THE TERMS OF THIS SUBSCRIPTION AGREEMENT, AS SET FORTH BELOW,
HAVE BEEN MODIFIED IN ACCORDANCE WITH AN AGREEMENT BETWEEN
THE PURCHASERS AND THE COMPANY.
EXHIBIT 10.1
COMPOSITECH LTD.
INVESTOR SUBSCRIPTION AGREEMENT
AND INVESTOR QUESTIONNAIRE
THE SECURITIES OFFERED HEREBY IN THE FORM OF SHARES OF COMMON STOCK OF
COMPOSITECH LTD. HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, OR ANY STATE SECURITIES LAWS. THE SHARES CANNOT BE SOLD,
TRANSFERRED, ASSIGNED OR OTHERWISE DISPOSED OF EXCEPT IN COMPLIANCE WITH
THE RESTRICTIONS ON TRANSFERABILITY CONTAINED IN THIS AGREEMENT AND
APPLICABLE FEDERAL AND STATE SECURITIES LAWS AND WILL NOT BE TRANSFERRED OF
RECORD EXCEPT IN COMPLIANCE WITH THIS AGREEMENT AND SUCH LAWS.
* * * * * * *
PLEASE REVIEW THIS SUBSCRIPTION AGREEMENT CAREFULLY. PLEASE NOTE THAT IN
ADDITION TO SIGNING AND COMPLETING PAGE 15 OF THIS SUBSCRIPTION AGREEMENT,
YOU ARE REQUIRED TO INITIAL THE APPLICABLE PARAGRAPHS OF SECTION 4.
* * * * * * *
Compositech Ltd.
000 Xxxxxxxxx Xxxx
Xxxxxxxxx, XX 00000
Gentlemen:
1. Subscription. Subject to the terms and conditions of this Subscription
Agreement, the undersigned hereby subscribes for and agrees to purchase
____________ shares of Common Stock, par value $.01 per share (the "Shares"), at
a price of $_________ per Share, of Compositech Ltd., a Delaware corporation
(the "Company") and warrants, exercisable until February 15, 2001, enabling the
holder to purchase __________shares of the Company's Common Stock at $ _______
per Share, a price agreed to between the undersigned and the Company, at or
about the market price on the date of the purchase. The undersigned herewith
delivers a certified or bank check or wires funds, in accordance with the wire
transfer instructions attached hereto as Exhibit A, in the amount of
$___________ which amount represents the aggregate purchase price of the Shares.
Except to the extent provided by applicable state securities laws, the
undersigned agrees that this subscription shall be irrevocable and shall survive
the death or disability of the
undersigned. The undersigned further understands that if and to the extent that
this subscription is not accepted, in whole or in part, any amount received by
the Company from the undersigned will be returned to the undersigned without
interest or deduction.
2. Access to Information. The undersigned acknowledges that the Company has
made available to the undersigned, or the undersigned's personal advisors, the
opportunity to obtain additional information to evaluate the merits and risks of
the undersigned's investment in the Company.
3. General Representations and Warranties. The undersigned hereby
represents and warrants to the Company and the other purchasers of Shares as
follows:
(a) The Company has answered all inquiries that the undersigned has
made of it concerning the Company, its business and financial condition or
any other matter relating to the operation of the Company and the offer and
sale of the Shares.
(b) The undersigned has such knowledge and experience in financial and
business matters in general, and financial and business matters of the type
in which the Company will engage in particular, that the undersigned is
capable of evaluating the merits and risks of an investment in the Company.
(c) The undersigned is familiar with the nature of and risks attendant
to an investment of this type, the undersigned is financially capable of
bearing the economic risk of this investment and the undersigned can afford
the loss of the total amount of the investment.
