[Form of]
SUBSCRIPTION AGREEMENT
SUBSCRIPTION AGREEMENT (this "Agreement") made as of the date set forth on
the signature page hereof between Conversion Technologies International, Inc.,
0000 Xxxx Xxxxx Xxxxx, Xxxxx 000, Xxxxxxx, Xxxxxxx 00000 (the "Company") and the
undersigned (the "Subscriber").
W I T N E S S E T H:
WHEREAS, the Company has retained Placement Agent, on a "best efforts"
basis, in a private placement offering (the "Offering") of units (the "Units")
of the Company;
WHEREAS, the Company desires to issue a minimum of thirty (30) Units (the
"Minimum Offering") and a maximum of fifty (50) Units (the "Maximum Offering"),
with an option in favor of the Placement Agent to offer up to an additional
thirty (30) Units to cover over-allotments, each Unit consisting of ten thousand
(10,000) shares of Premium Preferred StockJ, stated value $10.00 per share, par
value $.001 per share, of the Company (the "Preferred Stock"), which shares will
be convertible at the option of the holder at any time after the initial
issuance date of the Preferred Stock into shares of common stock of the Company,
par value $.00025 per share (the "Common Stock"), at an initial conversion price
equal to the lesser of (a) $1.56 and (b) the average closing bid price of the
Common Stock on the Nasdaq Smallcap Market (the "SmallCap") for the thirty (30)
consecutive trading days immediately preceding (i) the initial closing date (the
"Initial Closing Date"), (ii) any interim closing date (each an "Interim Closing
Date") or (iii) the final closing date (the "Final Closing Date") of the
Offering, whichever is lowest (the Preferred Stock and the Common Stock issuable
upon conversion thereof being sometimes referred to collectively herein as the
"Securities");
WHEREAS, the Subscriber desires to purchase that number of Units set forth
on the signature page hereof on the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the promises and the mutual
representations and covenants hereinafter set forth, the parties hereto do
hereby agree as follows:
I SUBSCRIPTION FOR UNITS AND REPRESENTATIONS BY SUBSCRIBER
--------------------------------------------------------
1.1 Subject to the terms and conditions hereinafter set forth, the
Subscriber hereby subscribes for and agrees to purchase from the Company such
number of Units or fractions thereof and the Company agrees to sell such Units
to the Subscriber as is set forth upon the signature page hereof at a price
equal to $100,000 per Unit (the "Initial Offering Price"). The purchase price is
payable by personal or business check, wire transfer of immediately available
funds or money order made payable to "Fleet Bank, Escrow Agent, F/B/O Conversion
1
Technologies International, Inc." contemporaneously with the execution and
delivery of this Agreement by the Subscriber. The certificates representing the
Preferred Stock will be delivered by the Company within ten (10) days following
the consummation of the relevant Closing Date as set forth in Article III
hereof. The Subscriber understands, however, that this purchase of Units is
contingent upon the Company making sales of a minimum of thirty (30) Units prior
to the termination date of the Offering.
1.2 The Subscriber recognizes that the purchase of Units involves a high
degree of risk including, but not limited to, the following: (i) the Company
remains a development stage business with limited operating history and requires
substantial funds in addition to the proceeds of the Offering; (ii) an
investment in the Company is highly speculative, and only investors who can
afford the loss of their entire investment should consider investing in the
Company and the Units; (iii) the Subscriber may not be able to liquidate his
investment; (iv) transfer ability of the Securities is extremely limited; (v) in
the event of a disposition of the Securities, the Subscriber could sustain the
loss of his entire investment and (vi) the Company has not paid any dividends
since inception and does not anticipate the payment of dividends in the
foreseeable future. Such risks are more fully set forth in the Term Sheet (as
defined below) furnished by the Company to the Subscriber.
1.3 The Subscriber represents that the Subscriber is an "accredited
investor" as such term is defined in Rule 501 of Regulation D promulgated under
the Securities Act of 1933, as amended (the "Act"), as indicated by the
Subscriber's responses to the questions contained in Article VII hereof, and
that the Subscriber is able to bear the economic risk of an investment in the
Units.
1.4 The Subscriber hereby acknowledges and represents that (i) the
Subscriber has prior investment experience, including investment in securities
which are non-listed, unregistered and/or not traded on the Nasdaq National or
Small Cap Market, a national stock exchange nor on the NASD's automated
quotation system for actively traded stocks, or the Subscriber has employed the
services of an investment advisor, attorney and/or accountant to read all of the
documents furnished or made available by the Company to the Subscriber and to
all other prospective investors in the Units and to evaluate the merits and
risks of such an investment on the Subscriber's behalf; (ii) the Subscriber
recognizes the highly speculative nature of this investment; and (iii) the
Subscriber is able to bear the economic risk which the Subscriber hereby
assumes.
1.5 The Subscriber hereby acknowledges receipt and careful review of (a)
the Confidential Term Sheet dated August 8, 1997 as supplemented and amended,
and the attachments and exhibits thereto, all of which constitute an integral
part thereof (collectively the "Term Sheet") and (b) this Agreement and all
attachments to it; and hereby represents that the Subscriber has been furnished
by the Company during the course of this transaction with all information
regarding the Company which the Subscriber has requested or desired to know, has
2
been afforded the opportunity to ask questions of and receive answers from duly
authorized officers or other representatives of the Company concerning the terms
and conditions of the Offering and has received any additional information which
the Subscriber has requested.
1.6 (a) The Subscriber has relied solely upon the information provided by
the Company in the Term Sheet and in this Agreement in making the decision to
invest in the Units. To the extent necessary, the Subscriber has retained, at
the expense of the Subscriber, and relied upon appropriate professional advice
regarding the investment, tax and legal merits and consequences of this
Agreement and its purchase of the Units hereunder. The Subscriber acknowledges
and agrees that the Placement Agent has not supplied any information for
inclusion in the Term Sheet other than information furnished in writing to the
Company by the Placement Agent specifically for inclusion in the Term Sheet
relating to the Placement Agent, that the Placement Agent has no responsibility
for the accuracy or completeness of the Term Sheet and that the Subscriber has
not relied upon the independent investigation or verification, if any, which may
have been undertaken by the Placement Agent.
(b) The Subscriber represents that (i) the Subscriber was contacted
regarding the sale of the Units by the Placement Agent (or an authorized agent
or representative thereof) with whom the Subscriber had a prior substantial
pre-existing relationship and (ii) no Units were offered or sold to it by means
of any form of general solicitation or general advertising, and in connection
therewith the Subscriber did not: (A) receive or review any advertisement,
article, notice or other communication published in a newspaper or magazine or
similar media or broadcast over television or radio whether closed circuit, or
generally available; or (B) attend any seminar meeting or industry investor
conference whose attendees were invited by any general solicitation or general
advertising.
1.7 The Subscriber hereby represents that the Subscriber either by reason
of the Subscriber's business or financial experience or the business or
financial experience of the Subscriber's professional advisors (who are
unaffiliated with, and who are not compensated by, the Company or any affiliate
or selling agent of the Company, including the Placement Agent, directly or
indirectly) has the capacity to protect the Subscriber's own interests in
connection with the transaction contemplated hereby.
1.8 The Subscriber hereby acknowledges that the offering of Units has not
been reviewed by the United States Securities and Exchange Commission (the "SEC"
or the "Commission") or any state regulatory authority, since the Offering is
intended to be exempt from the registration requirements of Section 5 of the Act
pursuant to Regulation D promulgated under the Act. The Subscriber shall not
sell or otherwise transfer the Securities unless they are registered under the
Act or unless an exemption from such registration is available.
