CXI Common Stock underlying the COES Preferred
Shares within ninety (90) days from the Closing Date if the Registration
Statement is filed under Form S-3, or within one hundred (120) days from the
Closing Date if the Registration Statement is filed under Form S-1 or any other
appropriate forms, the Parent Company will pay Purchaser by wire transfer, as
liquidated damages for such failure and not as a penalty, one (1%) percent of
the Liquidation Preference (as defined below) of the COES Preferred Shares that
have not been converted, for each month, or any part thereof, that the
Registration Statement is not effective, or in the event of a Suspension (as
defined in Section 8.7) after such date. If the Parent Company does not remit
the damages to the Purchaser as set forth above, the Parent Company will pay the
Purchaser reasonable costs of collection, including attorneys fees, in addition
to the liquidated damages. Such payment shall be made to the Purchaser
immediately if the registration of the Conversion Shares and Warrant Shares is
not effected; provided, however, that the payment of such liquidated damages
shall not relieve the Subsidiary Company from its obligations to register the
Conversion Shares and Warrant Shares pursuant to this Section. The registration
of the Conversion Shares and Warrant Shares pursuant to this provision shall not
affect or limit Purchaser's other rights or remedies as set forth in this
Agreement. The "Liquidation Preference" for a Share shall equal $100 (subject to
adjustments for Reclassifications), plus all accrued and unpaid dividends (which
shall accrue through the Conversion Date, Redemption Date or the date liquidated
damages are paid, as applicable)
20
and any then unpaid liquidated damages (interest on which shall accrue at a rate
of 2% per month) arising under Sections 8.2(g), 10.2 or 10.6.
8.3 Underwriter. The Parent Company and the Subsidiary Company
understand that the Purchaser disclaims being an "underwriter" (as such term is
defined under the Securities Act and the rules and regulations promulgated
thereunder (an "Underwriter")), but Purchaser being deemed an Underwriter shall
not relieve the Parent Company and the Subsidiary Company of any obligation it
has hereunder.
8.4 Indemnification.
(a) General Indemnification. The Parent
Company and the Subsidiary Company together and the Purchaser agree to indemnify
the other and to hold the other harmless from and against any and all losses,
damages, liabilities, costs and expenses (including reasonable attorneys' fees)
which the other may sustain or incur in connection with the breach by the
indemnifying party of any representation, warranty or covenant made by it in
this Agreement.
(b) Indemnification for Registration Statement.
(i) By Parent Company and Subsidiary
Company. To the extent permitted by law, the Parent Company and Subsidiary
Company together will indemnify and hold harmless each Holder, the directors, if
any, of such Holder, the officers, if any, of such Holder who sign the
Registration Statement, each person, if any, who controls such Holder, any
underwriter (as defined in the Securities Act) for the Holders and each person,
if any, who controls any such underwriter within the meaning of the Securities
Act or the Exchange Act, against any losses, claims, damages, expenses or
liabilities (joint or several) to which any of them may become subject under the
Securities Act, the Exchange Act or otherwise, insofar as such losses, claims,
damages, expenses or liabilities (or actions or proceedings, whether commenced
or threatened, in respect thereof) arise out of or are based upon any of the
following statements, omissions or violations (collectively, a "Violation"): (i)
any untrue statement or alleged untrue statement of a material fact contained in
the Registration Statement including any preliminary prospectus or final
prospectus contained therein or any amendments or supplements thereto, (ii) the
omission or alleged omission to state therein a material fact required to be
stated therein, or necessary to make the statements therein, in light of the
circumstance in which they are made, not misleading or (iii) any violation or
alleged violation by the Company of the Securities Act, the Exchange Act, any
state securities law or any rule or regulation promulgated under the Securities
Act, the Exchange Act or any state securities law; and the Company will
reimburse the Holders and each such underwriter or controlling person, promptly
as such expenses are incurred, for any legal or other expenses reasonably
incurred by them in connection with investigating or defending any such loss,
claim, damage, liability action or proceeding; provided, however, that the
indemnity agreement contained in this Section 8.4(b) shall not apply to amounts
paid in settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of the Parent Company and the
Subsidiary Company, which consents shall not be unreasonably withheld, nor shall
the Parent Company and Subsidiary Company
21
be liable in any such case for any such loss, claim, damage, liability or action
to the extent that it arises out of or is based upon a Violation which occurs in
reliance upon and in conformity with written information furnished expressly for
use in connection with such registration by the Holders or any such underwriter
or controlling person, as the case may be. Such indemnity shall remain in full
force and effect regardless of any investigation made by or on behalf of the
Holders or any such underwriter or controlling person and shall survive the
transfer of the Securities by Holders.
(ii) By Holders. To the extent permitted
by law, each Holder, severally and not jointly, will indemnify and hold harmless
the Subsidiary Company, each of its directors, each of its officers who have
signed the Registration Statement, each person, if any, who controls the
Subsidiary Company within the meaning of the Securities Act or the Exchange Act,
any underwriter and any other stockholder selling securities pursuant to the
Registration Statement or any of its directors or officers or any person who
controls such holder or underwriter, against any losses, claims, damages or
liabilities (joint or several) to which any of them may become subject, under
the Securities Act, the Exchange Act or other federal state law, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon any Violation, in each case to the extent (and only to the
extent) that such Violation occurs in reliance upon and in conformity with
written information furnished by such Holder expressly for use in connection
with such registration, and such Holder will reimburse any legal or other
expenses reasonably incurred by any of them in connection with investigating or
defending any such loss, claim, damage, liability or action; provided, however,
that the indemnity agreement contained in this subsection 8.4(b) shall not apply
to amounts paid in settlement of such loss, claim, damage, liability or action
if such settlement is effected without the consent of such Holder, which consent
shall not be unreasonably withheld; and provided further, that the Holder shall
be liable under this paragraph for only that amount of losses, claims, damages
and liabilities as does not exceed the net proceeds to such Holder as a result
of the sale of the Securities pursuant to such registration.
(c) Procedure for Indemnification. Promptly
after receipt by an indemnified party under this Section 8.4 of notice of the
commencement of any action (including any governmental action), such indemnified
party will, if a claim in respect thereof is to be made against any indemnifying
party under this Section 8.4, deliver to the indemnifying party a written notice
of commencement thereof and the indemnifying party shall have the right to
participate in, and, to the extent the indemnifying party so desires, jointly
with any other indemnifying party similarly noticed, to assume control of the
defense thereof with counsel mutually satisfactory to the parties; provided,
however, that an indemnified party shall have the right to retain its own
counsel, with the fees and expenses to be paid by the indemnifying party, if, in
the reasonable opinion of counsel for the indemnifying party, representation of
such indemnified party by the counsel retained by the indemnifying party would
be inappropriate due to actual or potential differing interests between such
indemnified party and any other party represented by such counsel in such
proceeding. The failure to deliver written notice to the indemnifying party
within a reasonable time of the commencement of any such action shall relieve
such indemnifying party of any liability to the indemnified party under this
Section 8.4 only to the extent
22
prejudicial to its ability to defend such action, but the omission so to deliver
written notice to the indemnifying party will not relieve it of any liability
that it may have to any indemnified party other than under this Section 8.4. The
indemnification required by this Section 8.4 shall be made by periodic payments
of the amount thereof during the course of the investigation or defense,
promptly as such expense, loss, damage or liability is incurred.
(d) Contribution. To the extent any
indemnification by an indemnifying party is prohibited or limited by law, the
indemnifying party agrees to make the maximum contribution with respect to any
amounts for which it otherwise would be liable under this Section 8.4 to the
extent permitted by law, provided that (i) no contribution shall be made under
the circumstances where the maker would not have been liable for indemnification
under the fault standards set forth in this Section 8.4, (ii) no seller of the
Securities guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any seller
of the Securities who was not guilty of such fraudulent misrepresentation and
(iii) contribution by any seller of the Securities shall be limited in amount to
the net amount of proceeds received by such seller from the sale of such
Securities.
8.5 Information Available. So long as any registration
statement is effective covering the resale of the Conversion Shares or Warrant
Shares, the Parent Company and the Subsidiary Company will each furnish to
Purchaser:
(a) as soon as possible after available, one
copy of (i) each of its Annual Report to Stockholders (which Annual Report shall
contain financial statements audited in accordance with generally accepted
accounting principles in the United States of America by a national firm of
certified public accountants); (ii) if not included in substance in the Annual
Report to Stockholders, each of its annual report on Form 10-K within 100 days
after the end of each fiscal year of each Company, (iii) each of its Quarterly
Reports to Stockholders, and its quarterly report on Form 10-Q within sixty (60)
days, and (iv) a full copy of the registration statement covering the Conversion
Shares and Warrant Shares (the foregoing, in each case, excluding exhibits); and
(b) upon the reasonable request of Purchaser,
such other information that is generally available to the public.
8.6 Rule 144 Reporting. With a view to making available the
benefits of certain rules and regulations of the SEC which may at any time
permit the sale of the Conversion Shares and the Warrant Shares to the public
without registration, the Parent Company and the Subsidiary Company agrees to
use its best efforts to:
(a) make and keep public information available,
as those terms are understood and defined in Rule 144 under the Securities Act,
at all times after the effective date on which the Company becomes subject to
the reporting requirements of the Securities Act or the Exchange Act;
23
(b) use its best efforts to file with the SEC
in a timely manner all reports and other documents required of the Company under
the Securities Act and the Exchange Act;
(c) to furnish to Purchaser forthwith upon
request a written statement by the Parent Company or the Subsidiary Company as
to its compliance with the reporting requirements of said Rule 144, and of the
Securities Act and the Exchange Act, a copy of the most recent annual or
quarterly report of the Company, and such other reports and documents of the
Parent Company or the Subsidiary Company and other information in the possession
of or reasonably obtainable by the Parent Company or the Subsidiary Company as
Purchaser may reasonably request in availing itself of any rule or regulation of
the SEC allowing Purchaser to sell any such Conversion Shares or Warrant Shares
without registration.
8.7 Temporary Cessation of Offers and Sales by Purchaser. The
Purchaser acknowledges that there may occasionally be times when the Subsidiary
Company may be required to suspend the use of the prospectus forming part of the
Registration Statement (a "Suspension") until such time as an amendment to the
Registration Statement has been filed by the Company and declared effective by
the Commission, until the prospectus is supplemented or amended to comply with
the Securities Act, or until such time as the Subsidiary Company has filed an
appropriate report with the Commission pursuant to the Exchange Act. The
Subsidiary Company agrees to file any necessary amendments, supplements and
reports as soon as practicable under the circumstances. The Subsidiary Company
agrees to use its best efforts to cause a Suspension to be lifted within 10
business days during which time Purchaser agrees that it will not sell any
shares of Common Stock pursuant to such prospectus.
8.8 Transfer of Conversion Shares or Warrant Shares Stock
After Registration. Purchaser hereby covenants with the Parent Company and the
Subsidiary Company not to make any sale of the Conversion Shares or Warrant
Shares except either (i) in accordance with the Registration Statement, in which
case Purchaser covenants to comply with the requirement of delivering a current
prospectus, (ii) in accordance with Rule 144, in which case Purchaser covenants
to comply with Rule 144, or (iii) as otherwise permitted by applicable law.
8.9 Termination of Obligations. The obligations of the Parent
Company and Subsidiary Company pursuant to Sections 8.2, 8.3 and 8.6 hereof
shall cease and terminate upon the earlier to occur of (i) such time as all of
the Conversion Shares or Warrant Shares have been re-sold, or (ii) such time as
all of the Common Stock may be resold pursuant to Rule 144(k) under the
Securities Act.
Section 9. Legal Fees and Expenses. Each of the parties shall
pay its own fees and expenses (including the fees of any attorneys, accountants,
appraisers or others engaged by such party) in connection with this Agreement
and the transactions contemplated hereby.
24
Section 10. Conversion; Liquidated Damages.
10.1 Restrictions on Conversion. Conversion of all the COES
Preferred Shares may be made at the Conversion Price, the day following the date
that the Registration Statement for the CXI Common Stock underlying the COES
Preferred Stock and COES Warrants was declared effective by the SEC.
10.2 Notice of Conversion. Conversion of the COES Preferred
Shares to CXI Common Stock may be exercised in whole or in part by Purchaser
telecopying an executed and completed Notice of Conversion (in the form annexed
hereto as Exhibit D) to counsel for the Parent Company, with a copy to the
Parent Company and Subsidiary Company, and delivering the original Notice of
Conversion and the certificate representing the COES Preferred Shares to counsel
by hand or by express courier within three (3) business days of exercise. Each
date on which a Notice of Conversion is telecopied to and received by the Parent
Company in accordance with the provisions hereof shall be deemed a Conversion
Date. The Subsidiary Company will reissue and transmit the certificates in the
name of the Purchaser, or any other name as instructed by the Purchaser,
representing the CXI Common Stock transferable upon conversion of all or any
part of the COES Preferred Shares and COES Warrant Shares (and the Parent
Company will transmit any certificates for replacement COES Preferred Shares not
previously converted but included in the original certificate presented for
conversion) to the Purchaser via express courier within three (3) business days
after counsel for the Parent Company has received the original Notice of
Conversion and the certificate representing the COES Preferred Shares being so
converted. The Notice of Conversion and certificate representing the portion of
the COES Preferred Shares converted shall be delivered as follows:
To counsel of Parent Company:
Greenberg, Traurig, Hoffman, Lipoff, Xxxxx & Quentel
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, XX 00000
Attn: Xxxxxxx X. Xxxxx, Esq.
Telephone: 000-000-0000
Facsimile: 000-000-0000
To the Parent Company:
Commodore Environmental Services, Inc.
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, XX 00000
Attn.: Bentley X. Xxxx
Telephone: 000-000-0000
Facsimile: 000-000-0000
25
To the Subsidiary Company:
Commodore Applied Technologies, Inc.
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, XX 00000
Attn.: Bentley X. Xxxx
Telephone: 000-000-0000
Facsimile: 000-000-0000
or to such other person at such other place as the Parent Company shall
designate to the Purchaser in writing.