(d) If the undersigned is a corporation, partnership, trust or other
entity, it is duly organized and validly existing under the laws of the
state and country of its incorporation or formation and the person
executing this Subscription Agreement in a representative or fiduciary
capacity has full power and authority to execute and deliver this
Subscription Agreement in such capacity and on behalf of the subscribing
corporation, partnership, trust or other entity. Such entity has full right
and power to perform its obligations pursuant to this Subscription
Agreement.
4. ACCREDITED INVESTOR STATUS REPRESENTATIONS AND WARRANTIES. PLEASE
INITIAL THE APPLICABLE REPRESENTATION BELOW ((A) OR (B)) REGARDING THE NATURE OF
YOUR STATUS AS AN "ACCREDITED INVESTOR" AS SUCH TERM IS DEFINED IN RULE 501(A)
OF REGULATION D ("REGULATION D") PROMULGATED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "SECURITIES ACT").
(a) INITIAL IF (i) AND (ii) BELOW ARE APPLICABLE ___________.
(i) The undersigned is an individual who is such an "Accredited
Investor" because: the undersigned is a director or executive officer
of the Company; or the undersigned has a net worth, or joint net worth
with the undersigned's spouse, in excess of $1,000,000 (which net
worth includes the value
2
of homes, home furnishings and automobiles); or the undersigned had an
individual income in excess of $200,000 in each of the two most recent
years, or joint income with the undersigned's spouse in excess of
$300,000 in each of those years, and has a reasonable expectation of
reaching the same income level in the current year; and
(ii) The undersigned represents that the undersigned: (A) does
not have an overall commitment to investments which are not readily
marketable that is disproportionate to the undersigned's net worth,
and that the undersigned's investment in the Shares will not cause
such overall commitment to become excessive; and (B) has adequate net
worth and means of providing for the undersigned's current needs and
personal contingencies to sustain a complete loss of the undersigned's
investment in the Company at the time of investment and has no need
for liquidity in the undersigned's investment in the Shares.
OR
(b) INITIAL IF THE FOLLOWING IS APPLICABLE: ___________.
The undersigned is a corporation, partnership, trust, plan or other
organization, entity or institution which is an "Accredited Investor," as
defined in Regulation D.
5. Investment Representations. The undersigned hereby represents and
warrants to the Company and the other purchasers of Shares as follows:
(a) The undersigned understands that the Shares have not been
registered under the Securities Act or the securities laws of any state and
that the undersigned is purchasing the Shares for investment only; the
undersigned agrees and represents that the undersigned will not sell,
assign, pledge or otherwise dispose of any Shares or any portion thereof
unless, in the opinion of counsel for the Company, the same may be legally
sold or disposed of without registration or qualification under the
applicable state or federal statutes, or the Shares shall have been so
registered or qualified and an appropriate registration statement shall
then be in effect; the undersigned understands that the certificates
representing the Shares will bear a legend containing the foregoing
restriction; and the undersigned understands that the undersigned must bear
the economic risk of the investment for an indefinite period of time.
(b) The undersigned is fully aware that the Shares are being issued
and sold to the undersigned in reliance upon the exemption provided for in
Section 4(2) of the Securities Act and Rule 506 promulgated thereunder and
similar exemptions provided under state securities laws on the grounds that
no public offering is involved and that the representations, warranties and
agreements set forth in this Subscription Agreement are essential to the
claiming of such exemptions.
3
(c) The undersigned is purchasing the Shares with the undersigned's
personal funds and not with the funds of any other person, firm or entity; the
undersigned is acquiring the Shares for the undersigned's personal account for
investment only, and without any intention of selling or distributing all or any
part thereof; the undersigned has no reason to anticipate any change in personal
circumstances, financial or otherwise, which would cause the undersigned to
sell, distribute, or necessitate or require any sale or distribution of the
Shares; and no person other than the undersigned has any beneficial interest in
the Shares.
(d) No representations, warranties or covenants have been made to the
undersigned by the Company or any officer, employee, agent, affiliate or
subsidiary of the Company, other than the representations, warranties and
covenants included in this Subscription Agreement.
6. Representations, Warranties and Covenants of the Company. The Company
represents, warrants and covenants that:
(a) The Company is duly organized, validly existing and in good
standing as a corporation under the laws of the State of Delaware.
(b) The Company is duly qualified to do business as a foreign
corporation in good standing in each jurisdiction in which its activities
or the ownership or leasing of property require such qualification or where
the failure to so qualify would have a material adverse effect on the
business, operations, condition (financial or otherwise) or results of
operations of the Company.
(c) The outstanding shares of capital stock of the Company are duly
authorized, validly issued, fully paid and nonassessable; none of such
shares has been issued in violation of the preemptive rights of any
shareholder of the Company. The Shares, when issued in accordance with the
terms thereof, will be duly authorized, validly issued, fully paid and
nonassessable; and none of the Shares will be issued in violation of the
preemptive rights of any shareholder of the Company.
(d) This Subscription Agreement has been duly authorized, executed and
delivered by the Company and constitutes a legal, valid and binding
obligation of the Company enforceable in accordance with its terms.
(e) The Company is not in violation of any term or provision of (i)
any of its charter documents, including its certificate of incorporation or
by-laws, (ii) any material term or provision of any indenture, mortgage,
deed of trust, note agreement, or other agreement or instrument to which it
is a party or by which it is or may be bound or to which any of its assets,
property or business is or may be subject, (iii) any material term of any
indebtedness or (iv) to the best of the Company's knowledge, any statute or
any judgment, decree, order, rule or regulation of any court, regulatory
body or administrative agency or other federal, state or other
4
governmental body, domestic or foreign, having jurisdiction over its
assets, property or business, which violation or violations, either in any
case or in the aggregate, might result in any material adverse change,
financial or otherwise, in its assets, properties, condition, business,
earnings or prospects, and the execution and delivery by the Company of
this Subscription Agreement, the consummation by the Company of the
transactions herein contemplated and compliance by the Company with the
terms of this Subscription Agreement will not result in any such violation.
7. Indemnification. The undersigned agrees to indemnify and hold harmless
the Company, its officers, directors, employees, stockholders and affiliates,
and any person acting on behalf of the Company, from and against any and all
damage, loss, liability, cost and expense (including attorney's fees) which any
of them may incur by reason of the failure by the undersigned to fulfill any of
the terms and conditions of the Subscription Agreement, or by reason of any
breach of the representations, warranties and covenants made by the undersigned
herein, or in any other document provided by the undersigned to the Company. All
representations, warranties and covenants contained in this Subscription
Agreement, and the indemnification contained in this Section 7, shall survive
the acceptance of this Subscription Agreement by the Company.
8. Transferability; Binding Effect. The undersigned hereby agrees that this
Subscription Agreement may not be sold, assigned, pledged, transferred or
otherwise disposed of, except as otherwise provided for herein, in any manner,
by the purchaser, without the prior written consent of the Company. This
Subscription Agreement shall inure to the benefit of and be binding upon the
Company and its successors and assigns and the undersigned's heirs, personal
representatives, successors and permitted assigns.
9. Acceptance of Subscription. The Company shall have the right to accept
or reject this Subscription Agreement, in whole or in part, and this
Subscription Agreement shall be deemed to be accepted only when the acceptance
attached hereto is signed by the Company.
10. No Waiver. Notwithstanding any of the representations, warranties,
acknowledgments or agreements made herein by the undersigned, the undersigned
does not thereby or in any other manner waive any of the rights granted to the
undersigned under federal or state securities laws.
11. Registration Rights
(a) As used in this Section 11, the following terms shall have the
following meanings:
(i) "Affiliate" shall mean, with respect to any person, any other
person controlling, controlled by or under direct or indirect common
control with such person (for the purposes of this definition
"control," when used with respect to any specified person, shall mean
the power to direct the
5
management and policies of such person, directly or indirectly,
whether through ownership of voting securities, by contract or
otherwise; and the terms "controlling" and "controlled" shall have
meanings correlative to the foregoing).
(ii) "Business Day" shall mean a day Monday through Friday on
which banks are generally open for business in New York.
(iii) "Holders" shall mean the undersigned and any person holding
Registrable Securities to whom the rights under Section 11 have been
transferred in accordance with Section 11(i).
(iv) "Person" shall mean any person, individual, corporation,
partnership, trust or other nongovernmental entity or any governmental
agency, court, authority or other body (whether foreign, federal,
state, local or otherwise).
(v) The terms "register," "registered" and "registration" refer
to the registration effected by preparing and filing a registration
statement in compliance with the Securities Act, and the declaration
or ordering of the effectiveness of such registration statement.
(vi) "Registrable Securities" shall mean the Shares and any
shares of common stock of the Company issued as a dividend or other
distribution with respect to or in replacement of Shares; provided,
however, that such securities shall only be treated as Registrable
Securities if and only for so long as they (A) have not been disposed
of pursuant to a registration statement declared effective by the SEC,
(B) have not been sold in a transaction exempt from the registration
requirements of the Securities Act so that all transfer restriction
and restrictive legends with respect thereto are removed upon the
consummation of such sale or (C) are held by a Holder or a permitted
transferee pursuant to Section 11(i).
(vii) "Registration Expenses" shall mean all expenses incurred by
the Company in complying with Section 11(b) hereof, including, without
limitation, all registration, qualification and filing fees, printing
expenses, escrow fees, fees and expenses of counsel for the Company,
blue sky fees and expense (for a reasonable number of states) and the
expenses of any special audits incident to or required by any such
registration (but excluding the fees of legal counsel for any Holder).
(viii) "Registration Statement" shall have the meaning ascribed
to such term in Section 11(b).
6
(ix) "Registration Period" shall have the meaning ascribed to
such term in Section 11(c).
(x) "SEC" shall mean the U.S. Securities and Exchange Commission.
(xi) "Selling Expenses" shall mean all underwriting discounts and
selling commissions applicable to the sale of Registrable Securities
and all fees and expenses of legal counsel for any Holder.
(b) No later than 60 days after the purchase of Shares pursuant to
this Subscription Agreement (the "Filing Date"), the Company will file a
registration statement (the "Registration Statement") with the SEC and use
its reasonable best efforts to effect the registration, qualifications or
compliances (including, without limitation, the execution of any required
undertaking to file post-effective amendments, appropriate qualifications
or exemptions under applicable blue sky or other state securities laws and
appropriate compliance with applicable securities laws, requirements or
regulations) as may be so reasonably requested and as would permit or
facilitate the sale and distribution of all Registrable Securities.
Notwithstanding the foregoing, the Company will not be obligated to enter
into any underwriting agreement for the sale of any of the Shares.
(c) All Registration Expenses incurred in connection with any
registration, qualification, exemption or compliance pursuant to Section
11(b) shall be borne by the Company. All Selling Expenses relating to the
sale of securities registered by or behalf of Holders shall be borne by
such Holders pro rata on the basis of the number of securities so
registered.
(d) In the case of the registration, qualification, exemption or
compliance effected by the Company pursuant to this Subscription Agreement,
the Company will, upon reasonable request, inform each Holder as to the
status of such registration, qualification, exemption and compliance. At
its expense the Company will:
(i) use its reasonable best efforts to keep such registration,
and any qualification, exemption or compliance under state securities
laws which the Company determines to obtain, continuously effective
until at least the second anniversary of the Closing Date or until the
Holders have completed the distribution described in the registration
statement relating thereto, whichever first occurs. The period of time
during which the Company is required hereunder to keep the
Registration Statement effective is referred to herein as "the
Registration Period." Notwithstanding the foregoing at the Company's
election, the Company may cease to keep such registration,
qualification or compliance effective with respect to any Registrable
Securities and the registration rights of a Holder shall expire, at
such time as the Holder may sell under Rule 144 under the Securities
Act (or other exemption from registration acceptable to the Company)
in a
7
three-month period all Registrable Securities then held by such
Holder;
(ii) advise the Holders:
(A) when the Registration Statement or any amendment thereto
has been filed with the SEC and when the Registration Statement
or any post-effective amendment thereto has become effective;
(B) of any request by the SEC for amendments or supplements
to the Registration Statement or the prospectus included therein
or for additional information;
(C) of the issuance by the SEC of any stop order suspending
the effectiveness of the Registration Statement or the initiation
of any proceeding for such purpose;
(D) of the receipt by the Company of any notification with
respect to the suspension of the qualification of the Shares
included therein for sale in any jurisdiction or the initiation
or threatening of any proceeding for such purpose; and
(E) of the happening of any event that requires the making
of any changes in the Registration Statement or the prospectus so
that, as of such date, the statements therein are not misleading
and do not omit to state a material fact required to be stated
therein or necessary to make the statements therein (in the case
of the prospectus, in the light of the circumstances under which
they were made) not misleading;
(iii) make every reasonable effort to obtain the withdrawal of
any order suspending the effectiveness of any Registration Statement
at the earliest possible time;
(iv) during the Registration Period deliver to each Holder,
without charge, as many copies of the prospectus included in such
Registration Statement and any amendment or supplement thereto as such
Holder may reasonably request; and the Company consents to the use,
consistent with the provisions hereof, of the prospectus or any
amendment or supplement thereto by each of the selling Holders of
Registrable Securities in connection with the offering and sale of the
Registrable Securities covered by the prospectus or any amendment or
supplement thereto;
8
(v) prior to any public offering of the Registrable Securities
pursuant to any Registration Statement, register or qualify or obtain
an exemption for offer and sale under the securities or blue sky laws
of such jurisdictions as any such Holders reasonably request in
writing, provided that the Company shall not for any such purpose be
required to qualify generally to transact business as a foreign
corporation in any jurisdiction where it is not so qualified or to
consent to general service of process in any such jurisdiction, and do
any and all other acts or things reasonably necessary or advisable to
enable the offer and sale in such jurisdictions of the Registrable
Securities covered by such Registration Statement;
(vi) cooperate with the Holders to facilitate the timely
preparation and delivery of certificates representing Registrable
Securities to be sold pursuant to any Registration Statement free of
any restrictive legends to the extent not required at such time and in
such denomination and registered in such names as Holders may request
at least three business days prior to sales of Registrable Securities
pursuant to such Registration Statement; and
(vii) upon the occurrence of any event contemplated by Section
11(d)(ii)(E) above, the Company shall promptly prepare a
post-effective amendment to the Registration Statement or a supplement
to the related prospectus, or file any other required document so
that, as thereafter delivered to purchasers of the Registrable
Securities included therein not misleading, the prospectus will not
include any untrue statement of a material fact or omit to state any
material fact necessary to make the statements therein not misleading
in the light of the circumstances under which they were made.
(e) The Holders shall have no right to take any action to restrain,
enjoin or otherwise delay any registration pursuant to Section 11(b) hereof
as a result of any controversy that may arise with respect to the
interpretation or implementation of this Subscription Agreement.
(f) (i) To the extent permitted by law, the Company will
indemnify each Holder, each underwriter of the Registrable Securities
and each person controlling such Holder within the meaning of Section
15 of the Securities Act, with respect to which any registration,
qualification or compliance has been effected pursuant to this
Subscription Agreement, against losses, damages and liabilities (or
action in respect thereof), including any of the incurred in
settlement of any litigation, commenced or threatened (subject to
Section 11(f)(iii) below), arising out of or based on any untrue
statement (or alleged untrue statement) of a material fact contained
in any Registration Statement, prospectus or offering circular, or any
amendment or supplement thereof, incident to any such registration,
qualification or compliance, or based on any omission (or alleged
9
omission) to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, in
light of the circumstances in which they were made, and will reimburse
each Holder, each underwriter of the Registrable Securities and each
person controlling such Holder, for reasonable legal and any other
expenses reasonably incurred in connection with investigating or
defending any such claim, loss, damage, liability or action as
incurred; provided that the Company will not be liable in any such
case to the extent that any untrue statement or omission or allegation
thereof is made in reliance upon and in conformity with written
information furnished to the Company by or on behalf of such Holder
and stated to be specifically for use in preparation of such
registration statement, prospectus or offering circular; further
provided that the indemnity contained in this Section 11(f)(i) shall
not apply to amounts paid in settlement of any such claim, loss,
damages, liability, action or proceeding if such settlement is
effected without the consent of the Company (which consent shall not
be unreasonably withheld), nor shall the Company be liable in any such
case where the claim, loss, damage or liability arises out of or is
related to the failure of the Holder to comply with the covenants and
agreements contained in this Agreement with respect to the sales of
Registrable Securities, and except that the foregoing indemnity
agreement is subject to the conditions that insofar as it relates to
(A) any such untrue statement or alleged untrue statement or omission
or alleged omission made in the preliminary prospectus but eliminated
or remedied in the amended prospectus filed with the SEC pursuant to
Rule 424(b) or in the prospectus subject to completion and term sheet
under Rule 434 of the Securities Act, which together meet the
requirements of Section 10(a) of the Securities Act (the "Final
Prospectus"), such indemnity agreement shall not inure to the benefit
of any such Holder, any such underwriter or any such controlling
person, if a copy of the Final Prospectus was not furnished to person
or entity asserting the loss, liability, claim or damage at or prior
to the time such furnishing is required by the Securities Act, and (B)
any such untrue statement or alleged untrue statement or omission or
alleged omission based upon information furnished to the Company by
such Holder, such indemnity agreement shall not inure to the benefit
of any such Holder, any such underwriter or any such controlling
person;
(ii) Each Holder will severally, if Registrable Securities held
by such Holder are included in the securities as to which such
registration, qualification or compliance is being effected, indemnify
the Company, each of its directors and officers, each underwriter of
the Shares and each person who controls the Company within the meaning
of Section 15 of the Securities Act, against all claims, losses,
damages and liabilities (or actions in respect thereof), including any
of the foregoing incurred in settlement of any litigation, commenced
or threatened (subject to Section 11(f)(iii) below), arising out of or
based on any untrue statement (or alleged untrue statement) of a
material fact contained in any registration statement, prospectus or
offering circular, or any amendment or supplement thereof, incident to
any such registration, qualification or compliance, or based on any
omission (or alleged
10
omission) to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, in
light of the circumstances in which they were made, and will reimburse
the Company, such directors and officers, each underwriter of the
Shares and each person controlling the Company for reasonable legal
and any other expenses reasonably incurred in connection with
investigating or defending any such claim, loss, damage, liability or
action as incurred, in each case to the extent, but only to the
extent, that such untrue statement or omission or allegation thereof
is made in reliance upon and in conformity with written information
furnished to the Company by or on behalf of the Holder and stated to
be specifically for use in preparation of such registration statement,
prospectus or offering circular; provided that the indemnity shall not
apply to the extent that such claim, loss, damage or liability results
from the fact that a current copy of the prospectus that was made
available to the Holder was not sent or given to the person asserting
any such claim, loss, damage or liability at or prior to the written
confirmation of the sale of the Registrable Securities confirmed to
such person if such current copy of the prospectus would have cured
the defect giving rise to such loss, claim, damage or liability.
Notwithstanding the foregoing, in no event shall a Holder be liable
for any such claims, losses, damages or liabilities in excess of the
proceeds received by such Holder in the offering, except in the event
of fraud by such Holder;
(iii) Each party entitled to indemnification under this Section
11(f) (the "Indemnified Party") shall give notice to the party
required to provide indemnification (the "Indemnifying Party")
promptly after such Indemnified Party has actual knowledge of any
claim as to which indemnity may be sought, and shall permit the
Indemnifying Party to assume the defense of any such claim or any
litigation resulting therefrom, provided that counsel for the
Indemnifying Party, who shall conduct the defense of such claim or
litigation, shall be approved by the Indemnified Party (whose approval
shall not unreasonably be withheld), and the Indemnified Party may
participate in such defense at such Indemnified Party's expense, and
provided further that the failure of any Indemnified Party to give
notice as provided herein shall not relieve the Indemnifying Party of
its obligations under this Subscription Agreement, unless such failure
is prejudicial to the Indemnifying Party in defending such claim or
litigation. An Indemnifying Party shall not be liable for any
settlement of an action or claim effected without its written consent
(which consent will not be unreasonably withheld);
(iv) If the indemnification provided for in this Section 11(f) is
held by a court of competent jurisdiction to be unavailable to an
Indemnified Party with respect to any loss, liability, claim, damage
or expense
11
referred to therein, then the Indemnifying Party, in lieu of
indemnifying such Indemnified Party thereunder, shall contribute to
the amount paid or payable by such Indemnified Party as a result of
such loss, liability, claim, damage or expense in such proportion as
is appropriate to reflect the relative fault of the Indemnifying Party
on the one hand and of the Indemnified Party on the other in
connection with the statements or omissions which resulted in such
loss, liability, claim, damage or expense as well as any other
relevant equitable considerations. The relative fault of the
Indemnifying Party and of the Indemnified Party shall be determined by
reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission to state a material fact
relates to information supplied by the Indemnifying Party or by the
Indemnified Party and the parties' relative intent, knowledge, access
to information and opportunity to correct or prevent such statement or
omission.
(g) (i) Each Holder agrees that, upon receipt of any notice from the
Company of the happening of any event requiring the preparation of a
supplement or amendment to a prospectus relating to Registrable
Securities so that, as thereafter delivered to the Holders, such
prospectus will not contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading, each Holder
will forthwith discontinue disposition of Registrable Securities
pursuant to the Registration Statement contemplated by Section 11(b)
until its receipt of copies of the supplemented or amended prospectus
from the Company and, if so directed by the Company, each Holder shall
deliver to the Company all copies, other than permanent file copies
then in such Holder's possession, of the prospectus covering such
Registrable Securities current at the time of receipt of such notice;
(ii) Each Holder agrees to suspend, upon request of the Company,
any disposition of Registrable Securities pursuant to the Registration
Statement and prospectus contemplated by Section 11(b) during (A) any
period not to exceed two 30-day periods within any one 12-month period
the Company requires in connection with a primary underwritten
offering of equity securities and (B) any period, not to exceed one
30-day period per circumstance or development, when the Company
determines in good faith that offers and sales pursuant thereto should
not be made by reason of the presence of material undisclosed
circumstances or developments with respect to which the disclosure
that would be required in such a prospectus is premature, would have
an adverse effect on the Company or is otherwise inadvisable;
(iii) As a condition to the inclusion of its Registrable
Securities, each Holder shall furnish to the Company such information
regarding such Holder and the distribution proposed by such Holder as
the Company may
12
request in writing or as shall be required in connection with any
registration, qualification or compliance referred to in this Section
11;
(iv) Each Holder hereby covenants with the Company (A) not to
make any sale of the Registrable Securities without effectively
causing the prospectus delivery requirements under the Securities Act
to be satisfied, and (B) if such Registrable Securities are to be sold
by any method or in any transaction other than on a national
securities exchange, in the over-the-counter market, in privately
negotiated transactions, or in a combination of such methods, to
notify the Company at least five business days prior to the date on
which the Holder first offers to sell any such Shares;
(v) Each Holder acknowledges and agrees that the Registrable
Securities sold pursuant to a Registration Statement are not
transferable on the books of the Company unless the stock certificate
submitted to the transfer agent evidencing such Registrable Securities
is accompanied by a certificate reasonably satisfactory to the Company
to the effect that (A) the Registrable Securities have been sold in
accordance with such Registration Statement and (B) the requirement of
delivering a current prospectus has been satisfied;
(vi) Each Holder agrees not to take any action with respect to
any distribution deemed to be made pursuant to such Registration
Statement, that constitutes a violation of Regulation M under the
Exchange Act or any other applicable rule, regulation or law;
(vii) At the end of the period during which the Company is
obligated to keep the Registration Statement current and effective as
described above, the Holders of Registrable Securities included in the
Registration Statement shall discontinue sales of shares pursuant to
such Registration Statement upon receipt of notice from the Company of
its intention to remove from registration the shares covered by such
Registration Statement which remain unsold, and such Holders shall
notify the Company of the number of shares registered which remain
unsold immediately upon receipt of such notice from the Company.
(h) With a view to making available to the Holders the benefits of
certain rules and regulations of the SEC which at any time permit the sale
of the Registrable Securities to the public without registration, the
Company agrees to use its reasonable best efforts to:
(i) make and keep public information available, as those terms
are understood and defined in Rule 144 under the Securities Act, at
all times;
(ii) file with the SEC in a timely manner all reports and
13
other documents required of the Company under the Exchange Act; and
(iii) so long as a Holder owns any unregistered Registrable
Securities, furnish to such Holder upon any reasonable request a
written statement by the Company as to its compliance with Rule 144
under the Securities Act, and of the Exchange Act, a copy of the most
recent annual or quarterly report of the Company, and such other
reports and documents of the Company as such Holder may reasonably
request in availing itself of any rule or regulation of the SEC
allowing a Holder to sell any such securities without registration.
(i) The rights to cause the Company to register Registrable Securities
granted to the Holders by the Company under Section 11(a) may be assigned
in full by a Holder, provided that such transfer may otherwise be effected
in accordance with applicable securities laws; (ii) such Holder gives prior
written notice to the Company; and (iii) such transferee agrees to comply
with the terms and provisions of this Subscription Agreement, and such
transfer is otherwise in compliance with this Subscription Agreement.
Except as specifically permitted by this Section 11(i), the rights of a
Holder with respect to Registrable Securities as set out herein shall not
be transferable to any other Person, and any attempted transfer shall cause
all rights of such Holder therein to be forfeited.
(j) With the written consent of the Company and the Holders holding at
least a majority of the Registrable Securities that are then outstanding,
any provision of this Section 11 may be waived (either generally or in a
particular instance, either retroactively or prospectively and either for a
specified period of time or indefinitely) or amended. Upon the effectuation
of each such waiver or amendment, the Company shall promptly give written
notice thereof to the Holders, if any, who have not previously received
notice thereof or consented thereto in writing.
12. Acknowledgment. The undersigned acknowledges that the undersigned has
carefully read and fully understands this Subscription Agreement and its
representations.
13. Governing Law. This Subscription Agreement shall be governed by and
construed in accordance with the laws of the State of New York with the
exception of the choice of law provisions thereof.
14. Counterparts. This Subscription Agreement shall be executed through the
use of separate signature pages or in any number of counterparts, and each of
such counterparts shall, for all purposes, constitute one agreement binding on
all parties.
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IN WITNESS WHEREOF, the undersigned has executed this Subscription
Agreement this day of ____________, 1998.
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(Purchaser's Name)
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(Purchaser's Signature)
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(Purchaser's Address)
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(Purchaser's Social Security or
Taxpayer Identification Number)
$
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Subscription Amount
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(Purchaser's Telephone Number)
15
ACCEPTANCE
The undersigned hereby accepts the foregoing Subscription Agreement this
_____ day of _____________, 1998.
Compositech Ltd.
By:
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Name:
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Title:
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