AMENDED AND RESTATED STOCK PURCHASE AGREEMENT
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THIS AMENDED AND RESTATED STOCK PURCHASE AGREEMENT ("Agreement"), is
entered into this 30th day of August 2000 by and among COMMODORE APPLIED
TECHNOLOGIES, INC., a Delaware corporation having offices at ▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ("Commodore"); ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ("▇▇▇▇▇▇▇"),
an individual residing at ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ and
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ ("▇▇▇▇▇▇▇▇"), an individual residing at ▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇,
▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇; and DISPUTE RESOLUTION MANAGEMENT, INC., a Utah
corporation having offices at ▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇, ▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇
▇▇▇▇▇ (the "Company"). ▇▇▇▇▇▇▇ and Speciale are individually hereinafter
sometimes referred to as a "Stockholder" and collectively as the "Stockholders".
W I T N E S S E T H:
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WHEREAS, the Stockholders are the record and beneficial owners of all
of the issued and outstanding shares of the capital stock and business of the
Company, which is engaged primarily in the business of serving as an
international business consulting firm specializing in the settlement and
resolution of disputes involving complex, latent and long-tail insurance claims,
including environmental, asbestos, products liability, Year 2000 issues and
other matters, for corporate and governmental clients (the "Core Business"); and
WHEREAS, effective as of January 31, 2000, Commodore, the Company, the
Stockholders and Dispute Resolution Management, LLC, a Delaware limited
liability company (the "LLC") entered into an Asset Purchase Agreement (the
"Prior Asset Agreement"); pursuant to which Prior Asset Agreement, the Operating
Agreement forming the LLC and the other exhibits thereto (a) the LLC was to
acquire the assets and liabilities of the Core Business, and (b) Commodore was
to have provided, in addition to shares of Commodore common stock and warrants,
approximately $14.5 million in cash to the LLC for distribution to the
Stockholders and certain key employees of the Company; and
WHEREAS, Commodore has (a) advised the Stockholders and the Company
that, to date, Commodore has been unable to obtain from unaffiliated third
parties on commercially acceptable terms the financing required to provide $14.5
million of cash consideration, plus approximately $1.5 million of additional
working capital, and (b) requested that the Stockholders agree to defer receipt
and finance the cash portion of the consideration in a manner which will provide
Commodore with time to obtain the necessary financing on commercially reasonable
terms; and
WHEREAS, the Stockholders are willing to provide Commodore with such
financial accommodations, all upon the terms and subject to the conditions set
forth below; and
WHEREAS, effective as of August 18, 2000, Commodore, the Company and
the Stockholders entered into an agreement and plan of merger (the "Merger
Agreement"); and
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WHEREAS, the parties hereto desire, pursuant to this Agreement and the
exhibits hereto, to amend and restate in its entirety, all of the transactions
contemplated by the Prior Asset Agreement and the Merger Agreement
(collectively, the "Prior Agreements") and the exhibits thereto; and
WHEREAS, each of (a) Commodore, (b) Commodore Environmental Services,
Inc., a Delaware corporation ("COES") and ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ and members of his
family (the "▇▇▇▇▇▇▇▇▇ Group"), as the record owners of a majority of the issued
and outstanding shares of common stock of Commodore (collectively, with COES,
the "CXI Majority Stockholders"), and (c) the respective boards of directors of
each of Commodore, COES and the Company, have all authorized and approved the
Acquisition, and the consummation of the other transactions contemplated by this
Agreement, all on the terms and subject to the conditions set forth in this
Agreement;
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and agreements herein set forth, the parties hereby covenant and agree
as follows:
1 THE ACQUISITON
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1.1 The Acquisition. At the time of the Closing on the Closing
Date (as such terms are hereinafter defined), Commodore shall purchase from the
Stockholders, and the Stockholders shall sell to Commodore, an aggregate of
twenty-four thousand three hundred (24,300) shares of the common stock of the
Company, $.10 par value per share (the "Majority Company Stock"), against
receipt by the Stockholders of the "Acquisition Stock" (as that term is
hereinafter defined) and the other consideration payable by Commodore to the
Stockholders hereunder.
1.2 Certificates for the Majority Company Stock. On the
Closing Date, the Stockholders shall deliver to Commodore, against receipt of
the Acquisition Stock and other consideration payable by Commodore hereunder,
certificates representing all of the shares of the Majority Company Stock. The
Majority Company Stock, when so delivered to Commodore, shall represent not less
than and not more than eighty-one (81%) percent of the issued and outstanding
shares of capital stock of the Company as at the Closing Date. The certificates
evidencing the Majority Company Stock shall be duly endorsed for transfer,
accompanied by duly executed stock powers with the signature of each of the
record owners appropriately guaranteed by a bank or appropriately witnessed and
notarized in a manner reasonably acceptable to Commodore. The Stockholders are,
and as at the Closing Date shall be, the record and beneficial owners of all,
and not less than all, of the issued and outstanding shares of capital stock of
the Company. Annexed hereto as Exhibit A and made a part hereof is a list of the
issued and outstanding shares of capital stock of the Company and the record and
beneficial owners thereof (the "Company Stock Ownership List"). An aggregate of
five thousand seven hundred (5,700) shares of Common Stock of the Company, $.10
par value per share (the "Minority Company Stock") shall be retained by the
Stockholders following the Closing Date and represents not more than and not
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less than nineteen (19%) percent of the issued and outstanding shares of capital
stock of the Company as at the Closing Date.
1.3 Stock Records and Minute Books. On the Closing Date, in
addition to the delivery and transfer of the Majority Company Stock to
Commodore, the Stockholderr shall deliver, and shall cause the Company to
deliver, to Commodore all of the stock records and minute books of the Company,
all of which records and books shall be complete, accurate and current.
2. CONSIDERATION.
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On the Effective Date and simultaneous with the consummation
of the Acquisition, the Stockholders, as the record owners of all of the
outstanding shares of Company Stock, shall be entitled to receive from
Commodore, in consideration for the Majority Company Stock, the following
consideration (the "Acquisition Consideration"); which Acquisition Consideration
shall be payable on the Closing Date to the Persons set forth in Sections 2.1,
2.2, 2.3 and 2.4 below.
2.1 The Acquisition Stock. An aggregate of (a) eight million
eight hundred and fifty nine thousand (8,859,000) shares of Commodore Common
Stock shall be issued to the Stockholders, in equal amounts as between them, and
(b) one million six hundred and forty-one thousand (1,641,000) shares of
Commodore Common Stock shall be issued to the Company, to be reserved for
distribution or payment in cash in the manner provided in Section 9.8 hereof.
Such ten million five hundred thousand (10,500,000) shares of Commodore Common
Stock is hereinafter collectively referred to as the "Acquisition Stock").
2.2 [Intentionally Omitted]
2.3 Commodore Warrants. Commodore shall issue to the
Stockholders, in equal amounts as between them, and certain other Persons
five-year warrants to purchase an aggregate of one million (1,000,000) shares of
Commodore Common Stock at an exercise price of $2.00 per share (the "Commodore
Warrants"); which Commodore Warrants shall be in substantially the form of
Exhibit B annexed hereto and made a part hereof.
2.4 Cash Flow Installment Payments. In addition to the
Acquisition Stock and the Commodore Warrants, for the period which shall
commence on the "Closing Date" (as that term is defined in Section 10) and shall
end on December 31, 2005 (the "Cash Flow Payment Period"), the Stockholders
shall be entitled to receive from the Company an aggregate of thirty-five (35%)
percent of all Company Cash Flow which shall be produced by the Company and all
Permitted Investments (the "Company Cash Flow Payments"); provided, that no
further Company Cash Flow Payments shall be required to be paid to the
Stockholders if an aggregate of Thirty Seven Million One Hundred Thirty One
Thousand Five Hundred Seventy Eight ($37,131,578) Dollars in accumulated Company
Cash Flow Payments shall have been paid to the Stockholders prior to the
expiration of the Cash Flow Payment Period. During the Cash Flow Payment Period,
thirty-five (35%) percent of all Company Cash Flow produced by the Company and
all Permitted Investments in each of the four quarterly periods ending on March
31st, June 30th, September 30th, December 31st (each a "Quarter") shall be paid
to the Stockholders in installments, commencing with the Quarter ending
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September 30, 2000 and ending with the Quarter ending December 31, 2005. Such
installment Company Cash Flow Payments shall be paid to the Stockholders, as
follows:
(a) except for the Quarter ending December 31st in
each fiscal year of Commodore and the Company ending on December 31st
or such other fiscal year end of the Company as may hereafter be
established (each a "Fiscal Year"), the Stockholders shall be entitled
to receive within thirty (30) days following the end of each Quarter
through the Quarter ending December 31, 2005, an amount which shall
equal thirty-five (35%) percent of the Company Cash Flow in such fiscal
Quarter. In the event and to the extent an amount in excess of
thirty-five (35%) percent of Company Cash Flow shall have been paid to
the Stockholders in any one fiscal Quarter, the excess, if any, shall
be credited against thirty-five (35%) percent of the Company Cash Flow
Payments payable to the Stockholders in the next immediately succeeding
fiscal Quarter(s);
(b) with respect to the fourth Quarter in each Fiscal
Year, commencing with the Fiscal Year ending December 31, 2000, within
10 days after receipt of the final Reviewed Financial Statements of the
Company and all Permitted Investments, but in no event later than one
hundred and five (105) days after the end of each such Fiscal Year, the
Stockholders shall be entitled to receive an amount which shall be
equal to (i) thirty-five (35%) percent of Company Cash Flow in such
Fiscal Year, less (ii) all payments made to the Stockholders in respect
of Company Cash Flow Payments during any or all of the immediately
preceding three (3) Quarters in such Fiscal Year (or in the case of the
Fiscal Year ending December 31, 2000, the number of Quarters from the
Closing Date to December 31, 2000);
(c) in the event and to the extent an amount in
excess of thirty-five (35%) percent of Company Cash Flow shall have
been paid to the Stockholders in any one Fiscal Year, the excess, if
any, shall be credited against thirty-five (35%) percent of Company
Cash Flow Payments payable to the Stockholders in the next immediately
succeeding Fiscal Year(s), which credit shall be applied in the order
of the next maturing Company Cash Flow Payments; provided, that if,
following December 31, 2005, the accumulated payments of Company Cash
Flow actually received by the Stockholders during the Cash Flow Payment
Period shall have exceeded an aggregate of $37,131,578, the excess, if
any, shall be refunded by the Stockholders to the Company by not later
than June 30, 2006.
(d) On a date which shall be the earlier to occur of
(i) a Sale of Control or (ii) December 31, 2003, the Stockholders shall
be entitled to have received an aggregate of not less than Ten Million
($10,000,000) Dollars of accumulated Company Cash Flow Payments,
irrespective of the accumulated amount of Company Cash Flow actually
produced.
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(e) each occasion that a Quarterly installment
Company Cash Flow Payment shall be due and payable to the Stockholders
pursuant to this Section 2.4, Commodore shall make such payment in cash
by wire transfer of immediately available funds to bank accounts
specified by the Stockholders or their designees.
2.5 Make Whole Agreement. In the event and to the extent that
the Stockholders shall not have received on a timely basis a minimum of Ten
Million ($10,000,000) Dollars in accumulated Company Cash Flow Payments,
Commodore shall guaranty payment in full of any "short-fall" in payment of such
minimum cumulative amount pursuant to terms of the Make Whole Agreement annexed
hereto as Exhibit C and made a part hereof (the "Make Whole Agreement").
2.6 Issuance of Acquisition Consideration and Commodore Option
Stock.
(a) On the Effective Date and simultaneous with
consummation of the Acquisition, Commodore shall issue to the Stockholders and
the Company, stock certificates evidencing an aggregate of six million
(6,000,000) shares of Commodore Common Stock, as follows:
(i) an aggregate of four million and sixty
thousand (4,060,000) shares of Commodore Common Stock shall be issued to the
Stockholders (in equal amounts as between them), representing a portion of the
8,859,000 shares of Acquisition Stock reserved for issuance to the Stockholders;
and
(ii) an aggregate of one million nine
hundred and forty thousand (1,940,000) shares of Commodore Common Stock shall be
issued to the Stockholders (in equal amounts as between them), representing a
portion of the 5,000,000 shares of Commodore Option Stock.
(b) Not later than two (2) Business Days after
receipt of Final Commodore Stockholders Approval, Commodore shall issue to the
Stockholders, the Company and the other Persons listed on Schedule 9.8 hereto,
stock certificates evidencing an aggregate of nine million five hundred thousand
(9,500,000) shares of Commodore Common Stock and the Commodore Warrants, as
follows:
(i) an aggregate of four million seven
hundred ninety nine thousand (4,799,000) shares of Commodore Common Stock shall
be issued to the Stockholders (in equal amounts as between them), representing
the balance of the 8,859,000 shares of Acquisition Stock reserved for issuance
to the Stockholders;
(ii) an aggregate of one million six hundred
forty-one thousand (1,641,000) shares of Commodore Common Stock shall be issued
to the Company, to be reserved for distribution or payment in the manner
provided in Section 9.8 hereof, representing the 1,641,000 shares of Acquisition
Stock reserved for issuance to the Company;
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(iii) an aggregate of three million and
sixty thousand (3,060,000) shares of Commodore Common Stock shall be issued to
the Stockholders (in equal amounts as between them), representing the balance of
the 5,000,000 shares of Commodore Option Stock; and
(iv) the Commodore Warrants shall be issued
to the Stockholders and the other Persons entitled to receive them, as provided
in Exhibit B hereto.
3. CERTAIN DEFINITIONS. As used in this Agreement and in
addition to the other terms defined herein, the following capitalized terms
shall have the following meanings:
"Acquisition" means the acquisition by Commodore of the
Majority Company Stock from the Stockholders, pursuant to the terms and
conditions set forth in this Agreement.
"Acquisition Stock" means the 10,500,000 shares of Commodore
Common Stock referred to in Section 2.1 of this Agreement.
"Adjusted Pre Tax Income of the Company" shall mean the
combined net income of the Company and Dispute Resolution Limited, a partnership
("DRL"), set forth on the 1999 Audited Financial Statement, as adjusted to (a)
give effect to the deduction of all compensation and bonuses payable to all
employees of the Company for the fiscal year ended December 31, 1999, other than
the bonuses and other payments referred to in Section 9.8 hereof, and (b) before
giving effect to (i) any payments or distributions by DRL to KPMG LLP or their
Affiliates ("KPMG") under the terms of the existing agreements between the
Company, the Stockholders and KPMG, or (ii) application or deduction of any
federal income taxes or any distributions to the Stockholders of aggregate
amounts of cash in excess of their current annual salaries rates.
"Affiliate" means with respect to any Person (the "Subject
Person"), any other Person that directly, or indirectly through one or more
intermediaries, controls, is controlled by, or is under common control with, the
Subject Person. As used in this definition, "control" (including, with its
correlative meanings, "controlled by" and "under common control with") shall
mean the possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of a Subject Person (whether through
ownership of securities or partnership or other ownership interests, by contract
or otherwise). With respect to any Person who is an individual, "Affiliates"
shall also include, without limitation, any member of such individual's Family
Group.
"Agreement" means this Stock Purchase Agreement as the same
may be amended, modified, supplemented or restated from time to time.
"Board of Directors" shall mean the five (5) Person board of
directors of the Company which shall be in place for a period of not less than
five (5) years following the Closing Date, and which shall consist of (a) two
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(2) Persons designated by Commodore, (b) the Stockholders or in the event of the
death or permanent disability of either or both of the Stockholders, two (2)
other Persons designated by the survivor of the Stockholders, and (c) one (1)
additional Person who shall be mutually acceptable to the Stockholders and
Commodore.
"Brownfields Real Estate Business" means the purchase, lease
or dealing in so-called "brownfields" or related environmentally impacted real
estate interests through the direct or indirect efforts of Commodore, the
Stockholders, the Company or any other employee of the Company or Commodore.
"Cash Flow" shall mean as applicable to any Person in
question, the individual, consolidated or combined Net Profit or Net Loss of
such Person and its consolidated Subsidiaries, if any, before (i) application of
federal, state and local income taxes of such Person and its consolidated
Subsidiaries and Permitted Investments, and (ii) all non-cash items of expenses
and deductions taken in respect of depreciation and/or amortization of good-will
and other intangible assets.
"Closing Date" means the date of consummation of the
transactions contemplated by this Agreement, which, in accordance with the
provisions of Section 10 of this Agreement, shall be deemed to have occurred as
of August 29, 2000.
"Commodore" has the meaning set forth the Preamble to this
Agreement.
"Commodore Common Stock" means the common stock of Commodore,
$.001 par value per share.
"Commodore Financial Services Business Development Plan" means
the business development plan which has been previously developed by Commodore
and the Stockholders.
"Commodore Option Stock" means the five million (5,000,000)
shares of Commodore Stock issuable to the Stockholders on the Closing Date in
consideration for the Minority Company Stock Option.
"Commodore Proxy Statement" shall have the meaning set forth
in Section 7.12 hereof.
"Commodore Stockholders Meeting" shall mean a special meeting
of the stockholders of Commodore to be called for the purpose of ratifying this
Agreement, the Acquisition and all of the transactions contemplated hereby.
"Company" means Dispute Resolution Management, Inc., a Utah
corporation..
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"Company Cash Flow" shall mean the consolidated or combined
Cash Flow of the Company and all Permitted Investments, all as set forth on the
Reviewed Financial Statements. In determining Company Cash Flow:
(a) the Reviewed Financial Statements shall be
prepared in accordance with generally accepted accounting principles;
(b) Company Cash Flow shall, at all times, be
calculated before giving effect to any deductions for compensation expense or
other related item of expense resulting from the issuance by Commodore of the
1,500,000 shares of Acquisition Stock referred to in Section 9.8 hereof; and
(c) Company Cash Flow shall, at all times, be
calculated before giving effect to any item of expense or accrued obligation
which shall not have been approved in advance by the Stockholders or otherwise
is made in violation of the provisions contained in Section 14.4 or Section 14.5
of this Agreement.
"Core Business" means the business of acting as consultants
specializing in the settlement and resolution of disputes involving complex,
latent and long-tail insurance claims, including environmental, asbestos,
products liability, Year 2000 issues and other matters, for corporate and
governmental clients.
"Effective Date" means the effective date of the acquisition
of Majority Company Stock by Commodore, pursuant to this Agreement.
"Employment Agreements" means the separate employment
agreements to be executed on the Closing Date between the Company and each of
▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇, in the form of Exhibit E annexed hereto and made a part
hereof.
"Extension Electronic Investments" means the electronic
databases described below to be acquired and/or created by Commodore Advanced
Sciences, Inc., a Subsidiary of Commodore, or any other Affiliate of Commodore,
to supplement and service existing markets. Such electronic databases consist
of:
(a) electronic contracting for government contracts,
including request for information ("RFI") and request for proposals ("RFP"),
leading to potential auction and related services;
(b) electronic inventory of hazardous, toxic,
radioactive and legacy waste, including locations, amounts, character and
remedial cost estimates, for both government and commercial clients;
(c) electronic information on technologies and
processes, together with cost ranges, available for treatment and processing of
various waste materials and categories, including by-product results, and
storage and disposal options.
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"Final Commodore Stockholders Approval" shall mean the date on
which the holders of record on the record date fixed in the Commodore Proxy
Statement of a majority of the issued and outstanding shares of Commodore Common
Stock shall have approved, adopted and ratified this Agreement, the Acquisition
and all of the transactions contemplated hereby at the Commodore Stockholders
Meeting.
"GAAP " means generally accepted accounting principles in the
United States which shall be in effect from time to time for any particular
Fiscal Year in question.
"Investment" means the acquisition or investment by a Person,
whether in the form of debt or equity securities (or any combinations or
derivatives thereof), of or in another Person, or a group of assets purchased in
a single transaction or series of related transactions, or any other asset,
including short-term investments of cash and loans.
"Lock Up Agreement" shall have the meaning set forth in
Section 7.16 hereof.
"Major Transactions" means any one or more of the contemplated
transactions, events or decisions set forth in Section 14.4 hereof.
"Minority Company Stock" means five thousand seven hundred
(5,700) shares of the Company common stock retained by the Stockholders
following the Closing Date and representing 19% of the issued and outstanding
shares of capital stock of the Company.
"Minority Company Stock Option" means the five year option,
commencing January 1, 2006 and ending December 31, 2010 pursuant to which the
Stockholders have granted to Commodore the option to purchase the Minority
Company Stock, pursuant to the Minority Company Stock Option Agreement.
"Minority Company Stock Option Agreement" means the option
agreement between the Stockholders and Commodore in the form of Exhibit H
annexed hereto and made a part hereof.
"National Securities Exchange" shall have the meaning set
forth in clause (iii) of Section 7.2(a) hereof.
"Net Profit" and "Net Loss" means the net income (including
items of income exempt from tax) and net loss (including expenditures that
neither can be capitalized nor deducted), respectively, of the Company or any
other applicable Person, all as determined in accordance with generally accepted
accounting principles.
"Obligations" shall have the meaning set forth in Section
7.2(d) hereof.
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"Option" shall have the meaning set forth in Section 7.2(a)
hereof.
"Option Period" shall have the meaning set forth in clause (i)
of Section 7.2(a) hereof.
"Participating Offered Investment" shall mean any Investment,
whether by way of ownership of securities, assets or properties, lease, license
or other use by Commodore, the Company or any direct or indirect wholly-owned or
partially-owned Subsidiary, joint venture, partnership or other entity in which
Commodore, the Company or their Affiliates has an interest, which shall:
(a) provide services similar to or compatible with
those currently provided by the Company in connection with the
operation of the Core Business,
(b) provide financial services or engage in real
estate activities in connection with environmental matters , including,
without limitation (i) the Brownfields Real Estate Business, (ii)
environmental and other insurance brokerage or indemnity coverage, and
(iii) such other financial services which are described or contemplated
by the Commodore Financial Services Business Development Plan; and/or
(c) provide environmental informational services or
systems, including electronic commerce or e-commerce products or
services (including, without limitation, the Extension Electronic
Investments), software or other Internet facilities for private
industry or governmental agencies.
"Permitted Investments" means a Participating Offered
Investment which has been approved in writing in advance by both of the
Stockholders.
"Person" means any individual, partnership, association,
trust, corporation, limited liability company or other entity, or government or
any political subdivision thereof.
"Repurchase Shares" means the individual and collective
reference to all or any portion of the nine million five hundred thousand
(9,500,000) shares of Acquisition Stock, for so long as such shares of
Acquisition Stock shall be subject to the Option and the Repurchase Obligation.
"Repurchase Balance" shall have the meaning defined in Section
7.2(b)(i) hereof.
"Repurchase Obligation" shall have the meaning defined in
Section 7.2(b) hereof.
"Repurchase Price" shall have the respective meanings as are
defined in Section 7.2(a)(iii) and in Section 7.2(b)(iii) hereof.
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"SEC" means the United States Securities and Exchange
Commission and any successor United States federal public or governmental
authority.
"Sale of Control" means the sale or transfer of all or a
majority of the assets or securities of the Company or Commodore (as the case
may be) to any Person, whether by way of asset sale, stock sale, merger,
consolidation or like combination.
"Securities Act" means the Securities Act of 1933, as amended,
and the rules and regulations of the SEC thereunder.
"Subsidiary" means, with respect to any Person, any
corporation, partnership, limited liability company, association or other
business entity of which (i) if a corporation, a majority of the total voting
power of shares of capital stock entitled (without regard to the occurrence of
any contingency) to vote generally in the election of directors thereof is at
the time owned or controlled, directly or indirectly, by that Person or one or
more Subsidiaries of that Person or a combination thereof, or (ii) if a
partnership, limited liability company, association or other business entity, a
majority of the partnership or other similar equity or other ownership interests
thereof is at the time owned or controlled, directly or indirectly, by any
Person or one or more Subsidiaries of that Person or a combination thereof. For
purposes hereof, a Person or Persons shall be deemed to have a majority
ownership interest in a partnership, limited liability company, association or
other business entity if such Person or Persons shall be allocated a majority of
partnership, limited liability company, association or other business entity
gains or losses or shall be or have the right to control (whether or not
exercised) the managing director, manager or a general partner of such
partnership, limited liability company, association or other business entity.
4 REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE
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STOCKHOLDERS.
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The Company and the Stockholders hereby jointly and severally represent
and warrant to Commodore as follows:
4.1 Title to the Company Stock. The Stockholders are the
record and beneficial owners of 100% of the issued and outstanding shares of
capital stock of the Company. The Stockholders have good, valid and marketable
title to the all of the issued and outstanding shares of capital stock of the
Company, all of which has been duly authorized and validly issued and is fully
paid and non-assessable, and is (and on the Closing Date will be) owned
beneficially and of record of the Stockholders, free and clear of all pledges,
liens, claims, charges, options, calls, encumbrances, restrictions and
assessments whatsoever, except for any restrictions which may be created by
operation of state or federal securities laws. No person other than the
Stockholders have any claim or interest in or to any of the Company Stock.
4.2 Valid and Binding Agreement. The Stockholders have full
legal right, power and authority to execute and deliver this Agreement and to
consummate the transactions contemplated hereby. This Agreement and, when
executed and delivered by the Stockholders, the Employment Agreements, the
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Non-Competition Agreements, the Pledge Agreement, the Make Whole Agreement, the
Minority Company Stock Option Agreement and the Registration Rights Agreement,
constitutes and will constitute the legal, valid and binding obligations of the
Stockholders, enforceable against the Stockholders in accordance with their
respective terms, except to the extent limited by bankruptcy, insolvency,
reorganization and other laws affecting creditors' rights generally, and except
that the remedy of specific performance or similar equitable relief is available
only at the discretion of the court before which enforcement is sought.
4.3 Organization, Good Standing and Qualification. The
Company: (a) is a corporation duly organized, validly existing and in good
standing under the laws of the State of Utah; (b) has all necessary corporate
power and authority to carry on its business and to own, lease and operate its
properties; and (c) is qualified to do business as a foreign corporation in each
foreign jurisdiction listed on Schedule 4.3; being the only jurisdictions where
such qualification is required by law and where the failure to be so qualified
would have a material adverse effect on the assets, business or financial
condition of the Company. True and complete copies of the Certificate of
Incorporation and By-Laws of the Company (including all amendments thereto), and
a correct and complete list of the officers and directors of the Company, are
annexed hereto as Schedule 4.3.
4.4 Capital Structure, Stock Ownership.
(a) The authorized capital stock of the Company is as
set forth in its Certificate of Incorporation contained in Schedule 4.4.
(b) There are no outstanding subscriptions, options,
rights, warrants, convertible securities or other agreements or calls, demands
or commitments obligating the Company to issue, transfer or purchase any shares
of its capital stock or any rights to any shares of capital stock, or obligating
the Stockholders to transfer any of the Company Stock. No shares of capital
stock of the Company are reserved for issuance pursuant to stock options,
warrants, agreements or other rights to purchase or acquire capital stock.
4.5 Subsidiaries and Investments. Except as set forth on
Schedule 4.5, the Company does not (a) own, directly or indirectly, any stock or
other equity securities of any Person, or (b) have any direct or indirect
Investment or equity or ownership interest in any person, firm, partnership,
corporation, venture or business other than the Core Business conducted by the
Company.
4.6 Financial Statements and Financial Information.
(a) Annexed hereto as Schedule 4.6(a) are true,
correct and complete copies of the balance sheets of the Company as of December
31, 1997, December 31, 1998 and December 31, 1999, and the related statements of
income, stockholders' equity and cash flows of the Company for the three (3)
years ended December 31, 1999 (collectively, the "Historical Financial
Statements").
12
(b) The Historical Financial Statements: (i) have
been audited by ▇▇▇▇▇, ▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ (the "Company Accountants") in
accordance with GAAP; (ii) fairly present in all material respects the Company's
financial condition as at the dates thereof, and the results of its operations
for the fiscal years then ended; (iii) contain and reflect all necessary
material adjustments and accruals for a fair presentation of the financial
condition and the results of operations as of the dates of and for the fiscal
years covered by such Historical Financial Statements; and (iv) make full and
adequate provision for the various assets and liabilities of the Company, fixed
or contingent, and the results of its operations and transactions in its
accounts, as of the dates and for the periods referred to therein.
(c) Schedule 4.6(c) annexed hereto contains a true
and complete list of the outstanding principal balance of, approximate accrued
interest on, and all collateral security for all indebtedness for money borrowed
and capitalized leases (collectively, "Debt") of the Company as of December 31,
1999, including but not limited to any such Debt owed by the Company to the
Stockholders and/or any of the Stockholders' Affiliates.
(d) Schedule 4.6(d) annexed hereto contains: (i) true
and complete aging schedules of the accounts receivable and accounts payable of
the Company as of December 31, 1999; (ii) a true and complete list of all
obligations (other than obligations disclosed in Schedule 4.6(c)) of the Company
to the Stockholders and/or any of the Stockholders' Affiliates on the date
hereof, (iii) a true and complete list of all obligations of the Company
guaranteed by the Stockholders on the date hereof, and the terms of such
guaranties; and (iv) a true and complete list reflecting the nature and amount
of all obligations owed to the Company on the date hereof by the Stockholders
and/or any of the Stockholders' Affiliates.
4.7 No Material Changes.
(a) Since December 31, 1999, the Company has not made
any payments or distributions of cash or other property of any kind, other than
(i) normal operating expenses, (ii) its state taxes for current periods, (iii)
scheduled amortization payments on existing Debt, plus any additional
indebtedness or capital leases incurred to finance capital expenditures within
the Company's 1999 capital expenditure budget, and (iv) cash distributions which
have been paid or may hereafter be paid to the Stockholders in respect of the
earnings and profits of the Company for all periods from and after January 1,
1999.
(b) Since December 31, 1999, the Core Business of the
Company has continued to be operated only in the ordinary course, and there has
not been:
(i) Any material adverse change in the
financial condition, operations or business of the Company from that shown on
the Historical Financial Statements, or any material transaction or commitment
effected or entered into outside of the normal course of the Company's Core
Business;
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(ii) Any damage, destruction or loss,
whether covered by insurance or not, materially and adversely affecting the
business, operations, assets, properties, financial condition or prospects of
the Company; or
(iii) Except for permitted distributions
pursuant to Section 7.5 below, any declaration, setting aside or payment of any
dividend or other distribution with respect to the Company Stock, any other
payment of any kind by the Company to the Stockholders or any of the
Stockholders' Affiliates outside of the ordinary course of business, any
forgiveness of any debt or obligation owed to the Company by the Stockholders or
any of the Stockholders' Affiliates, or any direct or indirect redemption,
purchase or other acquisition by the Company of any capital stock of the
Company.
4.8 Tax Returns and Tax Audits.
(a) Since inception in November 1996, the Company has
elected to be taxed as an electing small business (Subchapter S) corporation
under the provisions of Section 1371 et. seq., of the Internal Revenue Code of
1986, as amended (the "Code").
