STOCK EXCHANGE AGREEMENT MADE AND ENTERED INTO IN XXX XXXX XXX XXXXXXXX XX
XXXXXXXX, XX THE 16TH DAY OF OCTOBER, 1997
BY AND AMONG: COMPOSITECH LTD., a body corporate, duly
incorporated according to the laws of
the State of Delaware, having its head
office and principal place of business
in the Hamlet of Hauppauge, State of New
York,
(hereinafter referred to as the
"Company")
PARTY OF THE FIRST PART
AND: SOCIETE INNOVATECH DU GRAND MONTREAL, a
body politic, duly constituted according
to An Act respecting Societe Innovatech
du Grand Montreal, R.S.Q., ch. S-17.2,
having its head office and principal
place of business in the City of
Montreal, Province of Quebec,
(hereinafter referred to as
"Innovatech")
PARTY OF THE SECOND PART
AND: INDUSTRIES DEVMA INC., a body politic
and corporate, duly incorporated
according to the Companies Act (Quebec),
having its head office and principal
place of business in the City of
Montreal, Province of Quebec,
(hereinafter referred to as "Devma")
PARTY OF THE THIRD PART
AND: FONDS DE SOLIDARITE DES TRAVAILLEURS DU
QUEBEC (F.T.Q), a joint stock company,
duly incorporated according to the Act
establishing the Fonds de Solidarite des
Travailleurs du Quebec (F.T.Q), having
its head office and principal place of
business in the City of Montreal,
Province of Quebec,
(hereinafter referred to as "Fonds")
PARTY OF THE FOURTH PART
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AND: FONDS REGIONAL DE SOLIDARITE ILE DE
MONTREAL, limited partnership, a limited
partnership organized under the laws of
the Province of Quebec, herein
represented by Gestion du Fonds Regional
de Solidarite Ile de Montreal Inc., its
general partner, having its head office
and principal place of business in the
City of Montreal, Province of Quebec,
(hereinafter referred to as "FR")
PARTY OF THE FIFTH PART
SECTION 1 - PREAMBLE
1.1 WHEREAS concurrently with the execution of this Agreement, Innovatech,
Devma, Fonds, FR and the Company have subscribed for common shares in the
capital stock of Lamines CTEK Inc. ("Canco");
1.2 WHEREAS the Company has agreed to grant to each of Innovatech, Devma, Fonds
and FR the right to exchange their common shares in the capital stock of Canco
for common shares in the capital stock of the Company on the terms and
conditions set out in this Stock Exchange Agreement;
1.3 WHEREAS Innovatech, Devma, Fonds and FR have agreed to grant to the Company
the right to cause Innovatech, Devma, Fonds and FR to exchange their common
shares in the capital stock of Canco for common shares in the capital stock of
the Company on the terms and conditions set out in this Stock Exchange
Agreement.
NOW, THEREFORE, THIS AGREEMENT WITNESSETH:
SECTION 2 - DEFINITIONS
2.1 Definitions. In this Agreement:
2.1.1 "Adjusted Aggregate Distress Common Shares" shall mean the total number
of Common Shares which would be issued to each Purchaser upon the
exchange of its Total Distress Canco Shares in accordance with
subsections 3.4 and 3.5 hereof;
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2.1.2 "Adjusted Aggregate Initial Common Shares" shall mean the total number
of Common Shares which would be issued to each Purchaser upon the
exchange of all of its Initial Canco Shares in accordance with
subsections 3.4 and 3.5 hereof;
2.1.3 "Adjusted Aggregate Project Common Shares" shall mean the total number
of Common Shares which would be issued to each Purchaser upon the
exchange of its Total Project Canco Shares in accordance with
subsections 3.4 and 3.5 hereof;
2.1.4 "Adjusted Aggregate Subsequent Common Shares" shall mean the total
number of Common Shares which would be issued to each Purchaser upon the
exchange of its Total Subsequent Canco Shares in accordance with
subsections 3.4 and 3.5 hereof;
2.1.5 "Adjustment Commencement Date" shall mean (i) with respect to the
Initial Canco Shares and the Project Canco Shares, the date hereof; (ii)
with respect to the Distress Canco Shares, the date agreed to between
the Purchaser in question and the Company at the same time as the price
per Common Share provided for in paragraph 2.1.44 hereof is agreed upon,
failing which, the date the advance (which resulted in the issuance of
such Distress Canco Shares upon the conversion provided for in
subsection 12.9 of the Shareholders Agreement) was initially made by
such Purchaser pursuant to Section 12 of the Shareholders Agreement; and
(iii) with respect to the Subsequent Canco Shares, the date of issuance
thereof;
2.1.6 "Agreement" shall mean this Stock Exchange Agreement and all instruments
supplemental hereto or in amendment or confirmation hereof; "herein",
"hereof", "hereto", "hereunder" and similar expressions mean and refer
to this Agreement and not to any particular Section, subsection or other
subdivision; "Section", "subsection" or other subdivision of this
Agreement means and refers to the specified Section, subsection or other
subdivision of this Agreement;
2.1.7 "Average Closing Price Per Common Share" shall mean the weighted average
closing price per Common Share for the sixty trading (60) days
immediately preceding the date on which the determination must be made
on Nasdaq (Small Cap Market) or if the Common Shares are not listed on
Nasdaq (Small Cap Market), on any stock exchange on which the Common
Shares are listed, or if the Common Shares are not listed on either
Nasdaq (Small Cap Market) or any stock exchange, in the over-the-counter
market. In the event that the Common Shares are listed on more than one
exchange (including Nasdaq Small Cap Market), in order to calculate the
closing price per Common Share on each day, the average of the closing
price per Common Share on all the exchanges will be used;
2.1.8 "Business Day" shall mean any day, other than a Saturday or Sunday or a
day on which the principal commercial banks in the State of New York or