In the event that the COES Preferred Shares are not converted
within three (3) business days of the Conversion Date, the Parent Company shall
be liable to Purchaser for actual damages incurred from the fourth business day
following the Conversion Date through the ninth business day following the
Conversion Date for such failure (provided that Purchaser has delivered the
original valid Notice of Conversion and the original certificate(s) representing
the COES Preferred Shares to be converted, or an affidavit and indemnity
agreement as to lost certificates reasonably satisfactory to the Company). In
the event the COES Preferred Shares are not converted by the tenth (10th)
business day following the Conversion Date, the Parent Company shall pay to the
Purchaser, by wire transfer, as liquidated damages for such failure and not as a
penalty, an amount in cash equal to one (1%) percent per day of the Liquidation
Preference for the COES Preferred Shares to be converted which shall run from
the tenth (10th) business day following the Conversion Date; provided, however,
that actual damages and liquidated damages for a failure to deliver certificates
of CXI Common Stock shall be determined in accordance with Section 10.6, if both
of the following conditions are satisfied by the Parent Company: (i) the failure
to deliver certificates of CXI Common Stock is the result of a lack of available
shares of CXI Common Stock and (ii) the Parent Company commences, within ten
(10) business days after the initial Conversion Date to purchase or otherwise
acquire the number of shares of CXI Common Stock which is sufficient to permit
conversion of all COES Preferred Shares then outstanding at the Hypothetical
Conversion Price (as hereinafter defined) then in effect.
10.3 Mandatory Conversion. The COES Preferred Shares are
subject to mandatory conversion after five (5) years from the Closing Date, at
which time all COES Preferred Shares will automatically be converted at the
Conversion Price, upon the terms set forth in this section. Such five year
period will be extended by the number of days during such period that (i) the
Subsidiary Company's Common Stock has been Delisted and/or (ii) a Suspension has
been in effect and by the number of days after the 90th day or the 120th day,
whichever date is applicable as provided in Section 8.2(g) herein, that
Registration Statement was not declared effective. Any particular day in which
more than one of the foregoing condition events shall have been in effect shall
only be counted once in determining the number of days by which to extend the
five year period prior to mandatory conversion. In addition, mandatory
conversion shall not occur for so long as certain default events specified in
Section 5(e) of the Certificate of Designation are continuing.
26
10.4 Reservation of CXI Common Stock Transferable Upon
Conversion. The Parent Company shall at all times reserve and keep available out
of its holdings of shares of CXI Common Stock, such number of shares of CXI
Common Stock as shall from time to time be sufficient to effect the conversion
of all then outstanding COES Preferred Shares and COES Warrants, the sufficiency
of which shall be determined (in the case of the COES Preferred Shares) by using
a Conversion Price (the "Hypothetical Conversion Price") derived from a
hypothetical closing market price that is 75% of either (i) the actual Average
Closing Bid Price on the Closing Date or (ii) the actual Average Closing Bid
Price from time to time, whichever is lower, and in the case of the COES
Warrants, by the exercise price thereof. The Parent Company hereby covenants and
agrees that if at any time the Hypothetical Conversion Price falls to a level
that would not enable all outstanding COES Preferred Shares to be fully
converted and the outstanding COES Warrants to be fully exercised, the Parent
Company will promptly purchase or otherwise acquire the number of shares of CXI
Common Stock sufficient to permit the conversion of all COES Preferred Shares
then outstanding at the Hypothetical Conversion Price then in effect and the
exercise of all outstanding COES Warrants.
10.5 Liquidated Damages. In the event of a Delisting, a
Cumulative Suspension or Insufficient CXI Common Stock (each a "Damage Event"),
the Parent Company will pay to Purchaser (and to all other holders of the
Shares), by wire transfer, as liquidated damages for such non-availability and
not as a penalty, an amount in cash equal to 2% per month of the Liquidation
Preference of only those COES Preferred Shares then eligible for conversion,
without regard to Section 5.8, for the first two months after the occurrence of
a Damage Event, and 3% per month for each month thereafter. Similar liquidated
damages shall be paid with respect to any COES Preferred Shares not initially
eligible for conversion when the Damage Event first occurred but which
subsequently become eligible for conversion, without regard to Section 5.8,
commencing in the first month that such COES Preferred Shares become eligible
for such conversion. Such liquidated damages shall continue to accrue and shall
be payable until the Damage Event has been cured, and, if not paid, interest
thereon shall accrue at a rate of 2% per month. At the Purchaser's election,
such liquidated damages may be paid in cash or may be added to the principal of
the COES Preferred Shares for subsequent conversion purposes. Notwithstanding
the foregoing, in the case of a Delisting, after six months from the date of
such Delisting, the Parent Company shall have the option to force Purchaser to
as promptly as possible convert (in increments of no less than $50,000) all or
part of its COES Preferred Shares, subject to Purchaser being able to sell the
underlying Conversion Shares, and simultaneously sell such Conversion Shares
(where the conversion price therefor shall not be the Conversion Price but
instead shall equal 85% of the Purchaser's sale price of the Conversion Shares,
all as determined by Purchaser's actual trading records (to be provided to the
Company). In no event may the Company force Purchaser to convert less than
$50,000 of COES Preferred Shares at any one time.
Section 11. Redemption By Parent Company.
11.1 Parent Company's Right to Redeem. The Parent Company
shall have the right, at any time and from time to time, in its sole discretion,
to redeem in whole or in
27
part the COES Preferred Shares then outstanding, except that if the Purchaser or
any Holder of the COES Preferred Shares has submitted a Notice of Conversion,
the Parent Company shall not have the right to redeem the COES Preferred Shares
which were submitted for conversion and the certificates representing Conversion
Shares should be delivered promptly according to Section 10.2 herein. If the
Parent Company elects to redeem some, but not all, of the COES Preferred Shares,
the Parent Company shall redeem the COES Preferred Shares pro rata among the
Holders of all the COES Preferred Shares then outstanding. The date of the
Parent Company's redemption of COES Preferred Shares shall be referred to as the
"Redemption Date."
11.2 Redemption Price. The redemption price per COES
Preferred Share shall equal $125.
11.3 Mechanics of Redemption; Purchaser's Conversion Rights.
The Parent Company shall effect each such redemption by giving notice of its
election to redeem ("Redemption Notice"), by facsimile, by 5 P.M. New York City
time on the Redemption Date and shall provide a copy of such redemption notice
by overnight or 2-day courier, to Purchaser, all other Holders of COES Preferred
Shares and the Parent Company's Transfer Agent. Such redemption notice shall
indicate whether the Parent Company will redeem all or part of the COES
Preferred Shares. Upon the giving of any such Redemption Notice, and until the
earlier of either payment of the applicable redemption price or fifteen (15)
business days after the Redemption Date (or later as provided in Section 6(d)
below), the conversion rights in respect of the COES Preferred Shares and any
other outstanding shares of COES Convertible Preferred Stock called for
redemptions shall be suspended. Subject to the Parent Company's payment of the
applicable redemption price, the accrual of dividends in connection with the
shares of COES Convertible Preferred Stock called for redemption will suspend on
the Redemption Date.
11.4 Payment of Redemption Price. Upon receipt of a Redemption
Notice, Purchaser shall send its COES Preferred Shares being redeemed to the
Parent Company or its Transfer Agent within three (3) business days of the
receipt of such Redemption Notice, and the Parent Company shall pay the
applicable redemption price within fifteen (15) business days of the Redemption
Date (such fifteen (15) business day period shall be extended for each day the
COES Preferred Shares being redeemed have not been delivered to the Parent or
its Transfer Agent beyond the third (3rd) business day after receipt of the
Redemption Notice). The Parent Company shall not be obligated to deliver the
redemption price unless the COES Preferred Shares so redeemed are delivered to
the Parent Company or its Transfer Agent, or, in the event one or more
certificates have been lost, stolen, mutilated or destroyed, Purchaser delivers
to the Parent Company a lost certificate affidavit reasonably satisfactory to
Parent Company and its Transfer Agent.
11.5 Default of Parent Company's Redemption. If the Parent
Company fails to pay the applicable redemption price to the Purchaser and/or
other Holders of the COES Preferred Shares being redeemed by the Parent Company
within fifteen (15) business days of the Redemption Date (such fifteen (15)
business day period shall be extended for each day the COES Preferred Shares
being redeemed have not been delivered to the Parent or its
28
Transfer Agent beyond the third (3rd) business day after receipt of the
Redemption Notice), the Parent Company shall be deemed to have defaulted on
their right to redeem such COES Preferred Shares. Such COES Preferred Shares
shall thereafter become immediately convertible and the Conversion Price for
such COES Preferred Shares shall be equal to 75% of the Average Closing Bid
Price. The Conversion Price for such COES Preferred Shares shall not be subject
to a floor.
11.6 Blackout Period. Notwithstanding the foregoing, the
Parent Company may not either send out a redemption notice or effect a
redemption during a Blackout Period (defined as a period during which the Parent
Company's or the Subsidiary Company's officers or directors would not be
entitled to buy or sell stock because of their holding of material non-public
information). In the event the Parent Company initiates a redemption during a
Blackout Period without having first made public material non-public
information, the Parent Company or the Subsidiary Company shall disclose the
non-public information that resulted in the Blackout Period, and no redemption
shall be effected until at least 10 days after the Company or the Subsidiary
Company shall have given the Holder written notice that the Blackout Period has
been lifted.
Section 12. Notices. All notices, requests, consents and other
communications hereunder shall be in writing, shall be mailed by first class
registered or certified airmail, postage prepaid, or shall be sent by overnight
courier or by facsimile, and shall be deemed given when received:
(a) if to the Parent Company, to
Commodore Environmental Services, Inc.
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, XX 00000
Attn.: Bentley X. Xxxx
Telephone: 000-000-0000
Facsimile: 000-000-0000
copy to:
Greenberg, Traurig, Hoffman, Lipoff, Xxxxx & Quentel
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, XX 00000
Attn: Xxxxxxx X. Xxxxx, Esq.
Telephone: 000-000-0000
Facsimile: 000-000-0000
or to such other person at such other place as the Parent Company shall
designate to the Purchaser in writing;
29
(b) if to the Subsidiary Company:
Commodore Applied Technologies, Inc.
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, XX 00000
Attn.: Bentley X. Xxxx
Telephone: 000-000-0000
Facsimile: 000-000-0000
copy to:
Greenberg, Traurig, Hoffman, Lipoff, Xxxxx & Quentel
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, XX 00000
Attn: Xxxxxxx X. Xxxxx, Esq.
Telephone: 000-000-0000
Facsimile: 000-000-0000
or to such other person at such other place as the Subsidiary Company shall
designate to the Purchaser in writing;
(c) if to the Purchaser, to
American Investment Group of New York, L.P.
00 Xxx Xxxx Xxxxx Xxxx, Xxxxx X0
Xxxxxxxx, XX 00000
Attn.: Xxx Xxxxxxx
Telephone: 000-000-0000
Facsimile: 000-000-0000
copy to:
Xxxxxxxxx & Xxxxxx
000 Xxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Attn.: Xxxxxxx X. Xxxxx, Esq.
Telephone: 000-000-0000
Facsimile: 212-986-2399
or at such other address or addresses as may have been furnished to the Parent
Company and the Subsidiary Company in writing; or
(c) if to any transferee or transferees of a
Purchaser, at such address or addresses as shall have been furnished to the
Parent Company and the Subsidiary Company at the time of the transfer or
transfers, or at such other address or addresses as
30
may have been furnished by such transferee or transferees to the Parent Company
and the Subsidiary Company in writing.
Section 13. Miscellaneous.
13.1 Entire Agreement. This Agreement and the Exhibits hereto
embodies the entire agreement and understanding between the parties hereto with
respect to the subject matter hereof and supersedes all prior oral or written
agreements and understandings relating to the subject matter hereof. No
statement, representation, warranty, covenant or agreement or any kind not
expressly set forth in this Agreement or the Exhibits hereto shall affect, or be
used to interpret, change or restrict, the express terms and provisions of this
Agreement.
13.2 Amendments. This Agreement may not be modified or amended
except pursuant to an instrument in writing signed by the Parent Company, the
Subsidiary Company and by Purchaser.
13.3 Headings. The headings of the various sections of this
Agreement have been inserted for convenience of reference only and shall not be
deemed to be part of this Agreement.
13.4 Severability. In case any provision contained in this
Agreement should be invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein shall not in any way be affected or impaired thereby.
13.5 Governing Law/Jurisdiction. This Agreement will be
construed and enforced in accordance with and governed by the laws of the State
of New York, except for matters arising under the Securities Act, without
reference to principles of conflicts of law. Each of the parties consents to the
jurisdiction of the courts of or located in the State of New York, specifically
the Southern District of New York and/or the Supreme Court of the State of New
York in connection with any dispute arising under this Agreement and hereby
waives, to the maximum extent permitted by law, any objection, including any
objection based on forum non conveniens, to the bringing of any such proceeding
in such jurisdictions. Each party hereby agrees that if another party to this
Agreement obtains a judgment against it in such a proceeding, the party which
obtained such judgment may enforce same by summary judgment in the courts of any
country having jurisdiction over the party against whom such judgment was
obtained, and each party hereby waives any defenses available to it under local
law and agrees to the enforcement of such a judgment. In addition, the parties
agree that the party against whom such judgment was obtained will pay the legal
fees of the party obtaining such judgment. Each party to this Agreement
irrevocably consents to the service of process in any such proceeding by the
mailing of copies thereof by registered or certified mail, postage prepaid, to
such party at its address set forth herein. Nothing herein shall affect the
right of any party to serve process in any other manner permitted by law.
13.6 Recovery of Attorney's Fees. Should any party bring
an action to enforce the terms of this Agreement then, if Purchaser prevails in
such action it should be
31
entitled to recovery of its attorney's fees from the Parent Company or the
Subsidiary Company, and if the Parent Company or the Subsidiary Company prevails
in such action it shall be entitled to recovery of its attorney's fees from the
Purchaser.
13.7 Fees. Notwithstanding Section 13.6, the Parent Company
and the Subsidiary Company acknowledge that Purchaser shall have no
responsibility for the payment of any of its fees in connection with this
offering.
13.8 Counterparts/Facsimile. This Agreement may be executed in
two or more counterparts, each of which shall constitute an original, but all of
which, when taken together, shall constitute but one instrument, and shall
become effective when one or more counterparts have been signed by each party
hereto and delivered to the other party. In lieu of the original, a facsimile
transmission or copy of the original shall be as effective and enforceable as
the original.
13.9 Publicity. The Purchaser shall not issue any press
releases or otherwise make any public statement with respect to the transactions
contemplated by this Agreement without the prior written consent of the Parent
Company and the Subsidiary Company, except as may be required by applicable law
or regulation.
13.10 Survival. The representations and warranties in this
Agreement shall survive Closing.
32
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be signed by their duly authorized representatives the day and year
first above written.
COMMODORE ENVIRONMENTAL SERVICES, INC.