(b) All federal, state and local tax returns and tax
reports required to be filed by the Company on or before the date hereof have
been timely filed with the appropriate governmental agencies in all
jurisdictions in which such returns and reports are required to be filed; all
federal, state and local income, franchise, sales, use, property, excise,
payroll and other taxes (including interest and penalties and including
estimated tax installments where required to be filed and paid) due from or with
respect to the Company as of the date hereof have been fully paid, and
appropriate accruals have been made on the Company's books for taxes not yet due
and payable; all taxes and other assessments and levies which the Company is
required by law to withhold or to collect have been duly withheld and collected,
and have been paid over to the proper governmental authorities to the extent due
and payable; and there are no outstanding or pending claims, deficiencies or
assessments for taxes, interest or penalties with respect to any taxable period
of the Company.
(c) Neither the Company nor the Stockholders have
received notice of any pending audits with respect to any federal, state or
local tax returns of the Company, and no waivers of statutes of limitations have
been given or requested with respect to any tax years or tax filings of the
Company.
4.9 Personal Property; Liens. The Company has and owns good
and marketable title to all of its personal property, free and clear of all
liens, pledges, claims, security interests and encumbrances whatsoever. All
material items of machinery, equipment, vehicles and other fixed assets owned or
leased by the Company are listed in Schedule 4.9 annexed hereto (with specific
indication of those assets which are owned and those assets which are leased),
and, except as and to the extent disclosed in Schedule 4.9, all of such fixed
assets are in good operating condition and repair (reasonable wear and tear
excepted) and are adequate for their use in the Company's business as presently
conducted.
14
4.10 Real Property.
(a) The Company does not own or have any interest of
any kind (whether ownership, lease or otherwise) in any real property, except to
the extent of the Company's interest as lessee under the leases for the
Company's business premises located at (i) ▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇,
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, (ii) ▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇, ▇▇▇▇ ▇▇▇▇ ▇▇▇▇,
▇▇▇▇ ▇▇▇▇▇, and (iii) such other locations as are listed on Schedule 4.10 hereto
(collectively, the "Company Facilities"). True and complete copies of the lease
agreements in respect of the Company Facilities (including all amendments
thereto) are annexed hereto as Schedule 4.10 (collectively, the "Leases").
(b) The Company (and, to the best of the
Stockholders' knowledge, the landlords thereunder) is presently in compliance
with all of their respective obligations under the Leases, and the Company
Facilities are in good condition (reasonable wear and tear excepted), and are
adequate for the operation of the Company's business as presently conducted. No
consent of the landlord under any Lease will be required in order for the Leases
to remain in effect in accordance with their current terms, after giving effect
to the sale and transfer of the Company Stock pursuant to this Agreement.
(c) The Company's use of the Company Facilities in
the normal conduct of the Business does not violate any applicable building,
zoning or other law, ordinance or regulation affecting such real property, and
no covenants, easements, rights of way or other such conditions of record impair
the Company's use of the Company Facilities in the normal conduct of the
Business.
(d) All of the buildings, fixtures and other
improvements located on or at the Company Facilities are accessible by public
roads, and during the two (2) year period prior to the date hereof, the Company
has not experienced any material interruption in the delivery of adequate
quantities of any utilities or other public services required by the Company in
the normal operation of the Business.
4.11 Accounts Receivable.
(a) To the extent not already collected, all accounts
receivable shown on the Historical Financial Statements, and all accounts
receivable thereafter created or acquired by the Company prior to the Closing
Date (the "Accounts"), have arisen or will arise in the ordinary course of the
Company's business, and, to the extent not already collected, represent and will
represent amounts owed to the Company by unaffiliated third party account
debtors in respect of goods, products or services provided to such account
debtors by the Company, subject to customary adjustments which may be effected
with customers in the ordinary course of business (which adjustments are not and
will not be, in the aggregate, material to the financial condition and business
of the Company).
(b) The Stockholders have no knowledge of any
asserted counterclaims or set-offs in respect of any of such Accounts, or any
state of facts, events or occurrences which would impair the collection of such
15
Accounts in the ordinary course of business, subject to customary adjustments
which may be effected with customers in the ordinary course of business (which
adjustments are not and will not be, in the aggregate, material to the financial
condition and business of the Company).
4.12 Inventories. The Company does not maintain any inventory
or supplies held for resale.
4.13 Insurance Policies. Schedule 4.13 annexed hereto contains
a true and correct schedule of all insurance coverage held by the Company
concerning its business and properties, including the names of insurers, policy
limits and deductibles. Within the past three years none of such policies have
been cancelled by the insurers and to the best of the Stockholders' knowledge,
the types and levels of such insurance coverages are reasonable and customary
for businesses of comparable type, size and location.
4.14 Permits and Licenses. The Company possesses all required
permits, licenses and/or franchises, from whatever governmental authorities or
agencies (domestic and/or foreign) requiring the same and having jurisdiction
over the Company, necessary in order to operate its Business in the manner
presently conducted, except for such permits and licenses the failure to obtain
which would not have a material adverse affect on the business or financial
condition of the Company. All of the Company's permits, licenses and/or
franchises are valid, current and in full force and effect and none of such
permits, licenses or franchises will be voided, revoked or terminated, or
voidable, revocable or terminable, upon and by reason of the consummation of the
transactions contemplated by this Agreement.
4.15 Contracts and Commitments.
(a) Schedule 4.15 annexed hereto lists all real
property leases, personal property leases, commitments, loan agreements,
indentures, employment, consulting and shareholder agreements, and all other
contracts and agreements to which the Company is a party and which are material
to its business (collectively, "Material Contracts"), except that Schedule 4.15
need not list any such contract or agreement that is listed on any other
Schedule hereto, or was entered into in the ordinary course of the Core Business
of the Company and that, in any case: (i) is for the purchase of supplies or
other inventory items in the ordinary course of business; (ii) is related to the
purchase or lease of any capital asset involving aggregate payments of less than
$10,000 per annum; or (iii) may be terminated without penalty, premium or
liability by the Company on not more than thirty (30) days' prior written
notice.
(b) Except as set forth in Schedule 4.15: (i) all
Material Contracts are in full force and effect; (ii) the Company has not
received any notice that any Material Contract is in material breach or default
or is now subject to any condition or event which has occurred and which, after
notice or lapse of time or both, would constitute a material default by any
party under any such contract, lease, agreement or commitment; and (iii) none of
the Material Contracts will be voided, revoked or terminated, or voidable,
16
revocable or terminable, upon and by reason of the consummation of the
transactions contemplated by this Agreement.
(c) No purchase commitment by the Company is in
excess of the normal, ordinary and usual requirements
of the business of the Company.
4.16 Clients. Schedule 4.16 annexed hereto sets forth a
list of the names and addresses of all clients of the Company since January 1,
1997. Except as set forth on such Schedule 4.16, the Company has not received
any notice that any existing client intends to terminate relations with the
Company.
4.17 Labor, Benefit and Employment Agreements.
(a) Except as set forth in Schedule 4.17 annexed
hereto, the Company is not a party to (i) any collective bargaining agreement or
other written agreement covering unionized employees, (ii) any bonus, deferred
compensation, stock option, stock purchase, consulting, retirement, severance,
welfare or incentive plan, pension plan, profit sharing plan, retirement, or
other such benefit plan constituting an "employee benefit plan" within the
meaning of Section 3(3) of the Employee Retirement Income Security Act of 1974,
as amended (collectively, an "Employee Plan"), or (iii) any written agreement
with respect to the employment or compensation of any non-hourly and/or
non-union employee(s) which is not terminable without penalty by the Company on
not more than thirty (30) days' prior written notice. Schedule 4.17 sets forth
the amount of all compensation or remuneration (including any discretionary
bonuses) paid or to be paid by the Company during the 1999 fiscal year to
employees or consultants who presently receive aggregate compensation or
remuneration at an annual rate in excess of $75,000.
(b) No union is now certified or has claimed in
writing the right to be certified as a collective bargaining agent to represent
any employees of the Company, and there are no organizational activities or
labor disputes existing or, to the best of the Stockholders' knowledge,
threatened, involving organizational activities, picketing, strikes, slowdowns,
work stoppages, job actions or lockouts of any employees of the Company.
(c) Neither the Company nor the Stockholders have
received notice of any unfair labor practice charges or petitions for election
filed, pending or being litigated before the National Labor Relations Board or
any State labor relations board. The Company has not received any written notice
of any actual or alleged violation of any law, regulation, order or contract
term affecting the collective bargaining rights of employees, equal opportunity
in employment, or employee health, safety, welfare, or wages and hours. The
Company is not a party to any suits or administrative claims involving sexual
harassment or discrimination and the Stockholders have no actual knowledge that
any such claims are pending or threatened.
(d) The Company (i) is not a party to any
"multiemployer plan" (as defined in Section 3(37) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA")), and (ii) the Company has
not, at any time on or after April 29, 1980, suffered or caused any "complete
17
withdrawal" or "partial withdrawal" (as those terms are respectively defined in
Sections 4203 and 4205 of ERISA) therefrom on its part.
(e) With respect to any and all Employee Plans which
the Company may previously have maintained or sponsored, such Employee Plans
were administered in compliance in all material respects with all applicable
statutes, rules and regulations.
(f) Except as listed in Schedule 4.17, the Company
does not maintain any medical, health, life or other employee benefit insurance
programs or any welfare plans (within the meaning of Section 3(l) of ERISA) for
the benefit of any current or former employees, and, except as required by
statute or governmental regulation, the Company does not have any liability,
fixed or contingent, for health or medical benefits to any former employee.
4.18 No Breach of Statute, Decree or Other Instrument.
Except as set forth on Schedule 4.18, neither the execution and delivery of this
Agreement by the Stockholders , nor the performance of or compliance with the
terms and provisions of this Agreement on the part of the Company and/or the
Stockholders , will violate or conflict with any term of the Articles of
Incorporation or By-Laws of the Company or constitute a material breach or
violation of any statute, law, rule or regulation of any governmental authority
affecting the Company, or will at the Closing Date conflict with, result in a
breach of, or constitute a default under, any of the terms, conditions or
provisions of any judgment, order, award, injunction, decree, contract, lease,
agreement, indenture or other instrument to which the Company or the
Stockholders are a party or by which the Company or the Stockholders are bound.
No consent, authorization or approval of or filing with any governmental
authority or agency, or any third party, will be required on the part of the
Company or the Stockholders in connection with the consummation of the
transactions contemplated hereby. To the best of the Stockholders' knowledge,
the Company will not be required, whether by law, regulation or administrative
practice, to reapply for or refile to obtain any of the material licenses,
permits or other authorizations presently held by the Company and required for
the operation of its business as conducted on the date hereof
4.19 Compliance with Laws. The representations and
warranties contained in this Section 4.19 relate to matters other than
"Environmental Laws," which are covered by Section 4.24 below.
(a) The Company is, and has been at all times during
the three (3) year period prior to the date hereof, in compliance, in all
material respects, with all domestic, foreign, federal, state, local and
municipal laws and ordinances and governmental rules and regulations, and all
requirements of insurance carriers, applicable to its business, affairs,
properties or assets.
(b) The Company has not received any notice of
default or violation, nor is the Company in default or violation, with respect
to any judgment, order, writ, injunction, decree, demand or assessment issued by
any court or any federal, state, local, municipal or other governmental agency,
board, commission, bureau, instrumentality or department, domestic or foreign,
relating to any aspect of the Company's business, affairs, properties or assets.
The Company has not received any written notice of or been charged with, and is
not, to the best of the Stockholders' knowledge, under investigation with
18
respect to, any violation of any provision of any federal, state, local,
municipal or other law or administrative rule or regulation, domestic or
foreign, relating to any aspect of the Company's business, affairs, properties
or assets, which violation would have a material adverse effect on the business,
financial condition or results of operations of the Company.
4.20 Litigation. Except as disclosed on Schedule 4.20
hereto, there is no suit, action, arbitration, or legal, administrative or other
proceeding, or governmental investigation pending, or to the best knowledge of
the Stockholders threatened, by or against the Company or any of its assets or
properties. The Stockholders are not aware of any state of facts, events,
conditions or occurrences which would properly constitute grounds for or the
basis of any meritorious suit, action, arbitration, proceeding or investigation
against or with respect to the Company.
4.21 Patents, Licenses and Trademarks. Except as set forth
on Schedule 4.21, there are no (a) patents, patent applications, copyright
registrations and applications, registered trade names, and trademark
registrations and applications, both domestic and foreign, which are presently
owned, filed or held by the Company and/or the Stockholders or any of the
Company's directors, officers or employees and which in any way relate to or are
used in the business of the Company; (b) licenses, both domestic and foreign,
which are owned or controlled by the Company or the Stockholders and/or any of
the Company's directors, officers or employees and which in any way relate to or
are used in the business of the Company; or (c) franchises, licenses and/or
similar arrangements granted to the Company by others and/or to others by the
Company (collectively, "Intellectual Property"). The Stockholders do not own
personally or through any Affiliate of the Stockholders (other than the Company)
any such Intellectual Property.
4.22 Transactions with Affiliates. No material asset
employed in the business of the Company is owned by, leased from or leased to
the Stockholders, any of the Stockholders' Affiliates, any member of the
Stockholders' family or any partnership, corporation or trust for their benefit,
or any other officer or director of the Company or any Affiliate of the Company.
4.23 Bank Accounts. Annexed hereto as Schedule 4.23 is a
correct and complete list of all bank accounts and safe deposit boxes maintained
by or on behalf of the Company, with indication of all persons having signatory,
access or other authority with respect thereto.
4.24 Environmental Matters.
(a) As used in this Section 4.24: (i) the term
"Environmental Laws" means all federal, state and local laws, statutes,
regulations, permits, orders, ordinances, codes, rules and other governmental
restrictions, requirements and duties, including common law, relating to the
treatment, storage, disposal or release of air pollutants, water pollutants or
processed waste water or otherwise relating to human health, the environment or
hazardous substances, including but not limited to the Federal Solid Waste
Disposal Act; the Federal Clean Air Act (including, without limitation, the
19
Clean Air Act Amendments of 1990); the Federal Water Pollution Control Act; the
Hazardous Materials Transportation Act; the Federal Toxic Substances Control
Act; the Federal Resource Conservation and Recovery Act of 1976; the National
Environmental Policy Act; the Federal Comprehensive Environmental Response,
Compensation and Liability Act of 1980 ("CERCLA") and similar state laws, all
amendments to any of the foregoing statutes, and all regulations promulgated by
any federal or state agencies, including the Environmental Protection Agency,
regulations of the Nuclear Regulatory Agency, and regulations of any state
department of natural resources or state environmental protection agency now or
at any time hereinafter in effect; (ii) the terms "hazardous substances",
"release", "respond", "response", and all variations and derivatives thereof
shall mean and include, without limitation, all radioactive materials, asbestos
and asbestos-containing materials, PCB's, petroleum products and by-products,
all solid, semi-solid, liquid or gaseous substances which are toxic, ignitable,
corrosive, carcinogenic or otherwise dangerous to human, plant or animal health,
and all substances defined or listed as "hazardous substances", "toxic
substances", "hazardous waste", "toxic pollutants" in, or otherwise regulated
under any Environmental Law, including, without limitation, the meanings
ascribed to them in CERCLA.
(b) The Company has not received notice of any
pending or threatened litigation or administrative proceeding which in any
instance (i) asserts or alleges any violation of applicable Environmental Laws
on the part of the Company, (ii) asserts or alleges that the Company is required
to clean up, remove or otherwise take remedial or other response action due to
the disposal, depositing, discharge, leaking or other release of any hazardous
substances or materials, or (iii) asserts or alleges that the Company is
required to pay all or any portion of the costs of any past, present or future
cleanup, removal or remedial or other response action which arises out of or is
related to the disposal, depositing, discharge, leaking or other release of any
hazardous substances or materials by the Company. The Company is not subject to
any judgment, decree, order or citation related to or arising out of any
Environmental Laws. To the best of the Stockholders' knowledge, the Company has
not been named or listed as a potentially responsible party by any governmental
body or agency in any matter arising under any Environmental Laws. The Company
is not a participant in, nor does the Stockholders have actual knowledge of, any
governmental investigation involving the Company Facility or any other real
estate now or heretofore owned or leased by the Company.
(c) Neither the Company nor, to the best of the
Stockholders' knowledge, any other person, firm, corporation or governmental
entity has caused or permitted any hazardous substances or other materials to be
stored, deposited, treated, recycled or disposed of on, under or at any real
estate now or heretofore leased by the Company, which materials, if known to be
present, may reasonably be expected owned or to require or authorize cleanup,
removal or other remedial action under any applicable Environmental Laws.
(d) To the best of the Stockholders' knowledge, there
are not now nor have there ever been, any tanks or other storage facilities on,
under or at any real estate now or heretofore owned or leased by the Company
which contain or contained hazardous substances or other materials which, if
known to be present in soils or ground water, may reasonably be expected to
20
require or authorize cleanup, removal or other remedial action under any
Environmental Laws.
(e) To the best of the Stockholders' knowledge, the
Company has in full force and effect all material permits, licenses and
approvals required to be maintained under any Environmental Laws applicable to
the Company or the Company Facility.
(f) The Stockholders are not aware of any monitoring
and testing equipment and records which are legally required to assess
environmental compliance in accordance with Environmental Laws, and there are no
conditions presently existing at any real estate currently occupied by the
Company which would subject the Company to any damages, penalties, cleanup costs
or other liability under Environmental Laws, or which may reasonably be expected
to require cleanup, removal, remedial action or other response under any
applicable Environmental Laws.
4.25 Investment Decision. With respect to the receipt of
Commodore Common Stock, the Stockholders have obtained all such information as
the Stockholders have required in order to make an informed decision with
respect to the acceptance of an investment in such securities.
4.26 Schedules Incorporated by Reference. The making of
any recitation in any Schedule hereto shall be deemed to constitute a
representation and warranty that such recitation is an accurate statement and
disclosure of the information required by the corresponding Section(s) of this
Agreement, as, to the extent, and subject to the qualifications and limitations,
set forth in such corresponding Section(s).
4.27 Disclosure and Duty of Inquiry. Commodore is not and
will not be required to undertake any independent investigation to determine the
truth, accuracy and completeness of the representations and warranties made by
the Stockholders in this Agreement. The Stockholders representations and
warranties herein shall not be affected by any information which may come to the
attention of Commodore during the course of any investigation heretofore or
hereafter made.
5. REPRESENTATIONS AND WARRANTIES OF COMMODORE.
--------------------------------------------
Commodore hereby represents and warrants to the Stockholders
as follows:
5.1 Organization, Good Standing and Qualification.
Commodore is a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware, with all necessary power and authority
to execute and deliver this Agreement, to perform its obligations hereunder, and
to consummate the transactions contemplated hereby.
5.2 Valid and Binding Agreement. This Agreement and, when
executed and delivered by Commodore on the Closing Date, each of the
"Transaction Documents" (as hereinafter defined), constitute and will constitute
the legal, valid and binding obligations of Commodore, enforceable against
Commodore in accordance with their respective terms, except to the extent
21
limited by bankruptcy, insolvency, reorganization and other laws affecting
creditors' rights generally, and except that the remedy of specific performance
or similar equitable relief is available only at the discretion of the court
before which enforcement is sought.
5.3 No Breach of Statute or Contract. Neither the
execution and delivery of this Agreement by Commodore, nor compliance with the
terms and provisions of this Agreement or the Transaction Documents on the part
of Commodore, will: (a) violate the Certificate of Incorporation or By-Laws of
Commodore, or any statute or regulation of any governmental authority, domestic
or foreign, which affects and is material to the business of Commodore; (b)
require the issuance to Commodore of any authorization, license, consent or
approval of any federal or state governmental agency; or (c) conflict with or
result in a breach of any of the terms, conditions or provisions of any
judgment, order, injunction, decree, note, indenture, loan agreement or other
agreement or instrument to which Commodore is a party, or by which Commodore is
bound, or constitute a default thereunder.
5.4 Public Filings. Except as set forth on Schedule 5.6,
since June 1996 Commodore has timely made all filings of all periodic reports
with the SEC required to be made under the Securities and Exchange Act of 1934,
as amended, including, without limitation, all Form 10-K, Form 10-Q and Form 8-K
filings (the "1934 Act Reports"). The information contained in all such 1934 Act
Reports and in Commodore's Form S-3 Registration Statement currently being
reviewed by the SEC are complete and accurate in all material respects and does
not contain any untrue statements of a material fact or omit to state therein
any such material fact or circumstance required to make the statements contained
therein not misleading in any material respect.
5.5 Disclosure and Duty of Inquiry. The Stockholders are
not and will not be required to undertake any independent investigation to
determine the truth, accuracy and completeness of the representations and
warranties made by Commodore in this Agreement. Commodore's representations and
warranties herein shall not be affected by any information which may come to the
attention of the Stockholders during the course of any investigation heretofore
or hereafter made.
5.6 Investment Decision. Prior to the Closing Date,
Commodore and its representatives shall have had an opportunity to conduct and
shall have conducted a full and complete due diligence investigation of the
Assets, Assumed Liabilities, business, financial condition and prospects of the
Core Business of the Company (the "Due Diligence Investigation"), and shall have
obtained all such information as Commodore has deemed appropriate in order to
make an informed decision with respect to the consummation of the transactions
contemplated by this Agreement and the Exhibits hereto.
5.7 No Material Adverse Change. Since the date of
Commodore's filing of its Form 10-K for its fiscal year ended December 31, 1999,
there has been no material adverse change in the business, financial condition,
results of
22
operations or prospects of Commodore and its Subsidiaries, when taken as a
consolidated whole, except as otherwise expressly referred to or reflected in
the 1934 Act Reports referred to in Section 5.4 above.
6. THE STOCKHOLDERS' OBLIGATIONS BEFORE THE CLOSING DATE.
------------------------------------------------------
The Stockholders each covenant and agree that, from the date
hereof until the Closing Date:
6.1 Access to Information. In order to assist Commodore
in the conduct of its due diligence investigation, the Company and the
Stockholders shall permit Commodore and its counsel, accountants and other
representatives, upon reasonable advance notice to the Company, during normal
business hours and without undue disruption of the business of the Company, to
have reasonable access to all properties, books, accounts, records, contracts,
documents and information relating to the Company, including (without
limitation) to permit any accountants, attorneys or other professionals selected
by Commodore to perform a review (including access to accountants' work papers)
of the Historical Financial Statements. Commodore and its representatives shall
also be permitted to freely consult with the Company's counsel and accountants
concerning the Business of the Company, and, following delivery of Financing
Commitments acceptable to the Stockholders, to conduct interviews with
employees, customers and suppliers of the Company. In addition, the Stockholders
will assist Commodore in connection with attending meetings, making
presentations to, and having consultations with prospective financing sources;
provided, that such assistance shall (a) not obligate the Stockholders to attend
meetings at times or places that would interfere with their operation of the
Business, and (b) not be construed in any manner to obligate the Company or the
Stockholders, or either of them, to incur any personal liability or expense.
6.2 Conduct of Business in Normal Course. The Company
shall carry on its business activities in substantially the same manner as
heretofore conducted, and shall not make or institute any unusual or novel
methods of service, sale, purchase, lease, management, accounting or operation
that will vary materially from those methods used by the Company as of the date
hereof, without in each instance obtaining the prior written consent of
Commodore. Without limitation of the foregoing, the Company shall not make any
payments in violation of Section 4.7(a) above.
6.3 Preservation of Business and Relationships. The
Company shall, without making or incurring any unusual commitments or
expenditures, use its best efforts to preserve its business organization intact
and to preserve its present relationships with referral sources, clients,
customers, suppliers and others having business relationships with it.
6.4 Maintenance of Insurance. The Company shall continue
to carry its existing insurance, to the extent obtainable upon reasonable terms.
6.5 Corporate Matters. The Company shall not, without the
prior written consent of Commodore:
23
(a) amend its Articles of Incorporation or By-Laws;
(b) issue any shares of its capital stock;
(c) issue or create any warrants, obligations,
subscriptions, options, convertible securities or other commitments under which
any additional shares of its capital stock might be directly or indirectly
issued;
(d) amend, cancel or modify in any material respect
any Material Contract or enter into or modify any material new agreement,
commitment or transaction, except in each case in the ordinary course of
business;
(e) pay, grant or authorize any salary increases or
bonuses except in the ordinary course of business and consistent with past
practice, or enter into any employment agreement, consulting agreement,
management agreement or Employee Plan;
(f) make any change in its senior management
personnel;
(g) except pursuant to commitments in effect on the
date hereof and/or within the Company's 1999 capital expenditure budget (to the
extent disclosed in Schedule 6.5 annexed hereto), make any capital
expenditure(s) or commitment(s), whether by means of purchase, lease or
otherwise, or any operating lease commitment(s), in excess of $20,000 in the
aggregate;
(h) sell, assign or dispose of any capital asset(s)
with a net book value in excess of $10,000 as to any one item, or $50,000 in the
aggregate;
(i) materially change its method of collection of
accounts or notes receivable, accelerate or slow its payment of accounts
payable, or prepay any of its obligations or liabilities, other than prepayments
to take advantage of trade discounts not otherwise inconsistent with or in
excess of historical prepayment practices',
(j) incur any liability or indebtedness except, in
each instance, in the ordinary course of the Business;
(k) subject any of its assets or properties to any
further liens or encumbrances, other than Permitted Liens;
(l) forgive any liability or indebtedness owed to it
by the Stockholders or any of his Affiliates;
(m) enter into any material contracts with the
Stockholders or any key employees; or
(n) agree to do, or take any action in furtherance
of, any of the foregoing.
24
7. ADDITIONAL AGREEMENTS OF THE PARTIES.
-------------------------------------
7.1 Confidentiality. Notwithstanding anything to the
contrary contained in this Agreement, and subject only to any disclosure
requirements which may be imposed upon Commodore under applicable state or
federal securities or antitrust laws, it is expressly understood and agreed by
Commodore, the Company and the Stockholders that (a) this Agreement, the
Schedules hereto, and the conversations, negotiations and transactions relating
hereto and/or contemplated hereby, and (b) all financial information, business
records and other non-public information concerning the Company or Commodore
which any of Commodore, the Company and the Stockholders or their respective
representatives has received or may hereafter receive, shall be maintained in
the strictest confidence by Commodore, the Company and the Stockholders and
their respective representatives, and shall not be disclosed to any person that
is not associated or affiliated with any of Commodore, the Company and the
Stockholders and involved in the transactions contemplated hereby, without the
prior written approval of the Stockholders or Commodore, as applicable.
Notwithstanding the foregoing, Commodore may disclose confidential information
to prospective financing sources; provided, such financing sources execute and
deliver to the Company a separate confidentiality agreement in substantially the
form of Schedule 7.1 annexed hereto The provisions of this Section 7.1 shall not
be applicable to disclosures required to be made to third parties pursuant to
subpoenas or court orders. The parties hereto shall use their best efforts to
avoid disclosure of any of the foregoing or undue disruption of any of the
business operations or personnel of the Company or Commodore. In the event that
the transactions contemplated hereby shall not be consummated for any reason,
each of Commodore, the Company and the Stockholders covenant and agree that
neither they nor their respective representatives shall retain any documents,
lists or other writings which they may have received or obtained in connection
herewith or any documents incorporating any of the information contained in any
of the same (all of which, and all copies thereof in the possession or control
of themselves or their representatives, shall be returned to the original source
of the material at issue).
7.2 Commodore's Option and Repurchase Obligation.
Notwithstanding anything to the contrary, express or implied,
contained in this Agreement or in any exhibit hereto, with respect to up to an
aggregate of ten million five hundred thousand (10,500,000) shares of the
Acquisition Stock, the following provisions of this Section 7.2 shall apply:
(a) Option to Purchase. Commodore is hereby granted,
upon the terms and subject to the conditions hereinafter set forth, an option
(the "Option"), exercisable at any time or from time to time during the "Option
Period" (as hereinafter defined), to purchase any or all of the ten million five
hundred thousand (10,500,000) shares of Acquisition Stock at the "Repurchase
Price" (as hereinafter defined), all upon the terms and conditions set forth
below. Notwithstanding the foregoing, or any other provision of this Section
7.2, in addition to (and not in lieu of) their rights to terminate the entire
Option pursuant to the provisions of Section 7.2(a)(vii) below, the Stockholders
may at any time on or prior to Commodore's exercise of the entire Option and
payment of the full Repurchase Price for all shares of the Acquisition Stock,
elect to withhold from the Option and retain all or any part of up to one
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million (1,000,000) of the shares of Commodore Common Stock included in the
Acquisition Stock (such 1,000,000 shares of Acquisition Stock subject to
retention by the Stockholders being referred to herein as the "Additional
Commodore Stock"). The shares of Acquisition Stock which are subject to the
Option are hereinafter sometimes referred to herein as the "Repurchase Shares."
(i) The aforesaid Option shall commence upon
the effective date of the Acquisition and, to the extent not exercised,
shall terminate one (1) year from the Closing Date (the "Anniversary
Date"), unless sooner terminated as provided in clause (vii) of this
Section 7.2(a) (the "Option Period"). Commodore shall have the right to
purchase the Repurchase Shares on any one or more occasions during the
Option Period.
(ii) On each occasion that Commodore shall
elect to exercise the Option, whether in whole or in part, it shall
deliver to the record owners of the Repurchase Shares, not less than
twenty-four (24) hours and not more than thirty (30) days prior written
notice of exercise (the "Exercise Notice"); provided, that the final
Exercise Notice shall be given not later than thirty (30) days prior to
the expiration of the Option Period.
(iii) On each occasion that Commodore shall
elect to exercise its Option, it shall pay to the record owners of the
Repurchase Shares a purchase price, for each of the Repurchase Shares
set forth in the Exercise Notice, which shall be equal to the greater
of (i) one and 50/100 dollars ($1.50) or (ii) sixty-five (65%) percent
of the average of the closing prices of Commodore Common Stock, as
traded on the American Stock Exchange, Inc., The Nasdaq Stock Market,
Inc., the New York Stock Exchange, Inc. (collectively a "National
Securities Exchange"), as reported in The Wall Street Journal, Eastern
Edition, for the three (3) trading days immediately prior to the date
of each scheduled payment of such Repurchase Price (the "Repurchase
Price").
(iv) Against receipt by it of stock
certificates evidencing such Repurchase Shares, duly endorsed for
transfer, Commodore shall pay in full, in cash to the appropriate
record owners of the Repurchase Shares, the Repurchase Price for all
Repurchase Shares set forth in each Exercise Notice on a date which
shall be not later than thirty (30) days following the date of such
Exercise Notice. If, for any reason (other than a record owner's
failure to timely deliver to Commodore stock certificates evidencing
such Repurchase Shares, duly endorsed for transfer), Commodore shall
fail or refuse on any one occasion to make timely payment in full of
the Repurchase Price, the Option Period and the Option shall
immediately terminate.
(v) On each occasion that Commodore shall
elect to exercise the Option, it shall deliver the Exercise Notice to
each record owner of the Repurchase Shares and shall exercise the
Option and pay the Repurchase Price, on a pro-rata basis as among all
such record owners of Repurchase Shares, based upon the amount by which
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the number of Repurchase Shares owned by each record owner bears the
aggregate number of outstanding Repurchase Shares.
