COMMON STOCK PURCHASE AGREEMENT
Between
COMMODORE ENVIRONMENTAL SERVICES, INC.
COMMODORE APPLIED TECHNOLOGIES, INC.,
SOUTHBROOK INTERNATIONAL INVESTMENTS,
LTD.,
XXXXXXXX INVESTMENTS L.P.,
and
MONTROSE INVESTMENTS, LTD.
Dated as of February 9, 1998
COMMON STOCK PURCHASE AGREEMENT (this "Agreement"), dated as of February 9,
1998, between Commodore Environmental Services, Inc., a Delaware corporation
("COES"), Commodore Applied Technologies, Inc., a Delaware corporation (the
"Company"), and Southbrook International Investment, Ltd. ("Southbrook"),
Montrose Investments, Ltd. ("Montrose") and Xxxxxxxx Investment L.P.
("Xxxxxxxx"). Southbrook, Montrose and Xxxxxxxx are each referred to herein as a
"Purchaser" and are collectively referred to herein as the "Purchasers."
WHEREAS, subject to the terms and conditions set forth in this Agreement,
COES desires to sell to the Purchasers, and the Purchasers desire to purchase
from COES, shares of common stock, $.001 par value per share, of the Company
(the "Common Stock") which are currently owned of record and beneficially by
COES.
NOW THEREFORE, in consideration of the mutual covenants contained in this
Agreement, COES, the Company and each Purchaser agree as follows:
ARTICLE I
PURCHASE AND SALE OF COMMON STOCK
1.1. Purchase and Sale. (a) Subject to the terms and conditions set forth
herein, COES shall sell to the Purchasers, and the Purchasers, severally and not
jointly, shall purchase from COES for $6,000,000 (the "First Tranche Purchase
Price") an amount of Common Stock (the "Initial First Tranche Shares") equal to
6,000,000 divided by 90% of the average closing price of the Common Stock for
the five Trading Days immediately prior to the First Tranche Closing Date (as
defined below), together with any additional shares of Common Stock (the
"Additional First Tranche Shares", and together with the Initial First Tranche
Shares, the "First Tranche Shares"), if any, issued in accordance with Section
1.2(a)(iii) of this Agreement.
(b) Subject to the terms and conditions set forth herein, COES shall have
the right (but not the obligation) to sell to the Purchasers, and the
Purchasers, severally and not jointly, shall purchase from COES for $4,000,000
(the "Second Tranche Purchase Price", and together with the First Tranche
Purchase Price, the "Purchase Price") an amount of Company Common Stock (the
"Initial Second Tranche Shares") equal to 4,000,000 divided by 90% of the
average closing price of the Common Stock for the five Trading Days immediately
prior to the Second Tranche Closing Date (as defined below), together with any
additional shares of Common Stock (the "Additional Second Tranche Shares", and
together with the Initial Second Tranche Shares, the "Second Tranche Shares",
and together with the First Tranche Shares, the "Shares"), if any, issued in
accordance with Section 1.2(b)(iii) of this Agreement.
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1.2. The Closings.
(a) The Closing for the First Tranche Shares. (i) The closing of the
purchase and sale of the First Tranche Shares (the "First Tranche Closing")
shall take place at the offices of Xxxxxxxx Xxxxxxxxx Xxxxxx Xxxxxxxx & Xxxxxx
LLP ("Escrow Agent"), 0000 Xxxxxx xx xxx Xxxxxxxx, Xxx Xxxx, Xxx Xxxx 00000,
immediately following the date that the conditions set forth in Section 4.1 have
been satisfied or waived by the appropriate party. The date of the First Tranche
Closing is hereinafter referred to as the "First Tranche Closing Date." At the
First Tranche Closing, COES shall sell and issue to the Purchasers, and the
Purchasers shall, severally and not jointly, purchase from COES the Initial
First Tranche Shares for the First Tranche Purchase Price, all of which shall be
distributed to the parties by Escrow Agent pursuant to the terms of this
Agreement and the Escrow Agreement dated the date hereof among the parties
hereto and Escrow Agent, substantially in the form of Exhibit A attached hereto
(the "Escrow Agreement").
(ii) Prior to the First Tranche Closing: (a) COES shall deliver, or cause
to be delivered, to Escrow Agent (i) one or more stock certificates representing
the Initial First Tranche Shares to be purchased by the Purchasers as set forth
below the Purchaser's names on Schedule 1 attached hereto, each registered in
the name of such Purchaser, together with one or more stock certificates
representing the maximum amount of Additional First Tranche Shares which may be
sold hereunder, (ii) Warrants to purchase an aggregate of 150,000 shares of
Common Stock owned of record and beneficially by COES, at an exercise price per
share equal to the greater of $6.00 or 125% of the per share First Tranche
Closing Price, exercisable for three years from the First Tranche Closing Date,
registered in the names of the Purchasers as set forth in Schedule 1 and in the
form of Exhibit B (the "First Tranche Warrants"), (iii) the legal opinion
referenced in Section 4.1 (b)(iii), substantially in the form attached hereto as
Exhibit C, and (iv) all other documents, instruments and writings required to
have been delivered at or prior to the First Tranche Closing pursuant to this
Agreement and the Registration Rights Agreement, dated the date hereof, by and
between COES, the Company and the Purchasers, in the form of Exhibit D (the
"Registration Rights Agreement") and (a) each Purchaser shall deliver, or cause
to be delivered to Escrow Agent (i) the portion of the First Tranche Purchase
Price set forth next to its name on Schedule 1, in United States dollars in
immediately available funds by wire transfer to an account designated in writing
by Escrow Agent for such purpose on or prior to the First Tranche Closing Date,
and (ii) all documents, instruments and writings required to have been delivered
at or prior to the First Tranche Closing by such Purchaser pursuant to this
Agreement and the Registration Rights Agreement.
(iii) In the event that 90% of the average Per Share Market Value for the
First Tranche Measuring Period ("First Tranche Measuring Period Price") shall be
less than the per share First Tranche Purchase Price, then COES shall issue to
the Purchasers, within three Trading Days following the end of the First Tranche
Measuring Period, in the same proportion as the Initial First Tranche Shares,
for no additional consideration, an amount of additional shares of Company
Common Stock (the "Additional First Tranche Shares") equal to the difference
between (a) the amount equal to 6,000,000 divided by the First Tranche
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Measuring Period Price and (b) the amount of the Initial First Tranche Shares;
provided, however, that for purposes of such calculation the lowest First
Tranche Measuring Period Price shall be $2.00.
(b) The Closing for the Second Tranche Shares. (i) Subject to the terms and
conditions set forth in this Agreement, COES shall, no earlier than the last day
of the First Tranche Measuring Period and no later than 45 Trading Days
following the end of the First Tranche Measuring Period, have the right and
option (but not the obligation) to deliver a written notice to the Purchasers (a
"Second Tranche Financing Notice") requiring the Purchasers to buy the Initial
Second Tranche Shares. At the Second Tranche Closing (as defined below), each
Purchaser shall be obligated (subject to the terms and conditions herein) to
purchase such portion of such Initial Second Tranche Shares as equals such
Purchaser's pro rata portion of the purchase price for the Initial First Tranche
Shares issued and sold at the First Tranche Closing. The closing of the purchase
and sale of the Second Tranche Shares (the "Second Tranche Closing") shall take
place on the date specified by COES in the Second Tranche Financing Notice which
date shall be between 30 and 45 days after the date of delivery of the Second
Tranche Financing Notice, at the offices of Escrow Agent, but not prior to the
date that the conditions set forth in Section 4.2 have been satisfied or waived
by the appropriate party. The date of the Second Tranche Closing is hereinafter
referred to as the "Second Tranche Closing Date." At the Second Tranche Closing,
COES shall sell and issue to the Purchasers, and the Purchasers shall, severally
and not jointly, purchase from COES the Initial Second Tranche Shares for the
Second Tranche Purchase Price, all of which shall be distributed to the parties
by Escrow Agent pursuant to the terms of this Agreement and the Escrow
Agreement.
(ii) Prior to the Second Tranche Closing, (a) COES shall deliver, or caused
to be delivered, to the Escrow Agent (i) the Initial Second Tranche Shares to be
issued and sold thereat (or such other amount upon which the parties may agree),
registered in the name of the Purchasers (determined by reference to the amount
of Initial First Tranche Shares issued and sold at the First Tranche Closing),
together with one or more stock certificates representing the maximum amount of
Additional Second Tranche Shares which may be sold hereunder, (ii) Warrants to
purchase an aggregate of 100,000 shares of Company Common Stock at an exercise
price per share equal to the greater of $6.00 or 125 % of the per share Second
Tranche Closing Price, exercisable for three years from the Second Tranche
Closing Date, registered in the names of the Purchasers (in the same proportion
as the First Tranche Warrants) and in the form of Exhibit B (the "Second Tranche
Warrants" and together with the First Tranche Warrants, the "Warrants"), (iii)
the legal opinion referenced in Section 4.2(xii), substantially in the form
attached hereto as Exhibit C, and (iv) all other documents, instruments and
writings required to have been delivered at or prior to the Second Tranche
Closing by the Company to the Purchasers pursuant to this Agreement; and (b)
each Purchaser shall deliver, or cause to be delivered, to Escrow Agent (i) its
portion of the Second Tranche Purchase Price (based upon its portion of the
First Tranche Purchase Price) in United States dollars in immediately available
funds by wire transfer to an account designated in writing by Escrow Agent for
such purpose on or prior to the Second Tranche Closing Date and (ii) all
documents,
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instruments and writings required to have been delivered at or prior to the
Second Tranche Closing by such Purchaser pursuant to this Agreement.