By /s/ XXXXXXXXXXXXXXXXXXXX
--------------------------------------
Officer
COMMODORE APPLIED TECHNOLOGIES, INC.
By /s/ XXXXXXXXXXXXXXXXXXXXX
--------------------------------------
Officer
PURCHASER:_______________________________
By_______________________________________
Officer
33
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be signed by their duly authorized representatives the day and year
first above written.
COMMODORE ENVIRONMENTAL SERVICES, INC.
By___________________________________
Officer
COMMODORE APPLIED TECHNOLOGIES, INC.
By___________________________________
Officer
PURCHASER: AMERICAN INVESTMENT GROUP
OF NEW YORK, L.P.
By /s/ XXXXXXXXXXXXXXXXXXXX
----------------------------------
Officer
33
EXHIBIT A
CERTIFICATE OF DESIGNATION
EXHIBIT B
FORM OF STOCK PURCHASE WARRANT
EXHIBIT C1
COMMODORE ENVIRONMENTAL SERVICES, INC.
COMPLIANCE CERTIFICATE
The undersigned, an executive officer of COMMODORE ENVIRONMENTAL
SERVICES, INC., hereby certifies that the representations and warranties made by
Commodore Environmental Services, Inc. in the 7% Preferred Stock Securities
Purchase Agreement dated May 20, 1997 by and between Commodore Environmental
Services, Inc., Commodore Applied Technologies, Inc. and American Investment
Group of New York, L.P. were true and correct as of the date such
representations and warranties were made and are true and correct in all
material respects as of the date hereof with the same force and effect as
through such representations and warranties had been made on and as of the date
hereof.
IN WITNESS WHEREOF, the undersigned has signed this
Certificate as of this 20th day of May 1997.
COMMODORE ENVIRONMENTAL SERVICES, INC.
By____________________________________
Name__________________________________
Title_________________________________
EXHIBIT C2
COMMODORE APPLIED TECHNOLOGIES, INC.
COMPLIANCE CERTIFICATE
The undersigned, an executive officer of COMMODORE APPLIED
TECHNOLOGIES, INC., hereby certifies that the representations and warranties
made by Commodore Applied Technologies, Inc. in the 7% Preferred Stock
Securities Purchase Agreement dated May 20, 1997 by and between Commodore
Environmental Services, Inc., Commodore Applied Technologies, Inc. and American
Investment Group of New York, L.P. were true and correct as of the date such
representations and warranties were made and are true and correct in all
material respects as of the date hereof with the same force and effect as
through such representations and warranties had been made on and as of the date
hereof.
IN WITNESS WHEREOF, the undersigned has signed this
Certificate as of this 20th day of May 1997.
COMMODORE APPLIED TECHNOLOGIES, INC.
By__________________________________
Name________________________________
Title_______________________________
EXHIBIT C3
PURCHASER
COMPLIANCE CERTIFICATE
The undersigned, ,
of AMERICAN INVESTMENT GROUP OF NEW YORK, L.P. ("Purchaser"), hereby certifies
that the representations and warranties made by Purchaser in the 7% Preferred
Stock Securities Purchase Agreement dated May 20, 1997 between Commodore
Environmental Services, Inc., Commodore Applied Technologies, Inc. and Purchaser
were true and correct as of the date such representations and warranties were
made and are true and correct in all material respects as of the date hereof
with the same force and effect as through such representations and warranties
had been made on and as of the date hereof.
IN WITNESS WHEREOF, the undersigned has signed this
Certificate as of this 20th day of May 1997.
PURCHASER
AMERICAN INVESTMENT GROUP OF
NEW YORK, L.P.
By__________________________
Name________________________
Title_______________________
EXHIBIT D
NOTICE OF CONVERSION
(To be Executed by the Registered Holder in order to
Convert the 7% Preferred Stock)
The undersigned hereby irrevocably elects to convert ________ shares
of COES Preferred Stock represented by above Certificate No. ___ into shares of
common stock of COMMODORE APPLIED TECHNOLOGIES, INC. (the "Subsidiary")
according to the conditions hereof, as of the date written below.
The undersigned represents and warrants that:
All offers and sales by the undersigned of the shares of Common Stock
issuable to the undersigned upon conversion of the COES Preferred
Shares shall be made pursuant to an exemption from registration under
the Act, or pursuant to registration of the Common Stock under the
Securities Act of 1933, as amended.
-------------------------------- ---------------------------
Date of Conversion Applicable Conversion Price
-------------------------------- ---------------------------
Number of Shares of Common Stock $ Amount of Conversion
upon Conversion
-------------------------------- ---------------------------
Signature Name
Address: Delivery of Shares to:
THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE UNITED STATES SECURITIES AND
EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE PURSUANT TO AN
EXEMPTION FROM REGISTRATION UNDER REGULATION D PROMULGATED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"). THIS SUBSCRIPTION AGREEMENT
SHALL NOT CONSTITUTE AN OFFER TO SELL NOR A SOLICITATION OF AN OFFER TO BUY THE
SECURITIES IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION WOULD BE
UNLAWFUL. THE SECURITIES ARE "RESTRICTED" AND MAY NOT BE RESOLD OR TRANSFERRED
EXCEPT AS PERMITTED UNDER THE ACT PURSUANT TO REGISTRATION OR EXEMPTION
THEREFROM.
7% PREFERRED STOCK
SECURITIES PURCHASE AGREEMENT
COMMODORE ENVIRONMENTAL SERVICES, INC.
AND
COMMODORE APPLIED TECHNOLOGIES, INC.
THIS AGREEMENT is made as of the 20th day of May, 1997, by and
between COMMODORE ENVIRONMENTAL SERVICES, INC., traded on the "Pinksheets" under
the symbol "COES" (the "Parent Company"), a corporation, with its principal
office at 000 Xxxx 00xx Xxxxxx, Xxx Xxxx, XX 00000, COMMODORE APPLIED
TECHNOLOGIES INC., AMEX symbol "CXI" (the "Subsidiary Company"), a corporation,
with its principal office at 000 Xxxx 00xx Xxxxxx, Xxx Xxxx, XX 00000 and XXXXXX
PARTNERS (the "Purchaser"), with its principal office at 000 Xxxxx Xxxxxx,
Xxxxxxxxx, XX 00000.
IN CONSIDERATION of the mutual covenants contained in this
Agreement, the Parent Company, Subsidiary Company and the Purchaser agree as
follows:
Section 1. Certain Definitions. For purposes of this
Agreement:
"Change in Control Transaction" means the date the Parent
Company or the Subsidiary Company (i) sells or otherwise conveys all or
substantially all of its assets or (ii) effects a transaction (by merger or
otherwise) in which more than 50% of the voting power of the Parent Company or
the Subsidiary Company is disposed of, directly or indirectly, or if within any
12 month period there is a change of more than 50% of the members of the Parent
Company's or the Subsidiary Company's Board of Directors, or if any other
person, entity or group (as defined in Section 13(d) of the Exchange Act) and/or
any of their affiliates or associates acquires in excess of 50% of the Common
Stock.
"Closing Date" means the date agreed to by the parties for the
delivery of the stock certificate against a wire transfer of the funds to the
Parent Company.
"Closing" means the completion of the purchase and sale of the
COES Preferred Shares on the Closing Date.
"COES Convertible Preferred Stock" means the 60,000 shares of
Series D Preferred Stock of the Parent Company, $.01 par value, convertible into
CXI Common Stock as hereinafter provided and which has the rights, preferences
and privileges set forth in the Certificate of Designation attached hereto as
Exhibit A (the "Certificate of Designation").
"COES Preferred Shares" means the shares of COES Convertible
Preferred Stock purchased hereunder.
"Conversion Date" means the date on which the Purchaser has
telecopied the Notice of Conversion to counsel for the Parent Company.
"Conversion Price" means an amount equal to a fifteen (15%)
percent discount from the closing bid price of the CXI Common Stock as reported
by Bloomberg, L.P. ("Bloomberg") averaged for the previous five (5) business
days ending on the day before the Conversion Date (the "Average Closing Bid
Price"); provided, however, if the average of the closing bid price of the CXI
Common Stock, as reported by Bloomberg ("Floor Average"), for any consecutive
thirty (30) days is equal or less than $2.00 (such thirtieth (30th) day shall be
the "First Trigger Date"), the conversion price shall equal $2.00; if the Floor
Average for any consecutive thirty (30) days beginning any day after the First
Trigger Date is less than $2.00 ("Second Trigger Date"), the conversion price
shall equal $1.90; if the Floor Average for any thirty (30) days beginning any
day after the Second Trigger Date is less than $1.90 (the "Third Trigger Date"),
the conversion price shall equal $1.80; if the Floor Average for any consecutive
thirty (30) days beginning any day after the Third Trigger Date is less than
$1.80 (the "Fourth Trigger Date"), the conversion price shall equal $1.70; if
the Floor Average for any consecutive thirty (30) days beginning any day after
the Fourth Trigger Date is less than $1.70 (the "Fifth Trigger Date"), the
conversion price shall equal $1.60; if the Floor Average for any consecutive
thirty (30) days beginning any day after the Fifth Trigger Date is less than
$1.60, the conversion price shall equal $1.50. Subject to Section 11.5 herein,
in no event shall the Conversion Price be lower than $1.50 per share of CXI
Common Stock. If the CXI Common Stock is not traded on the American Stock
Exchange, the Average Closing Bid Price shall be the average closing bid price
(and if not available, the mean of the high and low prices) of the Common Stock
on the over-the-counter-market or the principal national securities exchange or
the Nasdaq National Market System or Nasdaq SmallCap Market System on which the
CXI Common Stock is traded for the previous five (5) business days ending on the
day before the Conversion Date.
The Conversion Price shall be equitably adjusted accordingly
on a pro rata basis in the event of the happening of certain events that would
affect the CXI Common Stock or COES Convertible Preferred Stock's value
including, but not limited to, forward and reverse stock splits, issuance of
stock dividends, subdivision of shares, combinations, reclassifications, or the
like (collectively "Reclassifications"). An adjustment made pursuant to this
section shall become effective immediately after the effective date of such
event retroactive to the record date, if any, for such an event.
2
"Convertible Date" means the date on which the COES Preferred
Shares will become convertible, which is the day following the date that the
Registration Statement for the shares of CXI Common Stock underlying the COES
Preferred Stock and COES Warrants has been declared effective by the Securities
and Exchange Commission ("SEC").
"Cumulative Suspension" means the date a Suspension (as
defined in Section 8.7) has occurred and is continuing or the date that is the
15th day in the aggregate that more than one Suspension has occurred since the
effective date of the Registration Statement.
"CXI Common Stock" means the underlying Common Stock of the
Subsidiary Company, $.001 par value.
"Delisting" means the date the CXI Common Stock is delisted
from AMEX and is not otherwise listed on the Nasdaq Stock Market or other
national securities exchange.
"Holder" means a holder of COES Preferred Shares.
"Insufficient CXI Common Stock" means the date the number of
shares of CXI Common Stock held by the Parent Company is not sufficient to
effect the conversion of all outstanding COES Preferred Shares then eligible for
conversion (whether or not the Holders have duly delivered Notices of
Conversion).
"Purchase Price" means the aggregate purchase price of the
COES Preferred Shares purchased.
Section 2. Authorization and Sale of Shares.
2.1 Authorization. Subject to the terms and conditions of this
Agreement, the Parent Company has authorized the sale and issuance of the COES
Preferred Shares.
2.2 Agreement to Sell and Purchase the Shares. The Parent
Company will sell and the Purchaser will buy, in reliance upon the
representations and warranties of the Parent Company, Subsidiary Company and
Purchaser contained in this Agreement, upon the terms and conditions hereinafter
set forth, Twenty Thousand (20,000) COES Preferred Shares of COES Convertible
Preferred Stock for an aggregate purchase price of Two Million Dollars
($2,000,000) for all such COES Preferred Shares based on U.S. $100 per share.
The COES Preferred Shares shall pay a 7% cumulative dividend, payable in cash or
CXI Common Stock at the Conversion Price, at the discretion of the Parent
Company, at the time of each conversion. Such purchase and sale shall occur on
the Closing Date. In addition, Parent Company will transfer to Purchaser, for no
additional consideration, five-year warrants ("COES Warrants") to purchase ten
(10) shares of CXI Common Stock for each COES Preferred Share purchased,
initially exercisable on the Convertible Date and for a period of five years
thereafter, at an exercise price equal to 110% of the average closing bid prices
of the CXI Common Stock, as reported by Bloomberg, over the 5-day trading period
ending on the day prior to the Closing Date.
2.3 Subsidiary Company. Whereas the Purchaser is purchasing
COES Preferred Shares from the Parent Company, and the Parent Company is
transferring CXI
3
Common Stock to the Purchaser upon conversion of COES Preferred Shares and
exercise of COES Warrants, the Parent Company hereby agrees to immediately remit
2.5% of the Purchase Price ($2.50 per COES Preferred Share which has a
subscription price of $100 per COES Preferred Share) at the Closing to the
Subsidiary Company, representing a portion of the $150,000 of aggregate
consideration for the Subsidiary Company's agreement to perform its obligations
as set forth in this Agreement and the Warrant Agreement, a form of which is
attached hereto as Exhibit B.
2.4 Time and Place of Closing. The Closing shall be held at
the offices of Xxxxxxxxx & Xxxxxx, 000 Xxxxx Xxxxxx, 00xx Xxxxx, Xxx Xxxx, XX
00000 as promptly as practicable as agreed to by the parties to this Agreement,
but no later than May 15, 1997 at which time either party may terminate this
Agreement.
2.5 Payment and Delivery. At or prior to the Closing, the
following shall occur:
(a) Provided that Purchaser has been notified by
Xxxxxxxxx & Zivian that the Parent Company has delivered certificates
representing the COES Preferred Shares and COES Warrants as provided in Section
2.5(b) below, Purchaser shall remit by wire transfer the Purchase Price as
payment in full for the COES Preferred Shares as follows: 89% of the Purchase
Price ($5,340,000) directly to the Parent Company, 9% of the Purchase Price
($540,000) directly to Avalon Research Group, Inc. (the "Finder"), and 2% of the
Purchase Price ($120,000) directly to Xxxxxxx X. Xxxxx.