1.9 The Subscriber understands that the Securities comprising the Units
have not been registered under the Act by reason of a claimed exemption under
the provisions of the
3
Act which depends, in part, upon the Subscriber's investment intention. In this
connection, the Subscriber hereby represents that the Subscriber is purchasing
the Securities comprising the Units for the Subscriber's own account for
investment and not with a view toward the resale or distribution to others. The
Subscriber, if an entity, was not formed for the purpose of purchasing the
Securities.
1.10 The Subscriber understands that although there currently is a public
market for the Common Stock, Rule 144 ("Rule 144") promulgated under the Act
requires, among other conditions, a one year holding period, prior to the resale
(in limited amounts) of securities acquired in a non-public offering without
having to satisfy the registration requirements under the Act. The Subscriber
understands and hereby acknowledges that the Company is under no obligation to
register any of the Units or any of the Securities comprising the Units under
the Act or any state securities or "blue sky" laws other than as set forth in
Article V. The Subscriber agrees to hold the Company and its directors,
officers, employees, controlling persons and agents (including the Placement
Agent and its officers, directors, employees, counsel, controlling persons and
agents) and their respective heirs, representatives, successors and assigns
harmless and to indemnify them against all liabilities, costs and expenses
incurred by them as a result of (i) any misrepresentation made by the Subscriber
contained in this Agreement (including the Confidential Investor Questionnaire
contained in Article VII herein), (ii) any sale or distribution by the
Subscriber in violation of the Act or any applicable state securities or "blue
sky" laws, or (iii) any untrue statement of a material fact made by the
Subscriber and contained herein.
1.11 The Subscriber consents to the placement of a legend on any
certificate or other document evidencing that such Securities have not been
registered under the Act or any state securities or "blue sky" laws and setting
forth or referring to the restrictions on transferability and sale thereof
contained in this Agreement. The Subscriber is aware that the Company will make
a notation in its appropriate records with respect to the restrictions on the
transferability of such Securities.
1.12 The Subscriber understands that the Company will review this Agreement
and is hereby given authority by the Subscriber to call the Subscriber's bank or
place of employment or otherwise review the financial standing of the
Subscriber; and it is further agreed that the Company (with the consent of the
Placement Agent) and the Placement Agent, at its sole discretion, reserves the
unrestricted right, without further documentation or agreement on the part of
the Subscriber, to reject or limit any subscription, to accept subscriptions for
fractional Units and to close the Offering to the Subscriber at any time.
1.13 The Subscriber hereby represents that the address of the Subscriber
furnished by Subscriber on the signature page hereof is the Subscriber's
principal residence if the Subscriber is an individual or its principal business
address if it is a corporation or other entity.
4
1.14 The Subscriber represents that the Subscriber has full power and
authority (corporate, statutory and otherwise) to execute and deliver this
Agreement and to purchase the Units and the Securities. This Agreement
constitutes the legal, valid and binding obligation of the Subscriber,
enforceable against the Subscriber in accordance with its terms.
1.15 If the Subscriber is a corporation, partnership, limited liability
company, trust, employee benefit plan, individual retirement account, Xxxxx
Plan, or other entity, (a) it is authorized and qualified to become an investor
in the Company and the person signing this Agreement on behalf of such entity
has been duly authorized by such entity to do so and (b) it is duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
organization.
1.16 The Subscriber acknowledges that if he or she is a Registered
Representative of an NASD member firm, he or she must give such firm the notice
required by the NASD's Rules of Fair Practice, receipt of which must be
acknowledged by such firm in Section 7.4 below.
1.17 The Subscriber acknowledges that at such time, if ever, as the
Securities are registered, sales of the Securities will be subject to state
securities laws, including those of the State of New Jersey which require any
securities sold in New Jersey to be sold through a registered broker-dealer or
in reliance upon an exemption from registration.
1.18 Subject to the proviso below, the Subscriber hereby agrees that for a
period of nine (9) (the "Lock-Up Period") months from the effective date of the
Registration Statement (as defined in Section 5.2 hereof), the Subscriber will
not, without the prior written consent of the Placement Agent, offer, pledge,
sell, contract to sell, grant any option for the sale of, or otherwise dispose
of, directly or indirectly, 75% of the Registrable Securities (as defined in
Section 5.1) purchased or acquired by the Subscriber, provided, however, that,
-------- -------
following each three month period after the Effective Date, an amount of
Registrable Securities equal to 25% of the number of Registrable Securities
purchased or acquired by the Subscriber shall become exempt from the lock-up
provisions contained in this sentence. For the sake of clarity, 25% of the
Registrable Securities will not be subject to any lock-up. In addition, the
Subscriber agrees that during the period from the date that the Subscriber was
first contacted with respect to the potential purchase of Securities through the
last date upon which the Subscriber holds any Securities or Registrable
Securities, the Subscriber will not directly or indirectly, through related
parties, affiliates or otherwise sell "short" or "short against the box" (as
those terms are generally understood) or otherwise engage in any "hedging"
transactions with respect to any equity security of the Company; provided,
--------
however, that it shall not be a violation of this Section 1.18, if the
-------
Subscriber places a sell order for Registrable Securities prior to the
conversion of the Preferred Stock or at the time the conversion is requested,
relies on the Company to deliver such Registrable Securities in accordance with
Section 5.4(h) and completes the sale of such Registrable Securities before the
Company delivers the Registrable Securities to the Subscriber.
5
In addition, the Subscriber agrees that during any applicable Lock-Up Period it
will not convert any of the Preferred Stock with respect to which the underlying
Registrable Securities are subject to such Lock-Up Period.
1.19 The subscriber acknowledges that (i) the Company has engaged,
consented to and authorized the Placement Agent in connection with the
transactions contemplated by this Agreement, (ii) the Company shall pay the
Placement Agent a commission and reimburse expenses in accordance with the
Placement Agency Agreement dated April 1, 1997 (the "Placement Agency
Agreement"), and the Company shall indemnify and hold harmless the Subscribers
from and against all fees, commissions or other payments owing by the Company to
the Placement Agent or any other person or firm acting on behalf of the Company
hereunder and (iii) that registered representatives of the Placement Agent
and/or its designees (including, without limitation, registered representatives
of the Placement Agent and/or its designees who participate in the Offering and
sale of the securities sold in the Offering) shall be paid a portion of the
commissions paid to the Placement Agent including a portion of the Placement
Warrants (as defined below).
1.20 In consideration for the covenants of the Company contained in Section
2.11, the Subscriber covenants to vote any voting securities purchased by the
Subscriber hereunder (or obtained upon conversion of such securities) in favor
of an increase in the authorized shares of Common Stock of the Company to a
minimum of 40,000,000 and in any case a number of shares sufficient for the
purpose of conversion of all the Series A Preferred Stock sold in or related to
this Offering including without limitation, (x) the Common Stock underlying the
Placement Warrants and (y) the Common Stock underlying the Preferred Stock
resulting from dividends paid on the Preferred Stock (or such other amount as
may be authorized by the Board of Directors of the Company). If the Subscriber
fails to so vote such securities in accordance with this Section 1.20, the
Subscriber will not be entitled the to rights conferred in Section 2.11.
II REPRESENTATIONS BY AND COVENANTS OF THE COMPANY
-----------------------------------------------
Except as set forth on the Schedule of Exceptions attached hereto as
Exhibit A, the Company hereby represents and warrants to the Subscriber that:
2.1 Organization, Good Standing and Qualification. Each of the Company and
---------------------------------------------
Dunkirk International Glass and Ceramics Corporation and Advanced Particle
Technologies, Inc. (collectively, the "Subsidiaries") is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation and has full corporate power and authority to
conduct its business as described in the Term Sheet. Each of the Company and the
Subsidiaries is duly qualified to do business as a foreign corporation and is in
good standing in each jurisdiction in which the laws require the Company or the
Subsidiaries to be so qualified and/or authorized to do business.