the Province of Quebec are not open for business during normal banking
hours;
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2.1.9 "Canco" shall have the meaning ascribed thereto in subsection 1.1;
2.1.10 "Canco Shares" shall mean the Initial Canco Shares, the Project Canco
Shares, the Distress Canco Shares and the Subsequent Canco Shares,
collectively;
2.1.11 "Capital Reorganization" shall mean (i) any reclassification of any
Common Shares at any time outstanding or change of any Common Shares
into other shares or into other securities or other capital
reorganization (other than a Share Reorganization); (ii) any
amalgamation, consolidation or merger of the Company with or into any
other corporation or other entity (other than a consolidation,
amalgamation or merger which does not result in any reclassification of
the outstanding Common Shares or a change of the Common Shares into
other shares or securities); (iii) any transfer of the undertaking or
assets of the Company as an entirety or substantially as an entirety to
another corporation or other entity;
2.1.12 "Charges" shall mean any security interest, hypothec, prior claim, lien,
charge, pledge, encumbrance, mortgage, adverse claim or title retention
agreement of any nature or kind whatsoever;
2.1.13 "Closing" shall mean the closing of any exchange of any Canco Shares for
Common Shares;
2.1.14 "Closing Date" shall mean the date of each Closing;
2.1.15 "Common Shares" shall mean the Company's common stock having the rights,
privileges and preferences as set forth in the Restated Certificate of
Incorporation of the Company dated February 18, 1997, provided however,
that in the event of a Recapitalization, "Common Shares" shall
thereafter mean the shares, securities or other property or rights which
a Purchaser is entitled to receive in accordance with subsection 3.5
upon the exchange referred to in subsection 3.2 or 3.3;
2.1.16 "Company SEC Documents" shall have the meaning ascribed thereto in
paragraph 6.1.1;
2.1.17 "Company Shares" shall mean any class of shares of the Company's stock;
2.1.18 "Currency Exchange Rate" means the noon rate as reported by the Bank of
Canada, for the conversion of Canadian dollars into US dollars;
2.1.19 "Distress Canco Shares" shall mean the common shares in the capital
stock of Canco issued to any of the Purchasers pursuant to Section 12 of
the Shareholders Agreement;
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2.1.20 "dollar", "dollars" and the sign "$" shall, unless otherwise indicated,
each mean lawful money of the United States;
2.1.21 "Exchange Act" shall mean the Securities Exchange Act of 1934 (United
States), as amended from time to time;
2.1.22 "Exchange Rate" shall mean at any time, the number of Common Shares that
each Purchaser shall be entitled to receive for each Canco Share from
time to time pursuant to subsection 3.4;
2.1.23 "Exchange Right" shall have the meaning ascribed thereto in subsection
3.2;
2.1.24 "Forced Closing" shall have the meaning ascribed thereto in subsection
5.4;
2.1.25 "Forced Exchange" shall have the meaning ascribed thereto in subsection
3.3;
2.1.26 "Forced Exchange Conditions" shall have the meaning ascribed thereto in
subsection 5.1;
2.1.27 "Forced Exchange Notice" shall have the meaning ascribed thereto in
subsection 5.2;
2.1.28 "Initial Canco Shares" shall mean the 1,066,192 class "A" common shares
in the capital stock of Canco issued to the Purchasers on the date
hereof;
2.1.29 "Notice of Exchange" shall have the meaning ascribed thereto in
subsection 4.1;
2.1.30 "Person" shall mean an individual, corporation, company, partnership,
trust, unincorporated association, entity with judicial personality,
governmental authority or any other entity recognized by law and
pronouns when they refer to a Person shall have a similarly extended
meaning;
2.1.31 "Project Canco Shares" shall mean the common shares in the capital stock
of Canco issued to any of the Purchasers pursuant to Section 11 of the
Shareholders Agreement;
2.1.32 "Purchasers" shall mean Innovatech, Devma, Fonds and FR and all
transferees of Canco Shares of Innovatech, Devma, Fonds or FR (other
than the Company) in accordance with the Shareholders Agreement,
collectively and "Purchaser" shall mean any one of them;
2.1.33 "Purchaser's Sale Notice" shall have the meaning ascribed thereto in
subsection 5.3;
2.1.34 "Recapitalization" shall have the meaning ascribed thereto in
subsection 3.5;
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2.1.35 "Registration Rights Agreement" shall mean the registration rights
agreement of even date among the Purchasers and the Company providing
for the obligation of the Company to register the Common Shares of the
Purchasers;
2.1.36 "Share Reorganization" shall mean (i) any issue of Company Shares or
securities exchangeable for or convertible into Company Shares to any
holders of Common Shares as a stock dividend; (ii) any distribution on
any of its outstanding Common Shares payable in Company Shares or
securities exchangeable for or convertible into Company Shares; (iii)
any subdivision, redivision or change of its outstanding Common Shares
into a greater number of Common Shares; or (iv) any reduction,
combination or consolidation of its outstanding Common Shares into a
smaller number of Common Shares;
2.1.37 "SEC" shall mean the United Stated Securities and Exchange Commission;
2.1.38 "SEC Documents" shall mean the documents filed by the Company with the
SEC at any time;
2.1.39 "Securities Act" shall mean the Securities Act of 1933 (United States),
as amended from time to time;
2.1.40 "Shareholders Agreement" shall mean the memorandum of agreement of even
date between the parties hereto and Canco setting forth the terms and
conditions which will govern the relationship of the shareholders of
Canco.