(iii) In the event that 90% of the average Per Share Market Value for the
Second Tranche Measuring Period (the "Second Tranche Measuring Period Price")
shall be less than the per share Second Tranche Purchase Price, then COES shall
issue to the Purchasers, within three Trading Days of the end of the Second
Tranche Measuring Period, in the same proportion as the Initial Second Tranche
Shares, for no additional consideration, an amount of additional shares of
Common Stock (the "Additional Second Tranche Shares") equal to the difference
between (a) the amount equal to 4,000,000 divided by the Second Tranche
Measuring Period Price and (b) the amount of the Initial Second Tranche Shares;
provided, however, that for purposes of such calculation the Second Tranche
Measuring Period Price shall not be below $2.00.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
2.1. Representations, Warranties and Agreements of COES and the Company.
Each of COES and the Company hereby severally, and not jointly and severally,
makes the following representations and warranties to the Purchasers:
(a) Organization and Qualification. Each of COES and the Company is a
corporation, duly incorporated, validly existing and in good standing under
the laws of the State of Delaware, with the requisite corporate power and
authority to own and use its respective properties and assets and to carry
on its respective business as currently conducted. Neither COES nor the
Company has any subsidiaries other than (i) inactive non-operating
subsidiaries or (ii) as set forth in the Form 10-K Annual Report for the
fiscal year ended December 31, 1996 (the "1996 Form 10-K") for each of COES
and the Company (each a "Subsidiary" and collectively the "Subsidiaries").
Each of the Subsidiaries is a corporation, duly incorporated, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation or organization (as applicable), with the full corporate
power and authority to own and use its properties and assets and to carry
on its business as currently conducted. Each of COES, the Company and their
respective Subsidiaries is duly qualified to do business and is in good
standing as a foreign corporation in each jurisdiction in which the nature
of the business conducted or property owned by it makes such qualification
necessary, except where the failure to be so qualified or in good standing,
as the case may be, would not, individually or in the aggregate, (x)
adversely affect the legality, validity or enforceability of the Common
Stock or any of the Transaction Documents (as defined below) in any
material respect, (y) have or result in a material adverse effect on the
results of operations, assets, prospects, or financial condition of COES
and its Subsidiaries, taken as a whole, or the Company and its
Subsidiaries, taken as a whole, or (z) adversely impair the ability of COES
or the Company to perform fully on a
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timely basis their obligations under any Transaction Document (any of (x),
(y) or (z), being a "Material Adverse Effect").
(b) Authorization; Enforcement. Each of COES and the Company
(collectively, the "Corporations") has the requisite corporate power and
authority to enter into and to consummate the transactions contemplated by
this Agreement, the Warrants and the Registration Rights Agreement
(collectively, the "Transaction Documents.") and the Intercompany Note, and
otherwise to carry out its obligations hereunder and thereunder. The
execution and delivery of each of the Transaction Documents by the
Corporations and the consummation by each of them of the transactions
contemplated hereby and thereby, including without limitation, the issuance
of the Intercompany Note, have been duly authorized by all necessary action
on the part of each of COES and the Company and no further action is
required by COES or the Company. Each of the Transaction Documents has been
duly executed by COES and the Company, as applicable, and when delivered in
accordance with the terms hereof, will constitute the valid and binding
obligation of COES and the Company, respectively, enforceable against COES
and the Company in accordance with its terms, except as such enforceability
may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium, liquidation or similar laws relating to, or affecting generally
the enforcement of, creditors' rights and remedies or by other equitable
principles of general application. Neither COES, the Company nor any
Subsidiary is in violation of any of the provisions of its respective
certificate of incorporation, by-laws or other charter documents.
(c) Capitalization. The authorized, issued and outstanding capital
stock of each of COES and the Company is set forth in Schedule 2.1(c). No
shares of Common Stock are entitled to preemptive or similar rights, nor is
any holder of the Common Stock entitled to preemptive or similar rights
arising out of any agreement or understanding with the Company by virtue of
any of the Transaction Documents. Except as disclosed in Schedule 2.1(c),
there are no outstanding options, warrants, script rights to subscribe to,
calls or commitments of any character whatsoever relating to, or, except as
a result of the purchase and sale of the Shares and Warrants, securities,
rights or obligations convertible into or exchangeable for, or giving any
Person any right to subscribe for or acquire any shares of Common Stock, or
contracts, commitments, understandings, or arrangements by which COES, the
Company or any Subsidiary is or may become bound to issue additional shares
of Common Stock, or securities or rights convertible or exchangeable into
shares of Common Stock. To the knowledge of COES and the Company, except as
specifically disclosed in the SEC Documents (as defined below) or Schedule
2.1 (c), no Person or group of related Persons beneficially owns (as
determined pursuant to Rule 13d-3 promulgated under the Securities Exchange
Act of 1934, as amended (the "Exchange Act")) or has the right to acquire
by agreement with or by obligation binding upon the Company beneficial
ownership of in excess of 5% of the Common Stock. A "Person" means an
individual or corporation, partnership, trust, incorporated or
unincorporated association, joint venture, limited liability company, joint
stock company, government (or an agency or subdivision thereof) or other
entity of any kind.
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(d) Issuance of Shares. Warrants and Warrant Shares. The Shares, the
Warrants and the shares of Common Stock issuable upon exercise of the
Warrants (the "Warrant Shares") are duly authorized and validly issued,
fully paid and nonassessable, and are owned of record and beneficially by
COES free and clear of all liens, encumbrances and rights of first refusal
of any kind (collectively, "Liens"). As at the First Tranche Closing Date
and the Second Tranche Closing Date (each a "Closing Date"), as the case
may be, COES will have, and will at all times while the Warrants are
outstanding own of record and beneficially, an adequate number of shares of
Common Stock to enable it to perform its obligations under this Agreement
and the Warrants with respect to the number of Shares and Warrants to be
issued at such Closing Date and upon exercise of such Warrants. Similarly,
the Company will, at all relevant times, maintain an adequate reserve of
duly authorized shares of Common Stock to enable it to issue fully paid and
nonassessable shares of Common Stock upon exercise of the Warrants in the
event that, for any reason, COES is unable to so issue such Warrant Shares.
The Shares and the Warrant Shares are referred to herein as the
"Transaction Shares."
(e) No Conflicts. The execution, delivery and performance of this
Agreement and the other Transaction Documents and the Intercompany Note by
COES and the Company and the consummation by the COES and Company of the
transactions contemplated hereby and thereby do not and will not (i)
conflict with or violate any provision of their respective certificates of
incorporation, bylaws or other charter documents (each as amended through
the date hereof) or (ii) subject to obtaining the consents referred to in
Section 2.1 (f), conflict with, or constitute a default (or an event which
with notice or lapse of time or both would become a default) under, or give
to others any rights of termination, amendment, acceleration or
cancellation of, any agreement, indenture or instrument (evidencing a COES
debt or a Company debt or otherwise) to which COES or the Company is a
party or by which any property or asset of either COES or the Company is
bound or affected, or (iii) result in a violation of any law, rule,
regulation, order, judgment, injunction, decree or other restriction of any
court or governmental authority to which COES or the Company is subject
(including Federal and state securities laws and regulations), or by which
any material property or asset of COES or the Company is bound or affected,
except in the case of each of clauses (ii) and (iii), such conflicts,
defaults, terminations, amendments, accelerations, cancellations and
violations as would not, individually or in the aggregate, have or result
in a Material Adverse Effect. The business of each of COES and the Company
is not being conducted in violation of any law, ordinance or regulation of
any governmental authority, except for violations which, individually or in
the aggregate, would not have a Material Adverse Effect.
(f) Consents and Approvals. Except as specifically set forth in
Schedule 2.1(f), neither COES, the Company nor any Subsidiary is required
to obtain any consent, waiver, authorization or order of, give any notice
to, or make any filing or registration with, any court or other Federal,
state, local or other governmental authority or other Person in connection
with the execution, delivery and performance by COES or the Company of the
Transaction Documents, other than (i) the filing of the Registration
Statement, pursuant to the Registration Rights Agreement, with the
Securities and Exchange Commission (the "Commission"), which shall be filed
in accordance with and in the time periods set forth in the
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Registration Rights Agreement, (ii) the application(s) or any letter(s)
acceptable to the American Stock Exchange ("AMEX") for the listing of the
Transaction Shares with the AMEX (and with any other national securities
exchange or market on which the Common Stock is then listed), (iii) any
filings, notices or registrations under applicable state securities laws,
and (iv) other than, in all other cases, where the failure to obtain such
consent, waiver, authorization or order, or to give such notice or make
such filing or registration would not have or result in, individually or in
the aggregate, a Material Adverse Effect (together with the consents,
waivers, authorizations, orders, notices and filings referred to in
Schedule 2.1(f), the "Required Approvals").