(vi) The Stockholders shall, and shall cause
the other holders of the Repurchase Shares to fully cooperate with
Commodore and its designated assignees in connection with the timely
delivery of certificates evidencing the appropriate number of
Repurchase Shares to be repurchased pursuant to each Exercise Notice,
duly endorsed by the holder for transfer or accompanied by duly
executed stock powers with signatures appropriately notarized or
guaranteed. In such connection, on the Effective Date, the Stockholders
and each other holder of Repurchase Shares shall deliver to ▇▇▇▇▇▇▇▇▇
Traurig, LLP, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, as custodian,
certificates evidencing all Repurchase Shares, and such custodian, as
securities counsel to Commodore shall delivery appropriate instructions
to the Commodore transfer agent on each occasion that Repurchase Shares
are to be delivered upon each full or exercise of the Option.
(vii) The Option Period set forth in clause
(i) of this Section 7.2(a) shall automatically terminate, without any
further action on the part of any Person, prior to the Anniversary Date
and thereafter the Option shall be null and void, if Commodore or the
Company shall fail to fully perform on a timely basis any of the
"Obligations" (as that term is defined in Section 7.2(d) below). In
addition, and notwithstanding the grant of the Option hereunder, the
Stockholders may, upon three (3) days prior written notice to Commodore
terminate the Option as to all Repurchase Shares at any time prior to
the Anniversary Date; provided, that if the Stockholders (acting on
behalf of themselves and the other holders of the Repurchase Shares)
shall so elect to voluntarily terminate the Option, the Repurchase
Obligation described in Section 7.2(b) below shall similarly terminate
as of the date of such voluntary termination of the Option by the
Stockholders.
(b) Obligation to Repurchase the Repurchase Shares.
Notwithstanding anything to the contrary, express or implied, contained in this
Agreement, and as material consideration to induce the Stockholders to amend and
restate the Prior Asset Agreement, Commodore hereby irrevocably and
unconditionally covenants and agrees to purchase from the record owners of the
Repurchase Shares, by a date which shall be not later than the Anniversary Date,
at the Repurchase Price set forth in this Section 7.2(b), a sufficient number of
the Repurchase Shares, so as to provide the record owners of the Repurchase
Shares by the Anniversary Date with cash payments which shall aggregate not less
than Fourteen Million Five Hundred Thousand ($14,500,000) Dollars, inclusive of
payments made upon the prior exercise(s) by Commodore of the Option set forth in
Section 7.2(a) above. The foregoing covenant and agreement of Commodore is
herein referred to as the "Repurchase Obligation." The Repurchase Obligation of
$14,500,000 shall be inclusive of stated interest thereon at the rate of 6.37%
per annum; which interest shall be payable on the Anniversary Date, together
with payment of the "Repurchase Balance" (as that term is hereinafter defined).
Such Repurchase Obligation shall be discharged by Commodore, as follows:
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(i) On the Anniversary Date, against
delivery of the appropriate number of Repurchase Shares duly endorsed
for transfer, Commodore shall make payment to the record owners of the
Repurchase Shares (on a pro-rata basis as among all such record owners
of Repurchase Shares, based upon the amount by which the number of
Repurchase Shares owned by each record owner bears the aggregate number
of outstanding Repurchase Shares) of an aggregate amount as shall equal
(A) Fourteen Million Five Hundred Thousand ($14,500,000) Dollars, less
(B) the aggregate payments previously made at the applicable Repurchase
Prices to such record owners or their predecessors upon exercise of the
Option set forth in Section 7.2(a) above (the "Repurchase Balance").
(ii) The number of Repurchase Shares to be
delivered to Commodore, in exchange for its payment of the Repurchase
Balance, shall be determined by dividing the Repurchase Balance by the
Repurchase Price set forth below in clause (iii) of this Section
7.2(b).
(iii) For purposes of this Section 7.2(b),
the Repurchase Price for each of the Repurchase Shares shall be equal
to the greater of (i) one and 50/100 dollars ($1.50) or (ii) sixty-five
(65%) percent of the average of the closing prices of Commodore Common
Stock, as traded on a National Securities Exchange, as reported in the
Wall Street Journal, for the three trading days immediately prior to
the Anniversary Date.
(iv) If, for any reason (other than a
record owner's failure to timely deliver to Commodore stock
certificates evidencing such Repurchase Shares, duly endorsed for
transfer), Commodore shall fail or refuse to make payment in full of
the Repurchase Balance with thirty (30) days after the Anniversary
Date, the Stockholders, may on behalf of themselves and all other
record owners of the Repurchase Shares, in addition to and not in lieu
of all of their remedies at law, exercise all of their rights and
remedies contemplated by Section 7.2(d) below and Exhibit D annexed
hereto.
(c) Acknowledgements and Additional Agreements of
Commodore. Commodore acknowledges that, but for the Repurchase Obligation set
forth in Section 7.2(b) above and its agreement to provide collateral security
for the payment and performance of such Repurchase Obligation, and without the
immediately following covenant by Commodore, the Stockholders would not have
entered into this Agreement and would have terminated all transactions and other
relationships with Commodore. Accordingly, Commodore does hereby agree that if,
following the Closing Date, a petition is filed by or against Commodore and/or
any of its Subsidiaries (collectively, the "Commodore Group") commencing a case
under the United States Bankruptcy Code or if Commodore or any of the other
members of the Commodore Group shall become the subject of any insolvency,
bankruptcy, receivership, readjustment of debt, dissolution, reorganization ,
liquidation or similar proceeding, under state or federal law, the Stockholders
28
and the other holders of Repurchase Shares will be immediately and absolutely
entitled to, and each member of the Commodore Group hereby consents to, the
relief specified in clauses (i), (ii) and (iii) below, singly, alternatively or
cumulatively, and each member of the Commodore Group agrees that it will not
object to, contest or oppose any motion, application, complaint or other
proceeding by the Stockholders (acting on behalf of themselves and any other
holders of the Repurchase Shares), to obtain such relief, and each member of the
Commodore Group will take all actions necessary to enable the Stockholders and
other holders of Repurchase Shares to obtain the following relief:
(i) the Stockholders and the other holders
of Repurchase Shares shall be entitled to the immediate termination of
the automatic stay imposed by Section 362 of the Bankruptcy Code to
enable any of them to exercise all of their rights and remedies under
this Agreement, the Pledge Agreement annexed hereto as Exhibit D and
applicable law;
(ii) the Stockholders and the other holders
of the Repurchase Shares shall be entitled to the immediate dismissal
of such case pursuant to Section 305(a)(1) of the Bankruptcy Code (with
attorneys' fees and other costs), and Commodore and each other member
of the Commodore Group agree that such dismissal will be in the
interest of creditors and themselves; and
(iii) the Stockholders and each other
holder of Repurchase Shares shall be entitled to the immediate
dismissal of such case under Section 1112(b) of the Bankruptcy Code for
cause, and Commodore and each other member of the Commodore Group agree
that the filing of such case by any of them shall per se be deemed to
have been commenced in bad faith and solely for the improper purpose of
impeding the exercise of the rights and remedies of the Stockholders
and other holders of Repurchase Shares with attendant unnecessary delay
and needless cost.
In addition to (and not in lieu) of the foregoing, each of
Commodore and all other members of the Commodore Group do hereby irrevocably and
unconditionally covenant and agree:
(A) to waive any and all equitable defenses to the exercise of
the rights and remedies of the Stockholders and the other holders of Repurchase
Shares set forth in this Section 7.2 and in the Pledge Agreement annexed hereto
as Exhibit D, including, without limitation, the equitable defense of
forfeiture; and
(B) that the rights and remedies of the Stockholders and other
holders of Repurchase Shares which are set forth in this Section 7.2 and in the
Pledge Agreement annexed hereto as Exhibit D shall not be subject to pro ration
(d) Collateral to Secure Obligations. As collateral
to secure payment and performance by Commodore and/or the Company of (i) the
obligation of Commodore to hold the Commodore Stockholders Meeting and obtain
Final Commodore Stockholders Approval, as contemplated by Section 7.12 below,
(ii) the full and timely payment of the entire Repurchase Obligation with
respect to the Repurchase Shares, (iii) Commodore's obligations under the Make
29
Whole Agreement, (iv) the obligation of the Company to make full and timely
payments of all quarterly installments of Company Cash Flow Payments of Company
Cash Flow, as defined and provided in Section 2.5 hereof, up to and including
the first Ten Million ($10,000,000) Dollars of such Company Cash Flow Payments
which are due and payable in quarterly installments through December 31, 2003,
and (v) the obligations of each of Commodore and the Company to duly perform all
of its and their respective covenants, agreements and undertakings which are set
forth in Section 14.4 and Section 14.5 of this Agreement (collectively, the
"Obligations"), on the Effective Date, and in addition to the Acquisition Stock
which shall serve as collateral for the Repurchase Obligations, Commodore shall
pledge to the Stockholders all, and not less than all, of the shares of Majority
Company Stock (the "Pledged Shares") pursuant to the terms of the Pledge and
Security Agreement annexed hereto as Exhibit D and made a part hereof (the
"Pledge Agreement").
7.3 Employment Agreements. On the Closing Date, the
Company and each of ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇ shall enter into a five-year employment
agreement in the form of Exhibit "E" annexed hereto (collectively, the
"Employment Agreements").
7.4 Non-Competition Agreement. On the Closing Date,
Commodore, the Company and each of the Stockholders shall enter into a five-year
non-competition and nondisclosure agreement in the form of Exhibit "F" annexed
hereto (the "Non-Competition Agreement").
7.5 Dividends and Distributions; Tax Accounting and
Payments.
(a) It is expressly acknowledged, understood and
agreed by Commodore that the Stockholders shall have the absolute right to cause
the Company to distribute to the Stockholders in cash all of the earnings,
profits and income before application of federal income taxes, earned by the
Company for all periods from January 1, 1999 through and including the Closing
Date (the "Cash Distributions"). Notwithstanding the foregoing, following the
date hereof and through the Closing, the Stockholders (i) shall cause the
Company to retain sufficient cash to pay all of its obligations incurred in the
ordinary course of business, (ii) shall not accelerate the collection of
accounts receivables or delay the payment of accounts payables, and (iii) shall,
in good faith, cause the Company to retain sufficient cash reserves as at the
Closing Date to pay ordinary anticipated business expenses. Not less than ten
(10) day prior to the Closing, the Stockholders shall submit to Commodore a
schedule of all Cash Distributions paid and which shall be paid to the
Stockholders prior to the Closing Date.
(b) The parties hereby confirm and consent that the
Company's income in respect of the fiscal year in which the Closing Date occurs
shall not be prorated as between the Stockholders (on the one hand) and
Commodore (on the other hand), but shall be determined based on actual income
for that portion of the current fiscal year through the Closing Date and for
that portion of the current fiscal year subsequent to the Closing Date, with the
Company having been deemed to have closed its books for these purposes on and as
of the Closing Date. The amounts required to be paid by the Stockholders as
taxes in respect of the Stockholders' allocable share of the net income of the
Company during the period from (i) January 1, 1999 through December 31, 1999,
30
and (ii) for the period from January 1, 2000 through the Closing Date are
collectively referred to herein as the "Tax Obligations."
(c) In the event that the aggregate Cash
Distributions which shall have been made to the Stockholders from the date of
this Agreement through the Closing Date Company shall, for any reason, not be
sufficient to enable the Stockholders to satisfy the Stockholders' Tax
Obligations, then, in order to enable the Stockholders to pay the balance, if
any, of such Tax Obligations, not later than ninety (90) days after the Closing
Date, Commodore shall pay, arrange to pay, or cause the Company to pay, to the
Stockholders an amount equal to:
(i) that percentage of the net income of
the Company from January 1, 1999 through the Closing Date equal to the
highest combined marginal federal and state personal income tax rate,
minus
(ii) the aggregate Cash Distributions, if
any, which have been previously distributed by the Company to the
Stockholders between the date of this Agreement and the Closing Date.
7.6 No Shopping. Prior to any valid termination of this
Agreement pursuant to Section 11 below, neither the Stockholders nor any of the
Stockholders' representatives (nor any officers, directors, affiliates or
representatives of the Company) will solicit or otherwise entertain any offers
or inquiries, or negotiate with or enter into any discussions, commitments,
agreements or understandings with any person, firm or entity (other than
Commodore) in respect of any sale or disposition in any manner of any capital
stock, assets or business (or any material portion thereof) of the Company or
any other transaction which, if consummated, would frustrate the intent of this
Agreement.
7.7 Non-Interference. None of the parties shall cause to
occur any act, event or condition which would cause any of their respective
representations and warranties made in this Agreement to be or become untrue or
incorrect in any material respect as of the Closing Date, or would interfere
with, frustrate or render unreasonably expensive the satisfaction by the other
party or parties of any of the conditions precedent set forth in Sections 8 and
9 below.
7.8 Key Employee Agreements. On or before the Closing,
the Company shall enter into long-term (not less than three years) employment
and non-competition agreements with those key employees of the Company listed on
Schedule 7.8 annexed hereto (the "Key Employees"); all upon such terms and
conditions as shall be mutually acceptable to Commodore and the Stockholders.
7.9 Commodore Stock Options. Prior to the Effective Date,
each of the Stockholders and Commodore shall establish a Commodore stock option
program for employees of the Company (including the Key Employees) who shall be
designated by the Stockholders, all upon such terms and conditions as shall be
mutually acceptable to the Stockholders and the board of directors and
compensation committee of Commodore.
31
7.10 Registration Rights Agreement. On the Closing Date,
Commodore and each of the Stockholders shall enter into a registration rights
agreement in the form of Exhibit "G" annexed hereto (the "Registration Rights
Agreement").
7.11 Make Whole Agreement. On the Closing Date, Commodore
shall execute and deliver to and each of the Stockholders an agreement in the
form of Exhibit "C" annexed hereto (the "Make Whole Agreement").
7.12 Commodore Stockholders Meeting. Immediately following
the date of execution of this Agreement, Commodore shall take all steps
necessary to call a the Commodore Stockholders Meeting. In such connection,
Commodore shall promptly prepare and file with the SEC a proxy statement under
Section 14A of the Securities Exchange Act of 1934, as amended, containing
therein all requisite disclosures concerning the Company, the Acquisition and
the transactions contemplated hereby (the "Commodore Proxy Statement"), and
shall use its best efforts to cause such Commodore Proxy Statement to be
declared effective by the SEC as soon as practicable following the date of this
Agreement. Commodore does hereby covenant and agree that (a) the Commodore
Stockholders Meeting shall take place in New York City as soon as practicable
following SEC approval of the Commodore Proxy Statement, and (b) Final Commodore
Stockholders Approval shall have been received on a date which shall be not
later than November 15, 2000.
7.13 Minority Company Stock Option Agreement. On the
Closing Date, the Stockholders and Commodore shall have executed and delivered
the Minority Company Stock Option Agreement in the form of Exhibit H annexed
hereto, pursuant to which Minority Company Stock Option Agreement (a) the
Stockholders shall grant to Commodore the Minority Company Stock Option, and (b)
in consideration for the grant of such Minority Company Stock Option, Commodore
shall issue to the Stockholders, in equal amounts, an aggregate of five million
(5,000,000) shares of the Commodore Option Stock.
7.14 Irrevocable Proxy from CXI Majority Stockholders.
Simultaneous with the execution and delivery of this Agreement, the CXI Majority
Stockholders shall have executed and delivered to the Stockholders, an
irrevocable proxy coupled with an interest, pursuant to which the CXI Majority
Stockholders shall grant to the Stockholders, acting jointly, an irrevocable
proxy, coupled with an interest, to vote all shares of Commodore Common Stock
owned of record by the CXI Majority Stockholders IN FAVOR of this Agreement, the
Acquisition and the transactions contemplated hereby, at the Commodore
Stockholders Meeting or any adjournment or adjournments thereof.
7.15 Authorization of Agreement. The execution, delivery
and performance by Commodore of this Agreement, the Certificate of Acquisition,
the Make Whole Agreement, the Pledge Agreement, the Non-Competition Agreement,
the Employment Agreements, the Registration Rights Agreement and the Minority
Company Stock Option Agreement and the other related Exhibits hereto and thereto
(collectively, the "Transaction Documents") and the consummation of the
Acquisition, delivery of stock certificates and instruments evidencing the
Acquisition Stock, the Commodore Option Stock and the Commodore Warrant, and the
32
all of other transactions contemplated by this Agreement (a) has been duly and
validly authorized and approved by the Board of Directors of Commodore in all
respects, and (b) shall be duly and validly authorized, approved and ratified by
the stockholders of Commodore at the Commodore Stockholders Meeting and Final
Commodore Stockholders Approval shall have been received by not later than
November 15, 2000.
7.16 Lock-Up Agreement. Each of the Stockholders and the
Company do hereby covenant agree (on behalf of themselves and all other holders
of the Commodore Securities described herein) that, without the prior written
approval of Commodore, they will not sell, transfer, pledge, hypothecate or
assign (collectively, "Transfer") any of the 16,500,000 shares of Commodore
Common Stock, comprising the Acquisition Stock, Commodore Option Stock or the
shares of Commodore Common Stock issuable upon exercise of the Commodore
Warrants (collectively, the "Commodore Securities") for a period of thirteen
(13) months from the Closing Date; provided, that the covenants and agreements
of the Stockholders and the Company set forth in this Section 7.16 (the "Lock Up
Agreement") shall automatically terminate and thereafter be without further
force or effect in the event that the Option set forth in Section 7.2(a) shall
automatically terminate or be voluntarily terminated prior to the Anniversary
Date for any of the reasons set forth in Section 7.2(a)(vii) of this Agreement.
8. CONDITIONS PRECEDENT TO COMMODORE'S PERFORMANCE.
------------------------------------------------
The obligations of Commodore to consummate the transactions
contemplated by this Agreement are further subject to the satisfaction, at or
before the Effective Date, of all the following conditions, any one or more of
which may be waived in writing by Commodore:
8.1 Accuracy of Representations and Warranties. All
representations and warranties made by the Stockholders in this Agreement, in
any Schedule(s) hereto, and/or in any written statement delivered to Commodore
under this Agreement shall be true and correct in all material respects on and
as of the Effective Date as though such representations and warranties were made
on and as of that date.
8.2 Performance. The Stockholders and the Company shall
have performed, satisfied and complied with all covenants, agreements and
conditions required by this Agreement to be performed, satisfied or complied
with by them on or before the Effective Date, including, without limitation, all
covenants and agreements described in Article 7 of this Agreement.
8.3 Certification. Commodore shall have received a
certificate, dated the Effective Date, signed by the Stockholders, certifying,
in such detail as Commodore and its counsel may reasonably request, that the
conditions specified in Sections 8.1 and 8.2 above have been fulfilled.
8.4 Good Standing Certificates. The Stockholders shall
have delivered to Commodore a certificate or telegram issued by the Secretary of
State of the State of Utah, evidencing the good standing of the Company in such
jurisdiction as of a date not more than fifteen (15) days prior to the Closing
Date.
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8.5 Absence of Litigation. No action, suit or proceeding
by or before any court or any governmental body or authority, against the
Company or pertaining to the transactions contemplated by this Agreement or
their consummation, shall be pending or threatened on the Closing Date, which
action, suit or proceeding would, if determined adversely, have a material
adverse effect on the business, financial condition, operations or prospects of
the Company, or impair the ability of the Stockholders to transfer and deliver
to Commodore all of the Company Stock free and clear of all pledges, liens,
claims, charges, options, calls, encumbrances, restrictions and assessments
whatsoever (except any restrictions which may be created by operation of state
or federal securities laws).
8.6 Consents. All necessary disclosures to and agreements
and consents of (a) Commodore's lenders, (b) any parties to any contracts and/or
any licensing authorities which are material to the Company's business, and (c)
any governmental authorities or agencies to the extent required in connection
with the transactions contemplated by this Agreement, shall have been obtained
and true and complete copies thereof delivered to Commodore.
8.7 Settlement of Affiliate Obligation. All debts,
liabilities and other monetary obligations owed to the Company on the Closing
Date by the Stockholders and/or any of the Stockholders' Affiliates shall have
been fully paid to the Company in immediately available funds, such that no such
Affiliate obligations shall be outstanding on and after the Closing Date.
8.8 Material Litigation. Between the date of this
Agreement and the Effective Date, no litigation, arbitration or other legal
proceeding shall have been brought by any third party seeking to enjoin the
transfer of the Company Stock and the other transactions contemplated by this
Agreement.
8.9 No Material Adverse Change. There shall not have
occurred any event or condition which could materially and adversely affect the
assets and properties, business, financial condition, results of operations or
business prospects of the Company from those reflected in the Audited 1999
Financial Statements, or disclosed in this Agreement or the Schedules hereto,
except for matters resulting from adverse changes in economic conditions
affecting businesses and economic conditions in the United States generally.
8.10 Execution and Delivery of Exhibits. On or before the
Effective Date, the Stockholders shall have executed and delivered to Commodore
and the Company (as applicable) the Transaction Documents constituting Exhibits
hereto.
8.11 Client Relationships. Prior to the Closing Date, no
material client of the Company (accounting for 10% or more of budgeted revenues
for fiscal 2000) shall have notified the Company of its intention to terminate
the Company's services prior to the normal expiration of a contracted-for
assignment.
34
8.12 Minimum 1999 Adjusted Pre-Tax Income. The Adjusted
Pre-Tax Income of the Company for the fiscal year ending December 31, 1999 shall
be not less than Four Million ($4,000,000) Dollars.
8.13 CXI Majority Stockholders Consent. The CXI Majority
Stockholders, being the record holders of a majority of the currently
outstanding shares of Commodore Common Stock shall have approved and ratified
this Agreement, the Acquisition and the other transactions contemplated hereby.
8.14 Proceedings and Instruments Satisfactory. All
proceedings, corporate or other, to be taken in connection with the transactions
contemplated by this Agreement, and all documents incidental thereto, shall be
reasonably satisfactory in form and substance to Commodore and its counsel. The
Stockholders shall have submitted to Commodore or its representatives for
examination the originals or true and correct copies of all records and
documents relating to the business and affairs of the Company which Commodore
may have requested in connection with said transactions.
9. CONDITIONS PRECEDENT TO THE PERFORMANCE BY THE STOCKHOLDERS.
------------------------------------------------------------
The obligations of the Stockholders to consummate the
transactions contemplated by this Agreement are further subject to the
satisfaction, at or before the Effective Date, of all of the following
conditions, any one or more of which may be waived in writing by the
Stockholders.
9.1 Accuracy of Representations and Warranties. All
representations and warranties made by Commodore in this Agreement and/or in any
written statement delivered by Commodore under this Agreement shall be true and
correct in all material respects on and as of the Effective Date as though such
representations and warranties were made on and as of that date.
9.2 Performance. Commodore shall have performed,
satisfied and complied with all covenants, agreements and conditions required by
this Agreement to be performed, satisfied or complied with by Commodore on or
before the Effective Date, including without limitation, satisfaction of all of
Commodore's covenants and agreements contained in Section 7 of this Agreement.
9.3 Certification. The Stockholders shall have received a
certificate, dated the Effective Date, signed by Commodore certifying, in such
detail as the Stockholders and their counsel may reasonably request, that the
conditions specified in Sections 9.1 and 9.2 above have been fulfilled.
9.4 Resolutions. The Stockholders shall have received
certified resolutions of the Board of Directors of Commodore in form reasonably
satisfactory to counsel for the Stockholders , authorizing this Agreement and
35
Commodore's execution, delivery and performance of the Transaction Documents and
all other actions to be taken by Commodore hereunder.
9.5 Receipt of Working Capital Financing. On or before
the Effective Date, Commodore shall have arranged for not less than Five Hundred
Thousand ($500,000) Dollars of additional cash working capital for the Surviving
Corporation, and shall use its best efforts to obtain an additional One Million
($1,000,000) Dollars of cash working capital for the Surviving Corporation, as
soon as practicable following the Effective Date.
9.6 Payments and Delivery of Exhibits. In addition to the
payments and deliveries contemplated by this Agreement, on the dates specified
in Section 2.6 hereof, the Stockholders and the Company shall have received duly
executed certificates evidencing (a) the 9,500,000 shares of Acquisition Stock,
(b) the Commodore Warrants, (c) the 1,000,000 shares of Additional Commodore
Common Stock, and (d) the 5,000,000 shares of Commodore Option Stock issuable
under the Minority Company Stock Option Agreement, and duly executed original
copies of the Make Whole Agreement, the Pledge Agreement, the Employment
Agreements, the Non-Competition Agreements, the Registration Rights Agreement
and the Minority Company Stock Option Agreement from Commodore and/or the
Company, as relevant, and evidence that the Certificate of Acquisition has been
duly filed and recorded with the Secretary of State of the State of Utah.
9.7 Dissolution of Dispute Resolution Limited. Dispute
Resolution Limited, a Utah limited partnership of which KPMG owns 20% and the
Company owns 80% shall have been terminated and dissolved.
9.8 Issuance of Acquisition Stock to the Company. On the
dates set forth in Section 2.6 hereof, Commodore shall have issued and delivered
to the Company an aggregate of One Million Five Hundred Thousand (1,500,000)
shares of the Acquisition Stock to be issued to or allocate for the Persons
designated below:
(a) an aggregate of 1,200,000 shares of Acquisition
Stock shall be retained by the Company to represent the basis for
future payments for certain employees listed on Schedule 9.8 annexed
hereto in the event of exercise by Commodore of the Option or pursuant
to payment of the Repurchase Obligation set forth in Section 7.2
hereof; and
(b) an aggregate of 300,000 shares of Acquisition
Stock shall be retained by the Company to represent the basis for
future payments to ▇▇▇▇▇▇ ▇▇▇▇▇ & Company, Boise, Idaho, a business
broker, and/or its designees.
9.9 Tax Opinion. On or before the Effective Date, the
Stockholders shall have received from ▇▇▇▇▇▇▇▇▇ Traurig, L.L.P., a favorable
opinion in form and substance reasonably acceptable to the Stockholders, with
respect to the tax implications of the Acquisition and the other transactions
contemplated hereby (the "Tax Opinion").
36
9.10 Proceedings and Instruments Satisfactory. All
proceedings to be taken in connection with the transactions contemplated by this
Agreement, and all documents incidental thereto, shall be reasonably
satisfactory in form and substance to the Stockholders and their counsel.
10. CLOSING.
--------
10.1 Place and Date of Closing. Unless this Agreement
shall be terminated pursuant to Section 11 below, the Effective Date of the
Acquisition and consummation of the other related transactions contemplated by
this Agreement shall take place at the offices of ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ LLP, or such
other location as shall be agreed upon by the parties, at 10:00 A.M. local time,
on a date which shall be not later than August 31, 2000 or such later date as
may be requested by either Commodore or the Stockholders, but not later than
September 15, 2000, unless further extended by mutual written agreement of
Commodore and the Stockholders (the "Outside Effective Date"). Notwithstanding
the foregoing, for all purposes of this Agreement, provided that the Effective
Date of the Acquisition shall have occurred by the Outside Effective Date, the
parties hereto do hereby agree that the closing of the transactions contemplated
by this Agreement (the "Closing"), including the retention of all profits,
losses, assets and liabilities of the Company, shall be deemed to have occurred
at 5:00 p.m. New York City Time, on August 29, 2000 (such date being referred to
in this Agreement as the "Closing Date").
10.2 Actions at Closing. On the Effective Date, the
parties shall make all payments and deliveries stated in this Agreement to be
made at, on or prior to the Effective Date, as set forth herein.
11. TERMINATION OF AGREEMENT.
-------------------------
11.1 General. Notwithstanding the provisions of Section 10
above, this Agreement may be terminated and the transactions contemplated hereby
may be abandoned at any time prior to the Effective Date:
(a) by the mutual written consent of Commodore and
the Stockholders;
(b) by Commodore, or by the Stockholders , if (i) a
material breach shall exist with respect to the written representations and
warranties made by the other party, (ii) the other party shall take any action
prohibited by this Agreement, if such actions shall or may have a material
adverse effect on the Company or on Commodore, and/or the transactions
contemplated hereby, and shall not fully remedy same within ten (10) days after
written notice thereof to such party, (iii) the other party shall not have
furnished, upon reasonable notice therefor, such certificates and documents
required in connection with the transactions contemplated hereby and matters
incidental thereto as it or he shall have agreed to furnish, and it is
reasonably unlikely that the other party will be able to furnish such item(s)
prior to the Outside Effective Date, or (iv) any consent of any third party to
37
the transactions contemplated hereby (whether or not the necessity of which is
disclosed herein or in any Schedule hereto) is reasonably necessary to prevent a
default under any outstanding material obligation of either party hereto and
such consent is not obtainable without material cost or penalty (unless the
party not seeking to terminate this Agreement agrees or agree to pay such cost
or penalty);
(c) by either Commodore or the Stockholders , at any
time on or after the Outside Effective Date, if (i) the transactions
contemplated hereby shall not have been consummated prior thereto, or (ii) the
Transaction Financings shall not have been completed by such Outside Effective
Date; provided, that the party seeking to effect such termination of this
Agreement shall not then be in breach or default of any material representation,
warranty, covenant, agreement or obligation imposed upon such party by this
Agreement; or
(d) by the Stockholders, at any time on or after
September 15, 2000 if the Stockholders shall not have received a favorable Tax
Opinion.
11.2 Effect of Termination. In the event of termination of
this Agreement pursuant to this Section 11, prompt written notice shall be given
by the terminating party to the other party, and, unless the party seeking to
terminate this Agreement shall have no right to do so, neither party to this
Agreement shall have any further liability to the other, except for the
Termination Payment contemplated by Section 11.3 below and that the
confidentiality provisions of this Agreement provided in Section 7.1 above shall
survive any termination or abandonment of this Agreement.
11.3 Termination Payment. In the event that for any
reason, other than a breach or violation by the Stockholders of the covenants
and agreements on their part to be performed pursuant to Section 11.1(b) above,
the transactions contemplated by this Agreement shall not be consummated by the
Outside Effective Date, the Stockholders shall receive from Commodore not later
than five (5) business days following the Outside Effective Date, as full
liquidated damages: (a) 250,000 shares of Commodore Common Stock; (b) 250,000
warrants (identical in all material respects to the Commodore Warrants) to
purchase shares of Commodore Common Stock; and (c) cash reimbursement of all
legal, accounting and other out-of-pocket costs and expenses which have been
incurred by the Stockholders or the Company through and including the Outside
Effective Date in connection with the transactions contemplated hereby.
38
12. INDEMNIFICATION.
----------------
12.1 General.
(a) The Stockholders (jointly and severally) shall
defend, indemnify and hold harmless Commodore from, against and in respect of
any and all claims, losses, costs, expenses, obligations, liabilities, damages,
recoveries and deficiencies, including costs of investigation, interest,
penalties and reasonable attorneys' fees, that Commodore may incur, sustain or
suffer (collectively, the "Commodore Losses") as a result of any breach of, or
failure by the Stockholders to perform, any of the representations, warranties,
covenants or agreements of the Stockholders contained in this Agreement or in
any Schedule(s) furnished by or on behalf of the Stockholders under this
Agreement.
(b) Commodore shall defend, indemnify and hold
harmless the Stockholders from, against and in respect of any and all claims,
losses, costs, expenses, obligations, liabilities, damages, recoveries and
deficiencies, including costs of investigation, interest, penalties and
reasonable attorneys' fees, that the Stockholders may incur, sustain or suffer
(collectively, the "Stockholders Losses") as a result of any breach of, or
failure by Commodore to perform, any of the representations, warranties,
covenants or agreements of Commodore contained in this Agreement.