(b) The Parent Company shall deliver or cause to be
delivered to Xxxxxxxxx & Zivian certificates representing the COES Preferred
Shares and the COES Warrants, registered in the name of Purchaser (or any
nominee designated by Purchaser at or prior to the Closing Date), free and clear
of all liens, claims, charges and encumbrances. Purchaser shall receive such
certificates from Xxxxxxxxx & Xxxxxx, as applicable, after the Parent Company,
Finder and Xxxxxxx X. Xxxxx have received the Purchase Price directly from
Purchaser.
(c) Wire instructions for the Parent Company has been
separately provided to the Purchaser's counsel.
Section 3. General Representations and Warranties of the
Parent Company. The Parent Company hereby represents and warrants to, and
covenants with, the Purchaser that the following are true and correct as of the
date hereof and as of the Closing Date.
3.1 Organization; Qualification. The Parent Company is a
corporation duly organized and validly existing under the laws of the State of
Delaware and is in good standing under such laws. The Parent Company has all
requisite corporate power and authority to own, lease and operate its properties
and assets, and to carry on its business as presently conducted. The Parent
Company is qualified to do business as a foreign corporation in each
jurisdiction in which the ownership of its property or the nature of its
4
business requires such qualification, except where failure to so qualify would
not have a material adverse effect on the Parent Company.
3.2 Capitalization. The authorized capital stock of the Parent
Company is as set forth in footnote 12 of the audited consolidated financial
statements of the Parent Company set forth in its Form 10-K for the fiscal year
ended December 31, 1996, a true copy of which has been supplied to Purchaser.
60,000 shares of the Parent Company's non-voting preferred stock has been
designated Series D Preferred Stock, $.01 par value. The Series D Preferred
Stock, when issued, shall be duly authorized and validly issued and are fully
paid and nonassessable.
3.3 CXI Common Stock Transferable Upon Conversion of COES
Preferred Shares or Exercise of COES Warrants. The Parent Company currently owns
Fifteen Million (15,000,000) shares of CXI Common Stock, all of which have been
duly authorized and validly issued and are fully paid and nonassessable. The
Parent Company will reserve from its holdings of CXI Common Stock a sufficient
number of shares of CXI Common Stock to permit the conversion in full of the
outstanding COES Preferred Shares and the exercise in full of the COES Warrants.
As of the Closing Date, the Parent Company had reserved sufficient shares of CXI
Common Stock for transfer to Purchaser upon exercise of the COES Preferred
Shares which are convertible, at Purchaser's option, at the Conversion Price, as
per Section 10 of this Agreement, and upon exercise of the COES Warrants. If the
Parent Company does not own sufficient shares of CXI Common Stock for transfer
to the Purchaser upon conversion of COES Preferred Shares and/or exercise of
COES Warrants, the Parent Company hereby agrees to promptly purchase or
otherwise acquire the sufficient amount of shares of CXI Common Stock and
transfer such shares to the Purchaser upon conversion of COES Preferred Shares
and/or exercise of COES Warrants.
Except for the consent of National Securities Corporation,
which has been obtained, the Parent Company has all requisite corporate right,
power and authority to transfer the shares of CXI Common Stock in its holdings
to Purchaser upon conversion of the COES Preferred Shares and exercise of the
COES Warrants.
3.4 Authorization. The Parent Company has all requisite
corporate right, power and authority to execute and deliver this Agreement and
to consummate the transactions contemplated hereby. All corporate action on the
part of the Parent Company, its directors and stockholders necessary for the
authorization, execution, delivery and performance of this Agreement by the
Parent Company, the authorization, sale, issuance and delivery of the COES
Preferred Shares and the performance of the Parent Company's obligations
hereunder has been taken. This Agreement has been duly executed and delivered by
the Parent Company and constitutes a legal, valid and binding obligation of the
Parent Company enforceable in accordance with its terms, subject to laws of
general application relating to bankruptcy, insolvency and the relief of debtors
and rules of law governing specific performance, injunctive relief or other
equitable remedies, and to limitations of public policy as they may apply to the
indemnification provisions set forth in Section 8.4 of this Agreement. Upon
their issuance, transfer and delivery pursuant to this Agreement, the COES
Preferred Shares, COES Warrants and shares of CXI Common Stock transferable
5
upon conversion of the COES Preferred Shares (the "Conversion Shares") and
exercise of the COES Warrants (the "Warrant Shares") (collectively, the
"Securities") will be validly issued, fully paid and nonassessable and will be
free of any liens or encumbrances; provided, however, that the COES Preferred
Shares and COES Warrants are subject to restrictions on transfer under state
and/or federal securities laws. The issuance and sale of the COES Preferred
Shares and COES Warrants will not give rise to any preemptive right or right of
first refusal or right of participation on behalf of any person. Upon
registration of the Conversion Shares and the Warrant Shares pursuant to Section
8 of this Agreement, there shall be no restriction on the transferability
thereof other than applicable prospectus delivery requirements.
3.5 No Conflict. The execution and delivery of this Agreement
do not, and the consummation of the transactions contemplated hereby will not,
conflict with, or result in any violation of, or default (with or without notice
or lapse of time, or both), or give rise to a right of termination, cancellation
or acceleration of any obligation or to a loss of a material benefit, under, any
provision of the Articles of Incorporation, and any amendments thereto, Bylaws,
stockholders agreements and any amendments thereto of the Parent Company or any
material mortgage, indenture, lease or other agreement or instrument, permit,
concession, franchise, license, judgment, order, decree statute, law, ordinance,
rule or regulation applicable to the Parent Company, its properties or assets.
3.6 Accuracy of Reports and Information. The Parent Company is
in full compliance, to the extent applicable, with all reporting obligations
under Section 12(b), 12 (g) or 15(d), as applicable, of the Securities Exchange
Act of 1934, as amended (the "Exchange Act").
The Parent Company has filed all material required to be filed
pursuant to all reporting obligations, under either Section 13(a) or 15(d) of
the Exchange Act for a period of at least twelve (12) months immediately
preceding the offer or sale of the COES Preferred Shares (or for such shorter
period that the Parent Company has been required to file such material).
3.7 SEC Filings/Full Disclosure. None of the Parent Company's
filings with the SEC since January 1, 1997 contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein in light of the circumstances under
which they were made, not misleading. The Parent Company has, since January 1,
1997, timely filed all requisite forms, reports and exhibits thereto with the
SEC. The Parent Company's Annual Report on Form 10-K for the year ended December
31, 1996, its Quarterly Reports for the periods ended March 31, 1997 and all
Current Reports on Form 8-K filed by the Parent Company from January 1, 1996 to
date are referred to as the "COES SEC Reports."
There is no fact known to the Parent Company (other than
general economic conditions known to the public generally) that has not been
disclosed in writing to the Purchaser which could reasonably be expected to have
a material adverse effect on the condition (financial or otherwise) or in the
earnings, business affairs, business prospects,
6
properties or assets of the Parent Company, or (ii) could reasonably be expected
to materially and adversely affect the ability of the Parent Company to perform
its obligations pursuant to this Agreement.
3.8 Absence of Undisclosed Liabilities. The Parent Company has
no material liabilities or obligations, absolute or contingent (individually or
in the aggregate), except as set forth in the financial statements included in
the COES SEC Reports (the "COES Financial Statements") or as incurred in the
ordinary course of business after the date of the COES Financial Statements.
3.9 Governmental Consent, etc. No consent, approval or
authorization of or designation, declaration or filing with any governmental
authority on the part of the Parent Company is required in connection with the
valid execution and delivery of this Agreement, or the offer, sale or issuance
of the COES Preferred Shares, or the consummation of any other transaction
contemplated hereby, except the filing with the SEC of a registration statement
on Form S-3 or Form S-1 for the purpose of registering the CXI Common Stock
underlying the COES Preferred Shares and the COES Warrants.
3.10 Intellectual Property Rights. Except as disclosed in the
COES SEC Reports, the Parent Company has sufficient trademarks, trade names,
patent rights, copyrights and licenses to conduct its business as contemplated
therein. To the Parent Company's knowledge, neither the Parent Company nor its
products is infringing or will infringe any trademark, trade name, patent right,
copyright, license, trade secret or other similar right of others currently in
existence; and there is no claim being made against the Parent Company regarding
any trademark, trade name, patent, copyright, license, trade secret or other
intellectual property right which could have a material adverse effect on the
condition (financial or otherwise), business, results of operations or prospects
of the Parent Company.
3.11 Material Contracts. Except as set forth in the COES SEC
Reports, the agreements to which the Parent Company is a party described therein
are valid agreements, in full force and effect, the Parent Company is not in
material breach or material default (with or without notice or lapse of time, or
both) under any of such agreements, and, to the Parent Company's knowledge, the
other contracting party or parties thereto are not in material breach or
material default (with or without notice or lapse of time, or both) under any of
such agreements.
3.12 Litigation. There is no action, proceeding or
investigation pending, or to the Parent Company's knowledge threatened, against
the Parent Company which might result, either individually or in the aggregate,
in any material adverse change in the business, prospects, conditions, affairs
or operations of the Parent Company. The Parent Company is not a party to or
subject to the provisions of any order, writ, injunction, judgment or decree of
any court or government agency or instrumentality. There is no action, suit,
proceeding or investigation by the Parent Company currently pending or which the
Parent Company currently intends to initiate.
7
3.13 Title to Assets. Except as set forth in COES SEC Reports,
the Parent Company has good and marketable title to all properties and material
assets described therein as owned by it, free and clear of any pledge, lien,
security interest, encumbrance, claim or equitable interest other than such as
are not material to the business of the Parent Company.
3.14 Subsidiaries. The Parent Company does not presently own
or control, directly or indirectly, any interest in any other corporation,
partnership, association or other business entity, except as stated in the COES
SEC Reports.
3.15 Required Governmental Permits. The Parent Company is in
possession of and operating in compliance with all authorizations, licenses,
certificates, consents, orders and permits from state, federal and other
regulatory authorities which are material to the conduct of its business, all of
which are valid and in full force and effect.
3.16 Listing. The Parent Company will maintain the listing of
its Common Stock on the "Pinksheets" or other organized, comparable United
States market or quotation system; provided, however, that the sole remedy for
Purchaser for breach of this representation shall be liquidated damages as
provided in Section 10.6.
3.17 Other Outstanding Securities/Financing Restrictions.
Except as set forth on the CXI SEC Reports (as defined herein), there are no
other outstanding debt or equity securities presently convertible into shares of
CXI Common Stock.
The Parent Company cannot, without the prior approval in
writing from the Purchaser, obtain convertible debt or equity financing which is
convertible into securities of the Subsidiary Company for a period of ninety
(90) days following the effective date of the Registration Statement (as defined
herein); however, the Parent Company will not require prior approval if (a) at
least 80% of the net proceeds of the financing is part of an acquisition by the
Parent Company of control of another company or entity, (b) at least 80% of the
net proceeds of the financing is a refinancing of the Parent Company's debt, or
(c) the financing is part of a public offering of the Parent Company's
securities.
3.18 Right of Participation. In the event the Parent Company
wishes to complete a financing similar in structure to the securities issued
hereby within one hundred and eighty (180) days from the Closing Date, the
Purchaser shall have the right to participate in such offering and shall have
three (3) business days to reply in writing after receipt of written notice of
such proposed financing from the Parent Company. In the event a writing is not
received by the Parent Company from the Purchaser specifying the extent of the
Purchaser's interest in so participating, this will be deemed a refusal by the
Purchaser of such right to participate.
3.19 Legal Opinion. Purchaser shall, upon purchase of the COES
Preferred Shares, receive an opinion letter from counsel to the Parent Company,
and the Parent Company represents that it will immediately obtain such an
opinion from counsel to the satisfaction of the Purchaser, to the effect that:
8
(a) The Parent Company is duly incorporated, validly
existing and in good standing in the jurisdiction of its incorporation.
(b) There is no action, proceeding or investigation
pending, or to such counsel's knowledge, threatened against the Parent
Company which might result, either individually or in the aggregate, in
any material adverse change in the business, prospects, conditions,
affairs or operations of the Parent Company.
(c) The Parent Company is not a party to or subject
to the provisions of any order, writ, injunction, judgment or decree of
any court or government agency or instrumentality.
(d) There is no action, suit, proceeding or
investigation by the Parent Company currently pending or, to such
counsel's knowledge, which the Parent Company currently intends to
initiate.
(e) All issued and outstanding shares of CXI Common
Stock have been duly authorized and validly issued and are fully paid
and nonassessable.
(f) This Securities Purchase Agreement and the Stock
Purchase Warrant, the issuance of the COES Preferred Shares and COES
Warrants and the transfer of the Conversion Shares and Warrant Shares
have been duly approved by all required corporate action, the requisite
consent of National Securities Corporation for the Parent Company to
transfer the shares of CXI Common Stock in its holdings to the
Purchaser upon conversion of the COES Preferred Shares and exercise of
the COES Warrants has been duly obtained, and that all such Securities,
upon delivery, shall be validly issued and outstanding, fully paid and
nonassessable.
(g) The execution, delivery and performance of this
Securities Purchase Agreement and the Stock Purchase Warrant by the
Parent Company, and the consummation of the transactions contemplated
thereby, will not, with or without the giving of notice or the passage
of time or both:
(i) Violate the provisions of any law, rule
or regulation which is material to the
assets, properties or business of the Parent
Company;
(ii) Violate the provisions of the charter
or bylaws of the Parent Company; or
(iii) To the best of counsel's knowledge,
violate any judgment, decree, order or award
of any court, governmental body or
arbitrator.
(iv) To the best of counsel's knowledge,
conflict with, or result in the breach or
termination of any term or provision of,
9
or constitute a default under, or cause any
acceleration under, or cause the creation of
any lien, charge or encumbrance upon the
properties or assets of the Parent Company
pursuant to, any note, bond, indenture,
mortgage, lease, deed of trust or other
instrument, obligation, or agreement to
which the Parent Company is a party and
which is material to Parent Company, or by
which the Parent Company, or any of its
material properties is or may be bound.
(h) This Securities Purchase Agreement and the Stock
Purchase Warrant constitute the valid and legally binding obligations
of the Parent Company and are enforceable against the Parent Company in
accordance with their respective terms, subject to laws of general
application relating to bankruptcy, insolvency and the relief of
debtors and rules of law governing specific performance, injunctive
relief or other equitable remedies, and, with respect to the Securities
Purchase Agreement, to limitations of public policy as they may apply
to the indemnification provisions set forth in Section 8.4 thereof.
3.20 Use of Proceeds. Except for payments aggregating $150,000
to the Subsidiary Company as provided herein, the Parent Company represents that
the net proceeds from this offering will be used for general corporate purposes.