6
2.2 Capitalization and Voting Rights. The authorized, issued and
------------------------------------
outstanding capital stock of the Company is as set forth in the Term Sheet under
"Capitalization"; all issued and outstanding shares of the Company are validly
issued, fully paid and nonassessable. The Securities comprising the Units have
been duly and validly authorized and, when issued and paid for pursuant to this
Agreement, will be validly issued, fully paid and nonassessable. Except as set
forth in the Term Sheet, there are no outstanding options, warrants, agreements,
convertible securities, preemptive rights or other rights to subscribe for or to
purchase any shares of capital stock of the Company. Except as set forth in the
Term Sheet, in this Agreement and as otherwise required by law, there are no
restrictions upon the voting or transfer of the Securities pursuant to the
Company's Certificate of Incorporation, as amended (the "Certificate of
Incorporation"), By-Laws or other governing documents or any agreement or other
instruments to which the Company is a party or by which the Company is bound.
2.3 Authorization; Enforceability. The Company has all corporate right,
------------------------------
power and authority to enter into this Agreement and to consummate the
transactions contemplated hereby. All corporate action on the part of the
Company, its directors and stockholders necessary for the authorization,
execution, delivery and performance of this Agreement by the Company, the
authorization, sale, issuance and delivery of the Preferred Stock contemplated
hereby and the Common Stock underlying such Preferred Stock and the performance
of the Company's obligations hereunder has been taken. This Agreement has been
duly executed and delivered by the Company and constitutes a legal, valid and
binding obligation of the Company, enforceable against the Company 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. Upon the issuance and delivery of the Preferred Stock as
contemplated by this Agreement, such securities will be validly issued, fully
paid and nonassessable. Upon the issuance and delivery of the Common Stock
underlying such securities or upon conversion, as the case may be, of the
Preferred Stock, the Common Stock will be validly issued, fully paid and
nonassessable. The issuance and sale of the Preferred Stock contemplated hereby
and the conversion, as the case may be, into Common Stock underlying such
Preferred Stock, will not give rise to any preemptive rights or rights of first
refusal on behalf of any person.
2.4 Certificate of Designation of Preferred Stock. The Preferred Stock has
----------------------------------------------
all of the rights, preferences and privileges substantially as set forth in the
Form of Certificate of Designation attached as Exhibit B to the Term Sheet, with
the initial conversion price equal to the lesser of (i) $1.56 and (ii) the
Market Price (as determined in accordance with the Certificate of Designation)
as of (A) the Initial Closing Date (as defined above), (B) any interim closing
date or (C) the Final Closing Date (as defined below) of the Offering, whichever
is lowest.
7
2.5 No Conflict; Governmental and Other Consents.
--------------------------------------------
(i) The execution and delivery by the Company of this Agreement and the
consummation of the transactions contemplated hereby will not result in the
violation of any law, statute, rule, regulation, order, writ, injunction,
judgment or decree of any court or governmental authority to or by which the
Company or either of the Subsidiaries is bound, or of any provision of the
Certificate of Incorporation or By-Laws of the Company or either of the
Subsidiaries, and will not conflict with, or result in a breach or violation of
any of the terms or provisions of, or constitute (with due notice or lapse of
time or both) a default under, any lease, loan agreement, mortgage, security
agreement, trust indenture or other agreement or instrument to which the Company
or either of the Subsidiaries is a party or by which it is bound or to which any
of its properties or assets is subject, nor result in the creation or imposition
of any lien upon any of the properties or assets of the Company or either of the
Subsidiaries.
(ii) No consent, approval, authorization or other order of any governmental
authority or other third-party is required to be obtained by the Company or the
Subsidiaries in connection with the authorization, execution and delivery of
this Agreement or with the authorization, issue and sale of the Units or the
Securities comprising the Units, except such filings as may be required to be
made with the Commission, the National Association of Securities Dealers, Inc.
and the National Association of Securities Dealers Automated Quotation System
("Nasdaq") and with any state or foreign blue sky or securities regulatory
authority.
2.6 Licenses. Except as set forth in the Term Sheet, each of the Company
--------
and the Subsidiaries has sufficient licenses, permits and other governmental
authorizations currently required for the conduct of its respective business or
ownership of properties and is in all material respects complying therewith.
2.7 Litigation. Except as set forth in the Term Sheet, the Company knows of
----------
no pending or threatened legal or governmental proceedings against the Company
or either of the Subsidiaries.
2.8 Accuracy of Reports. All material reports required to be filed by the
-------------------
Company and the Subsidiaries within the two years prior to the date of this
Agreement under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), have been duly filed with the Commission, complied at the time of filing
in all material respects with the requirements of their respective forms and,
except to the extent updated or superseded by the Term Sheet or any subsequently
filed report, were complete and correct in all material respects as of the dates
at which the information was furnished, and contained (as of such dates) no
untrue statement of a material fact nor omitted to state any material facts
necessary in order to make the statements contained therein, in light of the
circumstances under which they were made, not misleading.
2.9 Term Sheet; Disclosure. No information set forth in the Term Sheet or
-----------------------
any of the Offering Documents contains any untrue statement
8
of a material fact or omits to state a material fact necessary in order to make
the statements contained therein, in light of the circumstances under which they
were made, not misleading.
2.10 Investment Company. The Company is not an "investment company" within
------------------
the meaning of such term under the Investment Company Act of 1940, as amended,
and the rules and regulations of the Commission thereunder.
2.11 Authorized Shares. The Company shall (i) use its best efforts to
------------------
increase the authorized shares of Common Stock of the Company to a minimum of
40,000,000 and in any case a number of shares sufficient for the purpose of
conversion of all the Series A Preferred Stock sold in or related to this
Offering including without limitation, (x) the Common Stock underlying the
Placement Warrants and (y) the Common Stock underlying the Preferred Stock
resulting from dividends paid on the Preferred Stock (or such other amount as
may be authorized by the Board of Directors) within 90 days following the Final
Closing Date but in any event shall effect such increase no later than 180 days
following the Final Closing Date and (ii) at all times after the date upon which
such Common Stock is authorized, reserve and keep available out of its
authorized but unissued shares of Common Stock solely for the purpose of
effecting the conversion of the shares of Preferred Stock, such number of shares
of Common Stock as shall from time to time be sufficient to effect the
conversion of all outstanding shares of the Preferred Stock. If at any time the
Subscriber elects to convert any of such Subscriber's shares of Preferred Stock
and the Company does not have authorized and reserved for issuance a sufficient
number of shares of Common Stock to permit conversion in full of all outstanding
shares of Preferred Stock (including the Preferred Stock underlying the
Placement Warrants), then such Subscriber shall be entitled to receive upon
conversion of his Preferred Stock only that number of shares of Common Stock as
equals such Subscriber's Pro Rata Percentage of the number of shares of Common
Stock authorized and reserved for issuance upon conversion of Preferred Stock.
For purposes of the previous sentence, a Subscriber's "Pro Rata Percentage"
on any date equals the number of shares of Preferred Stock held of record by
such Subscriber on such date divided by the number of shares of Preferred Stock
held of record by all holders of Preferred Stock on such date (including the
Preferred Stock underlying the Placement Warrants).
In addition to the foregoing, if after 180 days following the Final Closing
Date the Company has failed to authorize and reserve a sufficient number of
shares of Common Stock to permit conversion in full of all outstanding shares of
Preferred Stock, the Company shall, for no additional consideration, issue to
the Subscriber additional shares of Preferred Stock equal to 0.25% of the shares
of Preferred Stock then held by such Subscriber, exclusive of shares of
Preferred Stock issued pursuant to this Section 2.11, for each day the Company
lacks sufficient authorized and reserved shares of Common Stock to permit
conversion in full of all outstanding shares of Preferred Stock.