(c) Commodore Losses or Stockholders Losses are
hereinafter referred to as "Losses", as they relate to the applicable party or
parties in Sections 12.3 and 12.4 above.
12.2 Limitations on Certain Indemnity, Right of Offset.
(a) Except with respect to any Commodore Losses
involving proven fraud by the Stockholders, the Stockholders shall not be liable
to Commodore with respect to Commodore Losses unless and until, and then only to
the extent that, the aggregate amount of all Commodore Losses shall exceed the
sum of $250,000 (the "Basket"). The Stockholders (jointly and severally) shall
thereafter be liable for all Commodore Losses in excess of the Basket, up to the
aggregate amount of the Closing Cash Payment portion of the Consideration set
forth in Section 2.1 hereof
(b) Duration of Indemnity for Breach of Warranty.
Commodore shall be entitled to indemnification by the Stockholders for Commodore
Losses, and the Stockholders shall be entitled to indemnification by Commodore
for Stockholders Losses, only in respect of claims for which notice of claim
shall have been given on or before September 30, 2001; provided that:
(i) with respect to Commodore Losses
relating to a breach of any warranties relating to tax matters
covered by Section 4.8 above, the duration of such indemnity
shall be with respect to claims asserted prior to the
expiration of the final statute of limitations for those tax
reports and tax returns covered by the warranties under
Section 4.8 above; and
39
(ii) neither Commodore nor the Stockholders
shall be entitled to indemnification in the event that the
subject claim for indemnification relates to a third-party
claim and the prospective indemnified party (as the case may
be) delayed giving notice thereof to such an extent as to
cause material prejudice to the defense of such third-party
claim.
(c) Rights of Offset. In the event that Commodore
shall suffer or incur any Commodore Losses which are established pursuant to a
written settlement agreement, arbitrators' decision or judicial determination,
Commodore shall have the right (in addition to any and all other rights and
remedies, all of which may be exercised separately or concurrently) to recover
the amount of such Commodore Losses by means of offset against any installments
of Company Cash Flow Payments then or thereafter payable to the Stockholders
pursuant to Section 2.5 of this Agreement. Notwithstanding the foregoing, until
such time as any such Commodore Losses shall have been finally established
through a settlement agreement a final judgment of a court of competent
jurisdiction from which no appeal can or shall be taken (a "Final Resolution"),
all accumulated periodic installments of Company Cash Flow Payments required to
be made to the Stockholders under Section 2.5 hereof, up to and including an
accumulated amount as shall equal the amount of Commodore Losses being claimed,
shall be paid by the Company into an interest bearing attorneys' escrow account
to be maintained by ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ LLP and to be disbursed pending such Final
Resolution in accordance with the terms of an escrow agreement satisfactory to
such counsel and the parties hereto. To the extent that such periodic
installment payments of Company Cash Flow required to be placed in escrow, as
aforesaid, shall equal the amount of the alleged Commodore Losses, the excess,
if any, of all subsequent periodic installment payments of Company Cash Flow
which is required to be paid to the Stockholders under Section 2.5 hereof shall
be immediately remitted directly to the Stockholders pending the Final
Resolution and thereafter.
12.3 Resolution of Disputes, Binding Arbitration.
(a) Whenever a claim shall arise for which any party
shall be entitled to indemnification hereunder, the indemnified party shall
notify the indemnifying party in writing within thirty (30) days of the
indemnified party's first receipt of notice of, or the indemnified party's
obtaining actual knowledge of, such claim, and in any event within such shorter
period as may be necessary for the indemnifying party to take appropriate action
to resist such claim. Such notice shall specify all facts known to the
indemnified party giving rise to such indemnity rights and shall estimate (to
the extent reasonably possible) the amount of potential liability arising
therefrom. If the indemnifying party shall be duly notified of such dispute, the
parties shall attempt to settle and compromise the same.
(b) In the event that any dispute relating to
indemnification hereunder or otherwise involving the interpretation or
application of this Agreement, any Schedule or Exhibit hereto or any other
Transaction Document cannot be settled or compromised, as aforesaid, within
twenty (20) days of receipt of the subject claim, either the indemnified party
or the indemnifying party shall promptly thereafter submit the dispute for final
and binding arbitration to JAMS or End-Dispute before a three-person panel of
arbitrators who shall be either (i) retired federal judges, or (ii) other
persons experienced in resolving commercial disputes and who are acceptable to
both the indemnifying party and the indemnified party (the "Arbitration"). Any
such Arbitration shall, if brought by the Stockholders, be held in New York, New
40
York and, if brought by Commodore shall be in Salt Lake City, Utah. The panel of
arbitrators shall be selected within twenty (20) days of submission of such
dispute to Arbitration. The parties shall use their collective best efforts to
promptly schedule and conduct the hearings before such arbitrators, with a view
toward concluding such arbitration proceedings not later than thirty (30) days
from the first submission of the dispute to arbitration. In addition to, and not
in lieu of, arbitration as a means of dispute resolution hereunder, any party
hereto shall have the right to seek specific enforcement of this Agreement or
any Transaction Document, or other injunctive or equitable relief or remedy
before any court of competent jurisdiction.
(c) In connection with any Arbitration pursuant to
this Section 12.3, the arbitrators shall, as part of their award, allocate the
fee of the Arbitration, including all fees of the arbitrators, the cost of any
transcripts, and the parties' reasonable attorneys' fees, based upon and taking
into account the arbitrators' determination of the merits and good faith of the
parties' claims and defenses in the subject proceeding.
(d) The decision and award of the arbitrators shall
be final and binding upon the parties hereto and shall be enforceable in any
court of competent jurisdiction, including any federal or state court in the
States of Utah, Delaware, New York or Colorado. Any process or other papers
hereunder may be served by registered or certified mail, return receipt
requested, or by personal service, provided that a reasonable time for
appearance or response is allowed.
(e) Any rights of indemnification established by
reason of such settlement, compromise, arbitration or litigation shall promptly
thereafter be satisfied by the indemnifying party in such amount as shall be
necessary to satisfy all applicable Losses determined in accordance with such
settlement and compromise, or by final nonappealable order or judgment of the
applicable judicial or arbitration panel.
12.4 Defense and Settlement. In connection with the
defense of any third party claims for which claims for indemnification have been
made hereunder, each party will provide reasonable access to its and the
Company's books and records as and to the extent required for the proper defense
of such third party claim. Neither party shall consent to any settlement or
purport to bind any other party to any settlement without the written consent of
the other party.
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13. COSTS.
------
13.1 Finder's or Broker's Fees. Except as set forth in
Section 9.8 hereof, each of Commodore (on the one hand) and the Stockholders (on
the other hand) represent and warrants that neither it, he, she nor any of their
respective Affiliates have dealt with any broker or finder in connection with
any of the transactions contemplated by this Agreement, and no broker or other
person is entitled to any commission or finder's fee in connection with any of
the transactions contemplated hereby.
13.2 Closing Expenses. Each of Commodore and the
Stockholders shall each pay all of their own respective professional fees and
other costs and expenses incurred or to be incurred by them, respectively, in
negotiating and preparing this Agreement and in closing and carrying out the
transactions contemplated by this Agreement; provided, that nothing herein
contained shall be deemed to prohibit the payment by the Company of professional
fees and other costs and expenses incurred or to be incurred by the Company in
connection with the transactions contemplated hereby and the continuing course
of its Business.
14. POST-CLOSING COVENANT AND AGREEMENTS OF THE PARTIES.
----------------------------------------------------
14.1 Income Taxes.
(a) Commodore shall not permit the Company, at any
time on or after Closing Date, to (i) amend any of the Company's tax reports or
tax returns with respect to periods prior the Closing Date, except to the extent
required by affirmative determination of the applicable taxing authority, or
(ii) grant any waiver of any applicable statute of limitations with respect to
any tax report or tax return of the Company for any period prior to the Closing
Date, without the prior written consent of the Stockholders.
(b) In the event of any investigation or audit with
respect to any tax report or tax return of the Company for any period prior to
the Closing Date, Commodore shall cause the Company to give prompt written
notice thereof to the Stockholders , and to permit the Stockholders and their
representatives to participate in and receive copies of all notices and
communications in connection with any such investigation or audit. Similarly, in
the event that the Stockholders shall be apprised of any such investigation or
audit prior to the Company being apprised thereof, the Stockholders shall give
prompt written notice thereof to the Company, and shall permit the Company and
its representatives to participate therein and receive copies of all notices and
communications in connection therewith. The Stockholders shall not, and
Commodore shall not permit the Company to, enter into any settlement of any such
investigation or audit unless (i) such settlement shall be approved in writing
by the Stockholders and the Company (such approval not to be unreasonably
withheld or delayed), or (ii) the Company shall have agreed to indemnify the
Stockholders in respect of any additional tax obligations which would be imposed
upon the Stockholders by reason of the subject settlement. In connection with
any such investigation or audit, each party shall be responsible for its own
42
costs and expenses, except to the extent otherwise agreed to in any written
agreement hereafter entered into and signed by the party to be charged
therewith.
14.2 Company Benefit and Compensation Matters. From and
after the Closing Date, Commodore will cause the Company to continue to maintain
the bonus plans and policies for key employees of the Company (other than the
Stockholders), a summary of which is annexed as Schedule 14.2 hereto. Neither
the Company nor Commodore shall revoke, change or modify any of such plans or
policies prior to December 31, 2005 without the prior written consent of the
Stockholders, which shall not be unreasonably withheld.
14.3 Further Assurances. From time to time from and after
the Closing, the parties shall execute and deliver, or cause to be executed and
delivered, any and all such further agreements, instruments, certificates and
other documents, and shall take or cause to be taken any and all such further
action, as any of the parties may reasonably deem necessary or desirable in
order to carry out the intent and purposes of this Agreement.
14.4 Major Transactions; Opt Out Rights.
(a) Notwithstanding anything to the contrary
contained in this Agreement (but subject at all times to the provisions of
Section 14.4(b) below), from the Closing Date through March 31, 2006 or
thereafter and for so long as any Company Cash Flow Payments contemplated by
Section 2.5 of this Agreement shall continue to be due and owing to the
Stockholders, neither the Company nor any Permitted Investment shall, nor shall
Commodore, or any of its Affiliates permit or cause the Company or any Permitted
Investment to, engage in or consummate any of the following (each a "Major
Transaction"), without, in each instance, the prior written affirmative vote,
consent and approval of both of the Stockholders:
(i) merge, consolidate or sell all or
substantially all of the assets or securities;
(ii) issue additional shares of capital
stock or other equity of the Company or of any Permitted
Investment,
(iii) make any Investments or other
acquisitions of material assets or businesses,
(iv) incur indebtedness for borrowed money
or capitalized lease obligations in any one or more
transaction aggregating in excess of $50,000 per annum,
(v) incur liens, mortgages or security
interests in any one or more transaction aggregating excess of
$50,000 per annum,
(vi) exceed or deviate from mutually agreed
upon capital budgets,
43
(vii) modify or terminate the Core Business,
(viii) enter into or consummate any transfer
or sale of properties or provide funds or credit to any third
parties (other than sales of inventories in the ordinary
course of business) in amounts aggregating more than $50,000
per annum,
(ix) increase compensation to executive
officers or management above mutually agreed upon levels,
(x) except for liabilities of the Company
which Commodore shall be obligated to pay, if any, enter into
any related party transactions, including payment to Commodore
or any of its Affiliates of any overhead expenses, salaries,
consulting fees, bonuses or other compensation or remuneration
to any officer, director, employee or stockholder of
Commodore;
(xi) amend or terminate any material
agreements,
(xii) settle any material litigation which
involves the loss of any rights, or payment of any moneys or
royalties,
(xiii) prepay or refinance indebtedness,
(xiv) make or accept any additional
Investments, whether in cash or other assets or Property, to
or for the Company or any Permitted Investment;
(xv) guaranty any obligations or incur any
obligations or indebtedness which would cause the Company Cash
Flow Payments to the Stockholders contemplated by Section 2.5
hereof to be subordinated in any manner or respect to the
rights of the holders of such obligations or indebtedness;
(xvi) take any action which would adversely
affect the Company's ability to distribute the Acquisition
Stock to the applicable Persons referred to in Section 9.8
hereof; or
(xvii) enter into any other transactions not
in the ordinary course of business.
(b) DRM Stockholders' "Opt-Out" Right. The provisions of this
Section 14.4(b) shall be only applicable to contemplated activities or
transactions affecting one or more Permitted Investment which is engaged in the
Extension Electronics Business or the Brownsfield Real Estate Business. Subject
to the foregoing and notwithstanding the provisions of Section 14.4(a) above, in
the event and to the extent that the board of directors or management of
Commodore or any Permitted Investment which is engaged in the Extension
44
Electronics Business or the Brownsfield Real Estate Business shall propose to
engage in any activity or transaction which (i) is otherwise required to be
approved by the Stockholders pursuant to the provisions of Section 14.4(a)
above, and (ii) is not approved by the Stockholders (a "Non-Approved Activity"),
Commodore or such Permitted Investment may nonetheless pursue and consummate
such Non-Approved Activity if otherwise authorized in accordance with applicable
corporate law; provided, however, that the Stockholders (and only such Persons)
may, at any time within one hundred and eighty (180) days following consummation
of the Non-Approved Activity, elect, by written notice to Commodore (the
"Opt-Out Notice"), to have the revenues, Net Profits, Net Loss or Cash Flow of
such Permitted Investment for all periods from and after the date of the Opt-Out
Notice excluded from the calculation of Company Cash Flow (the "Opt-Out Right").
In the event that the Stockholders shall timely elect to exercise their Opt-Out
Right pursuant to the provisions of this Section 14.4(b) for all purposes of
this Agreement, the direct or indirect Subsidiary of Commodore engaged in such
Non-Approved Activity shall no longer be deemed a Permitted Investment and
neither Commodore nor such entity be required to comply with the provisions of
Section 14.4(a) above or the other affirmative covenants set forth in Section
14.5 of this Agreement. Once the Stockholders have elected their Opt Out Right,
they may not subsequently require that the Subsidiary or other entity engaged in
such Non-Approved Activity again be deemed a Permitted Investment and included
in the calculation of Company Cash Flow, unless otherwise approved in writing by
Commodore.
(c) Participating and Other Investments. In the event and to
the extent that Commodore shall elect to consummate any Participating Offered
Investment which shall not be approved in writing by the Stockholders and
thereby not be deemed a Permitted Investment hereunder, Commodore may consummate
such Participating Offered Investment in any Affiliate or Subsidiary of
Commodore (other than the Company, a direct or indirect subsidiary of the
Company or another Permitted Investment); provided, that neither the revenues,
Net Profits, Net Loss or Cash Flow of such Participating Offered Investment
shall be included in the calculation of Company Cash Flow. In addition, so long
as the same shall not constitute a Participating Offered Investment hereunder,
nothing herein contained shall be deemed to limit or restrict Commodore from
making any investments or acquisitions of assets, businesses, securities or
properties of any person, firm or corporation, nor shall Commodore be required
to comply with the provisions of Section 14.4(a) above or the other affirmative
covenants set forth in Section 14.5 of this Agreement with respect to any such
investment or acquisition.
14.5 Certain Affirmative Covenants. Unless otherwise
agreed to in writing by the Stockholders, Commodore, the Company and each
Permitted Investment shall:
(a) maintain and preserve their corporate existence,
franchises, intellectual property and assets,
(b) pay all taxes and other government charges,
(c) provide the Stockholders with prompt notices of
any material events, including changes in location of assets, claims or
litigation, material adverse changes or defaults under any loan or related
credit agreements or to any other creditor(s),
45
(d) furnish the Stockholders with monthly, quarterly
and annual financial statements and other financial reports of the Company and
its subsidiaries,
(e) comply with the Commodore Financial Services
Business Development Plan and any supplemental business plans with respect to
the growth, development and expansion of the business activities of the Company
and contemplated Permitted Investments;
(f) provide the Stockholders with timely and accurate
information as to business developments and activities of the Company and each
Permitted Investment, including the application of the net proceeds of the
Transaction Financing described below and all additional financings;
(g) pay all insurance premiums, including premiums on
officers and directors liability insurance;
(h) with respect to each Participating Offered
Investment and Permitted Investment (i) offer the Stockholders full access to
all information, facilities and personnel with respect to a potential
Participating Offered Investment at the same time other Affiliates of Commodore
conduct their due diligence investigation, (ii) offer the Stockholders an
adequate opportunity to review and approve or reject all potential Participating
Offered Investments, (iii) if any Participating Offered Investment shall be
approved by the Stockholders and acquired by Commodore or any direct or indirect
Subsidiary or Affiliate of Commodore, constitute the same as a Permitted
Investment and include the revenues and Cash Flow of such Permitted Investment
in the calculation of Company Cash Flow, and (iv) except for Permitted
Investments involving the Brownsfield Real Estate Business and the Extension
Electronic Investments, make all Permitted Investments direct or indirect
Subsidiaries of the Company;
(i) vote all shares of the Company Stock owned by
Commodore or any of its Affiliates to elect as the entire Board of Directors of
the Company and the board of directors of each Permitted Investment of the
Company except Brownsfield Real Estate Business and Extension Electronic
Investments, to the extent applicable, the following persons or their individual
designees (A) Bentley ▇. ▇▇▇▇, (B) ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, (C) ▇▇▇▇▇▇▇, (D) ▇▇▇▇▇▇▇▇,
and (E) one other Person who shall be mutually acceptable to Commodore and to
the Stockholders.
(j) include all activities involving the Brownsfield
Real Estate Business and the Extension Electronic Investments in direct or
indirect Subsidiaries of Commodore, other than the Company and its direct or
indirect Subsidiaries; and
(k) notify the Stockholders of all potential
Participating Offered Investments and offer to the Stockholders the right to
include in the calculation of Company Cash Flow, the Cash Flow of all
Participating Offered Investments.
46
14.6 Stockholders' Approval.
(a) For all purposes of this Agreement, all matters
requiring the approval or consent of the Stockholders shall require that such
approval or consent be given by both of the Stockholders.
(b) In the event that, for any reason or no reason
(other than the death or permanent disability (as defined in their Employment
Agreement) of a Stockholder), one of the Stockholders shall fail or refuse to
provide his or her consent or approval in connection with any matter or
transaction, the same shall be deemed as though both of the Stockholders shall
have not approved such matter or transaction.
(c) In the event of the death or permanent disability
of a Stockholder, the surviving or non-disabled Stockholder shall, for all
purposes of this Agreement, be the only person whose approval or consent shall
thereafter be required in connection with all matters requiring such approval or
consent of the Stockholders hereunder. Accordingly (i) neither the heirs, legal
representatives, executors or administrators of any deceased or permanently
disabled Stockholder, nor the successors or assigns of any Stockholder shall
have any right to vote in respect of providing any approval, consent or
disapproval in respect of any activity or transaction otherwise requiring the
approval of the Stockholders hereunder, and (ii) such heirs, legal
representatives, executors, administrators, successors or assigns may not block
or otherwise enjoin any such existing or proposed activity or transaction.
15. FORM OF AGREEMENT.
------------------
15.1 Effect of Heading. The Section headings used in this
Agreement and the titles of the Schedules hereto are included for purposes of
convenience only, and shall not affect the construction or interpretation of any
of the provisions hereof or of the information set forth in such Schedules.
15.2 Entire Agreement, Waivers. This Agreement (including
the Schedules and Exhibits hereto) and the other Transaction Documents
constitute the entire agreement between the parties pertaining to the subject
matter hereof and thereof, and supersede all prior agreements or understandings
as to such subject matter. No party hereto has made any representation or
warranty or given any covenant to the other except as set forth in this
Agreement and the Schedules and Exhibits hereto and the other Transaction
Documents. No waiver of any of the provisions of this Agreement shall be deemed,
or shall constitute, a waiver of any other provisions, whether or not similar,
nor shall any waiver constitute a continuing waiver. No waiver shall be binding
unless executed in writing by the party making the waiver.
15.3 Counterparts. This Agreement may be executed
simultaneously in any number of counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the same
instrument.
47
16. PARTIES.
--------
16.1 Parties in Interest. Nothing in this Agreement,
whether expressed or implied, is intended to confer any rights or remedies under
or by reason of this Agreement on any persons other than the parties to it and
their respective heirs, executors, administrators, personal representatives,
successors and permitted assigns, nor is anything in this Agreement intended to
relieve or discharge the obligations or liability of any third persons to any
party to this Agreement, nor shall any provision give any third persons any
right of subrogation or action over or against any party to this Agreement.
16.2 Notices. All notices, requests, demands and other
communications under this Agreement shall be in writing and shall be deemed to
have been duly given (a) on the date of service, if served personally on the
party to whom notice is to be given, (b) on the day after the date sent by
recognized overnight courier service with all charges prepaid or billed to the
account of the sender, (c) three (3) days after being deposited in the United
States mail if sent by first class mail, registered or certified, postage
prepaid, or (d) when sent by facsimile transmission, to the party being notified
at its address or facsimile number set forth below or such other address or
facsimile number as any party hereto shall subsequently notify all other parties
hereto in writing:
(i) If to Commodore: with a copy to:
Commodore Applied Technologies, Inc. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, Esq.
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ - ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇: President ▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
fax no. (▇▇▇) ▇▇▇-▇▇▇▇ fax no. (▇▇▇) ▇▇▇-▇▇▇▇
(ii) If to the Stockholders: with a copy to:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
fax no. (▇▇▇) ▇▇▇-▇▇▇▇ ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
fax no. (▇▇▇) ▇▇▇-▇▇▇▇
-and-
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
fax no. (▇▇▇) ▇▇▇-▇▇▇▇
or to such other address as either party shall have specified by notice in
writing given to the other party.
48
17. MISCELLANEOUS.
--------------
17.1 Amendments and Modifications. No amendment or
modification of this Agreement or any Exhibit or Schedule hereto shall be valid
unless made in writing and signed by the party to be charged therewith.
17.2 Non-Assignability, Binding Effect. Other than an
assignment by Commodore of its indemnification rights and remedies to one or
more of its financing institutions, neither this Agreement, nor any of the
rights or obligations of the parties hereunder, shall be assignable by either
party hereto without the prior written consent of the other party. Otherwise,
this Agreement shall be binding upon and shall inure to the benefit of the
parties hereto and their respective heirs, executors, administrators, personal
representatives, successors and permitted assigns. Notwithstanding the
foregoing, Commodore shall have the right on or before the Closing Date to
assign this Agreement to any newly formed wholly-owned acquisition subsidiary
corporation of Commodore; provided, that any such permitted assignment shall in
no manner relieve, or be deemed to relieve, Commodore from any obligations,
covenants and agreements on its part to be performed both prior and subsequent
to the Closing Date. In addition, Commodore may assign all or any portion of the
Option described in Section 7.2(a) to any unaffiliated third person, firm or
corporation; provided, that any such permitted assignment shall in no manner
relieve, or be deemed to relieve, Commodore from any obligations, covenants and
agreements on its part to be performed pursuant to said Section 7.2(a) or
otherwise.
17.3 Entire Agreement. This Agreement, together with the
Exhibits hereto, represents the entire agreement between the parties with
respect to the subject matter hereof, and supersedes all other agreements,
written or oral, between the parties with respect to the subject matter hereof,
including without limitation, the terms of the Prior Asset Agreement, dated as
of January 31, 2000, and the Acquisition Agreement, dated as of August 18, 2000.
17.4 Governing Law, Jurisdiction. This Agreement shall be
construed and interpreted and the rights granted herein governed in accordance
with the laws of the State of Delaware applicable to contracts made and to be
performed wholly within such State.
[the balance of this page intentionally left blank]
49
IN WITNESS WHEREOF, the parties have executed this Agreement
on and as of the date first set forth above.
Commodore: COMMODORE APPLIED TECHNOLOGIES, INC.
By:________________________________
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, President
The Stockholders:
------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
The Company: DISPUTE RESOLUTION MANAGEMENT, INC.
By:________________________________
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, President
50
STOCKHOLDERS CONSENT
Reference is made to that certain Stock Purchase Agreement, dated of
even date herewith, among Commodore Applied Technologies, Inc., Dispute
Resolution Management, Inc., ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ and DRM
Acquisition Corp. Unless otherwise separately defined herein, all capitalized
terms used herein shall have the same meaning as is defined in the aforesaid
Stock Purchase Agreement.
By their execution and delivery of this Stockholders' Consent, each of
the undersigned do hereby irrevocably and unconditionally consent to the
Agreement, the Acquisition and all of the other transactions contemplated by the
Agreement, and do further hereby irrevocably and unconditionally covenant and
agree to vote all shares of Commodore Common Stock owned of record or
beneficially by them IN FAVOR of the Agreement, the Acquisition and all of the
transactions contemplated by the Agreement and all Exhibits thereto, at the
Commodore Stockholders Meeting and any adjournment or adjournments thereof.
This Stockholders' Consent has been duly authorized, approved and
ratified by the board of directors of Commodore Environmental Services, Inc.
Dated: August __, 2000 COMMODORE ENVIRONMENTAL SERVICES, INC.
By:_________________________________________
--------------------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
--------------------------------------------
--------------------------------------------
51
EXHIBIT A
ARTICLES OF MERGER
DRM ACQUISITION CORP.
into
DISPUTE RESOLUTION MANAGEMENT, INC.
Pursuant to the provisions of ss.16-10a-1105 of the Utah Business
Corporation Act, the undersigned domestic corporations adopt the following
Articles of Merger for the purpose of merging them into one of such
corporations;
FIRST: The names of the undersigned corporations and the states under
the laws of which they are respectively organized are:
Name of Corporation State of Incorporation
-------------------------------------------------------------
Dispute Resolution Management, Inc. Utah
DRM Acquisition Corp. Utah
SECOND: The laws of the State of Utah permit such merger.
THIRD: The name of the surviving corporation is Dispute Resolution
Management, Inc. (the "Surviving Corporation"), and it is to be governed by the
laws of the State of Utah.
FOURTH: The following Plan of Merger was approved by the shareholders
of the undersigned domestic corporations in the manner prescribed by the Utah
Business Corporation Act.
(a) Upon the effectiveness of the Merger: (i) the Surviving
Corporation shall own and possess all assets and property of every kind and
description, and every interest therein, wherever located, and all rights,
privileges, immunities, powers, franchises and authority of a public as well as
of a private nature, of each of Dispute Resolution Management, Inc. and DRM
Acquisition Corp. (the "Constituent Corporations"), and all obligations owed to,
belonging to or due to each of the Constituent Corporations, all of which shall
be vested in the Surviving Corporation pursuant to Utah Law without further act
or deed, and (ii) the Surviving Corporation shall be liable for all claims,
liabilities and obligations of the Constituent Corporations, all of which shall
become and remain the obligations of the Surviving Corporation pursuant to Utah
Law without further act or deed.
(b) Upon the effectiveness of the Merger, the Certificate of
Incorporation, By-Laws and directors of the Surviving Corporation shall be
identical to those of Dispute Resolution Management, Inc. as in effect
immediately prior to the effectiveness of the Merger.
1
(c) Upon the effectiveness of the Merger:
(i) Treasury Stock. Each share of capital stock of
---------------
Dispute Resolution Management, Inc., if any, held by Dispute Resolution
Management, Inc. as treasury stock immediately prior to the effectiveness of the
Merger shall be canceled and extinguished, and no payment or issuance of any
consideration shall be payable or shall be made in respect thereof;
(ii) Options and Warrants. As of the effective date
--------------------
of the Merger there are no options, warrants, rights, or other agreements to
acquire any securities of Dispute Resolution Management, Inc., or any securities
directly or indirectly convertible into or exchangeable for or exercisable to
acquire the same, and no agreements to issue or acquire or dispose of any of the
foregoing.
(iii) Treatment of DRM Acquisition Corp. Common
----------------------------------------------
Stock. Each of the twenty four thousand three hundred (24,300) issued and
-----
outstanding shares of common stock of DRM Acquisition Corp., $.10 par value per
share (the "DRM Acquisition Corp. Common Stock"), shall, upon the effectiveness
of the Merger, be converted into one (1) share of Common Stock, $.10 par value
per share, of Dispute Resolution Management, Inc., as the Surviving Corporation
of the Merger.
(iv) Treatment of Dispute Resolution Management, Inc.
------------------------------------------------
Stock. Each of the 30,000 shares of common stock of Dispute Resolution
-----
Management, Inc., $.10 par value per share (the "Company Stock") issued and
outstanding immediately prior to the effectiveness of the Merger shall be
treated as follows:
(A) an aggregate of five thousand seven
hundred (5,700) shares of Company Stock owned of record and beneficially in
equal amounts by ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ in Dispute Resolution
Management, Inc. shall be retained by ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
and each of such shares of Company Stock shall, pursuant to the Merger, be
deemed to represent one (1) share of Common Stock, $.10 par value per share, of
the Surviving Corporation of the Merger, or an aggregate of five thousand seven
hundred (5,700) shares of such Company Stock; and
(B) an aggregate of twenty four thousand
three hundred (24,300) shares of Company Stock owned of record and beneficially
in equal amounts by ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ shall be canceled
and extinguished and shall be converted into the right to receive the Merger
Consideration payable pursuant to Section 2 of the agreement and plan of merger,
dated as of August 18, 2000, among Commodore Applied Technologies, Inc., DRM
Acquisition Corp., Dispute Resolution Management, Inc., ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ and
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ (the "Merger Agreement"). Such Merger Consideration shall be
paid and delivered upon surrender to the Surviving Corporation of the
certificates representing such 24,300 shares of outstanding Company Stock (all
of which shall be delivered free and clear of any and all pledges, Liens (as
such term is hereinafter defined), claims, charges, options, calls,
encumbrances, restrictions and assessments whatsoever, except any restrictions
which may be created by operation of state or federal securities laws).
2
(d) Books and Records. All of the stock books, records and
------------------
minute books of Dispute Resolution Management, Inc., all financial and
accounting books and records of Dispute Resolution Management, Inc. and all
referral, client, customer and sales records of Dispute Resolution Management,
Inc., shall be the property of the Surviving Corporation.
FIFTH: As to each of the undersigned corporations, the number of shares
outstanding, and the designation and number of outstanding shares of each class
entitle to vote as a class on such Plan, are as follows:
Number of Shares Number of Shares Entitled to Vote as a Class
Name of Corporation Outstanding Designation of Class Number of Shares
---------------------------------- ---------------- ------------------------ ------------------
Dispute Resolution Management, Inc. 30,000 Common Stock 30,000
DRM Acquisition Corp. 30,000 Common Stock 30,000
SIXTH: As to each of the undersigned corporations, the total number of
shares voted for and against such Plan, respectively, and, as to each class
entitled to vote thereon as a class, the number of shares of such class voted
for and against such Plan, respectively, are as follows:
Number of Shares Entitled to Vote as a Class
Name of Corporation Class Voted For Voted Against
Dispute Resolution Management, Inc. Common Stock 30,000 shares no shares
DRM Acquisition Corp. Common Stock 30,000 shares no shares
SEVENTH: The Surviving Corporation hereby: (a) agrees that it may be
served with process in the state of Utah in any proceeding for the enforcement
of any obligation of the undersigned domestic corporation and in any proceeding
for the enforcement of the rights of a dissenting shareholder against the
Surviving Corporation; (b) irrevocably appoints the secretary of state of Utah
as its agent to accept service of process in any such proceeding; and (c) agrees
that it will promptly pay to the dissenting shareholders of such Surviving
Corporation the amount, if any, to which they shall be entitled under the
provisions of the Utah Business Corporation Act with respect to the rights of
dissenting shareholders.
Dated: ____________, 2000.
3
DISPUTE RESOLUTION MANAGEMENT, INC.
By: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Its President
By: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Its Secretary
DRM ACQUISITION CORP.
By: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Its President
By: ______________ Its Secretary
4
STATE OF UTAH )
) ss.:
COUNTY OF ____________ )
I, ______________, a notary public, do hereby certify that on this
___________ day of ____________, 2000, personally appeared before me ▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇, who, being by me first duly sworn, declared that he is the President of
Dispute Resolution Management, Inc.; that he signed the foregoing document as
President of the corporation and that the statements therein contained are true.
IN WITNESS WHEREOF, I have hereunto set my hand and seal this
____________ day of _____________________, A.D. 2000.
My Commission expires ________________.
--------------------------------
Notary Public
STATE OF YORK )
) ss.:
COUNTY OF NEW YORK )
I, ______________, a notary public, do hereby certify that on this
___________ day of ____________, 2000, personally appeared before me ▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇▇, who, being by me first duly sworn, declared that he is the President
of DRM Acquisition Corp.; that he signed the foregoing document as President of
the corporation and that the statements therein contained are true.
IN WITNESS WHEREOF, I have hereunto set my hand and seal this
____________ day of _____________________, A.D. 2000.
My Commission expires ________________.
--------------------------------
Notary Public
5
EXHIBIT B
WARRANT TO PURCHASE SHARES OF
COMMON STOCK OF COMMODORE APPLIED TECHNOLOGIES, INC.
W-1
_______ ___, ▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇
THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF
THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT") AND SUCH SECURITIES MAY NOT BE SOLD, OFFERED FOR
SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO THE CORPORATION THAT SUCH REGISTRATION IS NOT REQUIRED.
VOID AFTER 5:00 P.M., NEW YORK TIME
ON _______ ___, 2005
THIS CERTIFIES THAT for value received, [▇▇▇▇▇▇▇ ▇ ▇▇▇▇▇▇▇] [▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇] [▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇] [▇▇▇▇▇▇ ▇▇▇▇▇ & Company, Inc.] or their registered
permitted assigns (hereinafter collectively referred to as the "Holder"), may
subscribe for and purchase, subject to the terms and conditions hereof, from
Commodore Applied Technologies, Inc., a Delaware corporation (the "Company"),
[350,000] [350,000] 340,000] [340,000] [300,000] [20,000] shares of Common Stock
of the Company, par value $0.001 per share (the "Common Stock"), at any time
during the period (the "Exercise Period") commencing at 9:00 a.m. New York Time
on _________ ___, 2000 (the "Commencement Date") and ending at 5:00 p.m. New
York Time, on _________ ___, 2005, a date which is five (5) years from the
Commencement Date (the "Expiration Date"), at an exercise price per share (the
"Exercise Price") which shall be equal to two ($2.00) dollars be share. The
number of shares of Common Stock issuable upon exercise of this Warrant (the
"Warrant Shares"), the Exercise Price, and the kind of securities issuable upon
exercise of this Warrant, shall be subject to adjustment from time to time upon
the occurrence of certain events as set forth below.
In the event of a Sale of Control of the Company, the Holder of this
Warrant shall have the right (but not the obligation), immediately prior to or
simultaneous with such Sale of Control, to utilize the "cashless exercise"
rights contemplated by Section 1.1(b) below in connection with his or its
exercise of this Warrant.
Certain Definitions. As used herein:
--------------------
(a) the term `Warrant Shares" shall mean the shares of Common Stock
issuable upon exercise of this Warrant, as adjusted from time to time,
(b) the term "Sale of Control" shall mean the sale of all or
substantially all of the outstanding shares of capital stock or assets
of the Company, whether by sale, merger, consolidation or like
combination, to any unaffiliated third person, firm or corporation.
(c) the term "Sale of Control Price" shall mean the price per share
paid by any unaffiliated third person, firm or corporation for each
fully-diluted share of Common Stock of the Company in connection with
any Sale of Control; which Sale of Control Price shall be determined by
dividing (i) the total consideration received or receivable by the
Company or its stockholders in connection with such Sale of Control by
(ii) the aggregate number of shares of Common Stock of the Company
outstanding on a fully-diluted basis (after giving effect to the
exercise of all outstanding Company options and warrants or the
conversion into Common Stock of all outstanding convertible securities
of the Company ) immediately prior to consummation of such Sale of
Control.
1. Exercise Price and Expiration.
-----------------------------
(a) This Warrant may be exercised in whole or in part on any
Business Day (as such term is hereinafter defined) at any time during the
Exercise Period upon surrender to the Company, at its address for notices set
forth in Section 8 of this Warrant (or at such other office of the Company, if
any, or such other office of the Company's duly authorized agent for such
purpose, as may be maintained by the Company for such purpose and so designated
by the Company by written notice to the Holder prior to such exercise), together
with the following: (i) a duly completed and executed Notice of Warrant Exercise
in the form annexed hereto, and (ii) payment of the full Exercise Price for this
Warrant or the portion thereof then being exercised. This Warrant and all rights
and options hereunder shall expire on, and shall be immediately wholly null and
void to the extent the Warrant is not properly exercised prior to the Expiration
Date. As used in this Warrant the term "Business Day" shall mean the time period
between 9:00 a.m. New York, New York Time and 5:00 p.m. New York, New York Time
on any day other than any Saturday, Sunday, or other day on which commercial
banks in New York, New York are required or are authorized by law to close.
(b) Such Exercise Price shall be paid in lawful money of the
United States of America by bank cashier's check or by wire transfer of
immediately available funds to such account as shall have been designated in
writing by the Company to the Holder from time to time. In lieu of paying such
Exercise Price in cash, the Holder of this Warrant may elect to exercise certain
"cashless" exercise rights on each occasion the Holder elects to exercise this
Warrant.
(c) Such "cashless" exercise shall be elected by the Holder
indicating on the Notice of Exercise to the Company of the Holder's intention to
exercise such cashless exercise rights. The number of shares of Common Stock
issuable to the Holder of this Warrant upon any such "cashless" exercise shall
be calculated as follows:
2
(i) The number of Warrant Shares issuable upon any
full or partial exercise of this Warrant (the "Subject Warrant Shares") shall be
multiplied by the Exercise Price then in effect. The product thereof shall be
deemed to be the "Exercise Cost."
(ii) The Subject Warrant Shares shall be multiplied
by closing price per share of the Company's Common Stock, as traded on the
American Stock Exchange, the New York Stock Exchange, the Nasdaq Stock Exchange,
the OTC Electronic-Bulletin Board or any other national securities exchange as
at the date of the Notice of Exercise (the "Per Share Market Price") and the
product thereof shall be deemed to be the "Exercise Value."
(iii) The Exercise Cost shall be subtracted from the
Exercise Value and the positive result thereof, if any, shall be deemed the
"Profit."
(iv) The Company shall issue that number of Warrant
Shares to the Holder(s) as shall be determined by dividing the Profit by the Per
Share Market Price or Sale of Control Price, as the case may be.
(d) Upon the Holder's surrender of the Warrant and payment of
the Exercise Price or cashless exercise election, as set forth above, the
Company shall promptly issue and cause to be delivered to the Holder a
certificate or certificates for the total number of whole shares of Common Stock
for which this Warrant is then so exercised, as the case may be (adjusted to
reflect the effect of the anti-dilution provisions contained in Section 2 of
this Warrant, if any) in such denominations as are requested for delivery to the
Holder, and the Company shall thereupon deliver such certificates to the Holder.
The Holder shall be deemed to be the Holder of record of the shares of Common
Stock issuable upon such exercise, notwithstanding that the stock transfer books
of the Company shall then be closed or that certificates representing such
shares of Common Stock shall not then be actually delivered to the Holder. For
purposes of Rule 144 promulgated under the Securities Act of 1933, as amended
(the "Act"), it is intended, understood and acknowledged that the Warrant Shares
issued in a cashless exercise transaction pursuant to Section 1(b) above shall
be deemed to have been acquired by the Holder, and the holding period for the
Warrant Shares shall be deemed to have been commenced, on the issue date of the
Warrant. If, at the time this Warrant is exercised, a registration statement
under the Securities Act is not then in effect to register under said Securities
Act the Warrant Shares issuable upon exercise of this Warrant (together with any
applicable state securities law registrations), the Company may require the
Holder to make such representations, and may place such legends on certificates
representing the Warrant Shares, as may be reasonably required in the opinion of
counsel to the Company to permit the Warrant Shares to be issued without such
registration, unless the Company receives an opinion of counsel reasonably
satisfactory to counsel to the Company to the effect that said securities may be
freely traded without registration under the Securities Act.
(e) If the Holder shall exercise this Warrant with respect to
less than all of the Warrant Shares that may then be purchased under this
Warrant, having taken into account any prior exercise of the Warrant, the
Company shall promptly execute and deliver to the Holder a new warrant in the
form of this Warrant for the balance of such Warrant Shares.
3
2. Certain Anti-dilution Adjustments.
---------------------------------
(a) In case the Company shall at any time after the date the
Warrants were first issued (i) declare a dividend on the outstanding Common
Stock payable in shares of its capital stock, (ii) subdivide the outstanding
Common Stock, (iii) combine the outstanding Common Stock into a smaller number
of shares, or (iv) issue any shares of its capital stock by reclassification of
the Common Stock (including any such reclassification in connection with a
consolidation or merger in which the Company is the continuing corporation),
then, in each case, the Exercise Price, and the number of Warrant Shares
issuable upon exercise of this Warrant, in effect at the time of the record date
for such dividend or of the effective date of such subdivision, combination, or
reclassification, shall be proportionately adjusted so that the Holder after
such time shall be entitled to receive the aggregate number and kind of shares
which, if such Warrant had been exercised immediately prior to such time, it
would have owned upon such exercise and been entitled to receive by virtue of
such dividend, subdivision, combination, or reclassification. Such adjustment
shall be made successively whenever any event listed above shall occur.
(b) In case the Company shall issue or fix a record date for
the issuance to all holders of Common Stock of rights, options, or warrants to
subscribe for or purchase Common Stock (or securities convertible into or
exchangeable for Common Stock) at a price per share (or having a conversion or
exchange price per share, if a security convertible into or exchangeable for
Common Stock) less than the Exercise Price per share of Common Stock on such
record date, then, in each case, the Exercise Price shall be adjusted by
multiplying the Exercise Price in effect immediately prior to such record date
by a fraction, the numerator of which shall be the number of shares of Common
Stock outstanding on such record date plus the number of shares of Common Stock
which the aggregate offering price of the total number of shares of Common Stock
so to be offered (or the aggregate initial conversion or exchange price of the
4
convertible or exchangeable securities so to be offered) would purchase at such
current Exercise Price and the denominator of which shall be the number of
shares of Common Stock outstanding on such record date plus the number of
additional shares of Common Stock to be offered for subscription or purchase (or
into which the convertible or exchangeable securities so to be offered are
initially convertible or exchangeable). Such adjustment shall become effective
at the close of business on such record date; provided, however, that, to the
extent the shares of Common Stock (or securities convertible into or
exchangeable for shares of Common Stock) are not delivered, the Exercise Price
shall be readjusted after the expiration of such rights, options, or warrants
(but only with respect to Warrants exercised after such expiration), to the
Exercise Price which would then be in effect had the adjustments made upon the
issuance of such rights, options, or warrants been made upon the basis of
delivery of only the number of shares of Common Stock (or securities convertible
into or exchangeable for shares of Common Stock) actually issued. In case any
subscription price may be paid in a consideration part or all of which shall be
in a form other than cash, the value of such consideration shall be as
determined in good faith by the board of directors of the Company, whose
determination shall be conclusive absent manifest error. Shares of Common Stock
owned by or held for the account of the Company or any majority-owned subsidiary
shall not be deemed outstanding for the purpose of any such computation.
(c) In case the Company shall distribute to all holders of
Common Stock (including any such distribution made to the stockholders of the
Company in connection with a consolidation or merger in which the Company is the
continuing corporation) evidences of its indebtedness or assets (other than cash
dividends or distributions and dividends payable in shares of Common Stock), or
rights, options, or warrants to subscribe for or purchase Common Stock, or
securities convertible into or exchangeable for shares of Common Stock
(excluding those with respect to the issuance of which an adjustment of the
Exercise Price is provided pursuant to Section 2(b) hereof), then, in each case,
the Exercise Price shall be adjusted by multiplying the Exercise Price in effect
immediately prior to the record date for the determination of stockholders
entitled to receive such distribution by a fraction, the numerator of which
shall be the Exercise Price per share of Common Stock on such record date, less
the fair market value (as determined in good faith by the board of directors of
the Company, whose determination shall be conclusive absent manifest error) of
the portion of the evidences of indebtedness or assets so to be distributed, or
of such rights, options, or warrants or convertible or exchangeable securities,
applicable to one share, and the denominator of which shall be such current
Exercise Price per share of Common Stock. Such adjustment shall be made whenever
any such distribution is made, and shall become effective on the record date for
the determination of shareholders entitled to receive such distribution.
(d) No adjustment in the Exercise Price shall be required if
such adjustment is less than $.05; provided, however, that any adjustments which
by reason of this Section 2 are not required to be made shall be carried forward
and taken into account in any subsequent adjustment. All calculations under this
Section 2 shall be made to the nearest cent or to the nearest one-thousandth of
a share, as the case may be.
(e) In any case in which this Section 2 shall require that an
adjustment in the Exercise Price be made effective as of a record date for a
specified event, the Company may elect to defer, until the occurrence of such
event, issuing to the Holder, if the Holder exercised this Warrant after such
5
record date, the shares of Common Stock, if any, issuable upon such exercise
over and above the shares of Common Stock, if any, issuable upon such exercise
on the basis of the Exercise Price in effect prior to such adjustment; provided,
however, that the Company shall deliver to the Holder a due ▇▇▇▇ or other
appropriate instrument evidencing the Holder's right to receive such additional
shares upon the occurrence of the event requiring such adjustment
(f) Upon each adjustment of the Exercise Price as a result of
the calculations made in Sections 2(b) and 2(c) hereof, this Warrant shall
thereafter evidence the right to purchase, at the adjusted Exercise Price, that
number of shares (calculated to the nearest thousandth) obtained by dividing (A)
the product obtained by multiplying the number of shares purchasable upon
exercise of this Warrant prior to adjustment of the number of shares by the
Exercise Price in effect prior to adjustment of the Exercise Price by (B) the
Exercise Price in effect after such adjustment of the Exercise Price.
3. Mergers; Consolidations and Reclassifications.
---------------------------------------------
(a) In case of any consolidation with or merger of the Company
with or into another corporation (other than a merger or consolidation in which
the Company is the surviving or continuing corporation), or in case of any sale,
lease, or conveyance to another corporation of the property and assets of any
nature of the Company as an entirety or substantially as an entirety, such
successor, leasing, or purchasing corporation, as the case may be, shall (i)
execute with the Holder an agreement providing that the Holder shall have the
right thereafter to receive upon exercise of this Warrant solely the kind and
amount of shares of stock and other securities, property, cash, or any
combination thereof receivable upon such consolidation, merger, sale, lease, or
conveyance by a holder of the number of shares of Common Stock for which this
Warrant might have been exercised immediately prior to such consolidation,
merger, sale, lease, or conveyance and (ii) make effective provision in its
certificate of incorporation or otherwise, if necessary, to effect such
agreement. Such agreement shall provide for adjustments which shall be as nearly
equivalent as practicable to the adjustments in Section 2.
(b) In case of any reclassification or change of the shares of
Common Stock issuable upon exercise of this Warrant (other than a change in par
value or from no par value to a specified par value, or as a result of a
subdivision or combination, but including any change in the shares into two or
more classes or series of shares), or in case of any consolidation or merger of
another corporation into the Company in which the Company is the continuing
corporation and in which there is a reclassification or change (including a
change to the right to receive cash or other property) of the shares of Common
Stock (other than a change in par value, or from no par value to a specified par
value, or as a result of a subdivision or combination, but including any change
in the shares into two or more classes or series of shares), the Holder shall
have the right thereafter to receive upon exercise of this Warrant solely the
kind and amount of shares of stock and other securities, property, cash, or any
combination thereof receivable upon such reclassification, change,
consolidation, or merger by a holder of the number of shares of Common Stock for
which this Warrant might have been exercised immediately prior to such
reclassification, change, consolidation, or merger. Thereafter, appropriate
6
provision shall be made for adjustments which shall be as nearly equivalent as
practicable to the adjustments in Section 2.
(c) The above provisions of this Section 3 shall similarly
apply to successive reclassifications and changes of shares of Common Stock and
to successive consolidations, mergers, sales, leases, or conveyances.
4. Certain Representations of the Company.
--------------------------------------
Throughout the Exercise Period, the Company has and will continue to
have (i) all requisite power and authority to issue this Warrant and the Warrant
Shares, and (ii) sufficient authorized and unissued securities of Common Stock
to permit exercise of this Warrant.
5. Certain Covenants of the Company.
--------------------------------
(a) The Company shall take such steps as are necessary to
cause the Company to continue to have sufficient authorized and unissued shares
of Common Stock reserved in order to permit the exercise of the unexercised and
unexpired portion of this Warrant, if any.
(b) The Company covenants and agrees that all Warrant Shares
issued upon the due exercise of this Warrant will, upon issuance in accordance
with the terms hereof, be duly authorized, validly issued, fully paid and
non-assessable and free and clear of all taxes, liens, charges, and security
interests created by the Company with respect to the issuance thereof.
(c) The Company will pay all documentary stamp taxes, if any,
attributable to the initial issuance of Warrant Shares upon the exercise of this
Warrant; provided, that the Company shall not be required to pay any tax which
may be payable in respect of any transfer involved in the issue of this Warrant
or of any certificates for Warrant Shares in a name other than that of the
Holder upon the exercise of this Warrant, and the Company shall not be required
to issue or deliver such certificates unless or until the person or persons
requesting the issuance thereof shall have paid to the Company the amount of
such tax, or shall have established to the satisfaction of the Company that such
tax has been paid.
(d) This Warrant and, when so issued, the shares of Common
Stock which may be issued upon exercise of the Warrants, will have been issued
pursuant to an available exemption from registration under the Securities Act.
(e) The Company covenants and agrees that if it fails (i) to
file a registration statement covering the Warrant Shares as provided in a
Registration Rights Agreement between the Holder and the Company, dated of even
date herewith, or (ii) to issue the shares of Common Stock upon the proper
exercise of the Warrant, then the Holder may, in addition to any remedies at
law, immediately commence an action for specific performance.
6. No Shareholder Rights. No Holder of this Warrant shall, as such, be
entitled to vote or be deemed the holder of Common Stock or any other kind of
7
securities of the Company, nor shall anything contained herein be construed to
confer upon the Holder the rights of a shareholder of the Company or the right
to vote for the election of directors or upon any matter submitted to
shareholders at any meeting thereof, or give or withhold consent to any
corporate action or to receive notice of meetings or other actions affecting
shareholders (except as otherwise expressly provided herein), or to receive
dividends or subscription rights or otherwise, until the date of Holder's proper
exercise of this Warrant as described herein.
7. Notices. Any notice, demand, request, waiver or other communication
under this Agreement must be in writing and will be deemed to have been duly
given (i) on the date of delivery if delivered by hand to the address of the
party specified below (including delivery by courier), or (ii) on the fifth day
after deposit in the U.S. Mail if mailed to the party to whom notice is to be
given to the address specified below, by first class mail, certified or
registered, return receipt requested, First Class postage prepaid:
to the Company:
Commodore Applied Technologies, Inc.
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, President
the Holder:
-----------------------
-----------------------
-----------------------
Any party may from time to time change its address for the purpose of notices to
that party by a similar notice specifying a new address, but no such change will
be deemed to have been given until it is actually received by the party sought
to be charged with its contents.
8. General.
-------
(a) This Warrant shall be governed by and construed in
accordance with the laws of the State of Delaware without regard to its conflict
of laws provisions.
(b) Section and subsection headings used herein are included
herein for convenience of reference only and shall not affect the construction
of this Warrant or constitute a part of this Warrant for any other purpose.
(c) This Warrant may be executed simultaneously in any number
of counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument when instruments
originally executed by each party shall have been received by the Company.
(d) This Warrant shall be binding upon and inure to the
benefit of the parties hereto and their respective successors, heirs and
assigns.
[the balance of this page intentionally left blank]
8
IN WITNESS WHEREOF, the Company has duly executed this Warrant on and
as of the date first set forth above.
COMMODORE APPLIED TECHNOLOGIES, INC.
By: ____________________________________
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, President
9
NOTICE
OF
WARRANT EXERCISE
TO Commodore Applied Technologies, Inc.:
The undersigned hereby irrevocably elects to exercise the Warrant and
to purchase thereunder ______ full shares of Common Stock issuable upon the
exercise of such Warrant.
Please check the applicable method by which the undersigned elects to
exercise the Warrant:
The Exercise Price for this warrant shall be paid by delivery of
$___________ in cash as provided for in the Warrant ______.
The undersigned elects to exercise his or its "cashless" exercise
rights in the manner provided in Section 1(c) of the Warrant. ________.
The undersigned requests that certificates for such Warrant Shares be
issued in the name of:
Name:
Address:
Employer I.D. or S.S. #:
If such number of Warrants shall not be all the Warrants evidenced by
the Warrant document, the undersigned requests that a new document evidencing
the Warrants not so exercised issued and registered in the name of and delivered
to:
----------------------------------------
Name
----------------------------------------
Address
----------------------------------------
Employer I.D. or Social Security Number
Date: ________________ ________________________________________
Signature
10
EXHIBIT C
MAKE WHOLE AGREEMENT
THIS AGREEMENT ("Agreement") is made and entered into as the 30th day
of August 2000 by and among ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ("▇▇▇▇▇▇▇"), ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
("▇▇▇▇▇▇▇▇") and Commodore Applied Technologies, Inc., a Delaware corporation
("Commodore").
WHEREAS, Commodore, Dispute Resolution Management, Inc., a Utah
corporation (the "Company"), ▇▇▇▇▇▇▇ and Speciale have entered into that certain
amended and restated stock purchase agreement, dated as of August 30, 2000 (the
"Purchase Agreement"); and
WHEREAS, ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇ (individually and collectively, together
with their respective heirs, executors, successors and assigns, referred to
herein as the "Selling Stockholders") are entitled to receive, pursuant to
Section 2.5 of the Purchase Agreement periodic installment "Company Cash Flow
Payments" of "Company Cash Flow", as those terms are defined in the Purchase
Agreement; and
WHEREAS, in order to induce ▇▇▇▇▇▇▇ and Speciale to enter into the
Purchase Agreement and to consummate the transactions contemplated thereby,
Commodore has agreed to enter into this Agreement whereby Commodore will provide
to the Selling Stockholders or their designees, under certain circumstances
described herein, the right to receive certain cash payments and/or additional
share of common stock, $.001 par value per share (the "Commodore Common Stock"),
all upon the terms and subject to the conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein, the parties hereto intending to be bound thereby, it is
mutually agreed as follows:
1. Definitions. Unless otherwise separately defined herein, all
-----------
capitalized terms, when used in this Agreement, shall have the same meaning as
is defined in the Operating Agreement.
2. Make Whole Payment. In the event and to the extent that by not later than
-------------------
April 15, 2004 (the "Final Company Cash Flow Payment"), the Selling Stockholders
shall not have received in cash an aggregate amount of Company Cash Flow
Payment, as provided in Section 2.5 of the Purchase Agreement, which shall have
equaled Ten Million ($10,000,000) Dollars of such Company Cash Flow Payment (the
"Base Company Cash Flow Payment"), the difference, if any, between (a) the Base
Company Cash Flow Payment and (b) the actual accumulated amount of Company Cash
Flow Payment received in cash by the Selling Stockholders as at the Final
Company Cash Flow Payment Date, shall be defined herein as the "Make Whole
Payment."
3. Payment of Make Whole Payment. On or before April 30, 2004 (the "Make Whole
-----------------------------
Payment Date"), Commodore shall pay to the Selling Stockholders (in such
pro-rata amounts as between the Selling Stockholders as is provided in the
Purchase Agreement) the Make Whole Payment: (a) in cash by wire transfer of
immediately available funds (the "Cash Payment") and/or (b) by delivery to the
Selling Stockholders of such number of shares of Commodore Common Stock as shall
be calculated pursuant to Section 4 below. The form of payment of the Make Whole
Payment, whether a Cash Payment, in shares of Commodore Common Stock, or any
combination thereof, shall be determined solely by Commodore, except as provided
in Section 5 below.
4. Calculation of Number of Shares of Commodore Common Stock.
---------------------------------------------------------
(a) The number of shares of Commodore Common Stock to be issued by
Commodore to the Selling Stockholders on the Make Whole Payment Date shall be
determined by dividing (i) the aggregate amount of the Make Whole Payment which
Commodore elects to pay by delivery of shares of Commodore Common Stock, by (ii)
the average of the closing prices of Commodore Common Stock as such shares of
Commodore Common Stock are then traded on the American Stock Exchange, Inc.
("Amex"), the Nasdaq Stock Market, the New York Stock Exchange, Inc. or any
other national securities exchange, for the 30 consecutive trading days (the
"Average Closing Price") immediately prior to April 15, 2004.
(b) In the event that the aggregate number of shares of Commodore
Common Stock to be issued on the Make Whole Payment Date shall exceed an
aggregate of two million (2,000,000) shares of Commodore Common Stock, Commodore
shall have the right to issue to the Selling Stockholders on the Make Whole
Payment Date an aggregate of two million (2,000,000) shares of Commodore Common
Stock, and defer the payment of the balance of the Make Whole Payment for two
(2) additional years, as provided in Section 4(c) below.
(c) In the event that Commodore shall elect to defer the balance of the
Make Whole Payment beyond the Make Whole Payment Date, on a date which shall be
not later than April 15, 2006 (the "Deferred Make Whole Payment Date"),
Commodore shall pay the unpaid portion of the Make Whole Payment (the "Deferred
Make Whole Payment") either (i) by making an additional Cash Payment by wire
transfer of immediately available funds, and/or (ii) delivering additional
shares of Commodore Common Stock determined by dividing (A) the aggregate amount
of the Deferred Make Whole Payment which Commodore elects to pay by delivery of
shares of Commodore Common Stock, by (ii) the Average Closing Price immediately
prior to April 15, 2006. The form of payment of the Deferred Make Whole Payment,
whether a Cash Payment, in shares of Commodore Common Stock, or any combination
thereof, shall be determined solely by Commodore, except as provided in Section
5 below.
5. Right to Receive Make Whole Payment in Cash.
-------------------------------------------
Notwithstanding anything to the contrary, express or implied, contained
herein, in the event that in the event that
(a) the Company shall fail to make any quarterly payment to the Selling
Stockholders required to be made under the terms of the Purchase Agreement or
under the terms of the separate employment agreements, dated of even date
herewith, between the Company and each of ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇ (the "Employment
Agreements") within ten (10) days after the date such payment shall become due
and payable, or
(b) the Company or Commodore shall breach or otherwise fail to perform
any other material covenant or agreement to be observed or performed by the
2
Company or Commodore under the Purchase Agreement or the Employment Agreements
and shall fail to cure or remedy the same within thirty (30) days after written
notice thereof to the Company,
(in either case, a "Default Event"), then and in such event (unless it shall be
found pursuant to the provisions of Section 6 hereof that such Default Event has
not, in fact, occurred), the Selling Stockholders, or any of them, may require
by written notice to Commodore, that any and all Make Whole Payments due
hereunder shall be payable solely in cash by wire transfer of immediately
available funds, and not in shares of Commodore Common Stock.
6 Resolution of Disputes, Binding Arbitration.
-------------------------------------------
(a) Whenever a claim shall arise involving the interpretation or
application of this Agreement, the complaining party shall notify the other
party in writing within thirty (30) days of the complaining party's first
receipt of notice of, or the complaining party's obtaining actual knowledge of,
such claim, and in any event within such shorter period as may be necessary for
the other party to take appropriate action to resist such claim. Such notice
shall specify all facts known to the complaining party giving rise to such claim
or dispute and shall estimate (to the extent reasonably possible) the amount of
potential liability arising therefrom. If the other party shall be duly notified
of such dispute, the parties shall attempt to settle and compromise the same.
(b) In the event that any dispute involving the interpretation or
application of this Agreement or any Exhibit hereto cannot be settled or
compromised, as aforesaid, within twenty (20) days of receipt of the subject
claim, either the complaining party or the other party shall promptly thereafter
submit the dispute for final and binding arbitration to JAMS or End-Dispute
before a three-person panel of arbitrators who shall be either (i) retired
federal judges, or (ii) other persons experienced in resolving commercial
disputes and who are acceptable to both the complaining party and the other
party to such dispute (the "Arbitration"). Any such Arbitration shall, if
brought by the Selling Stockholders or any of them, be held in New York, New
York and, if brought by Commodore shall be in Salt Lake City, Utah. The panel of
arbitrators shall be selected within twenty (20) days of submission of such
dispute to Arbitration. The parties shall use their collective best efforts to
promptly schedule and conduct the hearings before such arbitrators, with a view
toward concluding such arbitration proceedings not later than thirty (30) days
from the first submission of the dispute to arbitration. In addition to, and not
in lieu of, arbitration as a means of dispute resolution hereunder, any party
hereto shall have the right to seek specific enforcement of this Agreement or
any Transaction Document, or other injunctive or equitable relief or remedy
before any court of competent jurisdiction.
(c) In connection with any Arbitration pursuant to this Section 6, the
arbitrators shall, as part of their award, allocate the fee of the Arbitration,
including all fees of the arbitrators, the cost of any transcripts, and the
parties' reasonable attorneys' fees, based upon and taking into account the
arbitrators' determination of the merits and good faith of the parties' claims
and defenses in the subject proceeding.
(d) The decision and award of the arbitrators shall be final and
binding upon the parties hereto and shall be enforceable in any court of
competent jurisdiction, including any federal or state court in the States of
Utah, Delaware, New York or Colorado. Any process or other papers hereunder may
be served by registered or certified mail, return receipt requested, or by
personal service, provided that a reasonable time for appearance or response is
allowed.
3
(e) Any rights established by reason of such settlement, compromise,
arbitration or litigation shall promptly thereafter be satisfied by the losing
party in such amount as shall be necessary to satisfy all applicable losses or
damages sustained or incurred by the complaining party, as determined in
accordance with such settlement and compromise, or by final nonappealable order
or judgment of the applicable judicial or arbitration panel.
(f) In connection with the defense of any third party claims for which
claims for indemnification have been made hereunder, each party will provide
reasonable access to its and the Company's books and records as and to the
extent required for the proper defense of such third party claim. Neither party
shall consent to any settlement or purport to bind any other party to any
settlement without the written consent of the other party.
(g) Notwithstanding anything to the contrary set forth above, in the
event and to the extent that the complaining party shall believe that such party
shall then have no adequate remedy at law, the complaining party shall have the
right, in addition to and not in lieu of the right to obtain compensatory or
other monetary relief, to seek and obtain injunctive relief, specific
performance or such other equitable remedies as any court of competent
jurisdiction shall deem appropriate in the circumstances.
7 Miscellaneous.
-------------
(a) Upon the occurrence and during the continuation of any Default
Event, the Selling Stockholders may enforce this Agreement without the need to
resort to any proceedings or obtain any judgment as against the Company.
(b) Commodore hereby acknowledges and agrees that the validity of this
Agreement and Commodore's obligations hereunder shall in no way be terminated,
modified, affected, impaired or diminished by reason of any of (i) the granting
by the Selling Stockholders of any consent, indulgence, extension, renewal,
waiver, compromise or release to Commodore, (ii) any failure by the Selling
Stockholders to insist in any one or more instances upon strict performance or
observance by Commodore or the Company of any of the terms, provisions or
conditions of the Purchase Agreement and/or any other agreement or instrument
executed and delivered by the Company in connection therewith (collectively, the
"Documents"), (iii) any assertion or non-assertion by the Selling Stockholders
against the Company of any of the rights or remedies reserved to the Selling
Stockholders in the Documents, (iv) any forbearance by the Selling Stockholders
from exercising any of its rights or remedies as aforesaid, (v) any bankruptcy,
insolvency, receivership, reorganization, liquidation or other similar
proceeding relating to the Company or any of its subsidiaries or affiliates,
other than Commodore, (vi) any relief of the Company and/or any such other
guarantor(s) from any of its obligations under the Documents, by operation of
law, in equity or otherwise, (vii) any amendment, modification, extension,
renewal, termination, compromise or waiver under or in respect of the Documents,
(viii) any sale, release or other disposition of any collateral security, if
effected in a commercially reasonable manner and in accordance with applicable
law, or (ix) any transfer, assignment or negotiation of any of the Documents
and/or any collateral security as aforesaid, including, without limitation, this
Agreement.
(c) This Agreement may be executed in any number of counterparts, each
of which shall be deemed an original but all of which together shall constitute
one and the same instrument.
4
(d) This Agreement shall be binding upon Commodore and its
administrators, representatives, successors and assigns, and shall inure to the
benefit of the Selling Stockholders and his or her heirs, executors,
administrators, personal representatives, successors and assigns.
(e) Subject to applicable statutes of limitations, no delay on the part
of the Selling Stockholders in exercising any rights hereunder, or any failure
by the Selling Stockholders to exercise any such rights, shall operate as a
waiver of any such rights for any purposes, it being understood that, subject to
applicable statutes of limitations, the Selling Stockholders may exercise any
and all of his rights hereunder at any time and from time to time pursuant to
the terms hereof.
(f) This Agreement may not be terminated, modified or amended except by
a writing duly executed by the Selling Stockholders and Commodore.
(g) This Agreement shall be governed by and construed in accordance
with the laws of the State of Utah, without giving effect to principles of
conflicts of laws.
(h) In the event that the Selling Stockholders shall, after default by
Commodore of any of its obligations hereunder, place this Agreement in the hands
of any attorney for enforcement and/or collection, pay to the Selling
Stockholders a reasonable attorneys' fee together with all other reasonable
costs and expenses of enforcement and collection.
IN WITNESS WHEREOF, the parties hereto, intending to be legally bound
hereby, has executed this Agreement this day of ______________, 2000.
COMMODORE APPLIED TECHNOLOGIES, INC.
By:________________________________________
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, President and Chief
Executive Officer
--------------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-------------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
5
EXHIBIT D
---------
PLEDGE AND SECURITY AGREEMENT
------------------------------
THIS PLEDGE AND SECURITY AGREEMENT (this "Agreement"), dated as of the
30th day of August 2000, by and between COMMODORE APPLIED TECHNOLOGIES, INC., a
Delaware corporation ("Commodore" or "Pledgor"), and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
("▇▇▇▇▇▇▇") and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ ("Speciale"). Commodore is hereinafter
sometimes referred to as the "Pledgor", and ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇ are referred to
herein individually a "Pledgee" and collectively as the "Pledgees."
W I T N E S S E T H:
--------------------
WHEREAS, pursuant to an amended and restated stock purchase agreement,
dated August 30, 2000 between Commodore, DISPUTE RESOLUTION MANAGEMENT, INC., a
Utah corporation (the "Company"), and the Pledgees, (the "Purchase Agreement"),
as of the date of this Agreement Commodore acquired 81% of the issued and
outstanding shares of capital stock of the Company, and
WHEREAS, pursuant to the provisions of Section 7.12 of the Purchase
Agreement, Commodore has covenanted and agreed that by not later than November
15, 2000, it shall have obtained Final Commodore Stockholders Approval of the
Acquisition and issued the balance of the Consideration and Commodore Option
Stock pursuant to Section 2.6(b) of the Purchase Agreement; and
WHEREAS, pursuant to the terms of Section 7.2(b) of the Purchase
Agreement, Commodore has covenanted and agreed with the Pledgees to fulfill its
"Repurchase Obligation" (as that term is defined in the Purchase Agreement),
pursuant to which Commodore will purchase all or a portion of the 9,500,000
"Repurchase Shares" at the "Repurchase Price" (as those terms are defined in the
Purchase Agreement), and pay or cause to be paid to the Pledgees and other
holders of an aggregate of $14,500,000 in connection with the repurchase and
redemption of such Repurchase Shares from and after the date hereof through and
including the Anniversary Date (as defined in the Purchase Agreement); and
WHEREAS, pursuant to the terms of Section 2.4 of the Purchase Agreement
the Company has agreed to make certain "Company Cash Flow Payments" of "Company
Cash Flow" (as those terms are defined in the Purchase Agreement); and
WHEREAS,. pursuant to the terms of a make whole agreement, dated of
even date, among Commodore and Pledgees (the "Make Whole Agreement"), Commodore
has agreed to provide the Pledgees with certain payments either in cash or
shares of Commodore Common Stock, all as provided therein; and
WHEREAS, in order to secure the rights of the Pledgees in the event
that the Company or Pledgor shall breach or shall otherwise fail to perform any
of the "Obligations" (as that term is hereinafter defined), pursuant to the
terms of the Purchase Agreement, Commodore has agreed to pledge to the Pledgees
1
the "Pledged Stock" (as that term is hereinafter defined); all of which Pledged
Stock is being pledged to the Pledgees pursuant to this Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereby
agree as follows:
1. Definitions.
------------
Unless otherwise defined herein, all capitalized terms used in this
Agreement shall have the same meaning as is defined in the Asset Transfer
Agreement. In addition, the following terms shall have the following meanings
wherever used in this Agreement:
(a) "Obligations" shall mean the collective reference to:
(i) the covenant and agreement of Commodore that on
or prior to November 15, 2000 it shall have obtained Final Commodore
Stockholders Approval of the Acquisition and shall have issued to the Pledgees
and other recipients, stock certificates and instruments evidencing the balance
of the Acquisition Consideration and Commodore Option Stock and the Commodore
Warrants, all pursuant to the provisions of Section 7.12 and Section 2.6(b) of
the Purchase Agreement;
(ii) the full and timely payment of the entire
Repurchase Obligation, as set forth in Section 7.2(b) of the Purchase Agreement;
(iii) the obligation of the Company to make full and
timely payments of all quarterly installments of Company Cash Flow Payments of
Company Cash Flow, as defined and provided in Section 2.5 of the Purchase
Agreement up to and including the first Ten Million ($10,000,000) Dollars of
such Company Cash Flow Payments which are due and payable under the Purchase
Agreement in quarterly installments through December 31, 2003,
(iv) the covenants and agreements of Commodore to the
Pledgees under the terms of the Make Whole Agreement; and
(v) the covenants and agreements that each of
Commodore and the Company shall duly perform all of its and their respective
covenants, agreements and undertakings as set forth in Section 14.4 and Section
14.5 of the Purchase Agreement.
2
(b) "Pledged Stock" shall mean the collective reference to (i)
the Majority Company Stock, representing an aggregate of 24,300 shares of the
common stock of the Company, as Surviving Corporation of the Acquisition, owned
of record by Commodore as at the date hereof, representing one hundred (100%)
percent of the issued and outstanding shares of common stock of the Company
which is owned of record and beneficially by Commodore at the date hereof (the
"DRM Stock"); and (ii) the Acquisition Stock, representing an aggregate of
10,500,000 shares of Commodore Common Stock which is subject to repurchase by
Commodore or its assignee upon payment and performance of the Repurchase
Obligation (the "Commodore Stock"); provided, that (A) the Commodore Stock shall
no longer be deemed Pledged Stock hereunder nor shall any shares of Commodore
Stock be subject to this Agreement in the event that, and at such time as,
Commodore shall have fully paid and performed its Repurchase Obligation under
Section 7.2(b) of the Purchase Agreement, and (B) the number of shares of DRM
Stock, constituting the remaining Pledged Stock and the percentage of the issued
and outstanding shares of common stock of the Company which is owned of record
and beneficially by Commodore shall be reduced as provided in Section 8(b)
hereof.
(c) "Satisfaction Date" shall mean that date which shall be on
or before April 30, 2004 on which all of those Obligations referred to in
clauses (i) and (ii) of Section 1(a) above shall have been indefeasibly paid or
performed in full.
2. Pledge of the Pledged Stock.
----------------------------
(a) As security for the due and timely payment and performance
of all of the Obligations, Commodore hereby pledges to the Pledgees, and grants
to the Pledgees a first priority lien and security interest in, all of the
Pledged Stock (as same are constituted from time to time) and all proceeds
thereof, until the Satisfaction Date.
(b) In furtherance of the pledge hereunder, Commodore is,
concurrently herewith, delivering to the Pledgees the certificates representing
all of the currently outstanding Pledged Stock, each accompanied by appropriate
undated stock powers duly endorsed in blank by Commodore.
3. Retention of the Pledged Stock.
-------------------------------
(a) Except as otherwise provided herein, the Pledgees shall
have no obligation with respect to the Pledged Stock or any other property held
or received by the Pledgees hereunder, except to use reasonable care in the
custody and preservation thereof, to the extent required by law.
(b) The Pledgees shall hold the Pledged Stock and any other
property held or received by the Pledgees hereunder in the form in which same
are delivered herewith, unless and until there shall occur an Event of Default.
3
4. Rights to Vote Pledged Stock.
-----------------------------
Throughout the term of this Agreement, so long as no default
in the payment or performance of the Obligations has occurred, Commodore shall
have the sole right to vote the DRM Stock in all Company matters, except as to
matters or in a manner inconsistent with the terms of this Agreement. Throughout
the term of this Agreement and thereafter, irrespective of whether or not an
Event of Default hereunder shall have occurred, the Pledgees shall have the sole
right to vote all shares of Commodore Stock owned of record by them on all
matters as to which stockholders are entitled to vote under Delaware corporate
law.
5. Event of Default; Power of Attorney.
------------------------------------
(a) In the event that there shall occur (i) any default in the
full and timely payment or performance of any of the Obligations, which remains
uncured beyond any applicable notice and cure period, or (ii) Commodore or any
of its Subsidiaries (collectively, the "Commodore Group") becoming insolvent, or
(iii) the delisting of the shares of Commodore Common Stock from trading on a
National Securities Exchange; or (iv) the commencement of any case under the
United States Bankruptcy Code against Commodore or any member of the Commodore
Group, or (v) Commodore or any member of the Commodore Group becoming the
subject of any insolvency, bankruptcy, receivership, readjustment of debt,
dissolution, reorganization, liquidation or similar proceeding under state or
federal law, an "Event of Default" hereunder shall be deemed to have occurred,
and from and after the occurrence of any one or more Event of Default, the
Pledgees shall thereafter have the right (but not the obligation) to (A) vote
the DRM Stock in all Company matters, (B) apply any funds or other property
received in respect of the Pledged Stock to the Obligations, and receive in its
own name any and all further distributions which may be paid in respect of the
Pledged Stock, all of which shall, upon receipt by the Pledgees, be applied to
the Obligations, (C) transfer all or any portion of the DRM Stock (as determined
by the Pledgees in their discretion) on the books of the Company to and in the
name of the Pledgees or such other person or persons as the Pledgees may
designate, (D) effect any sale, transfer or disposition of all or any portion of
the Pledged Stock and in furtherance thereof, take possession of and endorse any
and all checks, drafts, bills of exchange, money orders or other documents and
instruments received on account of the Pledged Stock, (E) collect, ▇▇▇ for and
give acquittance for any money due on account of any of the foregoing, and (F)
take any and all other action contemplated by this Agreement, or as otherwise
permitted by law, or as the Pledgees may reasonably deem necessary or
appropriate, in order to accomplish the purposes of this Agreement.
(b) In furtherance of the foregoing powers of the Pledgees, the
Pledgor hereby authorizes and appoints the Pledgees, with full powers of
substitution, as the true and lawful attorney-in-fact of the Pledgor, in his
name, place and stead, to take any and all such action as the Pledgees, in their
sole discretion, may deem necessary or appropriate in furtherance of the
exercise of the aforesaid powers. Such power of attorney shall be coupled with
an interest, and shall be irrevocable until the Satisfaction Date. Without
limitation of the foregoing, such power of attorney shall not in any manner be
affected or impaired by reason of any act of the Pledgor or by operation of law.
Nothing herein contained, however, shall be deemed to require or impose any duty
upon the Pledgees to exercise any of the rights or powers granted herein.
4
(c) The foregoing rights and powers granted to the Pledgees,
and the foregoing power of attorney, shall be fully binding upon any person who
may acquire any beneficial interest in any of the Pledged Stock or any other
property held or received by the Pledgees hereunder.
6. Foreclosure; Sale or Retention of Pledged Stock.
(a) Without limitation of paragraph 5 above, if an Event of
Default hereunder shall occur, the Pledgees may elect (but shall not be
obligated so to do) to foreclose on the Pledged Stock and exercise any one or
more of the following rights and remedies set forth below.
(i) The Pledgees may offer and sell all or any
portion of the Pledged Stock in a public distribution (to the extent that any of
such Pledged Stock has been registered pursuant to an effective registration
statement or may be publicly sold pursuant to an exemption from such
registration requirements) or, if a public distribution is not legally
available, by means of a private placement restricting the offer or sale to a
limited number of prospective purchasers who meet such suitability standards as
the Pledgees and their counsel may deem appropriate, and who may be required to
represent that they are purchasing Pledged Stock for investment and not with a
view to distribution.
(ii) If an Event of Default shall occur by reason of
Commodore's breach of or failure to timely perform its Obligations contemplated
by clause (i) of the definition of "Obligations" under this Agreement, the
Pledgees may purchase all or any portion of the DRM Stock for the Pledgees' own
account solely in exchange for cancellation of Commodore's obligation to deliver
the Commodore Warrants and the balance of the shares of Acquisition Stock,
Additional Commodore Stock and Commodore Option Stock contemplated by Section
2.6(b) of the Purchase Agreement, in which event the Pledgees and other
recipients of such Commodore Securities may retain for their own account all
6,000,000 shares of Commodore Common Stock issued to them pursuant to Section
2.6(a) of the Purchase Agreement; the parties hereto agreeing that such
disposition represents the Pledgees' sole and exclusive remedy for such Event of
Default and fair and equitable liquidated damages (in addition to the Pledged
Stock) to compensate the Pledgees for the loss of the earnings and profits of
the Company which they would have been entitled to have received and retained
but for the consummation of the transactions contemplated by the Purchase
Agreement.
(iii) If an Event of Default (other than as
contemplated by clause (i) of this Section 6(a) above) shall occur either prior
to the payment of the full $14,500,000 Repurchase Price contemplated by Section
7.2 of the Purchase Agreement, or by reason of Commodore's breach of or failure
to timely perform its Obligations contemplated by clause (ii) of the definition
of "Obligations" under this Agreement, the Pledgees may elect to purchase all or
any portion of the DRM Stock for the Pledgees' own account and retain, in
addition to (an not in lieu of) such DRM Stock, that number of shares of
Commodore Stock as shall equal the sum of (A) 1,000,000 shares of Commodore
Stock, plus (B) fifty (50%) percent of 9,500,000 shares of the Acquisition Stock
originally issued to the Pledgees and all other holders of such Acquisition
Stock pursuant to the Purchase Agreement, less any of such 9,500,000 shares of
Acquisition Stock previously purchased by Commodore or any third parties
pursuant to Section 7.2 of the Purchase Agreement prior to the occurance of such
Event of Default (the "Commodore Stock Liquidated Damage Amount"). In the event
that the Pledgees shall elect the remedies provided for in this Section
6(a)(iii), they shall return to Commodore all shares of the Acquisition Stock in
excess of the Commodore Stock Liquidated Damage. It is expressly understood and
agreed that such Commodore Stock Liquidated Damage Amount , together with all or
any portion of the DRM Stock shall, for all purposes at law or in equity, be
deemed to be a commercially reasonable disposition of the subject Pledged Stock,
5
and (B) the retention of the Commodore Stock Liquidated Damage Amount by the
Pledgees and the other holders of such Repurchase Shares represents fair and
equitable liquidated damages (in addition to the DRM Stock) to compensate the
Pledgees for the loss of the earnings and profits of the Company which they
would have been entitled to have received and retained but for the consummation
of the transactions contemplated by the Purchase Agreement.
(iv) If an Event of Default shall occur after the
payment of the full $14,500,000 Repurchase Price contemplated by Section 7.2 of
the Purchase Agreement, purchase all or any portion of the DRM Stock for the
Pledgees' own account at a price not less than the highest bona fide offer
received therefor, which if effected in a manner in compliance with applicable
law, shall be deemed to be a commercially reasonable disposition of the subject
DRM Stock;
(v) sell any or all of the Pledged Stock upon credit
or for future delivery, without being in any way liable for failure of the
purchaser to pay for the subject Pledged Stock; and
(vi) receive and collect the net proceeds of any sale
or other disposition of any Pledged Stock, and apply same in such order and to
such of the Obligations (including the costs and expenses of the sale or
disposition of the Pledged Stock) as the Pledgees may, in their absolute
discretion, deem appropriate.
(b) Upon any sale of any of the Pledged Stock in accordance
with this Agreement, the Pledgees shall have the right to assign, transfer and
deliver the subject Pledged Stock to the purchaser(s) thereof, and each such
purchaser shall be entitled to hold such Pledged Stock absolutely free from any
right or claim of the Pledgor and/or any other person claiming any beneficial
interest in the Pledged Stock, including any equity of redemption (which right
and all other such rights are hereby waived by the Pledgor to the fullest extent
permitted by law).
(c) Nothing herein contained shall be deemed to require the
Pledgees to effect any sale or disposition of any Pledged Stock at any time, or
to consummate any proposed public or private sale at the time and place at which
same was initially called. It is the intention of the parties hereto that the
Pledgees shall, subject to any further conditions imposed by this Agreement, at
all times following the occurrence of an Event of Default, have the right to
retain legal and beneficial ownership of the Pledged Stock, or use or deal with
the Pledged Stock as if the Pledgees were the outright owners thereof, and to
exercise any and all rights and remedies, as a secured party in possession of
collateral or otherwise, under any and all provisions of law.
(d) If an Event of Default of the nature contemplated by
Section 6(a)(iii) hereof shall occur and the Pledgees shall elect to retain the
DRM Stock and the Commodore Stock Liquidated Damage Amount, as contemplated by
the provisions set forth in clause (iii) of Section 6(a) above, such election
shall be the sole and exclusive remedy of the Pledgees and the other holders of
the Repurchase Shares, in full satisfaction of all Obligations of Commodore
hereunder. Notwithstanding the foregoing, the return of any additional shares of
Acquisition Stock by the Pledgees shall not effect the legal or beneficial
6
ownership of the Pledgees or any subsequent holders in and to the shares of
Commodore Option Stock, Commodore Warrants or shares of Commodore Common Stock
issuable upon exercise of the Commodore Warrants; all of which Commodore
Securities shall continue to remain the sole and exclusive property of such
holders.
(e) The Pledgees acknowledge that the other holder(s) of the
Repurchase Shares shall have designated the Pledgees as their sole and exclusive
agents to deal with all 1,500,000 Repurchase Shares owned by such other holders
for purposes of this Agreement.
7. Covenants, Representations and Warranties.
------------------------------------------
In connection with the transactions contemplated by this Agreement, and
knowing that the Pledgees are and shall be relying hereon, Commodore hereby
covenants, represents and warrants that:
(a) the Pledged Stock has been and will be duly and validly
issued, are and will be fully paid and non-assessable, and are and will be owned
by Commodore free and clear of any and all restrictions, pledges, liens,
encumbrances or other security interests of any kind, save and except for the
pledge to the Pledgees pursuant to this Agreement;
(b) there are and will be no options, warrants or other rights
in respect of the sale, transfer or other disposition of any of the Pledged
Stock, and Commodore has the absolute right to pledge the Pledged Interests
hereunder without the necessity of any consent of any Person;
(c) the Pledged Stock constitutes one hundred (100%) percent of
the issued and outstanding ordinary shares and other securities of the Company
which is owned of record and beneficially by Commodore on the date hereof; and,
on the date hereof, there are no options, warrants or other rights to subscribe
for or acquire any capital stock or other securities of the Company, or any
securities or other rights exercisable for or convertible into any capital
stock, securities or rights to acquire securities of the Company;
(d) neither the execution or delivery of this Agreement, nor
the consummation of the transactions contemplated hereby, nor the compliance
with or performance of this Agreement by the Pledgor, conflicts with or will
result in the breach or violation of or a default under the terms, conditions or
provisions of (i) any mortgage, security agreement, indenture, evidence of
indebtedness, loan or financing agreement, or other agreement or instrument to
which the Pledgor is a party or by which the Pledgor is bound, or (ii) any
provision of law, any order of any court or administrative agency, or any rule
or regulation applicable to the Pledgor;
(e) this Agreement has been duly executed and delivered by
Commodore and constitutes the legal, valid and binding obligation of each of
Commodore, enforceable against the Pledgor in accordance with its terms;
(f) there are no actions, suits or proceedings pending or
threatened against or affecting the Pledgor that involve or relate to the
Pledged Stock;
7
(g) Pledgor shall not, at any time prior to the release of the
lien on the Pledged Interests in accordance with paragraph 8 below, (i) sell,
transfer or convey any interest in any of the Pledged Stock, or (ii) suffer or
permit any other pledge, lien or encumbrance to be created upon or granted with
respect to any of the Pledged Stock; and
(h) from time to time hereafter, Commodore shall take any and
all such further action, and shall execute and deliver any and all such further
documents and/or instruments, as the Pledgees may request in order to accomplish
the purposes of this Agreement, in order to enable the Pledgees to exercise any
of their rights hereunder, and/or in order to secure more fully the Pledgee's
interest in the Pledged Stock.
(i) Commodore acknowledges that, but for the
Repurchase Obligation set forth in Section 7.2(b) of the Purchase Agreement and
its willingness to provide Pledgees collateral security for the payment and
performance of such Repurchase Obligation, pursuant to this Pledge Agreement,
and without the covenants by Commodore set forth in this Section 7(i) and in
Section 7(j) below, the Pledgees would not have entered into the Purchase
Agreement and would have terminated all transactions and other relationships
with Commodore. Accordingly, Commodore does hereby agree that if at any time
following the date hereof a petition is filed by or against Commodore and/or any
member of the Commodore Group commencing a case under the United States
Bankruptcy Code or if Commodore or any of the other members of the Commodore
Group shall become the subject of any insolvency, bankruptcy, receivership,
readjustment of debt, dissolution, reorganization , liquidation or similar
proceeding, under state or federal law, the Pledgees and the other holders of
Repurchase Shares will be immediately and absolutely entitled to, and each
member of the Commodore Group hereby consents to, the relief specified in
clauses (A), (B) and (C) below, singly, alternatively or cumulatively, and each
member of the Commodore Group agrees that it will not object to, contest or
oppose any motion, application, complaint or other proceeding by the Pledgees
(acting on behalf of themselves and any other holders of the Repurchase Shares),
to obtain such relief, and each member of the Commodore Group will take all
actions necessary to enable the Pledgees and other holders of Repurchase Shares
to obtain the following relief:
(A) the Pledgees and the other holders of
Repurchase Shares shall be entitled to the immediate termination of the
automatic stay imposed by Section 362 of the Bankruptcy Code to enable
any of them to exercise all of their rights and remedies under this
Agreement and applicable law;
(B) the Pledgees and the other holders of the
Repurchase Shares shall be entitled to the immediate dismissal of such
case pursuant to Section 305(a)(1) of the Bankruptcy Code (with
attorneys' fees and other costs), and Commodore and each other member
of the Commodore Group agree that such dismissal will be in the
interest of creditors and themselves; and
(C) the Pledgees and each other holder of
Repurchase Shares shall be entitled to the immediate dismissal of such
case under Section 1112(b) of the Bankruptcy Code for cause, and
Commodore and each other member of the Commodore Group agree that the
8
filing of such case by any of them shall per se be deemed to have been
commenced in bad faith and solely for the improper purpose of impeding
the exercise of the rights and remedies of the Pledgees and other
holders of Repurchase Shares with attendant unnecessary delay and
needless cost.
(j) Commodore does hereby further irrevocably and
unconditionally covenant and agree, on behalf of itself and all other members of
the Commodore Group:
(A) to waive any and all equitable defenses to the
exercise of the rights and remedies of the Pledgees and the other
holders of Repurchase Shares set forth in Section 7.2 of the Purchase
Agreement and in this Agreement, including, without limitation, the
equitable defense of forfeiture; and
(B) that the rights and remedies of the Pledgees and
other holders of Repurchase Shares set forth in Section 7.2 of the
Purchase Agreement and in this Agreement shall not be subject to pro
ration
8. Return of the Pledged Stock.
----------------------------
(a) To the extent that the Pledgees shall not previously have
taken, acquired, sold, transferred, disposed of or otherwise realized value on
the Pledged Stock in accordance with this Agreement, the Pledgees shall release
their lien hereunder and return the Pledged Stock to and in the name of
Commodore at the Satisfaction Date. In the event that the Pledgees shall not,
within ten (10) business days of receipt of the final payments of the
Obligations, redeliver to Commodore all, and not less than all, of the
certificates evidencing the Pledged Stock, Commodore shall be entitled to apply
to any court of competent jurisdiction for such injunctive relief as shall be
reasonably required to effect compliance by the Pledgees (or either of them) of
the provisions of this Section 8 and (in addition to any such injunctive relief)
Pledgees shall pay all reasonable attorneys fees and other court courts incurred
by Commodore.
(b) Notwithstanding the provisions of Section 8(a) above, if
and for so long as no Event of Default hereunder shall have occurred and is
continuing, at such time as (i) the Pledgor shall have paid and satisfied in
full, on a timely basis, the entire Repurchase Obligation provided in Section
7.2(b) of the Purchase Agreement, or (ii) the Pledgees shall have otherwise
received, on a timely basis, a total of $14,500,000 of cash payments upon
exercise of the Option contemplated by Section 7.2(a) of the Purchase Agreement,
the number of shares of Pledged Stock subject to this Agreement shall be reduced
to 12,150 shares of the common stock of the Company, or such other number of
shares of common stock of the Company as shall represent fifty (50%) percent of
the original number of shares of Pledged Stock held subject to this Agreement.
9. Expenses of the Pledgees.
-------------------------
All expenses incurred by the Pledgees (including but not limited to
reasonable attorneys' fees) in connection with the receipt of Pledged Stock
9
hereunder from time to time after the date hereof, and any actual or attempted
sale or other disposition of Pledged Stock hereunder, shall be reimbursed to the
Pledgees by the Company on demand, or, at the Pledgees' option, such expenses
may be added to the Obligations.
10. Resolutions of Disputes, Binding Arbitration.
---------------------------------------------
(a) Whenever a claim shall arise involving the interpretation
or application of this Agreement, the complaining party shall notify the other
party in writing within thirty (30) days of the complaining party's first
receipt of notice of, or the complaining party's obtaining actual knowledge of,
such claim, and in any event within such shorter period as may be necessary for
the other party to take appropriate action to resist such claim. Such notice
shall specify all facts known to the complaining party giving rise to such claim
or dispute and shall estimate (to the extent reasonably possible) the amount of
potential liability arising therefrom. If the other party shall be duly notified
of such dispute, the parties shall attempt to settle and compromise the same.
(b) In the event that any dispute involving the interpretation
or application of this Agreement or any Exhibit hereto cannot be settled or
compromised, as aforesaid, within twenty (20) days of receipt of the subject
claim, either the complaining party or the other party shall promptly thereafter
submit the dispute for final and binding arbitration to JAMS or End-Dispute
before a three-person panel of arbitrators who shall be either (i) retired
federal judges, or (ii) other persons experienced in resolving commercial
disputes and who are acceptable to both the complaining party and the other
party to such dispute (the "Arbitration"). Any such Arbitration shall, if
brought by any of the Pledgees, be held in New York, New York and, if brought by
Commodore shall be in Salt Lake City, Utah. The panel of arbitrators shall be
selected within twenty (20) days of submission of such dispute to Arbitration.
The parties shall use their collective best efforts to promptly schedule and
conduct the hearings before such arbitrators, with a view toward concluding such
arbitration proceedings not later than thirty (30) days from the first
submission of the dispute to arbitration. In addition to, and not in lieu of,
arbitration as a means of dispute resolution hereunder, any party hereto shall
have the right to seek specific enforcement of this Agreement or any Transaction
Document, or other injunctive or equitable relief or remedy before any court of
competent jurisdiction. (c) In connection with any Arbitration pursuant to this
Section 10, the arbitrators shall, as part of their award, allocate the fee of
the Arbitration, including all fees of the arbitrators, the cost of any
transcripts, and the parties' reasonable attorneys' fees, based upon and taking
into account the arbitrators' determination of the merits and good faith of the
parties' claims and defenses in the subject proceeding.
(d) The decision and award of the arbitrators shall be final
and binding upon the parties hereto and shall be enforceable in any court of
competent jurisdiction, including any federal or state court in the States of
Utah, Delaware, New York or Colorado. Any process or other papers hereunder may
be served by registered or certified mail, return receipt requested, or by
personal service, provided that a reasonable time for appearance or response is
allowed.
(e) Any rights established by reason of such settlement,
compromise, arbitration or litigation shall promptly thereafter be satisfied by
the losing party in such amount as shall be necessary to satisfy all applicable
10
losses or damages sustained or incurred by the complaining party, as determined
in accordance with such settlement and compromise, or by final nonappealable
order or judgment of the applicable judicial or arbitration panel.
(f) In connection with the defense of any third party claims
for which claims for indemnification have been made hereunder, each party will
provide reasonable access to its and their books and records as and to the
extent required for the proper defense of such third party claim. Neither party
shall consent to any settlement or purport to bind any other party to any
settlement without the written consent of the other party.
(g) Notwithstanding anything to the contrary set forth above,
in the event and to the extent that the complaining party shall believe that
such party shall then have no adequate remedy at law, the complaining party
shall have the right, in addition to and not in lieu of the right to obtain
compensatory or other monetary relief, to seek and obtain injunctive relief,
specific performance or such other equitable remedies as any court of competent
jurisdiction shall deem appropriate in the circumstances.
11. Miscellaneous.
--------------
(a) Any notices or consents required or permitted under this
Agreement shall be in writing and shall be deemed given when personally
delivered, when sent by recognized overnight courier service with all charges
prepaid or billed to the account of the sender, or when mailed by certified
mail, return receipt requested, with all charges prepaid, in each instance
addressed to the party being notified at his or its address first set forth
above, either party may change its address for notices by means of written
notice given in accordance herewith, provided that same shall not be deemed to
have been given until actual receipt by the party being notified.
(b) The laws of the State of Delaware shall govern the
construction and enforcement of this Agreement and the rights and remedies of
the parties hereto.
(c) This Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective heirs, executors,
administrators, personal representatives, successors and permitted assigns. The
Pledgor shall not, however, assign any of his rights or obligations hereunder
without the prior written consent of the Pledgees. Except as otherwise referred
to herein, this Agreement, and the documents executed and delivered pursuant
hereto, constitute the entire agreement between the parties relating to the
specific subject matter hereof.
(d) Neither any course of dealing between the Pledgor and the
Pledgees nor any failure to exercise, or any delay in exercising, on the part of
the Pledgees, any right, power or privilege hereunder shall operate as a waiver
thereof; nor shall any single or partial exercise of any right, power or
privilege operate as a waiver of any other exercise of such right, power or
privilege or any other right, power or privilege.
(e) The Pledgees' rights and remedies, whether established
hereby or by any other agreements or by law or in equity, shall cumulative and
may be exercised singularly or concurrently.
11
(f) No change, amendment, modification, waiver, assignment of
rights or obligations, cancellation or discharge hereof, or of any part hereof,
shall be valid unless the Pledgees shall have consented thereto in writing.
(g) The captions and paragraph headings in this Agreement are
for convenience of reference only, and shall not in any way define, limit or
describe the construction, terms or provisions of this Agreement.
(h) If any provision of this Agreement is held invalid or
unenforceable, either in its entirety or by virtue of its scope or application
to given circumstances, such provision shall thereupon be deemed modified only
to the extent necessary to render same valid, or not applicable to given
circumstances, or excised from this Agreement, as the situation may require, and
this Agreement shall be construed and enforced as if such provision had been
included herein as so modified in scope or application, or had not been included
herein, as the case may be.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
and as of the date first set forth above.
COMMODORE APPLIED TECHNOLOGIES, INC.
By: ________________________________
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, President
-------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
12
STATE OF NEW YORK )
) ss:
COUNTY OF NEW YORK )
On this _____ day of ___________ 2000 before me, a Notary Public in and
for the jurisdiction aforesaid, personally appeared ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, known to
me to be the person who executed the foregoing Stock Pledge Agreement, and who
stated to me that he executed the said Stock Pledge Agreement in his capacity as
President of Commodore Applied Technologies, Inc., duly authorized so to do by
its board of directors.
------------------------
Notary Public
13
EXHIBIT E
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement"), entered into as of the
30th day of August 2000, by and between DISPUTE RESOLUTION MANAGEMENT, INC., a
Utah corporation (the "Company") having offices ▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇
▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ and ▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇, ▇▇▇▇ ▇▇▇▇ ▇▇▇▇,
▇▇▇▇ ▇▇▇▇▇, and [▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇] [▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇], an individual residing
at _________________ _____________________ (the "Employee");
W I T N E S S E T H:
WHEREAS, the Employee has heretofore been one of the owners and senior
executive officer of the Company; and
WHEREAS, Commodore Applied Technologies, Inc., a Delaware corporation
("Commodore"), has acquired 81% of the shares of capital stock of the Company
pursuant to the terms of an amended and restated stock purchase agreement dated
August 30, 2000 (the "Purchase Agreement") among Commodore, the Company, and
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, the former stockholders of the
Company; and
WHEREAS, by reason of his [her] prior ownership of and employment with
the Company, the Employee is familiar with all aspects of the operations and
business of the Company; and
WHEREAS, to promote the ongoing business of the Company and to ▇▇▇▇▇▇
an orderly transition of the ownership and management of the Company, the
Company desires to assure itself of the right to the Employee's services from
and after the date hereof, on the terms and conditions of this Agreement; and
WHEREAS, the Employee is willing and able (free of any other binding
contracts or commitments) to render his [her] services to the Company from and
after the date hereof, on the terms and conditions of this Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the parties hereby agree as follows:
1. Nature of Employment.
--------------------
(a) Subject to the terms and conditions of this Agreement, the Company
shall initially retain the Employee, and the Employee shall initially render
services to the Company, as the [Chief Executive Officer] [President] of the
Company. In such connection, the Employee shall be responsible for the operation
and management of the Company together with such other duties and
responsibilities as are customarily performed by a [Chief Executive Officer]
[President] of a corporation. Subject at all times to the terms and conditions
of Section 14.4(a) and Section 14.5 of the Purchase Agreement, the Employee
shall report to and shall be subject to the ultimate direction and guidance of
the Board of Directors of the Company.
Unless otherwise defined herein, all capitalized terms used in
this Agreement shall have the same meaning as is defined in the Operating
Agreement.
(b) Throughout the period of his employment hereunder, the Employee:
(i) shall devote his [her] full business time, attention, knowledge and skills,
exclusively, faithfully, diligently and to the best of his [her] ability, to the
active performance of his duties and responsibilities hereunder on behalf of the
Company; (ii) shall not, without the express prior written approval of the Board
of Directors of the Company in each instance, directly or indirectly accept
employment or compensation from, or perform services of any nature for, any
person, firm, corporation or business enterprise other than the Company; (iii)
subject to the provisions of Section 14.4(a) and Section 14.5 of the Purchase
Agreement, shall observe and carry out such reasonable rules, regulations,
policies, directions and restrictions as may be established from time to time by
the Board of Directors of the Company, including but not limited to the standard
employee policies and procedures of the Company as in effect from time to time;
and (iv) shall do such traveling as may reasonably be required in connection
with the performance of such duties and responsibilities; provided, however,
that the Employee shall not be assigned to regular duties such as would
reasonably require him to relocate his [her] permanent residence from the
greater Denver, Colorado [Salt Lake City, Utah] area.
(c) Throughout the term of this Agreement, the Company shall
cause the Employee to be nominated for election to the Board of Directors of the
Company.
2. Term of Employment.
------------------
(a) Subject to prior termination in accordance with paragraph
2(b) below, the Employee's full-time employment hereunder shall commence on the
date hereof and shall continue through and including December 31, 2005.
(b) This Agreement:
(i) may be terminated upon mutual written agreement
of the Company and the Employee;
(ii) may be terminated, at the option of the
Employee, upon thirty (30) days' prior written notice to the Company, in the
event that (A) the Company shall fail to make any payment to the Employee
required to be made under the terms of the Purchase Agreement, the Make Whole
2
Agreement (as hereinafter defined) or this Agreement within fifteen (15) days
after the date such payment became due and payable, or (B) the Company or
Commodore shall fail to perform any other material covenant or agreement to be
performed by the Company or Commodore under the Purchase Agreement or hereunder
and shall fail to cure or remedy same within thirty (30) days after written
notice thereof to the Company;
(iii) may be terminated, at the option of the Board
of the Company (the Employee abstaining from any such vote), at any time "for
cause" (as hereinafter defined);
(iv) may be terminated, at the option of the Company,
at any time in the event of the "permanent disability" (as hereinafter defined)
of the Employee; or
(v) shall automatically terminate upon the death of
the Employee.
(c) As used herein, the term "for cause" shall mean and be
limited to: (i) any material breach of this Agreement or the Non-Competition
Agreement by the Employee which in any case is not fully corrected within thirty
(30) days after written notice of same from the Company to the Employee; (ii)
gross neglect by the Employee of any of his [her] duties and responsibilities
hereunder; (iii) any fraud, criminal misconduct, breach of fiduciary duty,
dishonesty, or gross and willful misconduct by the Employee in connection with
the performance of any of his duties and responsibilities hereunder; (iv) the
Employee being under the influence of alcohol or drugs during business hours, or
being habitually drunk or addicted to drugs; or (v) the commission by the
Employee of any crime of moral turpitude, or any other action by the Employee
which may materially impair or damage the reputation of the Company.
(d) As used herein, the term "permanent disability" shall
mean, and be limited to, any physical or mental illness, disability or
impairment that prevents, or is reasonably likely to prevent, the Employee from
continuing the performance of his normal duties and responsibilities hereunder
for a period (i) in excess of six (6) consecutive months, or (ii) of six (6)
months or more (whether or not consecutive) in any twelve (12) month period. For
purposes of determining whether a "permanent disability" has occurred under this
Agreement, the written determination thereof by two (2) qualified practicing
physicians selected and paid for by the Company (and reasonably acceptable to
the Employee) shall be conclusive.
(e) Except for a termination by the Employee under Section
2(b)(ii) above, upon any termination of this Agreement as hereinabove provided,
the Employee (or his estate or legal representatives, as the case may be) shall
be entitled to receive any and all earned but unpaid Base Salary (as such terms
are hereinafter defined) appropriately prorated to and as of the effective date
of termination (based on the number of days elapsed prior to the date of
termination), and any other amounts then due and payable to the Employee
hereunder. All such payments shall be made on the next applicable payment date
therefor (as provided in paragraph 3 below) following the effective date of
termination. Such payments shall constitute all amounts to which the Employee
(or his estate or legal representative) shall be entitled upon termination of
this Agreement.
3
(f) Notwithstanding anything to the contrary contained in this
Agreement or in any other agreement dated of even date herewith referred to
herein, if it shall be established or mutually agreed that termination of this
Agreement by the Employee under the provisions of Section 2(b)(ii) above was
valid and for good reason, in addition to (and not in lieu of) any other
remedies then available to the Employee:
(i) the Employee shall be entitled to receive all
unpaid Base Salary through the remaining term of this Agreement, less
any amounts received from third parties in the nature of salary or
other compensation. Employee covenants that Employee shall use its
reasonable efforts to mitigate its damages hereunder;
(ii) if and to the extent payable, the obligations of
Commodore to the Employee under the make-whole agreement, dated of even
date herewith (the "Make Whole Agreement") shall, at the option of the
Employee, be payable in cash rather than in shares of Commodore Common
Stock, and
(iii) all stock options and payments under Section
401(k) plans for the benefit of the Employee shall become fully vested,
to the extent permitted under any then existing plans.
3. Compensation and Benefits.
-------------------------
(a) Base Salary. As compensation for his services to be
rendered hereunder, the Company shall pay to the Employee a base salary of
$250,000 per annum, payable at the rate of $20,833.33 per month (the "Base
Salary"). Such Base Salary shall be subject to (i) increase as provided in
Section 3(b) hereof, and (ii) payroll deductions and other withholdings as and
to the extent required by law from time to time. Such Base Salary shall be
payable to the Employee in accordance with the Company's payroll practices.
(b) Adjustments to Base Salary. Effective as of January 1,
2001 and on each anniversary date thereafter the Employee's annual Base Salary
shall be increased to the amounts set forth below for each calendar year in
question:
Calendar Year Base Salary
2001 $262,500
2002 $275,000
2003 $290,000
2004 $305,000
2005 $320,000
Nothing contained in Sections 3(a) or (b) above shall be
construed to prohibit or limit the right of the Company to grant, from time to
time, discretionary increases in the Employee's Base Salary.
4
(c) Fringe Benefits. The Company shall also make available to
the Employee, throughout the period of his full-time employment hereunder, such
benefits and perquisites as are generally provided by the Company to its
executive employees, including but not limited to eligibility for participation
in any group life, health, dental, vision, disability or accident insurance,
pension plan, profit-sharing plan, retirement savings plan, 401(k) plan, or
other such benefit plan or policy which may presently be in effect or which may
hereafter be adopted by the Company for the benefit of its employees generally;
provided, however, that nothing herein contained shall be deemed to require the
Company to adopt or maintain any particular plan or policy, or to preclude the
Company from amending or terminating any plan or policy. The Employee
acknowledges that he will cease to be eligible for all or substantially all of
such benefits following the conclusion of his full-time employment, and the
Employee will not make any claim for any such benefits for which he is not then
eligible.
(d) Expenses. Throughout the term of this Agreement, Company
shall also reimburse the Employee, upon presentment by the Employee to the
Company of appropriate receipts and vouchers therefor, for any and all actual
and reasonable out-of-pocket business expenses incurred by the Employee in
connection with the performance of his duties and responsibilities hereunder;
provided, however, that no reimbursement shall be required to be made for any
expense which is not properly deductible (in whole or in part) by the Company
for income tax purposes, or for any expense item which has not previously been
approved as and to the extent required in accordance with the Company's standard
policies and procedures in effect from time to time.
4. Vacation, etc.
--------------
(a) During the period of his full-time employment hereunder:
(i) The Employee shall be entitled to take, from time
to time, normal and reasonable vacations with pay, consistent with the Company's
standard policies and procedures in effect from time to time, at such times as
shall be mutually convenient to the Employee and the Company, and so as not to
interfere unduly with the conduct of the business of the Company. Such vacation
time may aggregate up to six (6) weeks per year.
(ii) The Employee shall further be entitled to paid
holidays, personal days and sick days in accordance with the Company's standard
policies and procedures in effect from time to time.
5. Company Property.
----------------
(a) The Employee hereby acknowledges and confirms that all
ideas and other developments or improvements conceived by the Employee, whether
alone or with others, during the term of this Agreement (whether or not during
working hours), that are within the scope of the business operations of the
Company or any of its subsidiaries or that relate to any business of any type
conducted or proposed to be conducted by the Company or any of its subsidiaries,
constitute the exclusive property of the Company or the subject subsidiary. The
Employee shall assist the Company or its subsidiaries (as applicable) as
required in order to establish, confirm and evidence the Company's or its
subsidiary's ownership of such ideas, developments and improvements, and shall
execute and deliver any and all such agreements, instruments and other documents
as may be necessary or appropriate in connection therewith.
(b) Upon termination of this Agreement under any
circumstances, and otherwise upon request of the Company or any of its
subsidiaries, the Employee shall immediately return all property of the Company
and/or its subsidiaries utilized by the Employee in rendering services
hereunder, to the extent in the Employee's possession or under his control.
6. Non-Assignability.
-----------------
In light of the unique personal services to be performed by
the Employee hereunder, it is acknowledged and agreed that any purported or
attempted assignment or transfer by the Employee of this Agreement or any of his
duties, responsibilities or obligations hereunder shall be void.
7. Notices.
-------
Any notices, requests, demands or other communications
required or permitted under this Agreement shall be in writing and shall be
deemed to have been given when delivered personally or three (3) days after
being mailed by certified mail, return receipt requested, addressed to the party
being notified at the address of such party first set forth above, or at such
other address as such party may hereafter have designated by notice; provided,
however, that any notice of change of address shall not be effective until its
receipt by the party to be charged therewith.
8. General.
-------
(a) Neither this Agreement nor any of the terms or conditions
hereof may be waived, amended or modified except by means of a written
instrument duly executed by the party to be charged therewith. Any waiver or
amendment shall only be applicable in the specific instance, and shall not
constitute or be construed as a waiver or amendment in any other or subsequent
instance. No failure or delay on the part of either party in respect of any
enforcement of obligations hereunder shall in any manner affect such party's
right to seek or effect enforcement at any other time or in respect of any other
required performance.
(b) Neither this Agreement nor any rights or obligations
hereunder may be assigned by either party without the express prior written
consent of the other party; provided, however, that the Company or any successor
or assign may, at any time and from time to time, assign this Agreement as part
of the sale of all or any substantial portion of the business of the Company.
(c) The captions and paragraph headings used in this Agreement
are for convenience of reference only, and shall not affect the construction or
interpretation of this Agreement or any of the provisions hereof
6
(d) This Agreement, and all matters or disputes relating to
the validity, construction, performance or enforcement hereof, shall be
governed, construed and controlled by and under the laws of the State of
Delaware.
(e) This Agreement shall be binding upon and shall inure to
the benefit of the parties hereto and their respective heirs, executors,
administrators, personal representatives, successors and permitted assigns.
(f) This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original hereof, but all of
which together shall constitute one and the same instrument.
(g) This Agreement constitutes the sole and entire agreement
and understanding between the parties hereto as to the subject matter hereof,
and supersedes all prior discussions, agreements and understandings of every
kind and nature between them as to such subject matter.
(h) This Agreement is intended for the sole and exclusive
benefit of the parties hereto and their respective heirs, executors,
administrators, personal representatives, successors and permitted assigns, and
no other person or entity shall have any right to rely on this Agreement or to
claim or derive any benefit herefrom absent the express written consent of the
party to be charged with such reliance or benefit.
(i) If any provision of this Agreement is held invalid or
unenforceable, either in its entirety or by virtue of its scope or application
to given circumstances, such provision shall thereupon be deemed modified only
to the extent necessary to render same valid, or not applicable to given
circumstances, or excised from this Agreement, as the situation may require; and
this Agreement shall be construed and enforced as if such provision had been
included herein as so modified in scope or application, or had not been included
herein, as the case may be.
9. Resolution of Disputes, Binding Arbitration.
-------------------------------------------
(a) Whenever a claim shall arise involving the interpretation
or application of this Agreement, the complaining party shall notify
the other party in writing within thirty (30) days of the complaining
party's first receipt of notice of, or the complaining party's
obtaining actual knowledge of, such claim, and in any event within such
shorter period as may be necessary for the other party to take
appropriate action to resist such claim. Such notice shall specify all
facts known to the complaining party giving rise to such claim or
dispute and shall estimate (to the extent reasonably possible) the
amount of potential liability arising therefrom. If the other party
shall be duly notified of such dispute, the parties shall attempt to
settle and compromise the same.
(b) In the event that any dispute involving the interpretation
or application of this Agreement which cannot be settled or
compromised, as aforesaid, within twenty (20) days of receipt of the
subject claim, either the complaining party or the other party shall
promptly thereafter submit the dispute for final and binding
7
arbitration to JAMS or End-Dispute before a three-person panel of
arbitrators who shall be either (i) retired federal judges, or (ii)
other persons experienced in resolving commercial disputes and who are
acceptable to both the complaining party and the other party to such
dispute (the "Arbitration"). Any such Arbitration shall, if brought by
the Employee, be held in New York, New York and, if brought by the
Company shall be in Salt Lake City, Utah. The panel of arbitrators
shall be selected within twenty (20) days of submission of such dispute
to Arbitration. The parties shall use their collective best efforts to
promptly schedule and conduct the hearings before such arbitrators,
with a view toward concluding such arbitration proceedings not later
than thirty (30) days from the first submission of the dispute to
arbitration. In addition to, and not in lieu of, arbitration as a means
of dispute resolution hereunder, any party hereto shall have the right
to seek specific enforcement of this Agreement or any Transaction
Document, or other injunctive or equitable relief or remedy before any
court of competent jurisdiction.
(c) In connection with any Arbitration pursuant to this
Section 9, the arbitrators shall, as part of their award, allocate the
fee of the Arbitration, including all fees of the arbitrators, the cost
of any transcripts, and the parties' reasonable attorneys' fees, based
upon and taking into account the arbitrators' determination of the
merits and good faith of the parties' claims and defenses in the
subject proceeding.
(d) The decision and award of the arbitrators shall be final
and binding upon the parties hereto and shall be enforceable in any
court of competent jurisdiction, including any federal or state court
in the States of Utah, Delaware, New York or Colorado. Any process or
other papers hereunder may be served by registered or certified mail,
return receipt requested, or by personal service, provided that a
reasonable time for appearance or response is allowed.
(e) Any rights established by reason of such settlement,
compromise, arbitration or litigation shall promptly thereafter be
satisfied by the losing party in such amount as shall be necessary to
satisfy all applicable losses or damages sustained or incurred by the
complaining party, as determined in accordance with such settlement and
compromise, or by final nonappealable order or judgment of the
applicable judicial or arbitration panel.
(f) In connection with the defense of any third party claims
for which claims for indemnification have been made hereunder, each
party will provide reasonable access to its and the Company's books and
records as and to the extent required for the proper defense of such
third party claim. Neither party shall consent to any settlement or
purport to bind any other party to any settlement without the written
consent of the other party.
(g) Notwithstanding anything to the contrary set forth above,
in the event and to the extent that the complaining party shall believe
that such party shall then have no adequate remedy at law, the
complaining party shall have the right, in addition to and not in lieu
of the right to obtain compensatory or other monetary relief, to seek
and obtain injunctive relief, specific performance or such other
equitable remedies as any court of competent jurisdiction shall deem
appropriate in the circumstances
8
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
and as of the date first set forth above.
DISPUTE RESOLUTION MANAGEMENT, INC.
By:
----------------------------------------
[▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇] [▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇]
9
EXHIBIT F
NON-COMPETITION AND NON-DISCLOSURE AGREEMENT
AGREEMENT (this "Agreement"), made and entered into as of the
30th day of August, 2000, by and between COMMODORE APPLIED TECHNOLOGIES, INC., a
Delaware corporation ("Commodore "), DISPUTE RESOLUTION MANAGEMENT INC., a Utah
corporation (the "Company"), and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, an individual ("▇▇▇▇▇▇▇")
and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, an individual ("Speciale");
W I T N E S S E T H :
WHEREAS, Commodore Applied Technologies, Inc., a Delaware
corporation ("Commodore"), has agreed to acquire 81% of the shares of capital
stock of the Company pursuant to the terms of an amended and restated stock
purchase agreement dated August 30, 2000 (the "Purchase Agreement") among
Commodore, the Company, and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, the former
stockholders of the Company; and
WHEREAS, by reason of their prior ownership of and employment
in the Company, each of ▇▇▇▇▇▇▇ and Speciale has detailed knowledge and
possesses confidential information concerning the Company and the business and
operations thereof, and
WHEREAS, on the date hereof, the Company, ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇
are entering into separate employment agreement (the "Employment Agreements")
pursuant to which ▇▇▇▇▇▇▇ and Speciale will be employed by the Company and in
connection with which ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇ will continue to have access to
confidential and proprietary information relating to the business of the
Company; and
WHEREAS, in order to induce Commodore to consummate the
transactions contemplated by the Purchase Agreement, and to induce Commodore to
cause the Company to enter into the Employment Agreements, each of ▇▇▇▇▇▇▇ and
Speciale has agreed, and Commodore has required ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇, to enter
into this Agreement;
NOW, THEREFORE, in consideration of the premises and the
mutual covenants and agreements contained herein, the parties hereby agree as
follows:
1. Restrictive Covenants.
---------------------
(a) Each of ▇▇▇▇▇▇▇ and Speciale do hereby
acknowledge and agree that: (i) the business contacts, customers, suppliers,
technology, know-how, trade secrets, marketing techniques and other aspects of
the Company have been of substantial value to the Company, and will hereafter
provide Commodore with substantial competitive advantage, (ii) such elements and
aspects of the Business are not generally known to the public or available
through any source other than ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇, and reasonable efforts have
been made to maintain the confidentiality thereof to the date hereof, (iii) they
have detailed knowledge of and possesses confidential information concerning the
Company, and (iv) by reason of their duties and responsibilities pursuant to the
Employment Agreements, they will become privy to confidential and proprietary
information of the Company.
(b) Each of ▇▇▇▇▇▇▇ and Speciale do hereby agree, for
the benefit of Commodore, the Company and their respective subsidiaries,
successors and assigns, that neither he nor she shall, directly or indirectly,
for himself or herself or through or on behalf of any other person or entity:
(i) at any time from and after the date
hereof, divulge, transmit or otherwise disclose or cause to be divulged,
transmitted or otherwise disclosed, any business contacts, client or customer
lists, technology, know-how, trade secrets, marketing techniques, contracts or
other confidential or proprietary information of or relating to the Company or
its subsidiaries of whatever nature (provided, however, that for purposes
hereof, information shall not be considered to be confidential or proprietary if
(A) it is a matter of common knowledge or public record, (B) it is generally
known throughout the industry, or (C) ▇▇▇▇▇▇▇ or ▇▇▇▇▇▇▇▇ can demonstrate that
such information was already known to the recipient thereof other than by reason
of any breach of any obligation under this Agreement or any other
confidentiality or nondisclosure agreement); and/or
(ii) at any time from the date hereof
through and including December 31, 2005, invest, carry on, engage or become
involved, either as an owner, principal, agent, advisor, stockholder (excluding
passive ownership of not more than 1% of the outstanding shares of a publicly
held corporation if such ownership does not involve managerial or operational
involvement or activity), manager, partner, joint venturer, participant or
consultant, in any business enterprise (other than Commodore, the Company and
their subsidiaries, successors or assigns) which derives 15% or more of their
consolidated revenues from the business of serving as an international business
consulting firm specializing in the settlement of complex, latent and long-tail
insurance claims, including environmental, asbestos, products liability, Year
2000 and other matters, for corporate and governmental clients (the "Business");
provided, however, that it shall not be a violation of this paragraph 1(b)(ii)
for either ▇▇▇▇▇▇▇ or Speciale to passively invest their funds in any mutual
funds(s) which holds investments in any business(es) of the type described in
this paragraph l(b)(ii), regardless of the amount of ▇▇▇▇▇▇▇'▇ or ▇▇▇▇▇▇▇▇'▇
investment in such mutual fund(s) or the level of ownership of such mutual
fund(s) in such business(es).
(c) Notwithstanding anything to the contrary, express
or implied, contained in this Section 1, in the event that Russell, Speciale, or
either of them shall validly terminate their Employment Agreement with the
Company by reason of the occurrence and continuation of any of the events
specified in Section 2(b)(ii) of the Employment Agreement(s), this Agreement and
the restrictive covenants contained herein shall simultaneously terminate.
2. Remedies. The parties hereby acknowledge and agree that any
--------
breach by either ▇▇▇▇▇▇▇ or Speciale or any of their respective affiliates,
directly or indirectly, of any of the foregoing restrictive covenants will cause
Commodore and the Company irreparable injury for which there is no adequate
remedy at law. Accordingly, ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇ do hereby expressly agree that,
in the event that either ▇▇▇▇▇▇▇ or Speciale or any of their respective
affiliates shall commit any such breach or any threatened breach hereunder,
directly or indirectly, Commodore and/or ▇▇▇▇▇▇▇▇▇ shall be entitled, in
addition to any and all other remedies available at law, to seek and obtain,
without requirement of posting any bond or other security, injunctive and/or
other equitable relief to require specific performance of or prevent, restrain
and/or enjoin the breaching party or parties under the provisions of this
Agreement.
3. Expenses. In the event of any dispute under or arising out
--------
of this Agreement, the prevailing party in such dispute shall be entitled to
recover from the non-prevailing party, in addition to any damages and/or other
relief that may be awarded, its reasonable costs and expenses (including
reasonable attorneys' fees) incurred in connection with prosecuting or defending
the subject dispute.
4. Benefits and Obligations. This Agreement shall be binding
-------------------------
upon and inure to the benefit of and shall be enforceable by Commodore and/or
the Company and their respective affiliates, successors and assigns, and ▇▇▇▇▇▇▇
and Speciale and their respective affiliates, successors and assigns; provided,
however , that neither ▇▇▇▇▇▇▇'▇ nor ▇▇▇▇▇▇▇▇'▇ obligations contained herein may
not be delegated or assigned.
5. Governing Law. This Agreement shall be governed by and
--------------
construed in accordance with
the laws of the State of Delaware, United States of America.
6. Arbitration of Certain Disputes. Except for any claim or
--------------------------------
proceeding seeking to assert or obtain equitable remedies hereunder (including,
without limitation, injunctive relief and/or specific enforcement), which claim
or proceeding may be asserted or brought in any court of competent jurisdiction
sitting in Utah, Delaware or New York (as to which courts, the parties hereby
consent to the jurisdiction thereof), any dispute involving the interpretation
or application of this Agreement shall be resolved by final and binding
arbitration in accordance with the procedures specified in the Purchase
Agreement.
7. Severability. It is acknowledged, understood and agreed
------------
that the restrictions contained in this Agreement (a) are made for good,
valuable and adequate consideration received and to be received each of ▇▇▇▇▇▇▇
and Speciale, (b) are reasonable and necessary, in terms of the time, geographic
scope and nature of the restrictions, for the protection of Commodore and/or the
Company and their respective affiliates and their good will, and (c) will not
pose any undue hardship on ▇▇▇▇▇▇▇ or ▇▇▇▇▇▇▇▇ or materially impair his or her
ability to support himself. It is intended that said provisions be fully
severable, and in the event that any of the foregoing restrictions, or any
portion of the foregoing restrictions, shall be deemed contrary to law, invalid
or unenforceable in any respect by any court or other tribunal of competent
jurisdiction, then such restrictions shall be deemed to be amended, modified and
reduced in scope and effect, only to that extent necessary to render same valid
and enforceable, and all other restrictions shall be unaffected and shall remain
in full force and effect.
8. Waiver, Amendment or Modification. Neither this Agreement
----------------------------------
nor any of the terms and conditions hereof may be waived, amended or modified
except by means of a written instrument duly executed by the party to be charged
therewith. No waiver of any provision, performance or default hereunder in any
instance shall be construed as a continuing waiver of such provision,
performance or default, or a waiver of any other provision, performance or
default, or of any future performance or default.
9. Notices. Any notice, request, demand or other communication
-------
required or permitted under this Agreement shall be in writing and shall be
given in the manner provided in the Purchase Agreement.
10. Counterparts. This Agreement may be executed in any number
------------
of counterparts, each of which shall be deemed an original, but all of which
shall together constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first set forth above.
COMMODORE APPLIED TECHNOLOGIES, INC.
By:
---------------------------------
DISPUTE RESOLUTION MANAGEMENT, INC.
By:
---------------------------------
---------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
---------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
EXHIBIT G
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT ("Agreement"), dated as of
the 29th day of August 2000, is made and entered into among ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
("▇▇▇▇▇▇▇"), ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ ("▇▇▇▇▇▇▇▇") and the other persons who are party
signatories to this Agreement (individually referred to as a "Holder" and
collectively referred to as the "Holders"), and COMMODORE APPLIED TECHNOLOGIES,
Inc., a corporation incorporated under the laws of the state of Delaware (the
"Company").
WHEREAS, in connection with the acquisition by the Company
from ▇▇▇▇▇▇▇ and Speciale on the date hereof of 81% of the shares of capital
stock of Dispute Resolution Management Inc. ("DRM") pursuant to that agreement
and plan of merger, dated as of August 18, 2000 among the Company, DRM, DRM
Acquisition Corp. ("Mergerco") and ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇ (the "Merger
Agreement"), the Company has issued to the Holders an aggregate of
(a) an aggregate of Fifteen Million Five Hundred Thousand
(15,500,000) shares of common stock of the Company, $.001 par value per share
(the "Subject Common Stock"); and
(b) five year warrants (the "Warrants") to purchase an
additional 1,000,000 shares of common stock of the Company, $.001 par value per
share ("Company Common Stock") at an exercise price of $2.00 per share.
In addition to the above, pursuant to the terms of a
make-whole agreement between the Company, ▇▇▇▇▇▇▇ and Speciale, dated of even
date herewith (the "Make Whole Agreement"), the Company has agreed under certain
conditions to issue to ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇ certain additional shares of Company
Common Stock (the "Contingent Shares").
The Subject Common Stock, the shares of Company Common Stock
issuable upon exercise of the Warrants (the "Warrant Shares") and the Contingent
Shares (if and when issued) are hereinafter collectively referred to as the
"Stock" or the "Securities." Such Securities have been issued or are issuable
upon exercise of the Warrants in the respective amounts as among the Holders set
forth on Schedule "A" annexed hereto; and
WHEREAS, all capitalized terms used herein which are not
defined herein shall have the same meaning as set forth in the Asset Transfer
Agreement.
NOW, THEREFORE, the parties hereto mutually agree as follows:
Section 1. Registrable Securities. As used herein the term "Registrable
-----------------------
Security" means the Stock; provided, however, that with respect to any
particular Registrable Security, such Stock shall cease to be a Registrable
Security when, as of the date of determination, (i) it has been effectively
registered under the Securities Act of 1933, as amended (the "1933 Act"), and
disposed of pursuant thereto, (ii) registration under the 1933 Act is no longer
required for the immediate public distribution of all of such securities held by
any holder thereof without limitation as a result of the provisions of Rule 144
promulgated under the 1933 Act or (iii) it has ceased to be outstanding. The
term "Registrable Securities" means any and/or all of the Stock falling within
the foregoing definition of a "Registrable Security." In the event of any
merger, reorganization, consolidation, recapitalization or other change in
corporate structure affecting the Common Stock, such adjustment shall be made in
the definition of "Registrable Security" as is appropriate in order to prevent
any diminution or enlargement of the rights granted pursuant to this Section 1.
Section 2. Restrictions on Transfer. The Holders acknowledge and understand
-------------------------
that, prior to the registration of the Securities as provided herein, the
Securities are "restricted securities" as defined in Rule 144 promulgated under
the 1933 Act. The Holders understand that no disposition or transfer of the
Securities may be made by the Holders in the absence of (i) an opinion of
counsel to the Holders that such transfer may be made without registration under
the 1933 Act or (ii) such registration.
Section 3. Registration Agreements.
-----------------------
(a) Registration Rights. Not later than ninety (90) days following the
date of this Agreement, the Company shall prepare and file with the Securities
and Exchange Commission ("Commission"), a registration statement (on Form S-1 or
Form S-3 (if available) and in compliance with Rule 415 promulgated under the
▇▇▇▇ ▇▇▇) which shall cover the Stock under the 1933 Act (the "Resale
Registration Statement"), at the sole expense of the Company (except as provided
in Section 3(a)(ii) hereof), in respect of all holders of Registrable
Securities, so as to permit a resale of the Registrable Securities under the
1933 Act. Subject to the provisions of Section 3(a)(iii), the Company shall use
its best efforts to cause the Resale Registration Statement to become effective
within ninety (90) days from the date of filing of such Resale Registration
Statement.
(i) The Company will maintain the effectiveness the Resale
Registration Statement or any post-effective amendment thereto filed under
Section 3(a) hereof current under the 1933 Act until the earlier of (A) the date
that all of the Registrable Securities have been sold pursuant to the Resale
Registration Statement, (B) the date the holders thereof receive an opinion of
counsel that all of the Registrable Securities may be sold under the provisions
of Rule 144 (without limitation) or (C) three (3) years after the Effective
Date. Notwithstanding the foregoing, the Company shall have the right in
connection with (x) any contemplated mergers, acquisitions or other business
combinations, or (y) any additional public offerings of its securities, to
suspend the effectiveness of such Resale Registration Statement or
post-effective amendment thereto, or otherwise notify the Holders of Registrable
Securities that such Resale Registration Statement is no longer current and may
not be used or delivered in connection with distributions of the Registrable
Securities (in either event, a "Blackout"). The length of any Blackout period
will not count for purposes of the time period set forth in this Section
3(a)(i)(C).
(ii) All fees, disbursements and out-of-pocket expenses and
costs incurred by the Company in connection with the preparation and filing of
the Resale Registration Statement and in complying with applicable securities
2
and Blue Sky laws (including, without limitation, all attorneys' fees, including
the reasonable fees and expenses of counsel to the Holder) shall be borne by the
Company. The Holder shall bear the cost of underwriting discounts and
commissions, if any, applicable to the Registrable Securities being registered.
The Company shall qualify any of the Securities for sale in such states as such
Holder reasonably designates and shall furnish indemnification in the manner
provided in Section 6 hereof. However, the Company shall not be required to
qualify any of the Securities for sale in any state which will require an escrow
or other restriction relating to the Company and/or the sellers. The Company at
its expense will supply the Holder with copies of the Resale Registration
Statement and the prospectus or offering circular included therein and other
related documents in such quantities as may be reasonably requested by such
Holder.
(iii) The Company shall not be required by this Section 3 to
include a Holder's Registrable Securities in any Resale Registration Statement
which is to be filed if, in the opinion of counsel for the Company, the proposed
offering or other transfer as to which such registration is requested is exempt
from applicable federal and state securities laws and would result in all
Investors or transferees obtaining securities which are not "restricted
securities", as defined in Rule 144 under the ▇▇▇▇ ▇▇▇.
(b) No provision contained herein shall preclude the Company from
selling securities pursuant to any Registration Statement in which it is
required to include Registrable Securities pursuant to Section 3(a).
(c) If at any time or from time to time after the effective date of the
Resale Registration Statement, the Company notifies the Holders in writing of
the existence of a Potential Material Event (as defined below), the Holders
shall not offer or sell any Registrable Securities or engage in any other
transaction involving or relating to Registrable Securities, from the time of
the giving of notice with respect to a Potential Material Event until such
Holder receives written notice from the Company that such Potential Material
Event either has been disclosed to the public or no longer constitutes a
Potential Material Event. A "Potential Material Event" means any of the
following: (A) the possession by the Company of material information not ripe
for disclosure in a registration statement; or (B) any material transaction,
engagement or activity by the Company which would be adversely affected by
disclosure in a registration statement at such time, that the Resale
Registration Statement would be materially misleading absent the inclusion of
such information. The Company will use its best efforts to disclose any such
Potential Material Event at the earliest possible time as determined by the
Company in good faith and with the advice of its counsel. The period of time
during which the Holders are precluded from selling any Securities as a result
of a Potential Material Event will not be counted for purposes of the time
period set forth in Section 3(a)(i)(C).
(d) The Company agrees that it shall declare the Resale Registration
Statement filed pursuant to this Section 3 effective within three Business Days
after being notified by the Commission that it may do so. The Company also
agrees that it shall promptly respond to any questions or comments from the SEC
relating to the Resale Registration Statement.
3
Section 4. Cooperation with Company. Holders will cooperate with the Company in
------------------------
all respects in connection with this Agreement, including timely supplying all
information reasonably requested by the Company and executing and returning all
documents reasonably requested in connection with the registration and sale of
the Registrable Securities.
Section 5. Registration Procedures. If and whenever the Company is required by
------------------------
any of the provisions of this Agreement to effect the registration of any of the
Registrable Securities under the 1933 Act, the Company shall (except as
otherwise provided in this Agreement), as expeditiously as possible:
(a) prepare and file with the Commission such amendments and
supplements to the Resale Registration Statement and the prospectus used in
connection therewith as may be necessary to keep such registration statement
effective for the time period specified in Section 3 hereof and to comply with
the provisions of the 1933 Act with respect to the sale or other disposition of
all securities covered by such registration statement whenever the Holder of
such securities shall desire to sell or otherwise dispose of the same (including
prospectus supplements with respect to the sales of securities from time to time
in connection with a registration statement pursuant to Rule 415 promulgated
under the Act);
(b) furnish to each Holder such numbers of copies of a summary
prospectus or other prospectus, including a preliminary prospectus or any
amendment or supplement to any prospectus, in conformity with the requirements
of the Act, and such other documents, as such Holder may reasonably request in
order to facilitate the public sale or other disposition of the securities owned
by such Holder;
(c) register and qualify the securities covered by the Resale
Registration Statement under such other securities or blue sky laws of such
jurisdictions as the Holders shall reasonably request and do any and all other
acts and things which may be necessary or advisable to enable each Holder to
consummate the public sale or other disposition in such jurisdiction of the
securities owned by such Holder, except that the Company shall not for any such
purpose be required to qualify to do business as a foreign corporation in any
jurisdiction wherein it is not so qualified or to file therein any general
consent to service of process;
(d) list such securities on the American Stock Exchange, Inc. ("Amex"),
Nasdaq National Market, NASDAQ Small Cap Stock Market, the New York Stock
Exchange, Inc., or other national securities exchange on which any securities of
the Company are then listed, if the listing of such securities is then permitted
under the rules of such exchange;
(e) notify each Holder of Registrable Securities covered by the Resale
Registration Statement, at any time when a prospectus relating thereto covered
by the Resale Registration Statement is required to be delivered under the 1933
Act, of the happening of any event of which it has knowledge as a result of
which the prospectus included in the Resale Registration Statement, as then in
effect, includes an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances then existing.
4
Section 6. Indemnification.
---------------
(a) The Company agrees to indemnify and hold harmless the Holders, and
each officer, director or person, if any, who controls each Holder within the
meaning of the 1933 Act ("Distributing Holder") against any losses, claims,
damages or liabilities, joint or several (which shall, for all purposes of this
Agreement, include, but not be limited to, all costs of defense and
investigation and all attorneys' fees), to which the Distributing Holder may
become subject, under the 1933 Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon any untrue statement or alleged untrue statement of any material fact
contained in the Registration Statement, the Resale Registration Statement or
any related preliminary prospectus, final prospectus, offering circular,
notification or amendment or supplement thereto, or arise out of or are based
upon the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading;
provided, however, that the Company (i) will not be liable in any such case to
the extent that any such loss, claim, damage or liability arises out of or is
based upon an untrue statement or alleged untrue statement or omission or
alleged omission made in the Registration Statement, the Resale Registration
Statement, preliminary prospectus, final prospectus, offering circular,
notification or amendment or supplement thereto in reliance upon, and in
conformity with, written information furnished to the Company by the
Distributing Holder specifically for use in the preparation thereof, or (ii)
cannot pay any amounts paid in settlement of any loss, claim, damage or
liability if such settlement is effected without the consent of the Company,
which consent shall not be unreasonably withheld or delayed. This Section 6(a)
shall not inure to the benefit of any Distributing Holder with respect to any
person asserting such loss, claim, damage or liability who purchased the
Registrable Securities which are the subject thereof if the Distributing Holder
failed to send or give (in violation of the 1933 Act or the rules and
regulations promulgated thereunder) a copy of the prospectus contained in such
Registration Statement or Resale Registration Statement, as the case may be, to
such person at or prior to the written confirmation of such person of the sale
of such Registrable Securities, where the Distributing Holder was obligated to
do so under the 1933 Act or the rules and regulations promulgated thereunder.
This indemnity provision will be in addition to any liability which the Company
may otherwise have.
(b) Each Distributing Holder agrees that it will indemnify and hold
harmless the Company, and each officer, director, or person, if any, who
controls the Company within the meaning of the 1933 Act, against any losses,
claims, damages or liabilities (which shall, for all purposes of this Agreement,
include, but not be limited to, all costs of defense and investigation and all
attorneys' fees) to which the Company or any such officer, director or
controlling person may become subject under the 1933 Act or otherwise, insofar
as such losses claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon any untrue statement or alleged untrue statement
of any material fact contained in the Registration Statement, the Resale
Registration Statement or any related preliminary prospectus, final prospectus,
offering circular, notification or amendment or supplement thereto, or arise out
of or are based upon the omission or the alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, but in each case only to the extent that such untrue
5
statement or alleged untrue statement or omission or alleged omission was made
in the Registration Statement, the Resale Registration Statement, preliminary
prospectus, final prospectus, offering circular, notification or amendment or
supplement thereto in reliance upon, and in conformity with, written information
furnished to the Company by such Distributing Holder specifically for use in the
preparation thereof. This indemnity provision will be in addition to any
liability which the Distributing Holder may otherwise have.
(c) Promptly after receipt by an indemnified party under this Section 6
of notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against the indemnifying party under this
Section 6, notify the indemnifying party of the commencement thereof; but the
omission so to notify the indemnifying party will not relieve the indemnifying
party from any liability which it may have to any indemnified party otherwise
than as to the particular item as to which indemnification is then being sought
solely pursuant to this Section 6. In case any such action is brought against
any indemnified party, and it notifies the indemnifying party of the
commencement thereof, the indemnifying party will be entitled to participate in,
and, to the extent that it may wish, jointly with any other indemnifying party
similarly notified, assume the defense thereof, subject to the provisions herein
stated and after notice from the indemnifying party to such indemnified party of
its election so to assume the defense thereof, the indemnifying party will not
be liable to such indemnified party under this Section 6 for any legal or other
expenses subsequently incurred by such indemnified party in connection with the
defense thereof other than reasonable costs of investigation, unless the
indemnifying party shall not pursue the action to its final conclusion. The
indemnified party shall have the right to employ separate counsel in any such
action and to participate in the defense thereof, but the fees and expenses of
such counsel shall not be at the expense of the indemnifying party if the
indemnifying party has assumed the defense of the action with counsel reasonably
satisfactory to the indemnified party; provided that if the indemnified party is
the Distributing Holder, the fees and expenses of such counsel shall be at the
expense of the indemnifying party if (i) the employment of such counsel has been
specifically authorized in writing by the indemnifying party, or (ii) the named
parties to any such action (including any impleaded parties) include both the
Distributing Holder and the indemnifying party and the Distributing Holder shall
have been advised by such counsel that there may be one or more legal defenses
available to the indemnifying party different from or in conflict with any legal
defenses which may be available to the Distributing Holder (in which case the
indemnifying party shall not have the right to assume the defense of such action
on behalf of the Distributing Holder, it being understood, however, that the
indemnifying party shall, in connection with any one such action or separate but
substantially similar or related actions in the same jurisdiction arising out of
the same general allegations or circumstances, be liable only for the reasonable
fees and expenses of one separate firm of attorneys for the Distributing Holder,
which firm shall be designated in writing by the Distributing Holder). No
settlement of any action against an indemnified party shall be made without the
prior written consent of the indemnified party, which consent shall not be
unreasonably withheld.
Section 7. Contribution. In order to provide for just and equitable contribution
------------
under the 1933 Act in any case in which (i) the indemnified party makes a claim
for indemnification pursuant to Section 6 hereof but is judicially determined
(by the entry of a final judgment or decree by a court of competent jurisdiction
and the expiration of time to appeal or the denial of the last right of appeal)
6
that such indemnification may not be enforced in such case notwithstanding the
fact that the express provisions of Section 6 hereof provide for indemnification
in such case, or (ii) contribution under the 1933 Act may be required on the
part of any indemnified party, then the Company and the applicable Distributing
Holder shall contribute to the aggregate losses, claims, damages or liabilities
to which they may be subject (which shall, for all purposes of this Agreement,
include, but not be limited to, all costs of defense and investigation and all
attorneys' fees), in either such case (after contribution from others) on the
basis of relative fault as well as any other relevant equitable considerations.
The relative fault shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Company on the one hand or the applicable Distributing Holder on
the other hand, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The Company and the Distributing Holder agree that it would not be just and
equitable if contribution pursuant to this Section 7 were determined by pro rata
allocation or by any other method of allocation which does not take account of
the equitable considerations referred to in this Section 7. The amount paid or
payable by an indemnified party as a result of the losses, claims, damages or
liabilities (or actions in respect thereof) referred to above in this Section 7
shall be deemed to include any legal or other expenses reasonably incurred by
such indemnified party in connection with investigating or defending any such
action or claim. No person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the ▇▇▇▇ ▇▇▇) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation.
Section 8. Notices. All notices, demands, requests, consents, approvals, and
-------
other communications required or permitted hereunder shall be in writing and,
unless otherwise specified herein, shall be (i) personally served, (ii)
deposited in the mail, registered or certified, return receipt requested,
postage prepaid, (iii) delivered by reputable air courier service with charges
prepaid, or (iv) transmitted by hand delivery, telegram, or facsimile, addressed
as set forth below or to such other address as such party shall have specified
most recently by written notice. Any notice or other communication required or
permitted to be given hereunder shall be deemed effective (a) upon hand delivery
or delivery by facsimile, with accurate confirmation generated by the
transmitting facsimile machine, 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
other than on a Business Day during normal business hours where such notice is
to be received) or (b) on the second Business Day following the date of mailing
by reputable 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 be:
If to the Company:
Commodore Applied Technologies, Inc.
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: President
7
If to the Holders at the addresses set forth on Schedule A attached
hereto.
Any party hereto may from time to time change its address or facsimile
number for notices under this Section by giving at least ten (10) days' prior
written notice of such changed address or facsimile number to the other party
hereto.
Section 9. Assignment. This Agreement is binding upon and inures to the benefit
----------
of the parties hereto and their respective heirs, successors and permitted
assigns. The rights granted the Holders under this Agreement shall not be
assigned without the written consent of the Company, which consent shall not be
unreasonably withheld. In the event of a transfer of the rights granted under
this Agreement, the Holder agrees that the Company may require that the
transferee comply with reasonable conditions as determined in the discretion of
the Company.
Section 10. Counterparts; Facsimile; Amendments. This Agreement may be executed
------------------------------------
in multiple counterparts, each of which may be executed by less than all of the
parties and shall be deemed to be an original instrument which shall be
enforceable against the parties actually executing such counterparts and all of
which together shall constitute one and the same instrument. Except as otherwise
stated herein, in lieu of the original documents, a facsimile transmission or
copy of the original documents shall be as effective and enforceable as the
original. This Agreement may be amended only by a writing executed by all
parties.
Section 11. Termination of Registration Rights. The rights granted pursuant to
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this Agreement shall terminate as to each Holder (and permitted transferees or
assignees) upon the occurrence of any of the following:
(a) all Holder's Securities subject to this Agreement have been
registered and disposed of;
(b) all of such Holder's Securities subject to this Agreement may be
sold without such registration (or limitation) pursuant to Rule 144 promulgated
by the SEC pursuant to the Securities Act;
(c) all of such Holder's Securities subject to this Agreement can be
sold pursuant to Rule 144(k).
Section 12. Headings. The headings in this Agreement are for reference purposes
--------
only and shall not affect in any way the meaning or interpretation of this
Agreement.
Section 13. Governing Law: Venue; Jurisdiction. This Agreement will be construed
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and enforced in accordance with and governed by the laws of the State of
Delaware, except for matters arising under the Act, without reference to
principles of conflicts of law. Each of the parties consents to the exclusive
jurisdiction of the U.S. District Court sitting in the Southern District of the
State of New York or the United States District Court sitting in Salt Lake City,
8
Utah in connection with any dispute arising under this Agreement and hereby
waives, to the maximum extent permitted by law, any objection, including any
objection based on forum non conveniens, to the bringing of any such proceeding
in such jurisdictions. Each party hereby agrees that if another party to this
Agreement obtains a judgment against it in such a proceeding, the party which
obtained such judgment may enforce same by summary judgment in the courts of any
country having jurisdiction over the party against whom such judgment was
obtained, and each party hereby waives any defenses available to it under local
law and agrees to the enforcement of such a judgment.
Section 14. Resolution of Disputes; Arbitration.
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(a) Whenever a claim shall arise involving the interpretation
or application of this Agreement, the complaining party shall notify the other
party in writing within thirty (30) days of the complaining party's first
receipt of notice of, or the complaining party's obtaining actual knowledge of,
such claim, and in any event within such shorter period as may be necessary for
the other party to take appropriate action to resist such claim. Such notice
shall specify all facts known to the complaining party giving rise to such claim
or dispute and shall estimate (to the extent reasonably possible) the amount of
potential liability arising therefrom. If the other party shall be duly notified
of such dispute, the parties shall attempt to settle and compromise the same.
(b) In the event that any dispute involving the interpretation
or application of this Agreement which cannot be settled or compromised, as
aforesaid, within twenty (20) days of receipt of the subject claim, either the
complaining party or the other party shall promptly thereafter submit the
dispute for final and binding arbitration to JAMS or End-Dispute before a
three-person panel of arbitrators who shall be either (i) retired federal
judges, or (ii) other persons experienced in resolving commercial disputes and
who are acceptable to both the complaining party and the other party to such
dispute (the "Arbitration"). Any such Arbitration shall, if brought by the
Employee, be held in New York, New York and, if brought by the Company shall be
in Salt Lake City, Utah. The panel of arbitrators shall be selected within
twenty (20) days of submission of such dispute to Arbitration. The parties shall
use their collective best efforts to promptly schedule and conduct the hearings
before such arbitrators, with a view toward concluding such arbitration
proceedings not later than thirty (30) days from the first submission of the
dispute to arbitration. In addition to, and not in lieu of, arbitration as a
means of dispute resolution hereunder, any party hereto shall have the right to
seek specific enforcement of this Agreement, or other injunctive or equitable
relief or remedy before any court of competent jurisdiction.
(c) In connection with any Arbitration pursuant to this
Section 14, the arbitrators shall, as part of their award, allocate the fee of
the Arbitration, including all fees of the arbitrators, the cost of any
transcripts, and the parties' reasonable attorneys' fees, based upon and taking
into account the arbitrators' determination of the merits and good faith of the
parties' claims and defenses in the subject proceeding.
(d) The decision and award of the arbitrators shall be final
and binding upon the parties hereto and shall be enforceable in any court of
competent jurisdiction, including any federal or state court in the States of
Utah, Delaware, New York or Colorado. Any process or other papers hereunder may
be served by registered or certified mail, return receipt requested, or by
9
personal service, provided that a reasonable time for appearance or response is
allowed.
(e) Any rights established by reason of such settlement,
compromise, arbitration or litigation shall promptly thereafter be satisfied by
the losing party in such amount as shall be necessary to satisfy all applicable
losses or damages sustained or incurred by the complaining party, as determined
in accordance with such settlement and compromise, or by final nonappealable
order or judgment of the applicable judicial or arbitration panel.
(f) In connection with the defense of any third party claims
for which claims for indemnification have been made hereunder, each party will
provide reasonable access to its and the Company's books and records as and to
the extent required for the proper defense of such third party claim. Neither
party shall consent to any settlement or purport to bind any other party to any
settlement without the written consent of the other party.
(g) Notwithstanding anything to the contrary set forth above,
in the event and to the extent that the complaining party shall believe that
such party shall then have no adequate remedy at law, the complaining party
shall have the right, in addition to and not in lieu of the right to obtain
compensatory or other monetary relief, to seek and obtain injunctive relief,
specific performance or such other equitable remedies as any court of competent
jurisdiction shall deem appropriate in the circumstances
Section 15. Severability. If any provision of this Agreement shall for any
------------
reason be held invalid or unenforceable, such invalidity or unenforceablity
shall not affect any other provision hereof and this Agreement shall be
construed as if such invalid or unenforceable provision had never been contained
herein.
Section 16. Capitalized Terms. All capitalized terms not otherwise defined
------------------
herein shall have the meaning assigned to them in the Merger Agreement.
Section 17. Entire Agreement. This Agreement, together with all documents
-----------------
referenced herein, embody the entire agreement and understanding between the
parties hereto with respect to the subject matter hereof and supersedes all
prior oral or written agreements and understandings relating to the subject
matter hereof. No statement, representation, warranty, covenant or agreement of
any kind not expressly set forth in this Agreement shall affect, or be used to
interpret, change or restrict, the express terms and provisions of this
Agreement.
10
IN WITNESS WHEREOF, the parties hereto have caused this
Registration Rights Agreement to be duly executed, on the day and year first
above written.
COMMODORE APPLIED TECHNOLOGIES, INC.
By:
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▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, President
Holders:
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-----------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-----------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
-----------------------------------
Name:
-----------------------------------
-----------------------------------
Name:
11
EXHIBIT H
OPTION AGREEMENT
THIS OPTION AGREEMENT ("Agreement") is made and entered into as of the
30th day of August 2000, among COMMODORE APPLIED TECHNOLOGIES, INC., a Delaware
corporation ("Commodore"); ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ("▇▇▇▇▇▇▇"), an individual having
an address at ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇; and ▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇ ("▇▇▇▇▇▇▇▇"), an individual having an address at ▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇,
▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇.
W I T N E S S E T H:
WHEREAS, Commodore, Russell, Speciale, and DISPUTE RESOLUTION
MANAGEMENT, INC., a Utah corporation (the "Company") entered into an amended and
restated stock purchase agreement, dated August 30, 2000 (the "Purchase
Agreement"); and
WHEREAS, as at the date of this Agreement, the transactions
contemplated by the Purchase Agreement were consummated, as a result of which
Mergeco was merged with and into the Company and Commodore acquired 81% of the
issued and outstanding shares of capital stock of the Company, as the surviving
corporation of such merger; and
WHEREAS, ▇▇▇▇▇▇▇ and Speciale (collectively, the
"Stockholders") currently own, in equal amounts, five thousand seven hundred
shares of common stock of the Company (the "Option Stock"); which Option Stock
represents 19% of the issued and outstanding shares of capital stock of the
Company;
WHEREAS, Commodore desires to purchase an option to acquire
from the Stockholders all, and not less than all, of their shares of Option
Stock and the Stockholders are willing to grant to Commodore such option, all
upon the terms and subject to the conditions hereinafter set forth, and
WHEREAS, by the execution and delivery hereof, each of
Commodore and the Stockholders represent that they have all requisite right,
authority and legal capacity to execute and deliver this Agreement and are not
acting on behalf of any undisclosed or partially disclosed principal;
NOW, THEREFORE, in consideration of the foregoing premises,
the parties hereto, Intending to be legally bound, hereby agree as follows:
1. Definitions Unless otherwise expressly defined herein, all
-----------
capitalized terms as used in this Agreement shall have the same meaning as is
defined in the Purchase Agreement.
2. Grant of Option.
---------------
Subject to the terms and conditions set forth in this Agreement, the
Stockholders hereby jointly and severally grant unto Commodore, an unconditional
and irrevocable right and option (the "Option") to purchase from the
Stockholders all, and not less than all, of the issued and outstanding shares of
Option Stock.
3. Term of Option.
--------------
The Option shall only be exercisable by Commodore or any other Person
after January 1, 2006, or earlier if the Stockholders shall have received a
total of $37,131,578 in aggregate cash and other distributions from the Company
under the Purchase Agreement and from Commodore under the Make Whole Agreement,
and shall terminate on December 31, 2010 (the "Option Exercise Period");
provided, that the Option shall terminate immediately upon the occurrence of:
(a) an "Event of Default" as that term is defined in the Pledge Agreement; (b) a
Sale of Control, or (c) an Initial Public Offering of the Company. Unless sooner
terminated, the Option may be exercised by Commodore at any time during the
Option Exercise Period upon not less than ninety (90) days prior written notice
to the Stockholders and in accordance with the provisions set forth below.
4. Consideration for Option.
------------------------
In consideration of its grant of the Option, on the Closing Date,
simultaneous with the execution and delivery of this Agreement, Commodore hereby
agrees to issue to the Stockholders in equal amounts the aggregate sum of Five
Million (5,000,000) shares of Commodore Common Stock (the "Option
Consideration"). Consummation of the transactions contemplated by the Purchase
Agreement shall be subject to and conditioned upon payment in full of the Option
Consideration, in addition to the other conditions specified therein.
5. Purchase Consideration for the Option Stock.
-------------------------------------------
The purchase consideration for the Option Stock upon timely exercise of
the Option shall be paid solely in shares of Commodore Common Stock, as provided
below. Such purchase consideration shall be based upon the "Equivalent Value" of
such Option Stock, as calculated in accordance with the following procedures:
(a) The fair market value of 100% of the Company and all Permitted
Investments as a going concern (collectively, the "Company FMV") shall be
determined by an appraisal rendered by an independent investment banking firm
which has not provided services to Commodore within the prior three years and
which is mutually acceptable to the Board of Directors of Commodore and the
Stockholders; provided, however, that solely for purposes of calculating the
Company FMV for purposes of this Agreement, the fair market value of the
Extension Electronic Investments shall not be included within the definition of
the Company FMV.
(b) The fair market value of 100% of Commodore and its consolidated
Subsidiaries (including 100% of the Company and all Permitted Investments,
inclusive of the Extension Electronic Investments) as a going concern (the
"Commodore FMV") shall be determined by an appraisal rendered by an independent
investment banking firm which has not provided services to Parent within the
prior three years and which is mutually acceptable to the Board of Directors of
Commodore and the Stockholders.
(c) The Company FMV shall be multiplied by a fraction (i) the numerator
of which shall be the Interests in the Company then owned by the Stockholders or
the Stockholders, and (ii) the denominator of which shall bear to the Interests
then owned by all Members in the Company (including Commodore) and which may be
acquired by any Member of other Person upon exercise of any options, warrants or
other outstanding rights to purchase Interests in the Company.
(d) the product of the calculation in Section 5(c) above shall be
divided by the Commodore FMV. The result thereof (whether less or greater than
1.00) shall be multiplied by the aggregate number of shares of Commodore Common
Stock then issued and outstanding.
(e) the result of the calculation set forth in Section 5(d) above shall
be deemed the Equivalent Value of the Option Stock and shall be payable in the
appropriate number of shares of Commodore Common Stock.
6. Additional Agreements
---------------------
(a) Appraisal. The Commodore FMV and the Company FMV shall be appraised
---------
as soon as practicable following Commodore's delivery of the notice of exercise
of the Option. Commodore shall pay all costs of obtaining the Commodore FMV and
Company FMV appraisals.
(b) Amendments. No amendment or modification to this Agreement shall be
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valid unless made in writing and signed by the party to be charged therewith.
(c) Non-Assignability, Binding Effect. Neither this Agreement, nor any
-----------------
of the rights or obligations of the parties hereunder, shall be assignable by
either party hereto without the prior written consent of the other party.
Otherwise, this Agreement shall be binding upon and shall inure to the benefit
of the parties hereto and their respective heirs, executors, administrators,
personal representatives, successors and permitted assigns. Notwithstanding the
foregoing, Commodore shall have the right to any newly formed wholly-owned
acquisition subsidiary corporation of Commodore; provided, that any such
permitted assignment shall in no manner relieve, or be deemed to relieve,
Commodore from any obligations, covenants and agreements on its part to be
performed both prior and subsequent to the date hereof.
(d) Legend. Until such time as the Option shall be exercised, expire or
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terminate, all certificates and other instruments evidencing the Option Stock
shall contain a legend to the effect that such Option Stock is subject to the
terms and conditions of this Agreement, including the provisions of Section 6(d)
above.
(d) Entire Agreement. This Agreement represents the entire agreement
-----------------
between the parties with respect to the subject matter hereof, and supersedes
all other agreements, written or oral, between the parties with respect thereto.
(e) Governing Law, Jurisdiction. This Agreement shall be construed and
---------------------------
interpreted and the rights granted herein governed in accordance with the laws
of the State of Delaware applicable to contracts made and to be performed wholly
within such State.
IN WITNESS WHEREOF, the parties have executed this Agreement
on and as of the date first set forth above.
Commodore: COMMODORE APPLIED TECHNOLOGIES, INC.
By:____________________________________
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, President
The Company: DISPUTE RESOLUTION MANAGEMENT, INC.
By:____________________________________
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, President
The Stockholders:
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▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
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▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