3.21 No Poison Pill. The Parent Company represents that it
does not have, and has no current intention to adopt, a stockholder rights plan
("poison pill").
Section 4. General Representations and Warranties of the
Subsidiary Company. The Subsidiary Company hereby represents and warrants to,
and covenants with, the Purchaser that the following are true and correct as of
the date hereof and as of the Closing Date.
4.1 Organization; Qualification. The Subsidiary Company is a
corporation duly organized and validly existing under the laws of the State of
Delaware and is in good standing under such laws. The Subsidiary Company has all
requisite corporate power and authority to own, lease and operate its properties
and assets, and to carry on its business as presently conducted. The Subsidiary
Company is qualified to do business as a foreign corporation in each
jurisdiction in which the ownership of its property or the nature of its
business requires such qualification, except where failure to so qualify would
not have a material adverse effect on the Subsidiary Company.
4.2 Capitalization. The authorized capital stock of the
Subsidiary Company is as set forth in the CXI SEC Reports. All issued and
outstanding shares of Common Stock have been duly authorized and validly issued
and are fully paid and nonassessable.
4.3 CXI Common Stock Transferable Upon Conversion of COES
Preferred Shares or Exercise of COES Warrants. Except for the consent of
National Securities Corporation, which has been obtained, the Subsidiary Company
has all requisite corporate
10
right, power and authority to transfer shares of CXI Common Stock owned by the
Parent Company to the Purchaser upon conversion of the COES Preferred Shares and
exercise of the COES Warrants.
4.4 Authorization. The Subsidiary Company has all requisite
corporate right, power and authority to execute and deliver this Agreement and
to consummate the transactions contemplated hereby. All corporate action on the
part of the Subsidiary Company, its directors and stockholders necessary for the
authorization, execution, delivery and performance of this Agreement by the
Subsidiary Company, and the performance of the Subsidiary Company's obligations
hereunder has been taken. This Agreement has been duly executed and delivered by
the Subsidiary Company and constitutes a legal, valid and binding obligation of
the Subsidiary Company enforceable in accordance with its terms, subject to laws
of general application relating to bankruptcy, insolvency and the relief of
debtors and rules of law governing specific performance, injunctive relief or
other equitable remedies, and to limitations of public policy as they may apply
to the indemnification provisions set forth in Section 8.4 of this Agreement.
Upon their issuance, transfer and delivery pursuant to this Agreement, the
Securities will have been validly issued, fully paid and nonassessable and will
be free of any liens or encumbrances; provided, however, that the COES Preferred
Shares and COES Warrants are subject to restrictions on transfer under state
and/or federal securities laws. Upon registration of the Conversion Shares and
the Warrant Shares pursuant to Section 8 of this Agreement, there shall be no
restriction on the transferability thereof other than applicable prospectus
delivery requirements.
4.5 No Conflict. The execution and delivery of this Agreement
do not, and the consummation of the transactions contemplated hereby will not,
conflict with, or result in any violation of, or default (with or without notice
or lapse of time, or both), or give rise to a right of termination, cancellation
or acceleration of any obligation or to a loss of a material benefit, under, any
provision of the Certificate of Incorporation, and any amendments thereto,
Bylaws, stockholders agreements and any amendments thereto of the Subsidiary
Company or any material mortgage, indenture, lease or other agreement or
instrument, permit, concession, franchise, license, judgment, order, decree
statute, law, ordinance, rule or regulation applicable to the Subsidiary
Company, its properties or assets.
4.6 Accuracy of Reports and Information. The Subsidiary
Company is in full compliance, to the extent applicable, with all reporting
obligations under Section 12(b), 12 (g) or 15(d), as applicable, of the Exchange
Act. The Subsidiary Company has registered its Common Stock pursuant to Section
12 of the Exchange Act and the Common Stock is listed and trades on AMEX.
The Subsidiary Company has filed all material required to be
filed pursuant to all reporting obligations, under either Section 13(a) or 15(d)
of the Exchange Act for a period of at least twelve (12) months immediately
preceding the offer or sale of the COES Preferred Shares (or for such shorter
period that the Subsidiary Company has been required to file such material).
11
4.7 SEC Filings/Full Disclosure. None of the Subsidiary
Company's filings with the SEC since January 1, 1997 contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein in light of the
circumstances under which they were made, not misleading. The Subsidiary Company
has, since January 1, 1997, timely filed all requisite forms, reports and
exhibits thereto with the SEC. The Subsidiary Company's Prospectus declared
effective by the SEC on June 28, 1996, the Annual Report on Form 10-K for the
year ended December 31, 1996, its Quarterly Reports for the periods ended March
31, 1997 and all Current Reports on Form 8-K filed by the Subsidiary Company
from January 1, 1996 to date are referred to as the "CXI SEC Reports."
There is no fact known to the Subsidiary Company (other than
general economic conditions known to the public generally) that has not been
disclosed in writing to the Purchaser which could reasonably be expected to have
a material adverse effect on the condition (financial or otherwise) or in the
earnings, business affairs, business prospects, properties or assets of the
Subsidiary Company, or (ii) could reasonably be expected to materially and
adversely affect the ability of the Subsidiary Company to perform its
obligations pursuant to this Agreement.
4.8 Absence of Undisclosed Liabilities. The Subsidiary Company
has no material liabilities or obligations, absolute or contingent (individually
or in the aggregate), except as set forth in the financial statements included
in the CXI SEC Reports (the "CXI Financial Statements") or as incurred in the
ordinary course of business after the date of the CXI Financial Statements.
4.9 Governmental Consent, etc. No consent, approval or
authorization of or designation, declaration or filing with any governmental
authority on the part of the Subsidiary Company is required in connection with
the valid execution and delivery of this Agreement, or the offer, sale or
issuance of the COES Preferred Shares, or the consummation of any other
transaction contemplated hereby, except the filing with the SEC of a
registration statement on Form S-3 or S-1 for the purpose of registering the CXI
Common Stock underlying the COES Preferred Shares and the COES Warrants.
4.10 Intellectual Property Rights. Except as disclosed in the
CXI SEC Reports, the Subsidiary Company has sufficient trademarks, trade names,
patent rights, copyrights and licenses to conduct its business as contemplated
therein. To the Subsidiary Company's knowledge, neither the Subsidiary Company
nor its products is infringing or will infringe any trademark, trade name,
patent right, copyright, license, trade secret or other similar right of others
currently in existence; and there is no claim being made against the Subsidiary
Company regarding any trademark, trade name, patent, copyright, license, trade
secret or other intellectual property right which could have a material adverse
effect on the condition (financial or otherwise), business, results of
operations or prospects of the Subsidiary Company.
4.11 Material Contracts. Except as set forth in the CXI SEC
Reports, the agreements to which the Subsidiary Company is a party described
therein are valid
12
agreements, in full force and effect, the Subsidiary Company is not in material
breach or material default (with or without notice or lapse of time, or both)
under any of such agreements, and, to the Subsidiary Company's knowledge, the
other contracting party or parties thereto are not in material breach or
material default (with or without notice or lapse of time, or both) under any of
such agreements.
4.12 Litigation. There is no action, proceeding or
investigation pending, or to the Subsidiary Company's knowledge threatened,
against the Subsidiary Company which might result, either individually or in the
aggregate, in any material adverse change in the business, prospects,
conditions, affairs or operations of the Subsidiary Company. The Subsidiary
Company is not a party to or subject to the provisions of any order, writ,
injunction, judgment or decree of any court or government agency or
instrumentality. There is no action, suit, proceeding or investigation by the
Subsidiary Company currently pending or which the Subsidiary Company currently
intends to initiate.
4.13 Title to Assets. Except as set forth in CXI SEC Reports,
the Subsidiary Company has good and marketable title to all properties and
material assets described therein as owned by it, free and clear of any pledge,
lien, security interest, encumbrance, claim or equitable interest other than
such as are not material to the business of the Subsidiary Company.
4.14 Subsidiaries. The Subsidiary Company does not presently
own or control, directly or indirectly, any interest in any other corporation,
partnership, association or other business entity, except as stated in the CXI
SEC Reports.
4.15 Required Governmental Permits. The Subsidiary Company is
in possession of and operating in compliance with all authorizations, licenses,
certificates, consents, orders and permits from state, federal and other
regulatory authorities which are material to the conduct of its business, all of
which are valid and in full force and effect.
4.16 Listing. The Subsidiary Company will maintain the listing
of its Common Stock on AMEX or other organized, comparable United States market
or quotation system; provided, however, that the sole remedy for Purchaser for
breach of this representation shall be liquidated damages as provided in Section
10.6.
4.17 Other Outstanding Securities/Financing Restrictions.
Except as set forth in the CXI SEC Reports, there are no other outstanding debt
or equity securities presently convertible into shares of CXI Common Stock.
Except as set forth in the CXI SEC Reports, the Subsidiary Company has no
outstanding restricted shares of Common Stock, or shares of Common Stock sold
under Regulation S or Regulation D under the Securities Act of 1933, as amended
(the "Securities Act") or outstanding under any other exemption from
registration, which are available for sale as unrestricted ("free trading")
stock.
The Subsidiary Company cannot, without the prior approval in
writing from the Purchaser, obtain convertible debt or equity financing for a
period of ninety (90) days following the effective date of the Registration
Statement (as defined herein); however, the
13
Subsidiary Company will not require prior approval if (a) at least 80% of the
net proceeds of the financing is part of an acquisition by the Subsidiary
Company of control of another company or entity, (b) at least 80% of the net
proceeds of the financing is a refinancing of the Subsidiary Company's debt, or
(c) the financing is part of a public offering of the Subsidiary Company's
securities.
4.18 Right of Participation. In the event the Subsidiary
Company wishes to complete a financing similar in structure to the securities
issued hereby within one hundred and eighty (180) days from the Closing Date,
the Purchaser shall have the right to participate in such offering and shall
have three (3) business days to reply in writing after receipt of written notice
of such proposed financing from the Subsidiary Company. In the event a writing
is not received by the Subsidiary Company from the Purchaser specifying the
extent of the Purchaser's interest in so participating, this will be deemed a
refusal by the Purchaser of such right to participate.
4.19 Legal Opinion. Purchaser shall, upon purchase of the COES
Preferred Shares, receive an opinion letter from counsel to the Subsidiary
Company, and the Subsidiary Company represents that it will immediately obtain
such an opinion from counsel to the satisfaction of the Purchaser, to the effect
that:
(a) The Subsidiary Company is duly incorporated,
validly existing and in good standing in the jurisdiction of its
incorporation.
(b) There is no action, proceeding or investigation
pending, or to such counsel's knowledge, threatened against the
Subsidiary Company which might result, either individually or in the
aggregate, in any material adverse change in the business, prospects,
conditions, affairs or operations of the Subsidiary Company.
(c) The Subsidiary Company is not a party to or
subject to the provisions of any order, writ, injunction, judgment or
decree of any court or government agency or instrumentality.
(d) There is no action, suit, proceeding or
investigation by the Company currently pending, to such counsel's
knowledge, or which the Subsidiary Company currently intends to
initiate.
(e) All issued and outstanding shares of CXI Common
Stock have been duly authorized and validly issued and are fully paid
and nonassessable.
(f) This Securities Purchase Agreement and the Stock
Purchase Warrant, the issuance of the COES Preferred Shares and COES
Warrants and the transfer of the Conversion Shares and Warrant Shares
have been duly approved by all required corporate action, the requisite
consent of National Securities Corporation for the Parent Company to
transfer the shares of CXI Common Stock in its holdings to the
Purchaser upon conversion of the COES Preferred Shares and exercise of
the
14
COES Warrants has been duly obtained, and that all such Securities,
upon delivery, shall be validly issued and outstanding, fully paid and
nonassessable.
(g) The execution, delivery and performance of this
Securities Purchase Agreement and the Stock Purchase Warrant by the
Subsidiary Company, and the consummation of the transactions
contemplated thereby, will not, with or without the giving of notice or
the passage of time or both:
(i) Violate the provisions of any law, rule
or regulation which is material to the
assets, properties or business of the
Subsidiary Company;
(ii) Violate the provisions of the charter
or bylaws of the Subsidiary Company; or
(iii) To the best of counsel's knowledge,
violate any judgment, decree, order or award
of any court, governmental body or
arbitrator.
(iv) To the best of counsel's knowledge,
conflict with, or result in the breach or
termination of any term or provision of, or
constitute a default under, or cause any
acceleration under, or cause the creation of
any lien, charge or encumbrance upon the
properties or assets of the Subsidiary
Company pursuant to, any note, bond,
indenture, mortgage, lease, deed of trust or
other instrument, obligation, or agreement
to which the Subsidiary Company is a party
and which is material to the Subsidiary
Company or by which the Subsidiary Company,
or any of its material properties is or may
be bound.
(h) This Securities Purchase Agreement and the Stock
Purchase Warrant constitute the valid and legally binding obligations
of the Subsidiary Company and are enforceable against the Subsidiary
Company in accordance with their respective terms, subject to laws of
general application relating to bankruptcy, insolvency and the relief
of debtors and rules of law governing specific performance, injunctive
relief or other equitable remedies, and, with respect to the Securities
Purchase Agreement, to limitations of public policy as they may apply
to the indemnification provisions set forth in Section 8.4 thereof.
4.20 No Poison Pill. The Subsidiary Company represents that it
does not have, and has no current intention to adopt, a stockholder rights plan
("poison pill").
Section 5. Representations, Warranties and Covenants of the
Purchaser. The Purchaser represents and warrants to, and covenants with, the
Parent Company and the Subsidiary Company that the following are true and
correct as of the date hereof and as of the Closing Date.
15
5.1 Authority. The Purchaser's signatory has all right, power,
authority and capacity to execute and deliver this Agreement and to consummate
the transactions contemplated hereby. This Agreement has been duly executed and
delivered by the Purchaser and will constitute the legal, valid and binding
obligations of the Purchaser, enforceable in accordance with its terms, subject
to laws of general application relating to bankruptcy, insolvency and the relief
of debtors and rules of law governing specific performance, injunctive relief or
other equitable remedies, and to limitations of public policy as they may apply
to the indemnification provisions set forth in Section 8.4 of this Agreement.
5.2 Investment Experience. Purchaser is an "accredited
investor" as defined in Rule 501(a) under the Securities Act. Purchaser is aware
of the Parent Company's and Subsidiary Company's business affairs and financial
conditions and has had access to and has acquired sufficient information about
the Parent Company and the Subsidiary Company, including the COES and CXI SEC
Reports, to reach an informed and knowledgeable decision to acquire the COES
Preferred Shares. Purchaser has such business and financial experience as is
required to give it the capacity to protect its own interests in connection with
the purchase of the COES Preferred Shares and the acquisition of the COES
Warrants.