9
III TERMS OF SUBSCRIPTION
---------------------
3.1 The Company shall issue a minimum of thirty (30) Units and a maximum of
fifty (50) Units. The Placement Agent, at its sole option, may offer and sell up
to an additional thirty (30) Units to cover over-allotments. The offering period
(the "Offering Period") shall begin on August 8, 1997. Upon receipt of the
Minimum Offering amount, the Placement Agent may conduct a closing and may
conduct subsequent closings on an interim basis (each a "Closing") until the
Maximum Offering amount has been reached (the "Final Closing Date"). The
Offering Period shall terminate at 11:59 p.m. New York City time on or before
October 8, 1997, subject to an extension, at the sole option of the Placement
Agent, for an additional sixty (60) days. The Units will be offered on a "best
efforts" basis. The purchase price is payable by personal or business check,
wire transfer of immediately available funds or money order made payable to
"Fleet Bank, NA, Escrow Agent, F/B/O Conversion Technologies International,
Inc."
3.3 Placement of the Units will be made by the Placement Agent, who will
receive certain compensation as described in the Term Sheet.
3.4 Pending the sale of the Units, all funds paid hereunder shall be
deposited by the Company in escrow with Fleet Bank, NA, having a branch at 000
Xxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx, 00000. If the Company shall not have obtained
subscriptions (including this subscription) for purchases of thirty (30) Units
on or before the Final Closing Date, then this subscription shall be void and
all funds paid hereunder by the Subscriber shall be promptly returned to the
Subscriber, with interest, subject to paragraph 3.5 hereof.
3.5 The Subscriber hereby authorizes and directs the Company to deliver the
Securities to be issued to the Subscriber pursuant to this Agreement directly to
the Subscriber's account maintained by the Placement Agent, if any, or, if no
such account exists, to the residential or business address indicated on the
signature page hereto.
3.6 The Subscriber hereby authorizes and directs the Company to return any
funds for unaccepted subscriptions to the same account from which the funds were
drawn, including any customer account maintained with the Placement Agent.
IV Conditions to Obligations of the Subscribers
--------------------------------------------
4.1 The Subscribers' obligation to purchase the Units at the closings
(each, a "Closing") is subject to the fulfillment on or prior to each Closing of
the following conditions, which conditions may be waived at the option of each
Subscriber to the extent permitted by law:
(a) Representations and Warranties Correct. The representations and
warranties made by the Company in Article II hereof shall be true and correct in
all material
10
respects when made, and shall be true and correct in all material respects on
each Closing with the same force and effect as if they had been made on and as
of said date.
(b) Covenants. All covenants, agreements and conditions contained in this
Agreement to be performed by the Company on or prior to such purchase shall have
been performed or complied with in all material respects.
(c) Listing. The Company will promptly file an Application for Listing of
Additional Shares with the SmallCap in accordance with Regulation M under the
Exchange Act and/or take any other necessary action to enable the Common Stock
into which the Preferred Stock is convertible to trade on the SmallCap.
(d) No Legal Order Pending. There shall not then be in effect any legal or
other order enjoining or restraining the transactions contemplated by this
Agreement.
(e) No Law Prohibiting or Restricting Such Sale. There shall not be in
effect any law, rule or regulation prohibiting or restricting such sale or
requiring any consent or approval of any person which shall not have been
obtained to issue the Securities (except as otherwise provided in this
Agreement).
(f) Minimum Subscriptions. The Company shall have received binding
subscriptions for at least 30 Units.
(g) Legal Opinions. At each Closing, each of Xxxxxxxx Xxxxxxxxx, counsel to
the Company and Xxxxxxx, Xxxxxxx, Rill & Xxxxx, patent and environmental counsel
to the Company, shall have delivered to the Placement Agent for the benefit of
the Placement Agent and the Subscribers, a legal opinion to such effect with
respect to legal matters relating to this Agreement and the Term Sheet as the
Placement Agent may require.
(h) Comfort Letter. On each Closing, if requested by the Placement Agent,
the Company's auditors shall have delivered to the Placement Agent, for the
benefit of the Placement Agent and the Subscribers, a comfort letter to such
effect as the Placement Agent may require.
V Registration Rights
-------------------
5.1 As used in this Agreement, the following terms shall have the following
meanings:
(a) "Affiliate" shall mean, with respect to any Person (as defined below),
---------
any other Person controlling, controlled by or under direct or indirect common
control with such Person (for the purposes of this definition "control," when
used with respect to any
11
specified Person, shall mean the power to direct the management and policies of
such person, directly or indirectly, whether through ownership of voting
securities, by contract or otherwise; and the terms "controlling" and
"controlled" shall have meanings correlative to the foregoing).
(b) "Business Day" shall mean a day Monday through Friday on which banks
-------------
are generally open for business in New York.
(c) "Holders" shall mean the Subscribers and any person holding Registrable
-------
Securities (including the shares of Common Stock issuable upon conversion of the
Preferred Stock underlying the warrants (the "Placement Warrants") to be granted
to the Placement Agent and/or its designees (including without limitation its
registered representatives) pursuant to the Placement Agency Agreement between
the Company and the Placement Agent) or any person to whom
the rights under Section 5 have been transferred in accordance with Section 5.9
hereof.
(d) "Person" shall mean any person, individual, corporation, limited
------
liability company, partnership, trust or other nongovernmental entity or any
governmental agency, court, authority or other body (whether foreign, federal,
state, local or otherwise).
(e) The terms "register," "registered" and "registration" refer to the
------- ---------- ------------
registration effected by preparing and filing a registration statement in
compliance with the Securities Act, and the declaration or ordering of the
effectiveness of such registration statement.
(f) "Registrable Securities" shall mean (i) the shares of Common Stock
-----------------------
issuable upon the conversion of the Preferred Stock, (ii) the shares of Common
Stock issuable upon conversion of the Preferred Stock underlying the Placement
Warrants and (iii) any shares of Common Stock issued as (or issuable upon the
conversion of any warrant, right or other security which is issued as) a
dividend or other distribution with respect to or in replacement of the
Securities; provided, however, that securities shall only be treated as
Registrable Securities if and only for so long as they (A) have not been
disposed of pursuant to a registration statement declared effective by the
Commission, (B) have not been sold in a transaction exempt from the registration
and prospectus delivery requirements of the Act so that all transfer
restrictions and restrictive legends with respect thereto are removed upon the
consummation of such sale or (C) are held by a Holder or a permitted transferee
pursuant to Section 5.9.
(g) "Registration Expenses" shall mean all expenses incurred by the Company
---------------------
in complying with Section 5.2 hereof, including, without limitation, all
registration, qualification and filing fees, printing expenses, escrow fees,
fees and expenses of counsel for the Company, blue sky fees and expenses and the
expense of any special audits incident to or required by any such registration
(but excluding the fees of legal counsel for any Holder).
12
(h) "Registration Statement" shall have the meaning ascribed to such term
-----------------------
in Section 5.2.
(i) "Registration Period" shall have the meaning ascribed to such term in
--------------------
Section 5.4.
(j) "Selling Expenses" shall mean all underwriting discounts and selling
-----------------
commissions applicable to the sale of Registrable Securities and all fees and
expenses of legal counsel for any Holder.
5.2 (a) No later than thirty (30) days after the Final Closing Date (the
"Filing Date"), the Company shall file a registration statement (the
"Registration Statement") with the Commission and use its best efforts to cause
the Registration Statement to be declared effective by the Commission prior to
the date which is 75 days after the Final Closing Date (the "Targeted Effective
Date") and use its best efforts to effect the registration, qualifications or
compliances (including, without limitation, the execution of any required
undertaking to file post-effective amendments, appropriate qualifications or
exemptions under applicable blue sky or other state securities laws and
appropriate compliance with applicable securities laws, requirements or
regulations) as may be requested and as would permit or facilitate the sale and
distribution of all Registrable Securities. Notwithstanding the foregoing, the
Company will not be obligated to enter into any underwriting agreement for the
sale of any of the Registrable Securities.