(g) Litigation; Proceedings. Except as specifically disclosed in the
Disclosure Materials (as hereinafter defined) there is no action, suit,
notice of violation, proceeding or investigation pending or, to the
knowledge of COES and the Company, threatened against or affecting COES or
the Company or any of its Subsidiaries or any of their respective
properties before or by any court, governmental or administrative agency or
regulatory authority (Federal, state, county, local or foreign) which (i)
adversely affects or challenges the legality, validity or enforceability of
any of the Transaction Documents or the Common Stock or (ii) could
reasonably be expected to, individually or in the aggregate, have a
Material Adverse Effect.
(h) No Default or Violation. Neither COES, the Company nor any
Subsidiary (i) is in default under or in violation of any indenture, loan
or credit agreement or any other agreement or instrument to which it is a
party or by which it or any of its properties is bound, (ii) is in
violation of any order of any court, arbitrator or governmental body
applicable to it, or (iii) is in violation of any statute, rule or
regulation of any governmental authority to which it is subject, except as
could not reasonably be expected to, in any such case (individually or in
the aggregate) have or result in a Material Adverse Effect.
(i) Schedules. The Schedules to this Agreement furnished by or on
behalf of COES and the Company do not contain any untrue statement of a
material fact or omit to state any material fact necessary in order to make
the statements made therein, in light of the circumstances under which they
were made, not misleading.
(j) Private Offering. Neither COES, the Company nor any Person acting
on its behalf has taken or will take any action which might subject the
offering, issuance or sale of the Securities to the registration
requirements of the Securities Act of 1933, as amended (the "Securities
Act").
(k) SEC Documents; Financial Statements; No Adverse Change. Each of
COES and the Company has filed all reports required to be filed by it under
the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
including pursuant to Section 13(a) or 15(d) thereof, for the three years
preceding the date hereof (or such shorter period as the Company was
required by law to file such material) (the foregoing materials being
collectively referred to herein as the "SEC Documents" and, together with
the Schedules to this Agreement, the "Disclosure Materials") on a timely
basis or has received a valid extension of such time of
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filing and has filed any such SEC Documents prior to the expiration of any
such extension. As of their respective dates, the SEC Documents complied in
all material respects with the requirements of the Securities Act and the
Exchange Act and the rules and regulations of the Commission promulgated
thereunder, and none of the SEC Documents, when filed, contained any untrue
statement of a material fact or omitted to state a material fact required
to be stated therein or necessary in order to make the statements therein,
in light of the circumstances under which they were made, not misleading.
All material agreements to which COES or the Company is a party or to which
the property or assets of COES or the Company are subject have been filed
as exhibits to the SEC Documents as required; neither COES, the Company nor
any of their Subsidiaries is in breach of any agreement where such breach
would have or result in a Material Adverse Effect. The financial statements
of the Company included in the SEC Documents comply in all material
respects with applicable accounting requirements and the rules and
regulations of the Commission with respect thereto as in effect at the time
of filing. Such financial statements have been prepared in accordance with
generally accepted accounting principles applied on a consistent basis
during the periods involved, except as may be otherwise specified in such
financial statements or the notes thereto, and fairly present in all
material respects the financial position of COES and the Company as of and
for the dates thereof and the results of operations and cash flows for the
periods then ended, subject, in the case of unaudited statements, to normal
yearend audit adjustments. Since the date of the financial statements
included in the last filed Quarterly Report on Form 10-Q for the period
ended September 30, 1997 for each of COES and the Company, except as
otherwise expressly set forth in Schedule 2.1(k) the Disclosure Schedule,
there has been no event, occurrence or development that has had a Material
Adverse Effect which has not been specifically disclosed to the Purchasers
by COES or the Company. The Company last filed audited financial statements
with the Commission in connection with its 1996 Form 10-K, and has not
received any comments from the Commission in respect thereof.
(l) Investment Company. Neither COES nor the Company is, or is
controlled by or under common control with an affiliate (an "Affiliate")
of, an "investment company" within the meaning of the Investment Company
Act of 1940, as amended.
(m) Certain Fees. Except for fees payable to Avalon Research Group,
Inc. for its services as a finder in the transactions contemplated hereby,
pursuant to an engagement letter previously furnished to the Purchasers
which fees will be paid in accordance with the Escrow Agreement, no fees or
commissions will be payable by COES or the Company to any broker, financial
advisor, finder, investment banker, or bank with respect to the
transactions contemplated by this Agreement. The Purchasers shall have no
obligation with respect to any fees or with respect to any claims made by
or on behalf of other Persons for fees of a type contemplated in this
Section that may be due in connection with the transactions contemplated by
this Agreement. COES and the Company shall indemnify and hold harmless each
of the Purchasers, its employees, officers, directors, agents, and
partners, and their respective Affiliates (as such term is defined under
Rule 405 promulgated under the Securities Act), from and against all
claims, losses, damages, costs (including the costs of preparation and
attorney's fees) and expenses suffered in respect of any such claimed or
existing fees.
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(n) Solicitation Materials. Neither COES nor the Company has (i)
distributed any offering materials in connection with the offering and sale
of any of the Transaction Shares other than the Disclosure Materials and
any amendments and supplements thereto or (ii) solicited any offer to buy
or sell any of the Transaction Shares by means of any form of general
solicitation or advertising. None of the Disclosure Materials or any other
information provided to the Purchasers by or on behalf of COES or the
Company contain any untrue statement of material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading.
(o) Form S-3 Eligibility. The Company is, and at each Closing Date
will be, eligible to register securities for resale with the Commission
under Form S-3 promulgated under the Securities Act.
(p) Listing and Maintenance Requirements Compliance. The Company has
not in the two years preceding the date hereof received notice (written or
oral) from the AMEX or any stock exchange, market or trading facility on
which the Common Stock is or has been listed (or on which it has been
quoted) to the effect that the Company is not in compliance with the
listing or maintenance requirements of such exchange or market. The Company
believes that it is in compliance with all such maintenance requirements.
(q) Patents and Trademarks. The Company has, or has rights to use, all
patents, patent applications, trademarks, trademark applications, service
marks, trade names, copyrights, licenses and rights (collectively, the
"Intellectual Property Rights") which are necessary for use in connection
with its business, as currently conducted and as described in the SEC
Documents, and which the failure to so have would have a Material Adverse
Effect. Except as disclosed in Schedule 2.1(s), to the best knowledge of
the Company, there is no existing infringement by another Person of any of
the Intellectual Property Rights which are necessary for use in connection
with the Company's business.
(r) Acknowledgment of Dilution. COES acknowledges that the (i) sale
and issuance of the Shares and (ii) issuance of the Common Stock upon
exercise of the Warrants will result in dilution of the outstanding shares
of Common Stock owned by COES, which dilution may be substantial under
certain market conditions. COES further acknowledges that its obligation to
(x) sell and issue the Shares and (y) issue Common Stock upon exercise of
the Warrants is unconditional and absolute, subject to the limitations set
forth herein or pursuant to the Warrants, regardless of the effect of any
such dilution. COES and the Company further acknowledge that the Purchasers
may sell Shares at any time, including, without limitation, during the
First Tranche Measuring Period and the Second Tranche Measuring Period.
(s) Registration Rights. Rights of Participation. Except as described
on Schedule 2.1(u) hereto, (A) the Company has not granted or agreed to
grant to any Person any rights (including "piggy-back" registration rights)
to have any securities of the Company registered with the Commission or any
other governmental authority which has not been satisfied and (B) no
Person, including, but not limited to, current or former shareholders of
the Company,
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underwriters, brokers or agents, has any right of first refusal, preemptive
right, right of participation, or any similar right to participate in the
transactions contemplated by this Agreement or any other Transaction
Document.
(t) Title. Except as disclosed in Schedule 2.1(v), the Company and the
Subsidiaries have good and marketable title in fee simple to all real
property and personal property owned by them which is material to the
business of the Company and its Subsidiaries, in each case free and clear
of all Liens, except for liens, claims or encumbrances as do not materially
affect the value of such property and do not interfere with the use made
and proposed to be made of such property by the Company and its
Subsidiaries. Any real property and facilities held under lease by the
Company and its Subsidiaries are held by them under valid, subsisting and
enforceable leases with such exceptions as are not material and do not
interfere with the use made and proposed to be made of such property and
buildings by the Company and its Subsidiaries.
(u) Regulatory Permits. COES, the Company and their Subsidiaries
possess all certificates, authorizations and permits issued by the
appropriate Federal, state or foreign regulatory authorities necessary to
conduct their respective businesses as described in the SEC Documents
except where the failure to possess such permits would not, individually or
in the aggregate, have a Material Adverse Effect ("Material Permits"), and
neither COES, the Company nor any such Subsidiary has received any notice
of proceedings relating to the revocation or modification of any Material
Permit.
2.2. Representations and Warranties of the Purchasers. Each of the
Purchasers, severally and not jointly, hereby represents and warrants to the
Company as follows:
(a) Organization; Authority. Each Purchaser is a corporation duly
incorporated or a limited partnership duly formed, validly existing and in
good standing under the laws of the jurisdiction of its incorporation or
formation with the requisite power and authority, corporate or otherwise,
to enter into and to consummate the transactions contemplated hereby and by
the Registration Rights Agreement and otherwise to carry out its
obligations hereunder and thereunder. The purchase by such Purchaser of the
Shares and the Warrants hereunder has been duly authorized by all necessary
action on the part of such Purchaser. Each of this Agreement and the
Registration Rights Agreement has been duly executed and delivered by such
Purchaser and constitutes the valid and legally binding obligation of such
Purchaser, enforceable against such Purchaser, in accordance with its
terms, subject to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and similar laws of general applicability
relating to or affecting creditors' rights generally and to general
principles of equity.
(b) Investment Intent. Each Purchaser is acquiring the Shares and the
Warrants for its own account for investment purposes only and not with a
view to or for distributing or reselling such Shares or Warrants or any
part thereof or interest therein, without prejudice, however, to such
Purchaser's right, subject to the provisions of this Agreement and
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the Registration Rights Agreement, at all times to sell or otherwise
dispose of all or any part of such Shares or Warrants pursuant to an
effective registration statement under the Securities Act and in compliance
with applicable State securities laws or under an exemption from such
registration.
(c) Purchaser Status. At the time such Purchaser was offered the
Shares and the Warrants, it was, and at the date hereof, it is, and at each
Closing Date and each exercise date under the Warrants, it will be, an
"accredited investor" as defined in Rule 501(a)(l)-(8) under the Securities
Act.
(d) Experience of Purchaser. Each Purchaser either alone or together
with its representatives, has such knowledge, sophistication and experience
in business and financial matters so as to be capable of evaluating the
merits and risks of the prospective investment in the Shares and the
Warrants, and has so evaluated the merits and risks of such investment.
(e) Ability of Purchaser to Bear Risk of Investment. Each Purchaser is
able to bear the economic risk of an investment in the Shares and the
Warrants and, at the present time, is able to afford a complete loss of
such investment.
(f) Access to Information. Each Purchaser acknowledges receipt of the
Disclosure Materials and further acknowledges that it has been afforded (i)
the opportunity to ask such questions as it has deemed necessary of, and to
receive answers from, representatives of the Company concerning the terms
and conditions of the offering of the Shares and the Warrants and the
merits and risks of investing in the Shares and the Warrants (ii) access to
information about the Company and the Company's financial condition,
results of operations, business, properties, management and prospects
sufficient to enable it to evaluate its investment; and (iii) the
opportunity to obtain such additional information which the Company
possesses or can acquire without unreasonable effort or expense that is
necessary to make an informed investment decision with respect to the
investment and to verify the accuracy and completeness of the information
contained in the Disclosure Materials.
(g) Reliance. Each Purchaser understands and acknowledges that (i) the
Shares and the Warrants are being offered and sold to the Purchaser without
registration under the Securities Act in a private placement that is exempt
from the registration provisions of the Securities Act under Section 4(2)
of the Securities Act or Regulation D promulgated thereunder and (ii) the
availability of such exemption, depends in part on, and the Company will
rely upon the accuracy and truthfulness of, the foregoing representations
and such Purchaser hereby consents to such reliance.
COES and the Company each acknowledge and agree that the Purchasers make no
representations or warranties with respect to the transactions contemplated
hereby other than those specifically set forth in this Section 2.2.
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ARTICLE III
OTHER AGREEMENTS OF THE PARTIES
3.1. Transfer Restrictions. (a) If any Purchaser should decide to dispose
of Shares or any portion of the Warrants held by it, each Purchaser understands
and agrees that it may do so only pursuant to an effective registration
statement under the Securities Act or pursuant to an available exemption from
the registration requirements of the Securities Act. In connection with any
transfer of any Shares or Warrants other than pursuant to an effective
registration statement or to the Company, the Company may require the transferor
thereof to provide to the Company a written opinion of counsel experienced in
the area of United States securities laws selected by the transferor, the form
and substance of which opinion shall be reasonably satisfactory to the Company,
to the effect that such transfer does not require registration of such
transferred securities under the Securities Act. Notwithstanding the foregoing,
the Company hereby consents to and agrees to register (i) any transfer of Shares
or Warrants by one Purchaser to another Purchaser, and agrees that no
documentation other than executed transfer documents shall be required for any
such transfer, and (ii) any transfer of Shares or Warrants by any Purchaser to
an Affiliate of such Purchaser or to an Affiliate of another Purchaser, or any
transfer among any such Affiliates, provided that the transferee certifies to
the Company that it is an "accredited investor" as defined in Rule 501(a) under
the Securities Act. Any such transferee shall be bound by the terms of this
Agreement and shall have the rights of a Purchaser under this Agreement and the
Registration Rights Agreement.
(b) Each Purchaser agrees to the imprinting, so long as is required by this
Section 3.1 (b), of the following legend on the Shares and the Warrants:
[NEITHER] THESE SECURITIES [NOR THE SECURITIES INTO WHICH THESE
SECURITIES ARE EXERCISABLE] HAVE NOT BEEN REGISTERED WITH THE SECURITIES
AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN
RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE
OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN
A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS.
The Warrant Shares issuable upon exercise of the Warrants shall not contain
the legend set forth above if the exercise of the Warrants occurs at any time
while the Registration Statement filed pursuant to the Registration Rights
Agreement covering the Warrant Shares is effective under the Securities Act or
in the event there is not an effective Registration Statement at such time, if
in the written opinion of counsel to the Company experienced in the area of
United States securities laws such legend is not required under applicable
requirements of the
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Securities Act (including judicial interpretations and pronouncements issued by
the staff of the Commission). The Company agrees that it will provide each
Purchaser, upon request, with a certificate or certificates representing
Transaction Shares, free from such legend at such time as such legend is no
longer required hereunder.
3.2. Stop Transfer Instruction. The Company may not make any notation on
its records or give instructions to any transfer agent of the Company which
enlarge the restrictions of transfer set forth in Section 3.1.
3.3. Furnishing of Information. As long as any Purchaser owns Shares,
Warrants or Transaction Shares, the Company covenants to timely file (or obtain
extensions in respect thereof and file within the applicable grace period) all
reports required to be filed by the Company after the date hereof pursuant to
Section 13(a) or 15(d) of the Exchange Act and to promptly furnish the
Purchasers with true and complete copies of all such filings. As long as any
Purchaser owns Shares, Warrants or Transaction Shares, if the Company is not
required to file reports pursuant to Section 13(a) or 15(d) of the Exchange Act,
it will prepare and furnish to the Purchasers and make publicly available in
accordance with Rule 144(c) promulgated under the Securities Act annual and
quarterly financial statements, together with a discussion and analysis of such
financial statements in form and substance substantially similar to those that
would otherwise be required to be included in reports required by Section 13(a)
or 15(d) of the Exchange Act, as well as any other information required thereby,
in the time period that such filings would have been required to have been made
under the Exchange Act. The Company further covenants that it will take such
further action as any holder of Shares may reasonably request, all to the extent
required from time to time to enable such Person to sell Transaction Shares
without registration under the Securities Act within the limitation of the
exemptions provided by Rule 144 promulgated under the Securities Act, including
the legal opinion referenced above in this Section. Upon the request of any such
Person, the Company shall deliver to such Person a written certification of a
duly authorized officer as to whether it has complied with such requirements.
3.4. Blue Sky Laws. In accordance with the Registration Rights Agreement,
the Company shall qualify the Transaction Shares under the securities or Blue
Sky laws of such jurisdictions as the Purchasers may request and shall continue
such qualification at all times through the third anniversary of the last
Closing Date; provide, however, that neither the Company nor its Subsidiaries
shall be required in connection therewith to qualify as a foreign corporation
where they are not now so qualified or to take any action that would subject the
Company to general service of process in any such jurisdiction where it is not
then so subject or subject the Company to any material tax in any such
jurisdiction where it is not then so subject.
3.5. Integration. The Company shall not sell, offer for sale or solicit
offers to buy or otherwise negotiate in respect of any security (as defined in
Section 2 of the Securities Act) that would be integrated with the offer or sale
of the Shares, the Warrants or the Transaction Shares
-13-
in a manner that would require the registration under the Securities Act of the
sale of the Shares, the Warrants or the Transaction Shares to any Purchaser.
3.6. Listing and Reservation of Transaction Shares. (a) The Shares are
listed on the AMEX, and if they should for any reason cease to be so listed, the
Company shall promptly prepare and file with the AMEX (as well as any other
national securities exchange or market on which the Common Stock is then listed)
an additional shares listing application or a letter acceptable to the AMEX
covering and listing a number of shares of Common Stock which is at least equal
to the maximum number of Transaction Shares (ii) take all steps necessary to
cause the Transaction Shares to be approved for listing on the AMEX (as well as
on any other national securities exchange or market on which the Common Stock is
then listed) as soon as possible thereafter, and (iii) provide to the Purchasers
evidence of such listing, and the Company shall maintain the listing of its
Common Stock on such exchange.
(b) The Company shall reserve for issuance upon exercise of the Warrants in
accordance with their terms the number of shares of Common Stock to be listed on
the AMEX (and such other national securities exchange or market on which the
Common Stock is then listed or traded) as set forth in Section 3.7(a). Shares of
Common Stock reserved for issuance upon exercise of the Warrants as set forth in
Section 3.7(a) shall be allocated pro rata to each of the Purchasers in
accordance with the amount of Shares issued and delivered to such Purchaser at
each Closing, as applicable.
3.7. Notice of Breaches. (a) COES, the Company and each Purchaser shall
give prompt written notice to the other of any breach of any representation,
warranty or other agreement contained in this Agreement, the Warrants or in the
Registration Rights Agreement, as well as any events or occurrences arising
after the date hereof and prior to, with respect to the Second Tranche Closing,
the Second Tranche Closing Date, which would reasonably be likely to cause any
representation or warranty or other agreement of such party, as the case may be,
contained herein to be incorrect or breached as of such Closing Date. However,
no disclosure by either party pursuant to this Section 3.7 shall be deemed to
cure any breach of any representation, warranty or other agreement contained
herein or in the Registration Rights Agreement.
(b) Notwithstanding the generality of Section 3.7(a), COES and the Company
shall promptly notify each Purchaser of any notice or claim (written or oral)
that it receives from any lender of COES or the Company to the effect that the
consummation of the transactions contemplated hereby and by the Registration
Rights Agreement violates or would violate any written agreement or
understanding between such lender and COES or the Company, and COES and the
Company shall promptly furnish by facsimile to the holders of the Shares a copy
of any written statement in support of or relating to such claim or notice.
(c) The default by any Purchaser of any of its obligations, representations
or warranties under any Transaction Document shall not be imputed to, and shall
have no effect
-14-
upon, any other Purchaser or affect obligations of COES or the Company under the
Transaction Documents to any non-defaulting Purchaser.
3.8. Exercise Obligations of COES and the Company. COES and the Company
each covenant to deliver Warrant Shares upon exercise of Warrants in accordance
with the terms and conditions and time periods set forth in the Warrants.
3.9. Subsequent Registrations. Other than Transaction Shares and other
"Registrable Securities" (as defined in the Registration Rights Agreement) to be
registered in accordance with the Registration Rights Agreement, or as set forth
on Schedule 3.9 to the Disclosure Schedule, neither COES nor the Company shall,
for a period of not less than 90 Trading Days after the date that the
Transaction Shares Registration Statement relating to the securities issued at
the First Tranche Closing Date and the Second Tranche Closing Date, as the case
may be, is declared effective by the Commission, without the prior written
consent of the Purchasers issue or sell any of equity or equity-equivalent
securities of the Company pursuant to Regulation S promulgated under the
Securities Act. Any days that any Purchaser is unable to sell Transaction Shares
under an Transaction Shares Registration Statement shall be added to such 90
Trading Day period for the purposes of (i) and (ii) above.
3.10. [Intentionally Omitted]
3.11 Use of Proceeds. COES shall, immediately upon receipt of the proceeds
hereunder, lend and advance all such proceeds, net of professional fees and
commissions to Avalon Group, Inc. (the "Net Proceeds"), directly to the Company.
Such loan and advance shall be evidenced by the Company's 8% non-convertible
note payable to COES (the "Intercompany Note"), which shall be payable as to
principal on the earlier to occur of (a) December 31, 1999, or (b) consummation
of any public offering or private placement (other than transactions
contemplated by this Agreement) of securities of the Company with net proceeds
aggregating in excess of $6.0 million, provided, however, that if such funds are
raised in a private placement during the period commencing on the date of this
Agreement and ending on the last day of the Effectiveness Period (as defined in
the Registration Rights Agreement), then the Intercompany Note shall not be
payable unless a Registration Statement filed in accordance with the
Registration Rights Agreement has been effective for 75 consecutive days and is
effective on the date of such repayment. The Company shall use all of the Net
Proceeds received from COES solely for working capital and general corporate
purposes and not for the satisfaction of any portion of Company borrowings,
including, but not limited to, the repayment of any portion of the $4,000,000
currently owed to COES pursuant a prior note issued by the Company to COES (the
"Prior COES Loan"), or to redeem any Company equity or equity-equivalent
securities. Pending application of the proceeds of this placement in the manner
permitted hereby, the Company will invest such proceeds in interest bearing
accounts and/or short-term, investment grade interest bearing securities.
3.11. Reimbursement. In the event that any Purchaser, other than by reason
of its gross negligence or willful misconduct, becomes involved in any capacity
in any action, proceeding
-15-
or investigation brought by or against any person, including stockholders of the
Company, in connection with or as a result of the consummation of the
transactions contemplated pursuant to the Transaction Documents, the Company
will reimburse such Purchaser for its legal and other expenses (including the
cost of any investigation and preparation) incurred in connection therewith. In
addition, with respect to each Purchaser, other than with respect to any matter
in which such Purchaser is a named party, the Company will pay such Purchaser
the charges, as reasonably determined by such Purchaser, for the time of any
officers or employees of such Purchaser devoted to appearing and preparing to
appear as witnesses, assisting in preparing for hearings, trial or pretrial
matters, or otherwise with respect to inquiries, hearings, trials, and other
proceedings relating to the subject matter of this Agreement. The reimbursement
obligations of the Company under this paragraph shall be in addition to any
liability which the Company may otherwise have, shall extend upon the same terms
and conditions to any affiliate of each Purchaser and partners, directors,
agents, employees and controlling persons (if any), as the case may be, of each
Purchaser and any such affiliate, and shall be binding upon and inure to the
benefit of any successors, assigns, heirs and personal representatives of the
Company, each Purchaser and any such affiliate and any such person. The Company
also agrees that no Purchaser or any such affiliates, partners, directors,
agents, employees or controlling persons shall have any liability to the Company
or any person asserting claims on behalf of or in right of the Company in
connection with or as a result of the consummation of the Transaction Documents
except to the extent that any losses, claims, damages, liabilities or expenses
incurred by the Company result from the gross negligence or willful misconduct
of such Purchaser or entity in connection with the transactions contemplated by
this Agreement.
3.12. Price Protection. In the event that during the period which is 90
days after the end of the First Tranche Measuring Period COES shall sell or the
Company shall issue any shares of Common Stock ("First Future Shares") at a
price per share which shall be less than the per share First Tranche Purchase
Price or during the period which is 90 days after the end of the Second Tranche
Measuring Period COES shall sell or the Company shall issue any shares of Common
Stock ("Second Future Shares") at a price per share which shall be less than the
per share Second Tranche Purchase Price, then the Company shall issue to the
Purchasers, pro rata in accordance with the percentage of Shares issued to the
Purchasers, for no additional consideration, an amount of additional shares of
Common Stock equal to (a) with respect to the First Future Shares, an amount
equal to the difference between (i) 6,000,000 divided by the price at which the
First Future Shares were sold or issued and (ii) the amount equal to the number
of Initial First Tranche Shares sold, and (b) with respect to the Second Future
Shares, an amount equal to the difference between (i) 4,000,000 divided by the
price at which the Second Future Shares were sold or issued and (ii) the amount
equal to the number of Initial Second Tranche Shares sold. If any additional
shares of Shares Common Stock are issued to the Purchasers pursuant to this
Section 3.13 such shares of Common Stock shall be included in the term
"Transaction Shares." Notwithstanding anything to the contrary set forth above,
the terms "First Future Shares" and "Second Future Shares" shall not include any
shares of Common Stock which may be issued in the future upon conversion of, or
pursuant to the terms of any agreement entered into by COES or the Company in
respect of, securities of COES
-16-
and/or the Company which have been issued or entered into and which have been
disclosed in writing to the Purchasers prior to the date of this Agreement.
3.14. Call Protection. COES hereby covenants and agrees that it will not
call the COES Prior Loan or the Intercompany Note during the First Tranche
Measuring Period. COES hereby also covenants and agrees that it will not call
the COES Prior Loan or the Intercompany Note for the period commencing on the
date of the Second Tranche Financing Notice and ending on the 31st day following
the last day of the Second Tranche Measuring Period.
ARTICLE IV
CONDITIONS
4.1. (a) Conditions Precedent to the Obligation of COES to Sell the Initial
First Tranche Shares. The obligation of COES to sell the Initial First Tranche
Shares and the First Tranche Warrants hereunder is subject to the satisfaction
or waiver by COES, at or before the First Tranche Closing, of each of the
following conditions:
(i) Accuracy of the Purchasers' Representations and Warranties. The
representations and warranties of each Purchaser shall be true and correct
in all material respects as of the date when made and as of the First
Tranche Closing Date, as though made on and as of such date;
(ii) Performance by the Purchasers. Each Purchaser shall have
performed, satisfied and complied in all material respects with all
covenants, agreements and conditions required by this Agreement to be
performed, satisfied or complied with by such Purchaser at or prior to the
First Tranche Closing; and
(iii) No Injunction. No statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated
or endorsed by any court or governmental authority of competent
jurisdiction which prohibits the consummation of any of the transactions
contemplated by this Agreement or the Registration Rights Agreement
relating to the issuance of any of the Shares or exercise of any of the
First Tranche Warrants.
(iv) Officer's Certificate. On the First Tranche Closing Date, each
Purchaser shall deliver to COES an Officer's Certificate dated the First
Tranche Closing Date and signed by an executive officer of such Purchaser
confirming the accuracy of such Purchasers respective representations,
warranties and covenants as of the First Tranche Closing Date and
confirming the compliance by the Purchasers with the conditions precedent
set forth in this Section 4.1(a) as of the First Tranche Closing Date.