5.3 Investment Intent. Without limiting its ability to resell
the COES Preferred Shares and the COES Warrants and underlying CXI Common Stock
pursuant to an effective registration statement, Purchaser represents that it is
purchasing the COES Preferred Shares for investment purposes. Purchaser
understands that its acquisition of the COES Preferred Shares and the COES
Warrants has not been registered under the Securities Act or registered or
qualified under any state securities law in reliance on specific exemptions
therefrom, which exemptions may depend upon, among other things, the bona fide
nature of Purchaser's investment intent as expressed herein. Purchaser will not,
directly or indirectly, offer, sell, pledge, transfer or otherwise dispose of
(or solicit any offers to buy, purchase or otherwise acquire or take a pledge
of) any of the COES Preferred Shares or the COES Warrants except in compliance
with the Securities Act and any applicable state securities laws, and the rules
and regulations promulgated thereunder.
5.4 Registration or Exemption Requirements. Purchaser further
acknowledges and understands that the COES Preferred Shares and the COES
Warrants may not be resold or otherwise transferred except in a transaction
registered under the Securities Act and any applicable state securities laws or
unless an exemption from such registration is available. Purchaser understands
that the certificate(s) evidencing the COES Preferred Shares and the COES
Warrants will be imprinted with a legend, subject to Section 5.7 below, that
prohibits the transfer thereof unless (i) they are registered or such
registration is not required, and (ii) if the transfer is pursuant to an
exemption from registration other than Rule 144 under the Securities Act and, if
the Parent Company shall so request in writing, an opinion of counsel reasonably
satisfactory to the Parent Company is obtained to the effect that the
transaction is so exempt.
5.5 No Legal, Tax or Investment Advice. Purchaser understands
that nothing in this Agreement or any other materials presented to Purchaser in
connection with
16
the purchase and sale of the COES Preferred Shares and the acquisition and
issuance of the COES Warrants constitutes legal, tax or investment advice.
Purchaser has consulted such legal, tax and investment advisors as it, in its
sole discretion, has deemed necessary or appropriate in connection with its
purchase of the COES Preferred Shares and acquisition of the COES Warrants.
5.6 Purchaser Review. Purchaser hereby represents and warrants
that the Purchaser has carefully examined the COES SEC Reports and CXI SEC
Reports and the COES and CXI Financial Statements contained therein. The
Purchaser acknowledges that the Parent Company and Subsidiary Company has made
available to the Purchaser all documents and information that it has requested
relating to the Parent Company and the Subsidiary Company and has provided
answers to all of its questions concerning the Parent Company and the Subsidiary
Company, the COES Preferred Shares and the COES Warrants. Nothing stated in the
previous two sentences, however, shall be deemed to affect the representations
and warranties of the Parent Company and the Subsidiary Company contained in
this Agreement.
5.7 Legend. The certificate or certificates representing the
Securities shall be subject to a legend restricting transfer under the
Securities Act, such legend to be substantially as follows:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED
FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933. SUCH SHARES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT WHICH, EXCEPT IN
THE CASE OF AN EXEMPTION PURSUANT TO RULE 144 UNDER SAID ACT, IS
CONFIRMED IN A LEGAL OPINION SATISFACTORY TO THE COMPANY."
The certificates shall also include any legends required by any applicable state
securities laws.
The legend(s) endorsed on a stock certificate pursuant to this
Section 5.7 or on any certificate representing any of the Securities shall be
removed and the Parent Company or the Subsidiary Company shall issue a
replacement certificate without such legend to the holder of such certificate if
the Securities represented by such certificate are registered under the
Securities Act or if such holder provides to the Parent Company or the
Subsidiary Company an opinion of counsel to the effect that a public sale,
transfer or assignment of such Securities may be made without registration.
5.8 Restrictions on Conversion of Shares. Notwithstanding
anything to the contrary contained herein, no COES Preferred Shares may be
converted by a Holder to the extent that, after giving effect to the Conversion
Shares issued pursuant to a Notice of Conversion, the total number of shares of
CXI Common Stock deemed beneficially owned by such Holder (other than by virtue
of the ownership of COES Preferred Shares or COES Warrants or ownership of other
securities that have limitations on a Holder's rights to convert
17
or exercise similar to those limitations set forth herein), together with all
shares of CXI Common Stock deemed beneficially owned by Holder's "affiliates"
(as defined in Rule 144 under the Securities Act) that would be aggregated for
purposes of determining whether a group under Section 13(d) of the Exchange Act
exists, would exceed 4.99% of the total issued and outstanding shares of CXI
Common Stock, provided that each Holder shall have the right to waive this
restriction, in whole or in part, immediately in case of a pending Change in
Control Transaction and in any other case upon 61 days prior notice to the
Parent Company and the Subsidiary Company. The delivery of a Notice of
Conversion by any Holder shall be deemed a representation by such Holder it is
in compliance with this Section 5.8. A transferee of COES Preferred Shares shall
not be bound by this provision unless it expressly agrees to be so bound. The
term "deemed beneficially owned" as used in this Section 5.8 shall exclude
shares that might otherwise be deemed beneficially owned by reason of the
convertibility of the COES Preferred Shares.
Section 6. Conditions to the Purchaser's Obligation to
Purchase. The Parent Company and the Subsidiary Company understand that the
Purchaser's obligation to purchase the COES Preferred Shares is conditioned
upon:
(a) Acceptance by Purchaser of this Agreement for the
sale of the COES Preferred Shares, as evidenced by the execution of this
Agreement by its authorized officers;
(b) Delivery of the COES Preferred Shares and COES
Warrants to Xxxxxxxxx & Xxxxxx;
(c)(i) The delivery at the Closing of a certificate
from an authorized officer of the Parent Company certifying that all
representations and warranties of the Parent Company are true and correct as of
the Closing Date (in the form annexed hereto as Exhibit C1);
(c)(ii) The delivery at the Closing of a certificate
from an authorized officer of the Subsidiary Company certifying that all
representations and warranties of the Subsidiary Company are true and correct as
of the Closing Date (in the form annexed hereto as Exhibit C2); and
(d) A filed Certificate of Designation.
Section 7. Conditions to Parent Company's Obligation to Sell.
Purchaser understands that the Parent Company's obligation to sell the COES
Preferred Shares is conditioned upon:
(a) The receipt and acceptance by the Parent Company
of this Agreement to issue the COES Preferred Shares as evidenced by execution
of this Agreement by the President or any Vice President of the Parent Company;
18
(b) Delivery to the Company, the Finder and Counsel
for Parent by Purchaser of good funds as payment in full for the purchase of the
COES Preferred Shares; and
(c) The delivery at the Closing of a certificate from
an authorized officer or representative of Purchaser certifying that all
representations and warranties of the Purchaser are true and correct as of the
Closing Date (in the form annexed hereto as Exhibit C3).
Section 8. Registration of the Shares; Compliance with the
Securities Act.
8.1 Definitions. For the purpose of this Section 8:
(a) the term "Registration Statement" shall mean any
registration statement required to be filed by Section 8.2 below, and shall
include any preliminary prospectus, final prospectus, exhibit or amendment
included in or relating to such registration statement; and
(b) the term "untrue statement" shall include any
untrue statement or alleged untrue statement, or any omission or alleged
omission to state in the Registration Statement a material fact required to be
stated therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
8.2 Registration Procedures and Expenses. The Parent
Company shall cause the Subsidiary Company to, and the Subsidiary Company shall:
(a) file with the SEC a registration statement under
the Securities Act on Form S-3, if the Subsidiary Company is eligible to file a
registration statement under such form, to register the Conversion Shares and
the Warrant Shares within thirty (30) days after the Closing Date and in
sufficient time to have such registration effective ninety (90) days from the
Closing Date; and if the Subsidiary Company is not eligible to file a
registration statement under Form S-3, to file with the SEC a registration
statement under the Securities Act on Form S-1 or any other form which is
appropriate, to register the Conversion Shares and the Warrant Shares within
sixty (60) days after the Closing Date and in sufficient time to have such
registration effective one hundred and twenty (120) days from the Closing Date.
(b) use its best efforts, subject to receipt of
necessary information from the Purchaser, to cause such Registration Statement
to become effective as promptly after filing as practicable;
(c) prepare and file with the SEC such amendments and
supplements to such Registration Statement and the prospectus used in connection
therewith as may be necessary to keep such Registration Statement effective
until termination of such obligation as provided in Section 8.9 below;
19
(d) furnish to the Purchaser with respect to the CXI
Common Stock registered on the Registration Statement (and to each underwriter,
if any, of such CXI Common Stock) such number of copies of prospectuses in
conformity with the requirements of the Securities Act and such other documents
as the Purchaser may reasonably request, in order to facilitate the public sale
or other disposition of all or any of the CXI Common Stock by the Purchaser;
provided, however, that the obligation of the Subsidiary Company to deliver
copies of prospectuses to the Purchaser shall be subject to the receipt by the
Subsidiary Company of reasonable assurances from the Purchaser that the
Purchaser will comply with the applicable provisions of the Securities Act and
of such other securities laws as may be applicable in connection with any use of
such prospectuses;
(e) file such documents as may be required of the
Subsidiary Company for normal securities law clearance for the resale of the
Common Stock in which states of the United States as may be reasonably requested
by the Purchaser; provided, however, that the Subsidiary Company shall not be
required in connection with this paragraph (e) to qualify as a foreign
corporation or execute a general consent to service of process in any
jurisdiction;
(f) bear all expenses in connection with the
procedures in paragraphs (a) through (e) of this Section 8.2 and the
registration of the CXI Common Stock on such Registration Statement and the
satisfaction of the blue sky laws of such states, including the reasonable fees
and expenses of legal counsel to the Purchaser in connection with the procedures
in paragraph (a) through (e) of this Section 8.2, other than underwriting
discounts and selling commissions or expenses required by law to be borne by
Purchaser; and
(g) in the event of the failure of Company to procure
registration of the CXI Common Stock underlying the COES Preferred Shares within
ninety (90) days from the Closing Date if the Registration Statement is filed
under Form S-3, or within one hundred (120) days from the Closing Date if the
Registration Statement is filed under Form S-1 or any other appropriate forms,
the Parent Company will pay Purchaser by wire transfer, as liquidated damages
for such failure and not as a penalty, one (1%) percent of the Liquidation
Preference (as defined below) of the COES Preferred Shares that have not been
converted, for each month, or any part thereof, that the Registration Statement
is not effective, or in the event of a Suspension (as defined in Section 8.7)
after such date. If the Parent Company does not remit the damages to the
Purchaser as set forth above, the Parent Company will pay the Purchaser
reasonable costs of collection, including attorneys fees, in addition to the
liquidated damages. Such payment shall be made to the Purchaser immediately if
the registration of the Conversion Shares and Warrant Shares is not effected;
provided, however, that the payment of such liquidated damages shall not relieve
the Subsidiary Company from its obligations to register the Conversion Shares
and Warrant Shares pursuant to this Section. The registration of the Conversion
Shares and Warrant Shares pursuant to this provision shall not affect or limit
Purchaser's other rights or remedies as set forth in this Agreement. The
"Liquidation Preference" for a Share shall equal $100 (subject to adjustments
for Reclassifications), plus all accrued and unpaid dividends (which shall
accrue through the Conversion Date, Redemption Date or the date liquidated
damages are paid, as applicable)
20
and any then unpaid liquidated damages (interest on which shall accrue at a rate
of 2% per month) arising under Sections 8.2(g), 10.2 or 10.6.
8.3 Underwriter. The Parent Company and the Subsidiary Company
understand that the Purchaser disclaims being an "underwriter" (as such term is
defined under the Securities Act and the rules and regulations promulgated
thereunder (an "Underwriter")), but Purchaser being deemed an Underwriter shall
not relieve the Parent Company and the Subsidiary Company of any obligation it
has hereunder.
8.4 Indemnification.
(a) General Indemnification. The Parent Company and
the Subsidiary Company together and the Purchaser agree to indemnify the other
and to hold the other harmless from and against any and all losses, damages,
liabilities, costs and expenses (including reasonable attorneys' fees) which the
other may sustain or incur in connection with the breach by the indemnifying
party of any representation, warranty or covenant made by it in this Agreement.
(b) Indemnification for Registration Statement.
(i) By Parent Company and Subsidiary Company. To
the extent permitted by law, the Parent Company and Subsidiary Company together
will indemnify and hold harmless each Holder, the directors, if any, of such
Holder, the officers, if any, of such Holder who sign the Registration
Statement, each person, if any, who controls such Holder, any underwriter (as
defined in the Securities Act) for the Holders and each person, if any, who
controls any such underwriter within the meaning of the Securities Act or the
Exchange Act, against any losses, claims, damages, expenses or liabilities
(joint or several) to which any of them may become subject under the Securities
Act, the Exchange Act or otherwise, insofar as such losses, claims, damages,
expenses or liabilities (or actions or proceedings, whether commenced or
threatened, in respect thereof) arise out of or are based upon any of the
following statements, omissions or violations (collectively, a "Violation"): (i)
any untrue statement or alleged untrue statement of a material fact contained in
the Registration Statement including any preliminary prospectus or final
prospectus contained therein or any amendments or supplements thereto, (ii) the
omission or alleged omission to state therein a material fact required to be
stated therein, or necessary to make the statements therein, in light of the
circumstance in which they are made, not misleading or (iii) any violation or
alleged violation by the Company of the Securities Act, the Exchange Act, any
state securities law or any rule or regulation promulgated under the Securities
Act, the Exchange Act or any state securities law; and the Company will
reimburse the Holders and each such underwriter or controlling person, promptly
as such expenses are incurred, for any legal or other expenses reasonably
incurred by them in connection with investigating or defending any such loss,
claim, damage, liability action or proceeding; provided, however, that the
indemnity agreement contained in this Section 8.4(b) shall not apply to amounts
paid in settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of the Parent Company and the
Subsidiary Company, which consents shall not be unreasonably withheld, nor shall
the Parent Company and Subsidiary Company
21
be liable in any such case for any such loss, claim, damage, liability or action
to the extent that it arises out of or is based upon a Violation which occurs in
reliance upon and in conformity with written information furnished expressly for
use in connection with such registration by the Holders or any such underwriter
or controlling person, as the case may be. Such indemnity shall remain in full
force and effect regardless of any investigation made by or on behalf of the
Holders or any such underwriter or controlling person and shall survive the
transfer of the Securities by Holders.