(b) If the Registration Statement is not declared effective by the
Securities and Exchange Commission by the Targeted Effective Date, the Company
shall, for no additional consideration, issue to the Subscriber additional
shares of Preferred Stock equal to 0.25% of the shares of Preferred Stock then
held on the Targeted Effective Date by such Subscriber, exclusive of any shares
of Preferred Stock issued pursuant to this Section 5.2(b), for each day the
Registration Statement is not declared effective by the Commission following the
Targeted Effective Date.
5.3 All Registration Expenses incurred in connection with any registration,
qualification, exemption or compliance pursuant to Section 5.2 shall be borne by
the Company. All Selling Expenses relating to the sale of securities registered
by or on behalf of Holders shall be borne by such Holders pro rata on the basis
of the number of securities so registered.
5.4 In the case of the registration, qualification, exemption or compliance
effected by the Company pursuant to this Agreement, the Company shall, upon
reasonable request, inform each Holder as to the status of such registration,
qualification, exemption and compliance. At its expense the Company shall:
13
(a) use its best efforts to keep such registration, and any qualification,
exemption or compliance under state securities laws which the Company determines
to obtain, continuously effective until the Holders have completed the
distribution described in the registration statement relating thereto. The
period of time during which the Company is required hereunder to keep the
Registration Statement effective is referred to herein as "the Registration
Period." Notwithstanding the foregoing, at the Company's election, the Company
may cease to keep such registration, qualification, exemption or compliance
effective with respect to any Registrable Securities, and the registration
rights of a Holder shall expire, at such time as the Holder may sell under Rule
144(k) under the Act (or other exemption from registration acceptable to the
Company) in a three-month period all Registrable Securities then held by such
Holder; and
(b) advise the Holders:
(i) when the Registration Statement or any amendment thereto has been filed
with the Commission and when the Registration Statement or any post-effective
amendment thereto has become effective;
(ii) of any request by the Commission for amendments or supplements to the
Registration Statement or the prospectus included therein or for additional
information;
(iii) of the issuance by the Commission of any stop order suspending the
effectiveness of the Registration Statement or the initiation of any proceedings
for such purpose;
(iv) of the receipt by the Company of any notification with respect to the
suspension of the qualification of the Registrable Securities included therein
for sale in any jurisdiction or the initiation or threatening of any proceeding
for such purpose; and
(v) of the happening of any event that requires the making of any changes
in the Registration Statement or the prospectus so that, as of such date, the
statements therein are not misleading and do not omit to state a material fact
required to be stated therein or necessary to make the statements therein (in
the case of the prospectus, in the light of the circumstances under which they
were made) not misleading;
(c) make every reasonable effort to obtain the withdrawal of any order
suspending the effectiveness of any Registration Statement at the earliest
possible time;
(d) furnish to each Holder, without charge, at least one copy of such
Registration Statement and any post-effective amendment thereto, including
financial statements
14
and schedules, and, if the Holder so requests in writing, all exhibits
(including those incorporated by reference) in the form filed with the
Commission;
(e) during the Registration Period, deliver to each Holder, without charge,
as many copies of the prospectus included in such Registration Statement and any
amendment or supplement thereto as such Holder may reasonably request; and the
Company consents to the use, consistent with the provisions hereof, of the
prospectus or any amendment or supplement thereto by each of the selling Holders
of Registrable Securities in connection with the offering and sale of the
Registrable Securities covered by the prospectus or any amendment or supplement
thereto. In addition, upon the reasonable request of the Holder and subject in
all cases to confidentiality protections reasonably acceptable to the Company,
the Company will meet with a Holder or a representative thereof at the Company's
headquarters to discuss all information relevant for disclosure in the
Registration Statement covering the Registrable Securities, and will otherwise
cooperate with any Holder conducting an investigation for the purpose of
reducing or eliminating such Holder's exposure to liability under the Act,
including the reasonable production of information at the Company's
headquarters;
(f) during the Registration Period, deliver to each Holder, without charge,
(i) as soon as practicable (but in the case of the annual report of the Company
to its stockholders, within 120 days after the end of each fiscal year of the
Company) one copy of: (A) its annual report to its stockholders, if any (which
annual report shall contain financial statements audited in accordance with
generally accepted accounting principles in the United States of America by a
firm of certified public accountants of recognized standing); (B) if not
included in substance in its annual report to stockholders, its annual report on
Form 10-KSB (or similar form); (C) each of its quarterly reports to its
stockholders, and, if not included in substance in its quarterly reports to
stockholders, its quarterly report on Form 10-QSB (or similar form), and (D) a
copy of the full Registration Statement (the foregoing, in each case, excluding
exhibits); and (ii) upon reasonable request, all exhibits excluded by the
parenthetical to the immediately preceding clause (D), and all other information
that is generally available to the public;
(g) prior to any public offering of Registrable Securities pursuant to any
Registration Statement, register or qualify or obtain an exemption for offer and
sale under the securities or blue sky laws of such jurisdictions as any such
Holders reasonably request in writing, provided that the Company shall not for
any such purpose be required to qualify generally to transact business as a
foreign corporation in any jurisdiction where it is not so qualified or to
consent to general service of process in any such jurisdiction, and do any and
all other acts or things necessary or advisable to enable the offer and sale in
such jurisdictions of the Registrable Securities covered by such Registration
Statement;
(h) cooperate with the Holders to facilitate the timely preparation and
delivery of certificates representing Registrable Securities to be sold pursuant
to any Registration Statement free of any restrictive legends to the extent not
required at such time and in such
15
denominations and registered in such names as Holders may request at least three
(3) business days prior to sales of Registrable Securities pursuant to such
Registration Statement;
(i) upon the occurrence of any event contemplated by Section 5.4(b)(v)
above, the Company shall promptly prepare a post-effective amendment to the
Registration Statement or a supplement to the related prospectus, or file any
other required document so that, as thereafter delivered to purchasers of the
Registrable Securities included therein, the prospectus will not include any
untrue statement of a material fact or omit to state any material fact necessary
to make the statements therein, in the light of the circumstances under which
they were made, not misleading; and
(j) use its best efforts to comply with all applicable rules and
regulations of the Commission, and will make generally available to the Holders
not later than 45 days (or 90 days if the fiscal quarter is the fourth fiscal
quarter) after the end of its fiscal quarter in which the first anniversary date
of the effective date of the Registration Statement occurs, an earnings
statement satisfying the provisions of Section 11(a) of the Act.
5.5 The Holders shall have no right to take any action to restrain, enjoin
or otherwise delay any registration pursuant to Section 5.2 hereof as a result
of any controversy that may arise with respect to the interpretation or
implementation of this Agreement.