(b) Conditions Precedent to the Obligation of the Purchasers to Purchase
the Initial First Tranche Shares. The obligation of each Purchaser hereunder to
acquire and pay for
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the Initial First Tranche Shares and the First Tranche Warrants is subject to
the satisfaction or waiver by such Purchaser, at or before the First Tranche
Closing, of each of the following conditions:
(i) Accuracy of the Representations and Warranties. The
representations and warranties of COES and of the Company set forth in this
Agreement and in the Registration Rights Agreement shall be true and
correct in all material respects as of the date when made and as of the
First Tranche Closing Date as though made on and as of such date;
(ii) Performance by COES and the Company. Each of COES and the Company
shall have performed, satisfied and complied in all material respects with
all covenants, agreements and conditions required by this Agreement to be
performed, satisfied or complied with by them at or prior to the First
Tranche Closing and shall be able to comply with all covenants, agreements
and conditions required by this Agreement to be performed, satisfied or
complied with by them in connection with the Second Tranche Closing;
(iii) No Injunction. No statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated
or endorsed by any court or governmental authority of competent
jurisdiction which prohibits the consummation of any of the transactions
contemplated by this Agreement or the Registration Rights Agreement
relating to the issuance of any of the Shares or exercise of any of the
First Tranche Warrants;
(iv) Adverse Changes. Since the date of the financial statements
included in the Company's Quarterly Report on Form 10-Q or Annual Report on
Form 10-K, whichever is more recent, last filed prior to the date of this
Agreement, no event which had a Material Adverse Effect and no material
adverse change in the financial condition or prospects of the Company shall
have occurred which is not disclosed in the Disclosure Materials (for
purposes hereof changes in the market price of the Common Stock may be
considered in determining whether there has occurred an event which has had
a Material Adverse Effect or whether a material adverse change has
occurred);
(v) No Suspensions of Trading in Common Stock. The trading in the
Common Stock shall not have been suspended by the Commission or on the AMEX
which suspension shall remain in effect;
(vi) Listing of Common Stock. The Shares shall be listed on the Amex;
(vii) Legal Opinion. COES shall have delivered to the Purchasers the
opinion of Xxxxxxxxx Xxxxxxx Xxxxxxx Xxxxxx Xxxxx & Xxxxxxx, outside
counsel to the Company, in substantially the form attached hereto as
Exhibit C;
(viii) Required Approvals. All Required Approvals shall have been
obtained other than those relating solely to the Second Tranche Shares;
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(ix) Shares of Common Stock. On or prior to the First Tranche Closing
Date, COES shall own, free and clear of all Liens the maximum number of
Transaction Shares required by the Transaction Documents to be sold by COES
in connection with the First Tranche Closing;
(x) Delivery of Stock Certificates and Warrant Certificates. COES
shall have delivered to Escrow Agent the stock certificate(s) representing
the Initial First Tranche Shares and the warrant certificate(s)
representing First Tranche Warrants, registered in the name of the
Purchasers, together with one or more stock certificates representing the
maximum amount of Additional First Tranche Shares which may be sold
hereunder, each in forms satisfactory to the Purchasers;
(xi) Registration Rights Agreement. Each of COES and the Company shall
have executed and delivered the Registration Rights Agreement;
(xii) Change of Control. No Change of Control (as hereafter defined)
shall have occurred between the date hereof and the First Tranche Closing
Date; and
(xiii) Transfer Agent Instructions. The Irrevocable Transfer Agent
Instructions, in the form of Exhibit D attached hereto, shall have been
delivered to and acknowledged in writing by the Company's transfer agent.
(xiv) Officer's Certificate. On the First Tranche Closing Date, each
of COES and the Company shall deliver to the Purchasers an Officer's
Certificate dated the First Tranche Closing Date and signed by an executive
officer of COES and the Company confirming the accuracy of the
Corporations' respective representations, warranties and covenants as of
the First Tranche Closing Date and confirming the compliance by the
Corporations with the conditions precedent set forth in this Section 4.1(b)
as of the First Tranche Closing Date.
4.2. Conditions Precedent to the Obligation of the Purchasers to Purchase
the Second Tranche Shares. The obligation of each Purchaser hereunder to acquire
and pay for the Initial Second Tranche Shares and the Second Tranche Warrants is
subject to the satisfaction or waiver by each Purchaser, at or before the Second
Tranche Closing, as applicable, of each of the following conditions:
(i) First Tranche Closing and First Tranche Measuring Period. The
First Tranche Closing shall have occurred and the First Tranche Measuring
Period shall be completed;
(ii) Accuracy of the Representations and Warranties. The
representations and warranties of COES and the Company contained herein and
in the Registration Rights Agreement shall be true and correct in all
material respects as of the date when made and as of the Second Tranche
Closing Date, as though made on and as of such date;
-19-
(iii) Performance. Each COES and the Company shall have performed,
satisfied and complied in all material respects with all covenants,
agreements and conditions required by this Agreement and the Registration
Rights Agreement to be performed, satisfied or complied with by them at or
prior to the Second Tranche Closing Date;
(iv) Transaction Shares Registration Statements. The Transaction
Shares Registration Statement with respect to the First Tranche Shares and
shares of Common Stock issuable upon exercise of the First Tranche Warrants
shall have been declared effective under the Securities Act by the
Commission; and on such Closing Date such Transaction Shares Registration
Statement shall be effective, not subject to any stop order for the ninety
(90) days prior to such Closing Date nor subject to any suspension pursuant
to Section 3(p) of the Registration Rights Agreement, and no stop order
shall be pending or threatened as at such Closing Date;
(v) No Injunction. No statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated
or endorsed by any court of governmental authority of competent
jurisdiction which prohibits the consummation of any of the transactions
contemplated by this Agreement or the Registration Rights Agreement
relating to the issuance of any of the Shares or exercise of any of the
Warrants;
(vi) Adverse Changes. Since the date of the financial statements
included in the Company's Quarterly Report on Form 10-Q or Annual Report on
Form 10-K, whichever is more recent, last filed prior to the date of this
Agreement, no event which had a Material Adverse Effect and no material
adverse change in the financial condition or prospects of the Company shall
have occurred which is not disclosed in the Disclosure Materials (for
purposes hereof changes in the market price of the Common Stock may be
considered in determining whether there has occurred an event which has had
a Material Adverse Effect or whether a material adverse change has
occurred);
(vii) Litigation. No material litigation shall have been instituted
threatened against the Company;
(viii) Management. In the reasonable judgment of each Purchaser, there
have been no substantial changes in the senior management of the Company;
(ix) No Suspensions of Trading in Common Stock. The trading in the
Common Stock shall not have been suspended by the Commission or on the AMEX
(except for any suspension of trading of limited duration solely to permit
dissemination of material information regarding the Company;
(x) Listing of Common Stock. The Common Stock shall have been at all
times since the First Tranche Closing Date, and on the Second Tranche
Closing Date, be listed for trading on the AMEX;
-20-
(xi) Change of Control. No Change of Control in the Company shall have
occurred. "Change of Control" means the occurrence of any of (i) an
acquisition after the date hereof by an individual or legal entity or
"group" (as described in Rule 13d-5(b)(1) promulgated under the Exchange
Act) of in excess of 50% of the voting securities of the Company, (ii) a
replacement of more than one-half of the members of the Company's board of
directors which is not approved by those individuals who are members of the
board of directors on the date hereof in one or a series of related
transactions, (iii) the merger of the Company with or into another entity,
consolidation or sale of all or substantially all of the assets of the
Company in one or a series of related transactions or (iv) the execution by
the Company of an agreement to which the Company is a party or by which it
is bound, providing for any of the events set forth above in (i), (ii) or
(iii);
(xii) Legal Opinion. COES shall have delivered to the Purchasers the
opinions of the Company's outside counsel, in substantially the form
attached hereto as Exhibit C dated the Second Tranche Closing Date;
(xiii) Required Approvals. All Required Approvals shall have been
obtained;
(xiv) Shares of Common Stock. On or prior to the Second Tranche
Closing Date, COES shall own, free and clear of all Liens the maximum
number of Transaction Shares required by the Transaction Documents to be
sold by COES in connection with the Second Tranche Closing;
(xv) Delivery of Stock Certificates and Warrant Certificates. COES
shall have delivered to Escrow Agent the stock certificate(s) representing
the Initial Second Tranche Shares and the warrant certificate(s)
representing Second Tranche Warrants, being purchased at the Second Tranche
Closing, registered in the name of the Purchasers, together with one or
more stock certificates representing the maximum amount of Additional
Second Tranche Shares which may be sold hereunder,, each in forms
satisfactory to the Purchasers;
(xvi) Performance of Exercise Obligations. COES shall have delivered
Warrant Shares upon exercise of the Warrants, if any, and otherwise
performed its obligations in accordance with the terms of the Warrants;
(xvii) Transfer Agent Instructions. The Irrevocable Transfer Agent
Instructions, in the form of Exhibit D attached hereto, shall have been
delivered to and acknowledged in writing by the Company's transfer agent.
(xvii) Market Price. The Market Price on the Second Tranche Closing
date shall be equal or greater than the Market Price on the First Tranche
Closing Date.
(xviii) Officer's Certificate. On the Second Tranche Closing Date,
each of COES and the Company shall deliver to the Purchasers an Officer's
Certificate dated the
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Xxxxxx Xxxxxxx Closing Date and signed by an executive officer of COES and the
Company confirming the accuracy of the Corporations' respective representations,
warranties and covenants as of the Second Tranche Closing Date and confirming
the compliance by the Corporations with the conditions precedent set forth in
this Section 4.2 as of the Second Tranche Closing Date.
ARTICLE V
DAMAGES
If (a) a Registration Statement covering any Transaction Shares required to
be filed pursuant to the Registration Rights Agreement is not filed on or prior
to the Effectiveness Date (as defined in the Registration Rights Agreement)
applicable to such Registration Statement, or (b) the Company fails to file with
the Commission a request for acceleration in accordance with Rule 12d1-2
promulgated under the Securities Exchange Act of 1934, as amended, within five
(5) days of the date that the Company is notified (orally or in writing,
whichever is earlier) by the Commission that a Transaction Share Registration
Statement will not be "reviewed," or not subject to further review, or (c) if a
Registration Statement required to be filed pursuant to the Registration Rights
Agreement with respect to the First Tranche Closing is not declared effective by
the Commission on or prior to July 1, 1998 or any other Registration Statement
covering any Transaction Shares required to be filed pursuant to the
Registration Rights Agreement is not declared effective by the Commission on or
prior to the Effectiveness Date applicable to such Registration Statement, or
(d) if any Registration Statement covering any Transaction Shares is filed with
and declared effective by the Commission but thereafter ceases to be effective
as to all Registrable Securities (as defined in the Registration Rights
Agreement) at any time prior to the expiration of the Effectiveness Period (as
defined in the Registration Rights Agreement), without being succeeded within 10
Trading Days by a subsequent Underlying Shares Registration Statement filed with
and declared effective by the Commission, or (e) if trading in the Common Stock
shall be suspended or if the Common Stock is delisted from the AMEX for any
reason for more than three (3) Trading Days in the aggregate, or (f) if the
exercise rights of the Purchasers regarding the Warrants are suspended for any
reason, or (g) if COES or the Company breaches in a material respect any
covenant or other material term or condition of any Transaction Document, and
such breach continues for a period of fifteen (15) days after written notice
thereof to COES and the Company (any such failure or breach being referred to as
an "Event, and for purposes of clauses (a), (c) and (f) the date on which such
Event occurs, or for purposes of clause (b) the date on which such five (5) day
period is exceeded, or for purposes of clause (d) the date which such 10 Trading
Day-period is exceeded, or for purposes of clause (e) the date on which such
three Trading Day period is exceeded, or for clause (g) the date on which such
fifteen (15) day period is exceeded, being referred to as "Event Date"), then
COES and the Company shall, jointly and severally, be responsible for paying the
purchasers (in accordance with their pro rata ownership of the Shares then
outstanding), in cash, as liquidated damages and not as a penalty, $3,000 per
day until such time as the applicable Event is cured.
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The provisions of this Section are in no way exclusive and shall in no way limit
the Company's obligations under the Registration Rights Agreement.
ARTICLE VI
DEFINITIONS
6.1. Definitions. For the purposes hereof, the following terms shall have
the following meanings:
"Market Price" as at any date shall mean the average Per Share Market Value
for the five (5) Trading Days immediately preceding such date.
"First Tranche Measuring Period" shall mean the 75 Trading Day period
commencing immediately following the effective date of the Registration
Statement filed with respect to the First Tranche Closing; provided, however,
that if such Registration Statement is not declared effective within 12 months
following the First Tranche Closing Date, then the First Tranche Measuring
Period shall commence on the date which is 12 months following the First Tranche
Closing Date; provided, further that in case such Transaction Shares
Registration Statement is declared effective prior to April 15, 1998, the "First
Tranche Measuring Period" shall mean the 75 Trading Day period commencing April
15, 1998.
"Second Tranche Measuring Period" shall mean the 75 Trading Day period
commencing immediately following the effective date of the Registration
Statement filed with respect to the Second Tranche Closing; provided, however,
that if such Registration Statement is not declared effective within 12 months
following the Second Tranche Closing Date, then the Second Tranche Measuring
Period shall commence on the date which is 12 months following the Second
Tranche Closing Date.
"Per Share Market Value" on any particular date means (a) the closing bid
price per share of the Common Stock on such date on the AMEX or other stock
exchange or quotation system on which the Common Stock is listed for trading, or
(b) if the Common Stock is not listed on the AMEX or any other stock exchange or
market, the closing bid price per share of the Common Stock on such date on the
over-the-counter market, as reported by the OTC Bulletin Board, or (c) if the
Common Stock is not quoted on the OTC Bulletin Board, the closing bid price per
share of Common Stock on such date on the over-the-counter market as reported by
the National Quotation Bureau Incorporated (or any similar organization or
agency succeeding its functions of reporting prices), or (d) if the Common Stock
is no longer traded on the over-the-counter market and reported by the National
Quotation Bureau Incorporated (or any similar organization or agency succeeding
its functions of reporting prices), such closing bid price shall be determined
by reference to "Pink Sheet" quotes for the relevant conversion period as
determined in good faith by the Holder or (c) if the Common Stock is not then
publicly traded, the fair market value of a share of Common Stock as determined
by an appraiser selected
-23-
in good faith by the Holders of a majority in interest of the Shares (the
Company, after receipt of the determination by such appraiser, shall have the
right to select an additional appraiser, in which case, the fair market value
shall be equal to the average of the determinations by each such appraiser);
provided, that all determinations of the Per Share Market Value shall be
appropriately adjusted for any stock dividends, stock splits or other similar
transactions during such period.
"Trading Day" means (a) a day on which the Common Stock is traded on the
AMEX or other stock exchange or market on which the Common Stock has been
listed, or (b) if the Common Stock is not then listed on the AMEX or any stock
exchange or market, a day on which the Common Stock is traded on the
over-the-counter market, as reported by the OTC Bulletin Board, or (c) if the
Common Stock is not quoted on the OTC Bulletin Board, a day on which the Common
Stock is quoted on the over-the-counter market as reported by the National
Quotation Bureau Incorporated (or any similar organization or agency succeeding
its functions of reporting prices); provided, however, that in the event that
the Common Stock is not listed or quoted as set forth in (a), (b) and (c)
hereof, then Trading Day shall mean any day except Saturday, Sunday and any day
which shall be a legal holiday or a day on which banking institutions in the
State of New York are authorized or required by law or other government action
to close.
ARTICLE VII
MISCELLANEOUS
7.1. Fees and Expenses. The Company shall pay up to $20,000 of the legal
fees of Xxxxxxxx Xxxxxxxxx Xxxxxx Xxxxxxxx and Xxxxxx LLP, the Purchasers
Counsel, in connection with the preparation of the Transaction Documents and for
such counsels representation of the Purchasers in connection with the
transactions contemplated thereby which fees shall be disbursed in accordance
with the terms of the Escrow Agreement, and otherwise, each party shall pay the
fees and expenses of its advisers, counsel, accountants and other experts, if
any, and all other expenses incurred by such party incident to the negotiation,
preparation, execution, delivery and performance of this Agreement, as set forth
in the Registration Rights Agreement. COES shall pay all stamp and other taxes
and duties levied in connection with the issuance of the Shares pursuant hereto.
7.2. Entire Agreement: Amendments. This Agreement, together with the
Exhibits and Schedules hereto, the Registration Rights Agreement and the
Warrants contain the entire understanding of the parties with respect to the
subject matter hereof and supersede all prior agreements and understandings,
oral or written, with respect to such matters.
7.3. Notices. Any notice or other communication required or permitted to be
given hereunder shall be in writing and shall be deemed to have been received
(a) upon hand delivery (receipt acknowledged) or delivery by telex (with correct
answer back received), telecopy or
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facsimile (with transmission confirmation report) at the address or number
designated below (if delivered on a business day during normal business hours
where such notice is to be received), or the first business day following such
delivery (if delivered on a business day after during normal business hours
where such notice is to be received) or (b) on the second business day following
the date of mailing by express courier service, fully prepaid, addressed to such
address, or upon actual receipt of such mailing, whichever shall first occur.
The addresses for such communications shall as set forth below each parties name
on Schedule 1, and if to the Company with copies to Xxxxxxxxx Traurig Xxxxxxx
Xxxxxx Xxxxx & Xxxxxxx, 000 Xxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, Attn: Xxxxxxx
X. Xxxxx, Esq., fax: (000) 000-0000, and if to any Purchaser with copies to
Xxxxxxxx Xxxxxxxxx Xxxxxx Xxxxxxxx & Xxxxxx LLP, 0000 Xxxxxx xx xxx Xxxxxxxx,
Xxx Xxxx, XX 00000, Attn: Xxxxxxx X. Xxxxxxxxx, Esq., fax: (000) 000-0000, or
such other address as may be designated in writing hereafter, in the same
manner, by such person.
7.4. Amendments, Waivers. No provision of this Agreement may be waived or
amended except in a written instrument signed, in the case of an amendment, by
each of COES, the Company and the Purchasers; or, in the case of a waiver, by
the party against whom enforcement of any such waiver is sought. No waiver of
any default with respect to any provision, condition or requirement of this
Agreement shall be deemed to be a continuing waiver in the future or a waiver of
any other provision, condition or requirement hereof, nor shall any delay or
omission of either party to exercise any right hereunder in any manner impair
the exercise of any such right accruing to it thereafter. Notwithstanding the
foregoing, no such amendment shall be effective to the extent that it applies to
less than all of the holders of the Shares outstanding. Neither COES nor the
Company shall offer or pay any consideration to a Purchaser for consenting to
such an amendment or waiver unless the same consideration is offered to each
Purchaser and the same consideration is paid to each Purchaser which consents to
such amendment or waiver.
7.5. Headings. The headings herein are for convenience only, do not
constitute a part of this Agreement and shall not be deemed to limit or affect
any of the provisions hereof.
7.6. Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of the parties and their successors and permitted assigns. COES
and the Company may not assign this Agreement or any rights or obligations
hereunder without the prior written consent of each of the Purchasers. No
Purchaser may assign this Agreement (other than to an Affiliate of such
Purchaser) or any rights or obligations hereunder without the prior written
consent of COES and the Company, except that any Purchaser may assign its rights
hereunder and under the Transaction Documents without the consent of COES or the
Company as long as such assignee demonstrates to the reasonable satisfaction of
COES and the Company its satisfaction of the representations and warranties set
forth in Section 2.2. This provision shall not limit a Purchaser's right to
transfer securities or transfer or assign rights hereunder or under the
Registration Rights Agreement.
-25-
7.7. No Third-Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective permitted successors and
assigns and is not for the benefit of, nor may any provision hereof be enforced
by, any other person.
7.8. Governing Law. This Agreement shall be governed by and construed and
enforced in accordance with the internal laws of the State of New York without
regard to the principles of conflicts of law thereof. Each party hereby
irrevocably submits to the nonexclusive jurisdiction of the state and Federal
courts sitting in the City of New York, borough of Manhattan, for the
adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein, and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that
such suit, action or proceeding is improper. Each party hereby irrevocably
waives personal service of process and consents to process being served in any
such suit, action or proceeding by mailing a copy thereof to such party at the
address in effect for notices to it under this Agreement and agrees that such
service shall constitute good and sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to limit in any way any right
to serve process in any manner permitted by law.
7.9. Survival. The agreements and covenants contained in Article III and
this Article VII shall survive the delivery of the Shares pursuant to this
Agreement and the representations and warranties of COES, Company and the
Purchasers contained in Article II shall survive each Closing hereunder and any
exercise of the Warrants.
7.10. Execution. This Agreement may be executed in two or more
counterparts, all of which when taken together shall be considered one and the
same agreement and shall become effective when counterparts have been signed by
each party and delivered to the other party, it being understood that both
parties need not sign the same counterpart. In the event that any signature is
delivered by facsimile transmission, such signature shall create a valid and
binding obligation of the party executing (or on whose behalf such signature is
executed) the same with the same force and effect as if such facsimile signature
page were an original thereof.
7.11. Publicity. COES, the Company and each Purchaser shall consult with
each other in issuing any press releases or otherwise making public statements
with respect to the transactions contemplated hereby and neither party shall
issue any such press release or otherwise make any such public statement without
the prior written consent of the other, which consent shall not be unreasonably
withheld or delayed, except that no prior consent shall be required if such
disclosure is required by law, in which such case the disclosing party shall
provide the other party with prior notice of such public statement. Neither COES
nor the Company shall publicly or otherwise disclose the names of any of the
Purchasers without each such Purchaser's prior written consent.
7.12. Severability. In case any one or more of the provisions of this
Agreement shall be invalid or unenforceable in any respect, the validity and
enforceability of the remaining terms and provisions of this Agreement shall not
in any way be affecting or impaired thereby and the
-26-
parties will attempt to agree upon a valid and enforceable provision which shall
be a reasonable substitute therefor, and upon so agreeing, shall incorporate
such substitute provision in this Agreement.
7.13. Remedies. In addition to being entitled to exercise all rights
provided herein or granted by law, including recovery of damages, the Purchasers
will be entitled to specific performance of the obligations of COES and the
Company under the Transaction Documents. Each of COES, the Company and the
Purchasers (severally and not jointly) agree that monetary damages would not be
adequate compensation for any loss incurred by reason of any breach of its
obligations described in the foregoing sentence and hereby agrees to waive in
any action for specific performance of any such obligation the defense that a
remedy at law would be adequate.
7.14. Independent Nature of Purchasers' Obligations and Rights. The
obligations of each Purchaser hereunder is several and not joint with the
obligations of the other Purchasers hereunder, and no Purchaser shall be
responsible in any way for the performance of the obligations of any other
Purchaser hereunder. Nothing contained herein or in any other agreement or
document delivered at any Closing, and no action taken by any Purchaser pursuant
hereto or thereto, shall be deemed to constitute the Purchasers as a
partnership, an association, a joint venture or any other kind of entity, or
create a presumption that the Purchasers are in any way acting in concert with
respect to such obligations or the transactions contemplated by this Agreement.
Each Purchaser shall be entitled to protect and enforce its rights, including
without limitation the rights arising out of this Agreement or out of the other
Transaction Documents, and it shall not be necessary for any other Purchaser to
be joined as an additional party in any proceeding for such purpose.
7.15. No Reliance. Each party acknowledges that (i) it has such knowledge
in business and financial matters as to be fully capable of evaluating this
Agreement, the other Transaction Documents and the transactions contemplated
hereby and thereby, (ii) it is not relying on any advice or representation of
the other party in connection with entering into this Agreement, the other
Transaction Documents or such transactions (other than the representations made
in this Agreement or the other Transaction Documents), (iii) it has not received
from such party any assurance or guarantee as to the merits (whether legal,
regulatory, tax, financial or otherwise) of entering into this Agreement or the
other Transaction Documents or the performance of its obligations hereunder and
thereunder, and (iv) it has consulted with its own legal, regulatory, tax,
business, investment, financial and accounting advisors to the extent that it
has deemed necessary, and has entered into this Agreement and the other
Transaction Documents based on its own independent judgment and on the advice of
its advisors as it has deemed necessary, and not on any view (whether written or
oral) expressed by such party.
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IN WITNESS WHEREOF, the parties hereto have caused this Common Stock
Purchase Agreement to be duly executed by their respective authorized persons as
of the date first indicated above.
COMMODORE ENVIRONMENTAL SERVICES, INC.
By: /s/ Xxxxxxx X. Xxxxxxxx
---------------------------------------------
Name: Xxxxxxx X. Xxxxxxxx
Title: Senior Vice President, Chief Financial
and Administrative Officer, Secretary
and General Counsel
COMMODORE APPLIED TECHNOLOGIES, INC.
By: /s/ Xxxx X. Xxxxxxxxx
---------------------------------------------
Name: Xxxx X. Xxxxxxxxx
Title: President and Chief Executive Officer
SOUTHBROOK INTERNATIONAL INVESTMENTS, LTD.
By: /s/ Xxxxxxx X. Xxxxxx
---------------------------------------------
Name: Xxxxxxx X. Xxxxxx
Title: Attorney-in-fact
XXXXXXXX INVESTMENTS L.P.
By: /s/ Xxxxxxx X. Xxxx
---------------------------------------------
Name: Xxxxxxx X. Xxxx
Title: Authorized Signatory
MONTROSE INVESTMENTS, LTD.
By: /s/ Xxxxxxx X. Xxxx
---------------------------------------------
Name: Xxxxxxx X. Xxxx
Title: Authorized Signatory
Schedule 1
Company:
Commodore Environmental Services, Inc.
000 Xxxx 00xx Xxxxxx,
Xxx Xxxx, Xxx Xxxx 00000
Attn: Bentley X. Xxxx.,
and Xxxxxxx X. Xxxxxxxx, Senior Vice President
Purchasers:
Southbrook International Investments, Ltd.
c/o Trippoak Advisors, Inc.
000 Xxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxx, XX 00000
Attn: Xxxxxx X. Xxxxxx
Fax: (000) 000-0000
Portion of First Tranche Purchase Price - $3,000,000
First Tranche Shares _ 690,846
Number of Shares underlying
First Tranche Warrant - 75,000
Xxxxxxxx Investments L.P.
000 Xxxx Xxxxxx, Xxxxx 0000
Xxxx Xxxxx, Xxxxx 00000
Attn: Xxxx Xxxx
Fax: (000) 000-0000
Portion of First Tranche Purchase Price - $1,050,000
First Tranche Shares 241,796
Number of Shares underlying
First Tranche Warrant - 26,250
Montrose Investments, Ltd.
000 Xxxx Xxxxxx, Xxxxx 0000
Xxxx Xxxxx, Xxxxx 00000
Attn: Xxxx Xxxx
Fax: (000) 000-0000
Portion of First Tranche Purchase Price - $1,950,000
First Tranche Shares 449,050
Number of Shares underlying
First Tranche Warrant - 48,750