(ii) By Holders. To the extent permitted by law,
each Holder, severally and not jointly, will indemnify and hold harmless the
Subsidiary Company, each of its directors, each of its officers who have signed
the Registration Statement, each person, if any, who controls the Subsidiary
Company within the meaning of the Securities Act or the Exchange Act, any
underwriter and any other stockholder selling securities pursuant to the
Registration Statement or any of its directors or officers or any person who
controls such holder or underwriter, against any losses, claims, damages or
liabilities (joint or several) to which any of them may become subject, under
the Securities Act, the Exchange Act or other federal state law, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon any Violation, in each case to the extent (and only to the
extent) that such Violation occurs in reliance upon and in conformity with
written information furnished by such Holder expressly for use in connection
with such registration, and such Holder will reimburse any legal or other
expenses reasonably incurred by any of them in connection with investigating or
defending any such loss, claim, damage, liability or action; provided, however,
that the indemnity agreement contained in this subsection 8.4(b) shall not apply
to amounts paid in settlement of such loss, claim, damage, liability or action
if such settlement is effected without the consent of such Holder, which consent
shall not be unreasonably withheld; and provided further, that the Holder shall
be liable under this paragraph for only that amount of losses, claims, damages
and liabilities as does not exceed the net proceeds to such Holder as a result
of the sale of the Securities pursuant to such registration.
(c) Procedure for Indemnification. Promptly after
receipt by an indemnified party under this Section 8.4 of notice of the
commencement of any action (including any governmental action), such indemnified
party will, if a claim in respect thereof is to be made against any indemnifying
party under this Section 8.4, deliver to the indemnifying party a written notice
of commencement thereof and the indemnifying party shall have the right to
participate in, and, to the extent the indemnifying party so desires, jointly
with any other indemnifying party similarly noticed, to assume control of the
defense thereof with counsel mutually satisfactory to the parties; provided,
however, that an indemnified party shall have the right to retain its own
counsel, with the fees and expenses to be paid by the indemnifying party, if, in
the reasonable opinion of counsel for the indemnifying party, representation of
such indemnified party by the counsel retained by the indemnifying party would
be inappropriate due to actual or potential differing interests between such
indemnified party and any other party represented by such counsel in such
proceeding. The failure to deliver written notice to the indemnifying party
within a reasonable time of the commencement of any such action shall relieve
such indemnifying party of any liability to the indemnified party under this
Section 8.4 only to the extent
22
prejudicial to its ability to defend such action, but the omission so to deliver
written notice to the indemnifying party will not relieve it of any liability
that it may have to any indemnified party other than under this Section 8.4. The
indemnification required by this Section 8.4 shall be made by periodic payments
of the amount thereof during the course of the investigation or defense,
promptly as such expense, loss, damage or liability is incurred.
(d) Contribution. To the extent any indemnification
by an indemnifying party is prohibited or limited by law, the indemnifying party
agrees to make the maximum contribution with respect to any amounts for which it
otherwise would be liable under this Section 8.4 to the extent permitted by law,
provided that (i) no contribution shall be made under the circumstances where
the maker would not have been liable for indemnification under the fault
standards set forth in this Section 8.4, (ii) no seller of the Securities guilty
of fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any seller of the
Securities who was not guilty of such fraudulent misrepresentation and (iii)
contribution by any seller of the Securities shall be limited in amount to the
net amount of proceeds received by such seller from the sale of such Securities.
8.5 Information Available. So long as any registration
statement is effective covering the resale of the Conversion Shares or Warrant
Shares, the Parent Company and the Subsidiary Company will each furnish to
Purchaser:
(a) as soon as possible after available, one copy of
(i) each of its Annual Report to Stockholders (which Annual Report shall contain
financial statements audited in accordance with generally accepted accounting
principles in the United States of America by a national firm of certified
public accountants); (ii) if not included in substance in the Annual Report to
Stockholders, each of its annual report on Form 10-K within 100 days after the
end of each fiscal year of each Company, (iii) each of its Quarterly Reports to
Stockholders, and its quarterly report on Form 10-Q within sixty (60) days, and
(iv) a full copy of the registration statement covering the Conversion Shares
and Warrant Shares (the foregoing, in each case, excluding exhibits); and
(b) upon the reasonable request of Purchaser, such
other information that is generally available to the public.
8.6 Rule 144 Reporting. With a view to making available the
benefits of certain rules and regulations of the SEC which may at any time
permit the sale of the Conversion Shares and the Warrant Shares to the public
without registration, the Parent Company and the Subsidiary Company agrees to
use its best efforts to:
(a) make and keep public information available, as
those terms are understood and defined in Rule 144 under the Securities Act, at
all times after the effective date on which the Company becomes subject to the
reporting requirements of the Securities Act or the Exchange Act;
23
(b) use its best efforts to file with the SEC in a
timely manner all reports and other documents required of the Company under the
Securities Act and the Exchange Act;
(c) to furnish to Purchaser forthwith upon request a
written statement by the Parent Company or the Subsidiary Company as to its
compliance with the reporting requirements of said Rule 144, and of the
Securities Act and the Exchange Act, a copy of the most recent annual or
quarterly report of the Company, and such other reports and documents of the
Parent Company or the Subsidiary Company and other information in the possession
of or reasonably obtainable by the Parent Company or the Subsidiary Company as
Purchaser may reasonably request in availing itself of any rule or regulation of
the SEC allowing Purchaser to sell any such Conversion Shares or Warrant Shares
without registration.
8.7 Temporary Cessation of Offers and Sales by Purchaser. The
Purchaser acknowledges that there may occasionally be times when the Subsidiary
Company may be required to suspend the use of the prospectus forming part of the
Registration Statement (a "Suspension") until such time as an amendment to the
Registration Statement has been filed by the Company and declared effective by
the Commission, until the prospectus is supplemented or amended to comply with
the Securities Act, or until such time as the Subsidiary Company has filed an
appropriate report with the Commission pursuant to the Exchange Act. The
Subsidiary Company agrees to file any necessary amendments, supplements and
reports as soon as practicable under the circumstances. The Subsidiary Company
agrees to use its best efforts to cause a Suspension to be lifted within 10
business days during which time Purchaser agrees that it will not sell any
shares of Common Stock pursuant to such prospectus.
8.8 Transfer of Conversion Shares or Warrant Shares Stock
After Registration. Purchaser hereby covenants with the Parent Company and the
Subsidiary Company not to make any sale of the Conversion Shares or Warrant
Shares except either (i) in accordance with the Registration Statement, in which
case Purchaser covenants to comply with the requirement of delivering a current
prospectus, (ii) in accordance with Rule 144, in which case Purchaser covenants
to comply with Rule 144, or (iii) as otherwise permitted by applicable law.
8.9 Termination of Obligations. The obligations of the Parent
Company and Subsidiary Company pursuant to Sections 8.2, 8.3 and 8.6 hereof
shall cease and terminate upon the earlier to occur of (i) such time as all of
the Conversion Shares or Warrant Shares have been re-sold, or (ii) such time as
all of the Common Stock may be resold pursuant to Rule 144(k) under the
Securities Act.
Section 9. Legal Fees and Expenses. Each of the parties shall
pay its own fees and expenses (including the fees of any attorneys, accountants,
appraisers or others engaged by such party) in connection with this Agreement
and the transactions contemplated hereby.
24
Section 10. Conversion; Liquidated Damages.
10.1 Restrictions on Conversion. Conversion of all the COES
Preferred Shares may be made at the Conversion Price, the day following the date
that the Registration Statement for the CXI Common Stock underlying the COES
Preferred Stock and COES Warrants was declared effective by the SEC.
10.2 Notice of Conversion. Conversion of the COES Preferred
Shares to CXI Common Stock may be exercised in whole or in part by Purchaser
telecopying an executed and completed Notice of Conversion (in the form annexed
hereto as Exhibit D) to counsel for the Parent Company, with a copy to the
Parent Company and Subsidiary Company, and delivering the original Notice of
Conversion and the certificate representing the COES Preferred Shares to counsel
by hand or by express courier within three (3) business days of exercise. Each
date on which a Notice of Conversion is telecopied to and received by the Parent
Company in accordance with the provisions hereof shall be deemed a Conversion
Date. The Subsidiary Company will reissue and transmit the certificates in the
name of the Purchaser, or any other name as instructed by the Purchaser,
representing the CXI Common Stock transferable upon conversion of all or any
part of the COES Preferred Shares and COES Warrant Shares (and the Parent
Company will transmit any certificates for replacement COES Preferred Shares not
previously converted but included in the original certificate presented for
conversion) to the Purchaser via express courier within three (3) business days
after counsel for the Parent Company has received the original Notice of
Conversion and the certificate representing the COES Preferred Shares being so
converted. The Notice of Conversion and certificate representing the portion of
the COES Preferred Shares converted shall be delivered as follows:
To counsel of Parent Company:
Greenberg, Traurig, Hoffman, Lipoff, Xxxxx & Xxxxxxx
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, XX 00000
Attn: Xxxxxxx X. Xxxxx, Esq.
Telephone: 000-000-0000
Facsimile: 000-000-0000
To the Parent Company:
Commodore Environmental Services, Inc.
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, XX 00000
Attn.: Bentley X. Xxxx
Telephone: 000-000-0000
Facsimile: 000-000-0000
25
To the Subsidiary Company:
Commodore Applied Technologies, Inc.
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, XX 00000
Attn.: Bentley X. Xxxx
Telephone: 000-000-0000
Facsimile: 000-000-0000
or to such other person at such other place as the Parent Company shall
designate to the Purchaser in writing.
In the event that the COES Preferred Shares are not converted
within three (3) business days of the Conversion Date, the Parent Company shall
be liable to Purchaser for actual damages incurred from the fourth business day
following the Conversion Date through the ninth business day following the
Conversion Date for such failure (provided that Purchaser has delivered the
original valid Notice of Conversion and the original certificate(s) representing
the COES Preferred Shares to be converted, or an affidavit and indemnity
agreement as to lost certificates reasonably satisfactory to the Company). In
the event the COES Preferred Shares are not converted by the tenth (10th)
business day following the Conversion Date, the Parent Company shall pay to the
Purchaser, by wire transfer, as liquidated damages for such failure and not as a
penalty, an amount in cash equal to one (1%) percent per day of the Liquidation
Preference for the COES Preferred Shares to be converted which shall run from
the tenth (10th) business day following the Conversion Date; provided, however,
that actual damages and liquidated damages for a failure to deliver certificates
of CXI Common Stock shall be determined in accordance with Section 10.6, if both
of the following conditions are satisfied by the Parent Company: (i) the failure
to deliver certificates of CXI Common Stock is the result of a lack of available
shares of CXI Common Stock and (ii) the Parent Company commences, within ten
(10) business days after the initial Conversion Date to purchase or otherwise
acquire the number of shares of CXI Common Stock which is sufficient to permit
conversion of all COES Preferred Shares then outstanding at the Hypothetical
Conversion Price (as hereinafter defined) then in effect.
10.3 Mandatory Conversion. The COES Preferred Shares are
subject to mandatory conversion after five (5) years from the Closing Date, at
which time all COES Preferred Shares will automatically be converted at the
Conversion Price, upon the terms set forth in this section. Such five year
period will be extended by the number of days during such period that (i) the
Subsidiary Company's Common Stock has been Delisted and/or (ii) a Suspension has
been in effect and by the number of days after the 90th day or the 120th day,
whichever date is applicable as provided in Section 8.2(g) herein, that
Registration Statement was not declared effective. Any particular day in which
more than one of the foregoing condition events shall have been in effect shall
only be counted once in determining the number of days by which to extend the
five year period prior to mandatory conversion. In addition, mandatory
conversion shall not occur for so long as certain default events specified in
Section 5(e) of the Certificate of Designation are continuing.
26
10.4 Reservation of CXI Common Stock Transferable Upon
Conversion. The Parent Company shall at all times reserve and keep available out
of its holdings of shares of CXI Common Stock, such number of shares of CXI
Common Stock as shall from time to time be sufficient to effect the conversion
of all then outstanding COES Preferred Shares and COES Warrants, the sufficiency
of which shall be determined (in the case of the COES Preferred Shares) by using
a Conversion Price (the "Hypothetical Conversion Price") derived from a
hypothetical closing market price that is 75% of either (i) the actual Average
Closing Bid Price on the Closing Date or (ii) the actual Average Closing Bid
Price from time to time, whichever is lower, and in the case of the COES
Warrants, by the exercise price thereof. The Parent Company hereby covenants and
agrees that if at any time the Hypothetical Conversion Price falls to a level
that would not enable all outstanding COES Preferred Shares to be fully
converted and the outstanding COES Warrants to be fully exercised, the Parent
Company will promptly purchase or otherwise acquire the number of shares of CXI
Common Stock sufficient to permit the conversion of all COES Preferred Shares
then outstanding at the Hypothetical Conversion Price then in effect and the
exercise of all outstanding COES Warrants.
10.5 Liquidated Damages. In the event of a Delisting, a
Cumulative Suspension or Insufficient CXI Common Stock (each a "Damage Event"),
the Parent Company will pay to Purchaser (and to all other holders of the
Shares), by wire transfer, as liquidated damages for such non-availability and
not as a penalty, an amount in cash equal to 2% per month of the Liquidation
Preference of only those COES Preferred Shares then eligible for conversion,
without regard to Section 5.8, for the first two months after the occurrence of
a Damage Event, and 3% per month for each month thereafter. Similar liquidated
damages shall be paid with respect to any COES Preferred Shares not initially
eligible for conversion when the Damage Event first occurred but which
subsequently become eligible for conversion, without regard to Section 5.8,
commencing in the first month that such COES Preferred Shares become eligible
for such conversion. Such liquidated damages shall continue to accrue and shall
be payable until the Damage Event has been cured, and, if not paid, interest
thereon shall accrue at a rate of 2% per month. At the Purchaser's election,
such liquidated damages may be paid in cash or may be added to the principal of
the COES Preferred Shares for subsequent conversion purposes. Notwithstanding
the foregoing, in the case of a Delisting, after six months from the date of
such Delisting, the Parent Company shall have the option to force Purchaser to
as promptly as possible convert (in increments of no less than $50,000) all or
part of its COES Preferred Shares, subject to Purchaser being able to sell the
underlying Conversion Shares, and simultaneously sell such Conversion Shares
(where the conversion price therefor shall not be the Conversion Price but
instead shall equal 85% of the Purchaser's sale price of the Conversion Shares,
all as determined by Purchaser's actual trading records (to be provided to the
Company). In no event may the Company force Purchaser to convert less than
$50,000 of COES Preferred Shares at any one time.