5.6 (a) To the extent permitted by law, the Company shall indemnify each
Holder, each underwriter of the Registrable Securities and each person
controlling such Holder within the meaning of Section 15 of the Act, with
respect to which any registration, qualification or compliance has been effected
pursuant to this Agreement, against all claims, losses, damages and liabilities
(or action in respect thereof), including any of the foregoing incurred in
settlement of any litigation, commenced or threatened (subject to Section 5.6(c)
below), arising out of or based on any untrue statement (or alleged untrue
statement) of a material fact contained in any registration statement,
prospectus or offering circular, or any amendment or supplement thereof,
incident to any such registration, qualification or compliance, or based on any
omission (or alleged omission) to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, in
light of the circumstances in which they were made, and will reimburse each
Holder, each underwriter of the Registrable Securities and each person
controlling such Holder, for legal and any other expenses reasonably incurred in
connection with investigating or defending any such claim, loss, damage,
liability or action as incurred; provided that the Company will not be liable in
any such case to the extent that any untrue statement or omission or allegation
thereof is made in reliance upon and in conformity with written information
furnished to the Company by or on behalf of such Holder and stated to be
specifically for use in preparation of such registration statement, prospectus
or offering circular; provided that the Company will not be liable in any such
case where the claim, loss, damage or liability arises out of or is related to
the failure of the Holder to comply with the covenants and agreements contained
in this Agreement respecting sales of
16
Registrable Securities, and except that the foregoing indemnity agreement is
subject to the condition that, insofar as it relates to any such untrue
statement or alleged untrue statement or omission or alleged omission made in
the preliminary prospectus but eliminated or remedied in the amended prospectus
on file with the Commission at the time the registration statement becomes
effective or in the amended prospectus filed with the Commission pursuant to
Rule 424(b) or in the prospectus subject to completion and term sheet under Rule
434 of the Act, which together meet the requirements of Section 10(a) of the Act
(the "Final Prospectus"), such indemnity agreement shall not inure to the
benefit of any such Holder, any such underwriter or any such controlling person,
if a copy of the Final Prospectus furnished by the Company to the Holder for
delivery was not furnished to the person or entity asserting the loss,
liability, claim or damage at or prior to the time such furnishing is required
by the Act and the Final Prospectus would have cured the defect giving rise to
such loss, liability, claim or damage.
(b) Each Holder will severally, if Registrable Securities held by such
Holder are included in the securities as to which such registration,
qualification or compliance is being effected, indemnify the Company, each of
its directors and officers, each underwriter of the Registrable Securities and
each person who controls the Company within the meaning of Section 15 of the
Securities Act, against all claims, losses, damages and liabilities (or actions
in respect thereof), including any of the foregoing incurred in settlement of
any litigation, commenced or threatened (subject to Section 5.6(c) below),
arising out of or based on any untrue statement (or alleged untrue statement) of
a material fact contained in any registration statement, prospectus or offering
circular, or any amendment or supplement thereof, incident to any such
registration, qualification or compliance, or based on any omission (or alleged
omission) to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, in light of the
circumstances in which they were made, and will reimburse the Company, such
directors and officers, each underwriter of the Registrable Securities and each
person controlling the Company for reasonable legal and any other expenses
reasonably incurred in connection with investigating or defending any such
claim, loss, damage, liability or action as incurred, in each case to the
extent, but only to the extent, that such untrue statement or omission or
allegation thereof is made in reliance upon and in conformity with written
information furnished to the Company by or on behalf of the Holder and stated to
be specifically for use in preparation of such registration statement,
prospectus or offering circular; provided that the indemnity shall not apply to
the extent that such claim, loss, damage or liability results from the fact that
a current copy of the prospectus was not made available to the Holder and such
current copy of the prospectus would have cured the defect giving rise to such
loss, claim, damage or liability. Notwithstanding the foregoing, in no event
shall a Holder be liable for any such claims, losses, damages or liabilities in
excess of the proceeds received by such Holder in the offering, except in the
event of fraud by such Holder.
(c) Each party entitled to indemnification under this Section 5.6 (the
"Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any
17
claim as to which indemnity may be sought, and shall permit the Indemnifying
Party to assume the defense of any such claim or any litigation resulting
therefrom, provided that counsel for the Indemnifying Party, who shall conduct
the defense of such claim or litigation, shall be approved by the Indemnified
Party (whose approval shall not unreasonably be withheld), and the Indemnified
Party may participate in such defense at such Indemnified Party's expense, and
provided further that the failure of any Indemnified Party to give notice as
provided herein shall not relieve the Indemnifying Party of its obligations
under this Agreement, unless such failure is materially prejudicial to the
Indemnifying Party in defending such claim or litigation. An Indemnifying Party
shall not be liable for any settlement of an action or claim effected without
its written consent (which consent will not be unreasonably withheld).
(d) If the indemnification provided for in this Section 5.6 is held by a
court of competent jurisdiction to be unavailable to an Indemnified Party with
respect to any loss, liability, claim, damage or expense referred to therein,
then the Indemnifying Party, in lieu of indemnifying such Indemnified Party
thereunder, shall contribute to the amount paid or payable by such Indemnified
Party as a result of such loss, liability, claim, damage or expense in such
proportion as is appropriate to reflect the relative fault of the Indemnifying
Party on the one hand and of the Indemnified Party on the other in connection
with the statements or omissions which resulted in such loss, liability, claim,
damage or expense as well as any other relevant equitable considerations. The
relative fault of the Indemnifying Party and of the Indemnified Party shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission to state a material fact
relates to information supplied by the Indemnifying Party or by the Indemnified
Party and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission.
5.7 (a) Upon receipt of any notice from the Company of the happening of any
event requiring the preparation of a supplement or amendment to a prospectus
relating to Registrable Securities so that, as thereafter delivered to the
Holders, such prospectus shall not contain an untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading, each Holder will
forthwith discontinue disposition of Registrable Securities pursuant to the
registration statement contemplated by Section 5.2 until its receipt of copies
of the supplemented or amended prospectus from the Company and, if so directed
by the Company, each Holder shall deliver to the Company all copies, other than
permanent file copies then in such Holder's possession, of the prospectus
covering such Registrable Securities current at the time of receipt of such
notice.
(b) Each Holder shall suspend, upon request of the Company, any disposition
of Registrable Securities pursuant to the Registration Statement and prospectus
contemplated by Section 5.2 during (i) any period not to exceed two 30-day
periods within any one 12-month period the Company requires in connection with a
primary underwritten offering of equity securities and (ii) any period, not to
exceed one 30-day period per circumstance or
18
development, when the Company determines in good faith that offers and sales
pursuant thereto should not be made by reason of the presence of material
undisclosed circumstances or developments with respect to which the disclosure
that would be required in such a prospectus is premature, would have an adverse
effect on the Company or is otherwise inadvisable.
(c) As a condition to the inclusion of its Registrable Securities, each
Holder shall furnish to the Company such information regarding such Holder and
the distribution proposed by such Holder as the Company may request in writing
or as shall be required in connection with any registration, qualification or
compliance referred to in this Article V.
(d) Each Holder hereby covenants with the Company (i) not to make any sale
of the Registrable Securities without effectively causing the prospectus
delivery requirements under the Act to be satisfied, and (ii) if such
Registrable Securities are to be sold by any method or in any transaction other
than on a national securities exchange, Nasdaq National Market, Nasdaq Small Cap
Market or in the over-the-counter market, in privately negotiated transactions,
or in a combination of such methods, to notify the Company at least five (5)
business days prior to the date on which the Holder first offers to sell any
such Registrable Securities.
(e) Each Holder acknowledges and agrees that the Registrable Securities
sold pursuant to the Registration Statement described in this Section are not
transferable on the books of the Company unless the stock certificate submitted
to the transfer agent evidencing such Registrable Securities is accompanied by a
certificate reasonably satisfactory to the Company to the effect that (i) the
Registrable Securities have been sold in accordance with such Registration
Statement and (ii) the requirement of delivering a current prospectus has been
satisfied.
(f) Each Holder agrees not to take any action with respect to any
distribution deemed to be made pursuant to such registration statement that
constitutes a violation of Regulation M under the Exchange Act or any other
applicable rule, regulation or law.
(g) At the end of the period during which the Company is obligated to keep
the Registration Statement current and effective as described above, the Holders
of Registrable Securities included in the Registration Statement shall
discontinue sales of shares pursuant to such Registration Statement upon receipt
of notice from the Company of its intention to remove from registration the
shares covered by such Registration Statement which remain unsold, and such
Holders shall notify the Company of the number of shares registered which remain
unsold immediately upon receipt of such notice from the Company.
19
5.8 With a view to making available to the Holders the benefits of certain
rules and regulations of the Commission which at any time permit the sale of the
Registrable Securities to the public without registration, the Company shall use
its reasonable best efforts to:
(a) make and keep public information available, as those terms are
understood and defined in Rule 144 under the Act, at all times;
(b) file with the Commission in a timely manner all reports and other
documents required of the Company under the Exchange Act; and
(c) so long as a Holder owns any unregistered Registrable Securities,
furnish to such Holder upon any reasonable request a written statement by the
Company as to its compliance with Rule 144 under the Act, and of the Exchange
Act, a copy of the most recent annual or quarterly report of the Company, and
such other reports and documents of the Company as such Holder may reasonably
request in availing itself of any rule or regulation of the Commission allowing
a Holder to sell any such securities without registration.
5.9 The rights to cause the Company to register Registrable Securities
granted to the Holders by the Company under this Article 5 may be assigned in
full by a Holder in connection with a transfer by such Holder of its Registrable
Securities, provided, however, that (i) such transfer may otherwise be effected
in accordance with applicable securities laws; (ii) such Holder gives prior
written notice to the Company; and (iii) such transferee agrees to comply with
the terms and provisions of this Agreement, and such transfer is otherwise in
compliance with this Agreement. Except as specifically permitted by this Section
5.9, the rights of a Holder with respect to Registrable Securities as set out
herein shall not be transferable to any other Person, and any attempted transfer
shall cause all rights of such Holder therein to be forfeited.
5.10 With the written consent of the Company and the Holders holding at
least a majority of the Registrable Securities that are then outstanding, any
provision of this Article V may be waived (either generally or in a particular
instance, either retroactively or prospectively and either for a specified
period of time or indefinitely) or amended. Upon the effectuation of each such
waiver or amendment, the Company shall promptly give written notice thereof to
the Holders, if any, who have not previously received notice thereof or
consented thereto in writing.
VI MISCELLANEOUS
-------------
6.1 Any notice or other communication given hereunder shall be deemed
sufficient if in writing and sent by registered or certified mail, return
receipt requested, or delivered by hand against written receipt therefor,
addressed to Conversion Technologies International, Inc., 00 Xxxxxxx Xxxx, Xxxxx
0, Xxxxxx, Xxx Xxxxxx, 00000, Attn: President, and to the Subscriber at the
Subscriber's address indicated on the signature page of this Agreement.
20
Notices shall be deemed to have been given or delivered on the date of mailing,
except notices of change of address, which shall be deemed to have been given or
delivered when received.
6.2 Except as provided in Section 5.10 above, this Agreement shall not be
changed, modified or amended except by a writing signed by the parties to be
charged, and this Agreement may not be discharged except by performance in
accordance with its terms or by a writing signed by the party to be charged.
6.3 Subject to the provisions of Section 5.9, this Agreement shall be
binding upon and inure to the benefit of the parties hereto and to their
respective heirs, legal representatives, successors and assigns. This Agreement
sets forth the entire agreement and understanding between the parties as to the
subject matter hereof and merges and supersedes all prior discussions,
agreements and understandings of any and every nature among them.
6.4 Upon the execution and delivery of this Agreement by the Subscriber,
this Agreement shall become a binding obligation of the Subscriber with respect
to the purchase of Units as herein provided; subject, however, to the right
hereby reserved to the Company to enter into the same agreements with other
subscribers and to add and/or delete other persons as subscribers.
6.5 NOTWITHSTANDING THE PLACE WHERE THIS AGREEMENT MAY BE EXECUTED BY ANY
OF THE PARTIES HERETO, THE PARTIES EXPRESSLY AGREE THAT ALL THE TERMS AND
PROVISIONS HEREOF SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS
OF THE STATE OF NEW YORK WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW. IN
THE EVENT THAT A JUDICIAL PROCEEDING IS NECESSARY, THE SOLE FORUM FOR RESOLVING
DISPUTES ARISING OUT OF OR RELATING TO THIS AGREEMENT IS THE SUPREME COURT OF
THE STATE OF NEW YORK IN AND FOR THE COUNTY OF NEW YORK OR THE FEDERAL COURTS
FOR SUCH STATE AND COUNTY, AND ALL RELATED APPELLATE COURTS, THE PARTIES HEREBY
IRREVOCABLY CONSENT TO THE JURISDICTION OF SUCH COURTS AND AGREE TO SAID VENUE.
6.6 In order to discourage frivolous claims the parties agree that unless a
claimant in any proceeding arising out of this Agreement succeeds in
establishing his claim and recovering a judgment against another party
(regardless of whether such claimant succeeds against one of the other parties
to the action), then the other party shall be entitled to recover from such
claimant all of its/their reasonable legal costs and expenses relating to such
proceeding and/or incurred in preparation therefor.
6.7 The holding of any provision of this Agreement to be invalid or
unenforceable by a court of competent jurisdiction shall not affect any other
provision of this Agreement, which shall remain in full force and effect. If any
provision of this Agreement shall
21
be declared by a court of competent jurisdiction to be invalid, illegal or
incapable of being enforced in whole or in part, such provision shall be
interpreted so as to remain enforceable to the maximum extent permissible
consistent with applicable law and the remaining conditions and provisions or
portions thereof shall nevertheless remain in full force and effect and
enforceable to the extent they are valid, legal and enforceable, and no
provisions shall be deemed dependent upon any other covenant or provision unless
so expressed herein.
6.8 It is agreed that a waiver by either party of a breach of any provision
of this Agreement shall not operate, or be construed, as a waiver of any
subsequent breach by that same party.
6.9 The parties agree to execute and deliver all such further documents,
agreements and instruments and take such other and further action as may be
necessary or appropriate to carry out the purposes and intent of this Agreement.
6.10 This Agreement may be executed in two or more counterparts each of
which shall be deemed an original, but all of which shall together constitute
one and the same instrument.
6.11 (a) The Subscribers severally agree not to issue any public statement
with respect to the Subscribers' investment or proposed investment in the
Company or the terms of any agreement or covenant between them and the Company
without the Company's prior written consent, except such disclosures as may be
required under applicable law or under any applicable order, rule or regulation.
(b) The Company agrees not to disclose the names, addresses or any other
information about the Subscribers, except as required by law; provided, that the
Company may use the name (but not the address) of the Subscriber in the
Registration Statement.
6.12 Each Subscriber severally represents and warrants that it has not
engaged, consented to nor authorized any broker, finder or intermediary to act
on its behalf, directly or indirectly, as a broker, finder or intermediary in
connection with the transactions contemplated by this Agreement. Each Subscriber
hereby severally agrees to indemnify and hold harmless the Company from and
against all fees, commissions or other payments owing to any such person or firm
acting on behalf of such Subscriber hereunder.
6.13 Nothing in this Agreement shall create or be deemed to create any
rights in any person or entity not a party to this Agreement, except (a) for the
holders of Registrable Securities and (b) for the Placement Agent pursuant to
Sections 1.6(a) and 1.19 hereof.
22
6.14 The Company acknowledges and agrees that irreparable damage would
occur in the event that any of the provisions of Article V of this Agreement
were not performed in accordance with its specific terms or were otherwise
breached and that such damage would not be compensable in money damages and that
it would be extremely difficult or impracticable to measure the resultant
damages. Accordingly, any Subscriber shall be entitled to an injunction or
injunctions with respect to the provisions of this Agreement and to enforce
specifically the terms and provisions hereof, in addition to any other remedy to
which it may be entitled at law or in equity, and the Company expressly waives
any defense that a remedy in damages would be adequate and expressly waives any
requirement in an action for specific performance for the posting of a bond by
the Subscriber bringing such action.
VII CONFIDENTIAL INVESTOR QUESTIONNAIRE
-----------------------------------
7.1 The Subscriber represents and warrants that he, she or it comes within
one category marked below, and that for any category marked, he, she or it has
truthfully set forth, where applicable, the factual basis or reason the
Subscriber comes within that category. ALL INFORMATION IN RESPONSE TO THIS
SECTION WILL BE KEPT STRICTLY CONFIDENTIAL. The undersigned agrees to furnish
any additional information which the Company deems necessary in order to verify
the answers set forth below.
Category A The undersigned is an individual (not a partnership,
corporation, etc.) whose individual net worth, or joint net
worth with his or her spouse, presently exceeds $1,000,000.
Explanation. In calculating net worth you may include equity
in personal property and real estate, including your
principal residence, cash, short-term investments, stock and
securities. Equity in personal property and real estate
should be based on the fair market value of such property
less debt secured by such property.
Category B The undersigned is an individual (not a partnership,
corporation, etc.) who had an individual income in excess
of $200,000 in each of the two most recent years, or joint
income with his or her spouse in excess of $300,000 in each
of those years (in each case including foreign income, tax
exempt income and full amount of capital gains and losses
but excluding any income of other family members and any
unrealized capital appreciation) and has a reasonable
expectation of reaching the same income level in the
current year.
Category C The undersigned is a director or executive officer of the
Company which is issuing and selling the Units.
23
Category D The undersigned is a bank; a savings and loan
association; insurance company; registered investment company;
registered business development company; licensed small
business investment company ("SBIC"); or employee benefit plan
within the meaning of Title 1 of ERISA and (a) the investment
decision is made by a plan fiduciary which is either a bank,
savings and loan association, insurance company or registered
investment advisor, or (b) the plan has total assets in excess
of $5,000,000 or (c) is a self directed plan with investment
decisions made solely by persons that are accredited
investors.
-----------------------------------
-----------------------------------
(describe entity)
Category E The undersigned is a private business development company as
defined in section 202(a)(22) of the Investment Advisors Act
of 1940.
-----------------------------------
-----------------------------------
(describe entity)
Category F The undersigned is either a corporation, partnership,
Massachusetts business trust, or non-profit organization
within the meaning of Section 501(c)(3) of the Internal
Revenue Code, in each case not formed for the specific purpose
of acquiring the Units and with total assets in excess of
$5,000,000.
-----------------------------------
-----------------------------------
(describe entity)
Category G The undersigned is a trust with total assets in excess of
$5,000,000, not formed for the specific purpose of acquiring
the Units, where the purchase is directed by a "sophisticated
investor" as defined in Regulation 506(b)(2)(ii) under the
Act.
Category H The undersigned is an entity (other than a trust) all the
equity owners of which are "accredited investors" within one
or more of the above categories. If relying upon this Category
alone, each equity owner must complete a separate copy of this
Agreement.
------------------------------
------------------------------
(describe entity)
24
Category I The undersigned is not within any of the categories above
and is therefore not an accredited investor.
The undersigned agrees that the undersigned will notify the Company at any time
on or prior to the Final Closing Date in the event that the representations and
warranties in this Agreement shall cease to be true, accurate and complete.
7.2 SUITABILITY (please answer each question)
-----------
(a) For an individual Subscriber, please describe your current employment,
including the company by which you are employed and its principal business:
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
(b) For an individual Subscriber, please describe any college or graduate
degrees held by you:
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
(c) For all Subscribers, please list types of prior investments:
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
(d) For all Subscribers, please state whether you have participated in other
private placements before:
YES_______ NO_______
(e) If your answer to question (d) above was "YES", please indicate frequency of
such prior participation in private placements of:
Public Private Public or Private
Companies Companies Biotechnology Companies
--------- --------- -----------------------
Frequently
-------- --------- ---------------
Occasionally -------- --------- ---------------
25
Never
-------- --------- ---------------
(f) For individual Subscribers, do you expect your current level of income to
significantly decrease in the foreseeable future:
YES_______ NO_______
(g) For trust, corporate, partnership and other institutional Subscribers, do
you expect your total assets to significantly decrease in the foreseeable
future:
YES_______ NO_______
(h) For all Subscribers, do you have any other investments or contingent
liabilities which you reasonably anticipate could cause you to need sudden cash
requirements in excess of cash readily available to you:
YES_______ NO_______
(i) For all Subscribers, are you familiar with the risk aspects and the
non-liquidity of investments such as the securities for which you seek to
subscribe?
YES_______ NO_______
(j) For all Subscribers, do you understand that there is no guarantee of
financial return on this investment and that you run the risk of losing your
entire investment?
YES_______ NO_______
7.3 MANNER IN WHICH TITLE IS TO BE HELD. (circle one)
-----------------------------------
(a) Individual Ownership
(b) Community Property
(c) Joint Tenant with Right of
Survivorship (both parties
must sign)
(d) Partnership*
(e) Tenants in Common
(f) Company*
(g) Trust*
(h) Other
26
*If Units are being subscribed for by an entity, the attached Certificate
of Signatory must also be completed.
7.4 NASD AFFILIATION.
----------------
Are you affiliated or associated with an NASD member firm (please check one):
Yes _________ No __________
If Yes, please describe:
------------------------------------
------------------------------------
------------------------------------
*If Subscriber is a Registered Representative with an NASD member firm, have the
following acknowledgment signed by the appropriate party:
The undersigned NASD member firm acknowledges receipt of the notice required by
Article 3, Sections 28(a) and (b) of the Rules of Fair Practice.
---------------------------------
Name of NASD Member Firm
By:
------------------------------
Authorized Officer
Date:
----------------------------
7.5 The undersigned is informed of the significance to the Company of the
foregoing representations and answers contained in the Confidential Investor
Questionnaire contained in this Section 7 and such answers have been provided
under the assumption that the Company will rely on them.
27
[Signature Page]
NUMBER OF UNITS X $100,000 = (the "Purchase Price")
----------------------------------------
Signature Signature (if purchasing jointly)
----------------------------------------
Name Typed or Printed Name Typed or Printed
Entity Name Entity Name
----------------------------------------
Address Address
----------------------------------------
City, State and Zip Code City, State and Zip Code
----------------------------------------
Telephone-Business Telephone--Business
----------------------------------------
Telephone-Residence Telephone--Residence
----------------------------------------
Facsimile-Business Facsimile--Business
----------------------------------------
Facsimile-Residence Facsimile--Residence
----------------------------------------
Tax ID # or Social Security # Tax ID # or Social Security #
Name in which securities should be issued:
----------------------------------
Check the box marked YES if you would like the securities
to be delivered to your account with Placement Agent Yes ___ No ___
(If you check "No", securities will be delivered to you at the address
provided above)
Dated:
--------------------, 1997
This Subscription Agreement is agreed to and accepted as of
, 1997.
CONVERSION TECHNOLOGIES
INTERNATIONAL, INC.
By:
--------------------------------------
Name:
Title:
28
CERTIFICATE OF SIGNATORY
(To be completed if Units are
being subscribed for by an entity)
I,
-----------------------------------------------------------, am
the
----------------------------------------- of
----------------------------------------------- (the "Entity").
I certify that I am empowered and duly authorized by the Entity to execute
and carry out the terms of the Subscription Agreement and to purchase and hold
the Units, and certify further that the Subscription Agreement has been duly and
validly executed on behalf of the Entity and constitutes a legal and binding
obligation of the Entity.
IN WITNESS WHEREOF, I have set my hand this________day of
_________________, 1997.
---------------------------------------
(Signature)