2.1.41 "Special Distribution" shall mean any issue, distribution or dividend to
any holders of Common Shares of any securities or other property or
rights (other than a cash dividend payable in the ordinary course of the
Company's business), which does not constitute a Share Reorganization;
2.1.42 "Subsequent Canco Shares" shall mean the common shares in the capital
stock of Canco to be issued to any of the Purchasers pursuant to Section
13 of the Shareholders Agreement;
2.1.43 "Total Distress Canco Shares" shall mean the total number of Distress
Canco Shares issued to a Purchaser on a given date upon the conversion
of any or all of the advance made by such Purchaser, the whole as
contemplated in subsection 12.9 of the Shareholders Agreement;
2.1.44 "Total Distress Common Shares" shall mean the quotient obtained when
dividing the (i) aggregate subscription price paid by a Purchaser for
the Distress Canco Shares on a given date (being the dollar amount of
the advance made by such Purchaser and any interest accrued thereon
which is being converted for such Distress Canco Shares
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pursuant to subsection 12.9 of the Shareholders Agreement) converted
into US dollars at the Currency Exchange Rate on the date such advance
was initially made by such Purchaser pursuant to Section 12 of the
Shareholders Agreement by (ii) a price per Common Share to be negotiated
in good faith by such Purchaser and the Company on or prior to the date
such advance is made by such Purchaser. If, however, no agreement is
reached by the date of such advance, the denominator referred to in (ii)
above shall be the Average Closing Price Per Common Share as calculated
on the date such advance was initially made by such Purchaser pursuant
to Section 12 of the Shareholders Agreement (the denominator determined
pursuant to (ii) above or the denominator determined in accordance with
the last sentence of this paragraph 2.1.44 being hereinafter referred to
as the "Distress Price Per Common Share");
2.1.45 "Total Initial Common Shares" shall mean the quotient obtained when
dividing the (i) aggregate subscription price paid by each Purchaser for
its Initial Canco Shares converted into US dollars at the Currency
Exchange Rate on that date by (ii) $5.09;
2.1.46 "Total Project Canco Shares" shall mean the total number of Project
Canco Shares issued to a Purchaser on a given date pursuant to Section
11 of the Shareholders Agreement;
2.1.47 "Total Project Common Shares" shall mean the quotient obtained when
dividing the (i) aggregate subscription price and/or consideration paid
by a Purchaser for the Total Project Canco Shares on a given date
converted into US dollars at the Currency Exchange Rate on that date by
(ii) $5.09;
2.1.48 "Total Subsequent Canco Shares" shall mean the total number of
Subsequent Canco Shares issued to a Purchaser on a given date pursuant
to Section 13 of the Shareholders Agreement;
2.1.49 "Total Subsequent Common Shares" shall mean the quotient obtained when
dividing the (i) aggregate subscription price paid by a Purchaser for
the Subsequent Canco Shares on a given date converted into US dollars at
the Currency Exchange Rate on that date by (ii) the Average Closing
Price Per Common Share as determined on the date of the subscription by
such Purchaser for such Subsequent Canco Shares (the "Subsequent Average
Closing Price Per Common Share");
2.1.50 "Voluntary Closing" shall have the meaning ascribed thereto in
subsection 4.1;
2.1.51 "Weighted Average Price Per Common Share" shall have the meaning
ascribed thereto in Schedule 2.1.51;
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SECTION 3 - AUTHORIZATION AND EXCHANGE OF CANCO SHARES
3.1 Authorization. Prior to the date hereof, the Company has authorized the
exchange and issuance, in accordance with the terms hereof, of up to one million
two hundred thousand (1,200,000) Common Shares.
3.2 Voluntary Exchange of Canco Shares. Subject to the terms and conditions
hereof, each Purchaser shall have the right to exchange, at any time and from
time to time, all or part of its Canco Shares for Common Shares at the Exchange
Rate (the "Exchange Right").
3.3 Forced Exchange of Canco Shares. Subject to the terms and conditions hereof,
the Company shall have the right to require all (and not less than all) of the
Purchasers to exchange all (and not less than all) of their Canco Shares for
Common Shares at the Exchange Rate (the "Forced Exchange"), it being understood
that this right may only be exercised by the Company for all of the Canco Shares
held by all the Purchasers.
3.4 Exchange Rate. Subject to subsections 3.5 and 3.7, the Company shall issue
to each Purchaser upon delivery by such Purchaser of (i) each Initial Canco
Share, one (1) Common Share; (ii) each Project Canco Share, that number of
Common Shares as is equal to the quotient obtained when dividing the Total
Project Common Shares of such Purchaser by the Total Project Canco Shares of
such Purchaser; (iii) each Distress Canco Share, that number of Common Shares as
is equal to the quotient obtained when dividing the Total Distress Common Shares
of such Purchaser by the Total Distress Canco Shares of such Purchaser; and (iv)
each Subsequent Canco Share, that number of Common Shares as is equal to the
quotient obtained when dividing the Total Subsequent Common Shares of such
Purchaser by the Total Subsequent Canco Shares of such Purchaser. In the event
that Project Canco Shares, Distress Canco Shares or Subsequent Canco Shares are
issued on more than one occasion, the Exchange Rate will be determined
separately at the time of each issuance and, as a consequence, the Exchange Rate
may not be the same for all Project Canco Shares, all Distress Canco Shares or
all Subsequent Canco Shares.
3.5 Adjustment to the Number of Common Shares. The number of Common Shares to be
issued upon the exchange referred to in subsection 3.2 or 3.3 shall be adjusted
to take into account changes to and dilutive events in respect of the Common
Shares occurring during the period from the Adjustment Commencement Date until
the date of such exchange. Such adjustment shall be made such that the
Purchasers shall be issued such number of Common Shares (or any security or
other property or rights such Common Shares may have become) as shall be equal
to the number of Common Shares (or such security or other property or rights
which the Common Shares may have become) the Purchasers would have been issued
in the aggregate if they had exercised the Exchange Right or if the Company had
exercised the Forced Exchange upon the Adjustment Commencement Date and the
Purchasers had owned such shares from the Adjustment Commencement Date until the
date of the exchange. For greater clarity, but without limiting the generality
of the foregoing, if the Company shall undertake a Share Reorganization, Capital
Reorganization or Special Distribution (collectively, a "Recapitalization")
prior to
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the issuance of the Common Shares to the Purchasers upon the exchange referred
to in subsection 3.2 or 3.3, each Purchaser shall receive upon the exchange
referred to in subsection 3.2 or 3.3 such number of Common Shares or securities
or other property or rights as such Purchaser would have received following such
Recapitalization had such Purchaser been issued its Common Shares pursuant to
any exchange prior to such Recapitalization and had subsequently participated
fully in such Recapitalization. The adjustments provided for herein are
cumulative and such adjustments shall be made successively whenever an event
referred to in this subsection 3.5 occurs.
3.6 Officer's Statement. Whenever the Exchange Rate is adjusted as provided in
subsection 3.5, the Company shall forthwith send to each Purchaser a statement,
signed by an officer of the Company, describing in reasonable detail the facts
giving rise to such adjustment, as well as the new Exchange Rate. This statement
shall be accompanied by a letter from the auditors of the Company confirming the
new Exchange Rate. If a dispute arises with respect to any adjustment in the
Exchange Rate, such dispute shall be settled by arbitration in the manner
provided in subsection 8.4 hereof.
3.7 Fractional Shares. No fractional Common Shares shall be issued upon the
exchange of the Canco Shares pursuant to subsection 3.2 or 3.3. In lieu of
issuing any fractional Common Shares to any Purchaser upon such exchange, the
Company shall pay to such Purchaser a cash adjustment in respect thereof in an
amount equal to the product obtained when multiplying the Average Closing Price
Per Common Share calculated on the date of the exchange by the fraction of the
Common Share which would otherwise have been issued.
SECTION 4 - EXCHANGE RIGHT
4.1 Voluntary Closing. Each closing of the exchange of the Canco Shares for
Common Shares pursuant to subsection 3.2 (the "Voluntary Closing") shall be held
at the offices of the Company in Hauppauge, New York, at 10:00 a.m., local time,
fifteen (15) Business Days after receipt by the Company of a properly completed
and executed notice of exchange in the form attached hereto as Schedule "4.1"
(the "Notice of Exchange") on behalf of any Purchaser or at such other time and
place upon which the Company and such Purchaser shall mutually agree.
4.2 Delivery. At each Voluntary Closing, each Purchaser who has given a Notice
of Exchange shall surrender the certificate or certificates for the Canco Shares
contemplated therein duly endorsed. Thereupon, the Company shall issue and
deliver at such office to such Purchaser a certificate or certificates for the
number of Common Shares to which such Purchaser is entitled pursuant to
subsection 3.4. Such exchange shall be deemed to have been made at the close of
business on the date of receipt by the Company of the Notice of Exchange and the
Purchaser entitled to receive Common Shares issuable upon such exchange shall be
treated for all purposes as the record-holder of such Common Shares on the date
of receipt by the Company of the Notice of Exchange.
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4.3 Conditions Precedent to Voluntary Closing. The obligation of each Purchaser
to proceed with each Voluntary Closing is subject to each of the conditions
hereinbelow set forth being satisfied as of the Closing Date all of which are
agreed to be material and are inserted for the exclusive benefit of such
Purchaser, and may be waived in whole or in part by such Purchaser, provided
that any waiver to be effective must be in writing:
4.3.1 the representations and warranties of the Company contained in this
Agreement shall be true and correct in all respects as if made at and as
of the date of such Closing;
4.3.2 the Company shall have complied with all its covenants, obligations and
agreements contained in this Agreement;
4.3.3 provided that the Notice of Exchange contemplates the exchange of all of
such Purchaser's Canco Shares, such Purchaser shall have been released
from all guarantees furnished by it on behalf of Canco and Canco shall
have repaid to such Purchaser all amounts loaned by such Purchaser to
Canco, together with all interest accrued thereon prior to the Closing
Date;
4.3.4 provided that the Notice of Exchange contemplates the exchange of all of
such Purchaser's Canco Shares, the Company and Canco shall have released
such Purchaser from all claims which they or either of them has or may
have against such Purchaser for matters arising out of its association
with Canco prior to the Closing Date;
4.3.5 the Company shall have furnished to such Purchaser an opinion addressed
to it and dated the date of such Closing from Xxxxxxx Leisure Xxxxxx &
Irvine or other United States counsel to the Company acceptable to such
Purchaser, covering substantially the same matters as were covered in
the opinion furnished by such counsel to the Purchasers on the date
hereof;
4.3.6 the Company shall have furnished to such Purchaser an officer's
certificate certifying that the representations and warranties of the
Company contained in this Agreement are true and correct in all respects
as if made at and as of the date of such Closing and confirming that the
Company has complied with all its covenants, obligations and agreements
contained in this Agreement;
4.3.7 the Company shall have delivered to such Purchaser all consents and
approvals of all Persons required in order to consummate the
transactions contemplated by the exchange set forth in subsection 3.2
and this Section 4. In addition, and without limiting the generality of
the foregoing, the consents of the ministries of the governments of
Quebec and Canada responsible for the financial assistance to be
provided to Canco by the Entente Auxiliaire Canada-Quebec sur le
developpement industriel (1991) pursuant to a letter agreement dated
April 22, 1997 and accepted by
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Canco on May 19, 1997 (the "Entente Canada-Quebec Consents") and the
consent of any lender of Canco shall have been delivered to such
Purchaser; and
4.3.8 if a demand registration in accordance with subsection 4.1 of the
Registration Rights Agreement is requested by such Purchaser within five
(5) Business Days following receipt by the Company of the Notice of
Exchange, the Company shall have filed all appropriate registration
statements or resale registration statements required by the
Registration Rights Agreement in connection with the Common Shares to be
issued to such Purchaser upon the exercise of the Exchange Right and
same shall have been declared effective.
4.4 Failure to Satisfy Conditions Precedent to Voluntary Closing. In the event
that any of the conditions precedent set forth in subsection 4.3 hereof shall
not have been fulfilled and/or performed as of the Closing Date, each Purchaser
may, at its option, either (i) advise the Company that it shall not proceed with
the exchange of its Canco Shares as contemplated in the Notice of Exchange or
(ii) proceed with the exchange of such Canco Shares, in either case without
prejudice to such Purchaser's rights, recourses and remedies.
4.5 Failure to Satisfy Certain Condition Precedent to Voluntary Closing.
Notwithstanding the provisions of subsection 4.4, in the event that the only
condition precedent not to have been fulfilled and/or performed as of the
Closing Date is the condition precedent set forth in paragraph 4.3.8, then each
of the Purchasers may, at its option, either (i) proceed with the exchange of
its Canco Shares, without prejudice to its rights, recourses and remedies or
(ii) postpone the Closing Date until this condition precedent is fulfilled
and/or performed, provided that if same is not fulfilled and/or performed within
90 days of the original Closing Date, then each of the Purchasers shall be
entitled to exercise either of the options set forth in subsection 4.4.
SECTION 5 - FORCED EXCHANGE
5.1 Conditions to Exercise Forced Exchange. The Company shall have the right to
exercise the Forced Exchange only if the following conditions (the "Forced
Exchange Conditions") are met at the time the Forced Exchange Notice (as
hereinafter defined) is given, at the time a Purchaser's Sale Notice (as
hereinafter defined), if any, is given and on the Closing Date:
5.1.1 the Average Closing Price Per Common Share is at least 150% of the
Weighted Average Price Per Common Share in respect of each Purchaser;
5.1.2 Canco's manufacturing facility in Montreal, Quebec has been completed
and is operating at its normal capacity during the immediately preceding
three consecutive months, normal capacity for any three month period
being both manufacturing and shipping of 2,475,000 square feet of
laminates during such three month period in
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response to firm orders received by Canco in the normal course of
business justifying the manufacturing of such quantity of laminates;
5.2 Notice of Forced Exchange. Should the Company wish to require all of the
Purchasers to exchange all of their Canco Shares for Common Shares, it shall be
obliged to provide the Purchasers with a notice to that effect (the "Forced
Exchange Notice") together with evidence that the conditions set forth in
paragraphs 5.1.1 and 5.1.2 have been met on that day.
5.3 Purchaser's Sale. Each of the Purchasers shall have fifteen (15) Business
Days from receipt of the Forced Exchange Notice in which to notify the Company
(the "Purchaser's Sale Notice") that it wishes to sell all or a portion of its
Common Shares (including, without limitation, the Common Shares to be issued to
such Purchaser upon the Forced Exchange) at a price per Common Share at least
equal to the Average Closing Price Per Common Share calculated on the date of
such Purchaser's Sale Notice. In the event that any Purchaser so notifies the
Company, the Company shall be obliged to purchase for cancellation or cause a
third party to purchase such Common Shares in the manner provided for in this
Section 5.
5.4 Forced Closing. The closing of the exchange of the Canco Shares for Common
Shares pursuant to subsection 5.1 (the "Forced Closing") shall be held at the
offices of the Company in Hauppauge, New York, at 10:00 a.m., local time, twenty
(20) Business Days after receipt by the Purchasers of the Forced Exchange Notice
or at such other time and place upon which the Company and the Purchasers shall
mutually agree.
5.5 Condition Precedent to Forced Closing. The obligation of the Purchasers to
proceed with the Forced Closing is subject to each of the conditions hereinbelow
set forth being satisfied as of the Closing Date all of which are agreed to be
material and are inserted for the exclusive benefit of the Purchasers and may be
waived in whole or in part by the Purchasers, provided that any waiver to be
effective must be in writing:
5.5.1 the representations and warranties of the Company contained in this
Agreement shall be true and correct in all respects as if made at and as
of the date of the Closing;
5.5.2 the Company shall have complied with all its covenants, obligations and
agreements contained in this Agreement;
5.5.3 the Purchasers shall have been released from all guarantees furnished by
them on behalf of Canco and Canco shall have repaid to each of the
Purchasers all amounts loaned by such Purchaser to Canco, together with
all interest accrued thereon prior to the Closing Date;
5.5.4 the Company and Canco shall have released the Purchasers from all claims
which they have or either of them has or may have against the Purchasers
or any of them for matters arising out of their association with Canco
prior to the Closing Date;
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5.5.5 the Company shall, if required by any Purchaser in accordance with such
Purchaser's Sale Notice, purchase for cancellation or cause a third
party to purchase that number of Common Shares held by such Purchaser
(including, without limitation, the Common Shares to be issued to such
Purchaser upon the Forced Exchange) as is set out in such Purchaser's
Sale Notice at a price per Common Share at least equal to the Average
Closing Price Per Common Share calculated on the date of such
Purchaser's Sale Notice. The purchase price for such Common Shares shall
be payable in cash on the Closing Date concurrently with the Forced
Closing;
5.5.6 the Company shall have furnished to the Purchasers an opinion addressed
to them and dated the date of the Closing from Xxxxxxx Leisure Xxxxxx &
Irvine or other United States counsel to the Company acceptable to such
Purchasers, covering substantially the same matters as were covered in
the opinion furnished by such counsel to the Purchasers on the date
hereof;
5.5.7 the Company shall have furnished to the Purchasers an officer's
certificate (i) certifying that the representations and warranties of
the Company contained in this Agreement are true and correct in all
respects as if made at and as of the Closing Date and that the
conditions set forth in paragraphs 5.1.1 and 5.1.2 hereof continue to be
true and correct as of the Closing Date and (ii) confirming that the
Company has complied with all its covenants, obligations and agreements
contained in this Agreement;
5.5.8 the Company shall have delivered to the Purchasers all consents and
approvals of all Persons required in order to consummate the
transactions contemplated by the Forced Exchange, each Purchaser's Sale
Notice and this Section 5. In addition, and without limiting the
generality of the foregoing, the Entente Canada-Quebec Consents and the
consent of any lender of Canco shall have been delivered to the
Purchasers; and
5.5.9 if a demand registration in accordance with subsection 4.1 of the
Registration Rights Agreement is requested by such Purchaser within five
(5) Business Days following receipt of the Forced Exchange Notice, the
Company shall have filed all appropriate registration statements or
resale registration statements required by the Registration Rights
Agreement in connection with the Common Shares to be issued upon the
Forced Exchange and same shall have been declared effective.
5.6 Failure to Satisfy Conditions Precedent to Forced Closing. In the event that
any of the conditions precedent set forth in subsections 5.5 hereof shall not
have been fulfilled and/or performed as of the Closing Date, each of the
Purchasers may, at its option, either (i) advise the Company that it refuses to
proceed with the exchange of its Canco Shares or (ii) proceed with the exchange
of its Canco Shares, in either case, without prejudice to its rights, recourses
and remedies. In the event, however, that one or more but less than all of the
Purchasers exercises the option set forth in (i) above, then the Company shall
have the right not to proceed with the
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Closing of the Forced Exchange of the Canco Shares held by the other Purchasers
who wished to proceed therewith, in which case such other Purchasers shall be
deemed to have exercised the option set forth in (i) above.
5.7 Failure to Satisfy Certain Condition Precedent to Forced Closing.
Notwithstanding the first sentence of subsection 5.6, in the event that the only
condition precedent not to have been fulfilled and/or performed as of the
Closing Date is the condition precedent set forth in paragraph 5.5.9 , then each
of the Purchasers may, at its option, either (i) proceed with the exchange of
its Canco Shares, without prejudice to its rights, recourses and remedies; or
(ii) postpone the Closing Date until this condition precedent is fulfilled
and/or performed, provided that if same is not fulfilled and/or performed within
90 days of the original Closing Date, then each of the Purchasers shall be
entitled to exercise either of the options set forth in the first sentence of
subsection 5.6. In the event, however, that one or more but less than all of the
Purchasers exercises the option set forth in (i) above, then the Company shall
have the right not to proceed with the Closing of the Forced Exchange of the
Canco Shares held by the other Purchasers who wish to proceed therewith, in
which case such other Purchasers shall be deemed to have exercised the option
set forth in (ii) above.
5.8 Delivery. At the Forced Closing, the Purchasers shall surrender the
certificates representing all of the Canco Shares, duly endorsed. Thereupon, the
Company shall issue and deliver to the Purchasers certificates for the number of
Common Shares to which the Purchasers are entitled pursuant to subsection 3.4.
Such exchange shall be deemed to have been made at the close of business on the
date of receipt by the Purchasers of the Forced Exchange Notice and the
Purchasers shall be treated for all purposes as the record-holders of such
Common Shares on the date of receipt by the Purchasers of the Forced Exchange
Notice. In addition, in the event that any Purchaser has provided the Company
with its Purchaser's Sale Notice, such Purchaser shall also surrender the
certificates representing all of the Common Shares which it wishes to sell, duly
endorsed, against payment of the purchase price therefor.
SECTION 6 REPRESENTATIONS, WARRANTIES, ACKNOWLEDGEMENTS
AND COVENANTS OF THE COMPANY
6.1 Representations and Warranties. The Company hereby represents and warrants
to each of the Purchasers, as of the date hereof, the following:
6.1.1 Public Filings. The Company has delivered to the Purchasers accurate and
complete copies (excluding copies of exhibits) of each report,
registration statement (on a form other than Form S-8) and definitive
proxy statement filed by the Company with the SEC between July 2, 1996
and the date the representation or warranty is made (the "Company SEC
Documents"). As of the time it was filed with the SEC (or, if amended or
superseded by a filing prior to the date of this Agreement, then on the
date of such filing): (i) each of the Company SEC Documents complied in
all material respects with the applicable requirements of the Securities
Act or the Exchange Act,
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as the case may be; and (ii) none of the Company SEC Documents 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 the light of the circumstances under which they
were made, not misleading.
6.1.2 Financial Statements. The consolidated, if applicable, financial
statements contained in the Company SEC Documents: (i) complied as to
form in all material respects with the published rules and regulations
of the SEC applicable thereto; (ii) were prepared in accordance with
generally accepted accounting principles applied on a consistent basis
throughout the periods covered, except as may be indicated in the notes
to such financial statements and (in the case of unaudited statements)
as permitted by Form 10-Q of the SEC, and except that unaudited
financial statements may not contain footnotes and are subject to normal
and recurring year-end audit adjustments; and (iii) fairly present the
financial position of the Company as of the respective dates thereof and
the consolidated, if applicable, results of operations of the Company
for the periods covered thereby.
6.1.3 Organization, Good Standing and Qualification. The Company is a
corporation duly organized, validly existing, and in good standing under
the laws of the State of Delaware. The Company has full power and
authority to own and operate its properties and assets, and to carry on
its business as presently conducted and as presently proposed to be
conducted.
6.1.4 Corporate Power. The Company has all requisite legal and corporate power
and authority to execute and deliver this Agreement and to carry out and
perform its obligations under the terms of this Agreement. Without
limiting the generality of the foregoing, all corporate action on the
part of the Company, its directors and shareholders necessary (i) for
the authorization, execution, delivery and performance of this Agreement
by the Company, (ii) for the authorization, issuance and delivery of the
Common Shares pursuant to this Agreement and (iii) for the purchase for
cancellation by the Company or the sale to the third party of each
Purchaser's Common Shares in connection with its Purchaser's Sale Notice
has been taken prior to the execution hereof.
6.1.5 Offering Valid. Assuming the accuracy of the representations and
warranties of the Purchasers contained in Section 7 hereof, the offer,
sale and issuance of the Common Shares pursuant to this Agreement is or
will be exempt from the registration requirements of the Securities Act
and all state "blue sky" laws or has been or will have been registered
or qualified under the registration, permit or qualification
requirements of all applicable federal and state securities laws.
6.1.6 Binding Agreement. This Agreement, when executed and delivered by the
Company, shall constitute a valid and binding obligation of the Company,
enforceable in
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accordance with its terms, subject to laws of general application
affecting creditors' rights and the exercise of judicial discretion in
accordance with general equitable principles.
6.1.7 Issuance of Common Shares. The issuance of Common Shares pursuant to
this Agreement is and will not be subject to any preemptive rights or
rights of first refusal. When issued in compliance with the provisions
of this Agreement and the Restated Certificate of Incorporation of the
Company dated February 18, 1997, as amended, the Common Shares will be
validly issued, fully paid and non-assessable, and will be free of all
Charges and restrictions on transfer other than restrictions on transfer
under state and/or federal securities laws at the time a transfer by a
Purchaser is proposed.
6.1.8 Consents. No consent, approval, authorization, order, registration or
qualification of or with any federal or state court or governmental
agency or body or any Person is required to enter into this Agreement or
for the consummation by the Company of the transactions contemplated by
this Agreement, except such consents, approvals, authorizations, orders,
registrations or qualifications which have been obtained by the Company
prior to the date hereof;
6.1.9 Compliance with Laws. The Company is not in violation of any law,
ordinance, administrative or governmental rule or regulation or court
decree applicable to it, and is not in violation with any term or
condition of, and has not failed to obtain, any license, permit,
franchise or other administrative or governmental authorization
necessary to the ownership of its property or to the conduct of its
business, which violation, non-compliance or failure to obtain,
individually or in the aggregate, would adversely affect the
consummation by the Company of the transactions contemplated by this
Agreement;
6.1.10 Compliance with Other Instruments. The execution and delivery of this
Agreement and the fulfilment of the terms hereof do not result in a
breach of, do not conflict with, and do not constitute a default under,
whether after notice or lapse of time, (i) any statute, rule or
regulation applicable to the Company; (ii) any court judgment, decree or
order binding the Company; or (iii) the constituent documents and
by-laws of the Company.
6.1.11 Reservation of Stock. The Company has reserved up to one million two
hundred thousand (1,200,000) Common Shares for issuance hereunder.
6.1.12 Brokers or Finders. The Purchasers have not incurred and will not incur,
directly or indirectly, as a result of any action taken by the Company
any liability for any brokerage fees, finder's fees, or agents'
commissions or other similar charges in connection with this Agreement.
- 17 -
6.2 Covenants of the Company. The Company hereby covenants as follows:
6.2.1 SEC Documents. As soon as practicable after the filing of any SEC
Documents, and in any event within twenty (20) days thereafter, the
Company will furnish each of the Purchasers with such SEC Documents;
6.2.2 Reservation of Stock. So long as any Canco Shares remain outstanding,
the Company will at all times reserve and keep available, solely for
issuance and delivery upon the exercise of the Exchange Right or the
Forced Exchange, all Common Shares issuable from time to time upon such
exchange;
6.2.3 Listing of Shares. Promptly after the issuance of the Common Shares to
any of the Purchasers pursuant to this Agreement, if the Company's
securities are publicly traded, the Company shall take all necessary
action to list such Common Shares, to the extent not already listed, on
the Nasdaq Small Cap Market and on such other securities exchange or
over-the-counter market where the Company's securities are listed;
6.2.4 Securities Act Exemption. The Company shall use its best efforts to
cause the issuance of the Common Shares to any Purchaser pursuant to
this Agreement to be made pursuant to such exemption or exemptions from
registration under the Securities Act as may be reasonably requested by
such Purchaser;
6.2.5 Notice and Information Rights. The Company shall from the date hereof
deliver to each Purchaser such information and notices as the Company is
required to deliver to the holders of Common Shares of the Company
pursuant to the Company's Restated Certificate of Incorporation dated
February 18, 1997, as amended, or otherwise.
6.2.6 Declaration of Dividends. The Company shall at least ninety (90) days
prior to the declaration of any dividend (other than a stock dividend),
advise each Purchaser or same in writing.
6.2.7 Recapitalization. The Company shall at least ninety (90) days prior to
any Recapitalization, advise each Purchaser of same in writing.
SECTION 7 - REPRESENTATIONS, WARRANTIES AND ACKNOWLEDGEMENTS OF THE PURCHASERS
7.1 Representation and Warranties. Each Purchaser hereby, severally and not
jointly and severally, represents and warrants to the Company as follows:
7.1.1 Investment. In each case, it is acquiring the right to acquire, and will
acquire, Common Shares as provided in this Agreement, as well as any
share it may acquire from another Purchaser, for investment for its own
account (or for the account of any
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of the other Purchasers), and not with the view to, or for resale in
connection with, any distribution thereof.
7.1.2 Title to Canco Shares. It is upon the date hereof the owner of record of
its Canco Shares and shall be upon each Closing Date the owner (both
beneficially and of record) of its Canco Shares. It will have upon each
Closing Date good and marketable title to the Canco Shares and the
absolute right, power and capacity to transfer and deliver the Canco
Shares to the Company pursuant to this Agreement, free and clear of all
Charges.
7.1.3 Brokers or Finders. The Company has not incurred and will not incur,
directly or indirectly, as a result of any action taken by such
Purchaser any brokerage fees, finder's fees, agents' commissions or
other similar charges in connection with this Agreement.
7.2 Acknowledgements. Each Purchaser hereby makes the following
acknowledgements:
7.2.1 Registration. It understands that neither the right to acquire, nor any
acquisition of, Common Shares as provided in this Agreement has been, or
will be, registered or qualified under the Securities Act or under any
applicable U.S. state securities laws, in reliance on specific
exemptions from the registration provisions of the Securities Act and
such laws, the availability of which depends upon, among other things,
the bona fide nature of its investment intent and the accuracy of the
other representations and acknowledgments set forth in this Section
7.1.1.
7.2.2 Non-transferability. It acknowledges that any Common Shares actually
acquired pursuant to this Agreement must be held by it indefinitely
unless a subsequent disposition thereof is registered and/or qualified
under the Securities Act and applicable U.S. state securities laws or,
in the opinion of Purchaser's counsel reasonably satisfactory to the
Company, exempt from such registration and/or qualification.
7.2.3 Accredited Investor. It is an "accredited investor" within the meaning
of Rule 501 under the Securities Act.
7.2.4 Legends. It understands that the certificates representing Common Shares
will bear a legend containing the restrictions referred to in paragraphs
7.1.1 and 7.1.2 above.
SECTION 8 - GENERAL PROVISIONS
8.1 Governing Law. This Agreement shall be governed in all respects by the laws
of the State of New York as they are applied to agreements entered into in New
York between New York residents and performed entirely within New York.
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8.2 Further Documents. Each party upon the request of the others, shall do,
execute, acknowledge and deliver or cause to be done, executed, acknowledged or
delivered all such further acts, deeds, documents, assignments, transfers,
conveyances, powers of attorney and assurances as may be reasonably necessary or
desirable to effect complete consummation of the transactions contemplated by
this Agreement.
8.3 Successors and Assigns. The provisions hereof shall enure to the benefit of
and be binding upon the parties hereto and their respective successors, assigns,
heirs, executors and administrators. Notwithstanding the foregoing, the Company
shall not be entitled to assign its rights hereunder. The parties hereto hereby
confirm that each transferee of any Canco Shares shall benefit from the Exchange
Rights contemplated in this Agreement provided that the transfer of such Canco
Shares was made in conformity with the Shareholders Agreement.
8.4 Arbitration. All disputes or controversies between the parties in respect of
the validity, interpretation or performance of the provisions of this Agreement
shall be definitively dealt with using the rules of conciliation and arbitration
of the International Chamber of Commerce, by one or more arbitrators appointed
in accordance with said rules, and to the exclusion of any courts, except for
any injunctive relief and any provisional remedy, including seizure before
judgment or attachment, which may be obtained from any court or tribunal having
jurisdiction. Any arbitration proceeding required pursuant to the terms hereof
shall take place in New York, New York and shall be conducted in both the
English and French language. The cost of the arbitration shall be borne in the
manner provided for in the arbitration award.
8.5 Notices. All offers, acceptances, rejections, notices, requests,
authorizations, permissions, directions, demands and other communications
hereunder shall be given in writing and shall be given by telecopier, or
delivered by hand, to the other parties at the following addresses:
if to Devma: INDUSTRIES DEVMA INC.
000 xx xx Xxxxxxxxxxx Xxxxxx Xxxx
Xxxxx 0000
Xxxxxxxx, Xxxxxx X0X 0X0
Attention: President
Telecopier: (000) 000-0000
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if to Innovatech: SOCIETE INNOVATECH DU GRAND MONTREAL
0000 Xxxxxxxxxx Xxxxxx
Xxxxx 0000
Xxxxxxxx, Xxxxxx
X0X 0X0
Attention: President and Chief Executive Officer
Telecopier: (000) 000-0000
if to Fonds: XXXXX XX XXXXXXXXXX XXX XXXXXXXXXXXX
XX XXXXXX (F.T.Q.)
0000 Xxxxx Xxxxxx
Xxxxxxxx, Xxxxxx
X0X 0X0
Attention: Vice President, Legal Affairs
Telecopier: (000) 000-0000
with a copy to: Senior Vice President, Investments
Telecopier: (000) 000-0000
if to FR: FONDS REGIONAL DE SOLIDARITE ILE DE
MONTREAL, limited partnership
000 Xx-Xxxxxxx Xxxxxx Xxxx
0xx Xxxxx
Xxxxxxxx, Xxxxxx
X0X 0X0
Attention: Managing Director
Telecopier: (000) 000-0000
- 21 -
if to the Company: COMPOSITECH LTD.
000 Xxxxxxxxx Xxxx
Xxxxxxxxx, Xxx Xxxx
00000-0000
Attention: the President
Telecopier: (000) 000-0000
with a copy
in all cases to: XXXXXXXX XXXXXXXXXX
0000 Xxxx-Xxxxxxxx Blvd. West
Suite 1400
Xxxxxxxx, Xxxxxx
X0X 0X0
Attention: Me Xxxxx Xxxxx
Telecopier: (000) 000-0000
with a copy
in all cases to: XXXXXXX LEISURE XXXXXX & IRVINE
00 Xxxxxxxxxxx Xxxxx
Xxx Xxxx, Xxx Xxxx
00000
Attention: Xxxxxx X. Xxx, Esq.
Telecopier: (000) 000-0000
or at such other address as the parties may have previously indicated to the
other parties in writing in conformity with the foregoing. Any such notice,
request, demand or other communication shall be deemed to have been received on
the date of delivery if delivered by hand, or the next Business Day immediately
following the date of transmission if sent by telecopier. The original copy of
any notice sent by telecopier shall be forwarded to the other parties by
registered mail, receipt return requested.
8.6 Time of the Essence. Time shall be of the essence in this Agreement.
8.7 Delays. When calculating the period of time within which or following which
any act is to be done or step taken pursuant to this Agreement, the day which is
the reference day in calculating such period shall be excluded. If the day on
which such delay expires is not a Business Day, then the delay shall be extended
to the next succeeding Business Day.
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8.8 Entire Agreement; Amendment. This Agreement and the Shareholders Agreement
and the other documents delivered pursuant hereto constitute the full and entire
understanding and agreement among the parties with regard to the subjects hereof
and thereof, and no party shall be liable or bound to any other party in any
manner by any warranties, representations or covenants except as specifically
set forth herein or therein. In the event that any provision of this Agreement
conflicts with any provision of the Shareholders Agreement, the former provision
shall prevail. Except as expressly provided herein, neither this Agreement nor
any term hereof may be amended, other than by a written instrument signed by all
the parties hereto.
8.9 Gender. Any reference in this Agreement to any gender shall include both
genders and the neutral, and words used herein importing the singular number
only shall include the plural and vice versa.
8.10 Headings. The division of this Agreement into Sections, subsections and
other subdivisions, and the insertion of headings are for convenience of
reference only and shall not affect or be utilized in the construction or
interpretation of this Agreement.
8.11 Waiver. Any waiver, permit, consent or approval of any kind or character on
the part of any party of any breach or default under this Agreement, or any
waiver on the part of any party of any provisions or conditions of this
Agreement, must be in writing and shall be effective only to the extent
specifically set forth in such writing. All remedies, either under this
Agreement or by law or otherwise afforded to any party, shall be cumulative and
not alternative.
8.12 Preamble. The preamble hereof shall form an integral part of this
Agreement.
8.13 Counterparts. This Agreement may be executed in any number of counterparts,
each of which shall be deemed to be an original, but all of which together shall
constitute one and the same document.
8.14 Severability. In the event that any provision of this Agreement becomes or
is declared by a court of competent jurisdiction to be illegal, unenforceable or
void, this Agreement shall continue in full force and effect without said
provision.
IN WITNESS WHEREOF, the parties have signed at the place and on the date
first hereinabove mentioned.
INDUSTRIES DEVMA INC. FONDS DE SOLIDARITE DES
TRAVAILLEURS DU QUEBEC (F.T.Q.)
Per: Per:
--------------------------- ---------------------------
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Per:
---------------------------
SOCIETE INNOVATECH DU GRAND FONDS REGIONAL DE SOLIDARITE
MONTREAL ILE DE MONTREAL, limited
partnership, by its general
partner, Gestion du Fonds
Regional de Solidarite Ile
de Montreal Inc.
Per: /s/Xxxxxx Xxxxxxx Per: /s/Xxxxxxxx Xxxxxxxxx
--------------------------- ---------------------------
Xxxxxx Xxxxxxx Xxxxxxxx Xxxxxxxxx
COMPOSITECH LTD.
Per: /s/Xxxxx Xxxxxx
---------------------------
Xxxxx Xxxxxx