Section 11. Redemption By Parent Company.
11.1 Parent Company's Right to Redeem. The Parent Company
shall have the right, at any time and from time to time, in its sole discretion,
to redeem in whole or in
27
part the COES Preferred Shares then outstanding, except that if the Purchaser or
any Holder of the COES Preferred Shares has submitted a Notice of Conversion,
the Parent Company shall not have the right to redeem the COES Preferred Shares
which were submitted for conversion and the certificates representing Conversion
Shares should be delivered promptly according to Section 10.2 herein. If the
Parent Company elects to redeem some, but not all, of the COES Preferred Shares,
the Parent Company shall redeem the COES Preferred Shares pro rata among the
Holders of all the COES Preferred Shares then outstanding. The date of the
Parent Company's redemption of COES Preferred Shares shall be referred to as the
"Redemption Date."
11.2 Redemption Price. The redemption price per COES Preferred
Share shall equal $125.
11.3 Mechanics of Redemption; Purchaser's Conversion Rights.
The Parent Company shall effect each such redemption by giving notice of its
election to redeem ("Redemption Notice"), by facsimile, by 5 P.M. New York City
time on the Redemption Date and shall provide a copy of such redemption notice
by overnight or 2-day courier, to Purchaser, all other Holders of COES Preferred
Shares and the Parent Company's Transfer Agent. Such redemption notice shall
indicate whether the Parent Company will redeem all or part of the COES
Preferred Shares. Upon the giving of any such Redemption Notice, and until the
earlier of either payment of the applicable redemption price or fifteen (15)
business days after the Redemption Date (or later as provided in Section 6(d)
below), the conversion rights in respect of the COES Preferred Shares and any
other outstanding shares of COES Convertible Preferred Stock called for
redemptions shall be suspended. Subject to the Parent Company's payment of the
applicable redemption price, the accrual of dividends in connection with the
shares of COES Convertible Preferred Stock called for redemption will suspend on
the Redemption Date.
11.4 Payment of Redemption Price. Upon receipt of a Redemption
Notice, Purchaser shall send its COES Preferred Shares being redeemed to the
Parent Company or its Transfer Agent within three (3) business days of the
receipt of such Redemption Notice, and the Parent Company shall pay the
applicable redemption price within fifteen (15) business days of the Redemption
Date (such fifteen (15) business day period shall be extended for each day the
COES Preferred Shares being redeemed have not been delivered to the Parent or
its Transfer Agent beyond the third (3rd) business day after receipt of the
Redemption Notice). The Parent Company shall not be obligated to deliver the
redemption price unless the COES Preferred Shares so redeemed are delivered to
the Parent Company or its Transfer Agent, or, in the event one or more
certificates have been lost, stolen, mutilated or destroyed, Purchaser delivers
to the Parent Company a lost certificate affidavit reasonably satisfactory to
Parent Company and its Transfer Agent.
11.5 Default of Parent Company's Redemption. If the Parent
Company fails to pay the applicable redemption price to the Purchaser and/or
other Holders of the COES Preferred Shares being redeemed by the Parent Company
within fifteen (15) business days of the Redemption Date (such fifteen (15)
business day period shall be extended for each day the COES Preferred Shares
being redeemed have not been delivered to the Parent or its
28
Transfer Agent beyond the third (3rd) business day after receipt of the
Redemption Notice), the Parent Company shall be deemed to have defaulted on
their right to redeem such COES Preferred Shares. Such COES Preferred Shares
shall thereafter become immediately convertible and the Conversion Price for
such COES Preferred Shares shall be equal to 75% of the Average Closing Bid
Price. The Conversion Price for such COES Preferred Shares shall not be subject
to a floor.
11.6 Blackout Period. Notwithstanding the foregoing, the
Parent Company may not either send out a redemption notice or effect a
redemption during a Blackout Period (defined as a period during which the Parent
Company's or the Subsidiary Company's officers or directors would not be
entitled to buy or sell stock because of their holding of material non-public
information). In the event the Parent Company initiates a redemption during a
Blackout Period without having first made public material non-public
information, the Parent Company or the Subsidiary Company shall disclose the
non-public information that resulted in the Blackout Period, and no redemption
shall be effected until at least 10 days after the Company or the Subsidiary
Company shall have given the Holder written notice that the Blackout Period has
been lifted.
Section 12. Notices. All notices, requests, consents and other
communications hereunder shall be in writing, shall be mailed by first class
registered or certified airmail, postage prepaid, or shall be sent by overnight
courier or by facsimile, and shall be deemed given when received:
(a) if to the Parent Company, to
Commodore Environmental Services, Inc.
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, XX 00000
Attn.: Bentley X. Xxxx
Telephone: 000-000-0000
Facsimile: 000-000-0000
copy to:
Greenberg, Traurig, Hoffman, Lipoff, Xxxxx & Quentel
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, XX 00000
Attn: Xxxxxxx X. Xxxxx, Esq.
Telephone: 000-000-0000
Facsimile: 000-000-0000
or to such other person at such other place as the Parent Company shall
designate to the Purchaser in writing;
29
(b) if to the Subsidiary Company:
Commodore Applied Technologies, Inc.
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, XX 00000
Attn.: Bentley X. Xxxx
Telephone: 000-000-0000
Facsimile: 000-000-0000
copy to:
Greenberg, Traurig, Hoffman, Lipoff, Xxxxx & Quentel
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, XX 00000
Attn: Xxxxxxx X. Xxxxx, Esq.
Telephone: 000-000-0000
Facsimile: 000-000-0000
or to such other person at such other place as the Subsidiary Company shall
designate to the Purchaser in writing;
(c) if to the Purchaser, to
Xxxxxx Partners
000 Xxxxx Xxxxxx
Xxxxxxxxx, XX 00000
Attn.: Xxx Xxxxxx
Telephone: 000-000-0000
Facsimile: 000-000-0000
copy to:
Xxxxxxxxx & Xxxxxx
000 Xxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Attn.: Xxxxxxx X. Xxxxx, Esq.
Telephone: 000-000-0000
Facsimile: 212-986-2399
or at such other address or addresses as may have been furnished to the Parent
Company and the Subsidiary Company in writing; or
(c) if to any transferee or transferees of a Purchaser, at
such address or addresses as shall have been furnished to the Parent Company and
the Subsidiary Company at the time of the transfer or transfers, or at such
other address or addresses as
30
may have been furnished by such transferee or transferees to the Parent Company
and the Subsidiary Company in writing.
Section 13. Miscellaneous.
13.1 Entire Agreement. This Agreement and the Exhibits hereto
embodies the entire agreement and understanding between the parties hereto with
respect to the subject matter hereof and supersedes all prior oral or written
agreements and understandings relating to the subject matter hereof. No
statement, representation, warranty, covenant or agreement or any kind not
expressly set forth in this Agreement or the Exhibits hereto shall affect, or be
used to interpret, change or restrict, the express terms and provisions of this
Agreement.
13.2 Amendments. This Agreement may not be modified or amended
except pursuant to an instrument in writing signed by the Parent Company, the
Subsidiary Company and by Purchaser.
13.3 Headings. The headings of the various sections of this
Agreement have been inserted for convenience of reference only and shall not be
deemed to be part of this Agreement.
13.4 Severability. In case any provision contained in this
Agreement should be invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein shall not in any way be affected or impaired thereby.
13.5 Governing Law/Jurisdiction. This Agreement will be
construed and enforced in accordance with and governed by the laws of the State
of New York, except for matters arising under the Securities Act, without
reference to principles of conflicts of law. Each of the parties consents to the
jurisdiction of the courts of or located in the State of New York, specifically
the Southern District of New York and/or the Supreme Court of the State of New
York in connection with any dispute arising under this Agreement and hereby
waives, to the maximum extent permitted by law, any objection, including any
objection based on forum non conveniens, to the bringing of any such proceeding
in such jurisdictions. Each party hereby agrees that if another party to this
Agreement obtains a judgment against it in such a proceeding, the party which
obtained such judgment may enforce same by summary judgment in the courts of any
country having jurisdiction over the party against whom such judgment was
obtained, and each party hereby waives any defenses available to it under local
law and agrees to the enforcement of such a judgment. In addition, the parties
agree that the party against whom such judgment was obtained will pay the legal
fees of the party obtaining such judgment. Each party to this Agreement
irrevocably consents to the service of process in any such proceeding by the
mailing of copies thereof by registered or certified mail, postage prepaid, to
such party at its address set forth herein. Nothing herein shall affect the
right of any party to serve process in any other manner permitted by law.
13.6 Recovery of Attorney's Fees. Should any party bring an
action to enforce the terms of this Agreement then, if Purchaser prevails in
such action it should be
31
entitled to recovery of its attorney's fees from the Parent Company or the
Subsidiary Company, and if the Parent Company or the Subsidiary Company prevails
in such action it shall be entitled to recovery of its attorney's fees from the
Purchaser.
13.7 Fees. Notwithstanding Section 13.6, the Parent Company
and the Subsidiary Company acknowledge that Purchaser shall have no
responsibility for the payment of any of its fees in connection with this
offering.
13.8 Counterparts/Facsimile. This Agreement may be executed in
two or more counterparts, each of which shall constitute an original, but all of
which, when taken together, shall constitute but one instrument, and shall
become effective when one or more counterparts have been signed by each party
hereto and delivered to the other party. In lieu of the original, a facsimile
transmission or copy of the original shall be as effective and enforceable as
the original.
13.9 Publicity. The Purchaser shall not issue any press
releases or otherwise make any public statement with respect to the transactions
contemplated by this Agreement without the prior written consent of the Parent
Company and the Subsidiary Company, except as may be required by applicable law
or regulation.
13.10 Survival. The representations and warranties in this
Agreement shall survive Closing.
32
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be signed by their duly authorized representatives the day and year
first above written.
COMMODORE ENVIRONMENTAL SERVICES, INC.
By
-------------------------------------
Officer
COMMODORE APPLIED TECHNOLOGIES, INC.
By
-------------------------------------
Officer
PURCHASER:
-----------------------------
By
------------------------------------
Officer
33
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be signed by their duly authorized representatives the day and year
first above written.
COMMODORE ENVIRONMENTAL SERVICES, INC.
By XXXXXXXXXXXXXXXXXXXXXXXX
-------------------------------------
Officer
COMMODORE APPLIED TECHNOLOGIES, INC.
By XXXXXXXXXXXXXXXXXXXXXXXXX
-------------------------------------
Officer
PURCHASER: XXXXXX PARTNERS
By
------------------------------------
Officer
34
EXHIBIT A
CERTIFICATE OF DESIGNATION
EXHIBIT B
FORM OF STOCK PURCHASE WARRANT
EXHIBIT C1
COMMODORE ENVIRONMENTAL SERVICES, INC.
COMPLIANCE CERTIFICATE
The undersigned, an executive officer of COMMODORE ENVIRONMENTAL
SERVICES, INC., hereby certifies that the representations and warranties made by
Commodore Environmental Services, Inc. in the 7% Preferred Stock Securities
Purchase Agreement dated May 20, 1997 by and between Commodore Environmental
Services, Inc., Commodore Applied Technologies, Inc. and Xxxxxx Partners were
true and correct as of the date such representations and warranties were made
and are true and correct in all material respects as of the date hereof with the
same force and effect as through such representations and warranties had been
made on and as of the date hereof.
IN WITNESS WHEREOF, the undersigned has signed this
Certificate as of this 20th day of May 1997.
COMMODORE ENVIRONMENTAL SERVICES, INC.
By
------------------------------------------
Name
----------------------------------------
Title
---------------------------------------
EXHIBIT C2
COMMODORE APPLIED TECHNOLOGIES, INC.
COMPLIANCE CERTIFICATE
The undersigned, an executive officer of COMMODORE APPLIED
TECHNOLOGIES, INC., hereby certifies that the representations and warranties
made by Commodore Applied Technologies, Inc. in the 7% Preferred Stock
Securities Purchase Agreement dated May 20, 1997 by and between Commodore
Environmental Services, Inc., Commodore Applied Technologies, Inc. and Xxxxxx
Partners were true and correct as of the date such representations and
warranties were made and are true and correct in all material respects as of the
date hereof with the same force and effect as through such representations and
warranties had been made on and as of the date hereof.
IN WITNESS WHEREOF, the undersigned has signed this
Certificate as of this 20th day of May 1997.
COMMODORE APPLIED TECHNOLOGIES, INC.
By
------------------------------------------
Name
----------------------------------------
Title
---------------------------------------
EXHIBIT C3
PURCHASER
COMPLIANCE CERTIFICATE
The undersigned, ,
------------------- -------------------------
of XXXXXX PARTNERS ("Purchaser"), hereby certifies that the representations and
warranties made by Purchaser in the 7% Preferred Stock Securities Purchase
Agreement dated May 20, 1997 between Commodore Environmental Services, Inc.,
Commodore Applied Technologies, Inc. and Purchaser were true and correct as of
the date such representations and warranties were made and are true and correct
in all material respects as of the date hereof with the same force and effect as
through such representations and warranties had been made on and as of the date
hereof.
IN WITNESS WHEREOF, the undersigned has signed this
Certificate as of this 20th day of May 1997.
PURCHASER
XXXXXX PARTNERS
By
------------------------------------------
Name
----------------------------------------
Title
---------------------------------------
EXHIBIT D
NOTICE OF CONVERSION
(To be Executed by the Registered Holder in order to Convert the 7%
Preferred Stock)
The undersigned hereby irrevocably elects to convert shares of COES
Preferred Stock represented by above Certificate No. into shares of common stock
of COMMODORE APPLIED TECHNOLOGIES, INC. (the "Subsidiary") according to the
conditions hereof, as of the date written below.
The undersigned represents and warrants that:
All offers and sales by the undersigned of the shares of Common Stock
issuable to the undersigned upon conversion of the COES Preferred
Shares shall be made pursuant to an exemption from registration under
the Act, or pursuant to registration of the Common Stock under the
Securities Act of 1933, as amended.
---------------------------------- ---------------------------
Date of Conversion Applicable Conversion Price
---------------------------------- ---------------------------
Number of Shares of Common Stock $ Amount of Conversion
upon Conversion
---------------------------------- ---------------------------
Signature Name
Address: Delivery of Shares to:
