CONVERSION TECHNOLOGIES INTERNATIONAL, INC.
THIS SUBSCRIPTION AGREEMENT (the "Agreement") made as of the date set
forth on the signature page hereof between Conversion Technologies
International, Inc., a Delaware corporation (the "Company"), and the undersigned
(the "Subscriber").
WHEREAS, the Company desires to issue in a private placement to accredited
investors (the "Offering") a minimum of 580 units (the "Minimum Offering") and a
maximum of 1,000 units (the "Maximum Offering") (such units being collectively
referred to herein as the "Units"), each Unit consisting of five thousand
(5,000) shares of a newly authorized series of the Company's preferred stock
referred to as Series B Convertible Preferred Stock, par value $.001 per share,
stated value $.60 per share (the "Series B Preferred Stock"), each such share
being convertible at the option of the holder at any time after the initial
issuance date into twenty (20) shares of the Company's common stock, par value
$.00025 per share (the "Common Stock"), based on a current conversion price of
$.03 per share (the Series B Preferred Stock and the Common Stock issuable upon
conversion thereof being sometimes referred to collectively herein as the
"Securities");
WHEREAS, the Subscriber desires to purchase the number of Units set forth
on the signature page hereof.
NOW, THEREFORE, for and in consideration of the premises and the mutual
covenants hereinafter set forth, the parties hereto do hereby agree as follows:
I. SUBSCRIPTION FOR UNITS AND REPRESENTATIONS BY SUBSCRIBER
1.1 Subject to the terms and conditions set forth in this Agreement and in
the Confidential Private Placement Memorandum, dated April 8, 1999, as it may be
supplemented and amended (the "Memorandum") with respect to the Offering, the
Subscriber hereby subscribes for and agrees to purchase from the Company the
number of Units or fractions thereof set forth on the signature page hereof at a
price equal to $3,000 per Unit, and the Company agrees to sell such number of
Units for said purchase price. The purchase price is payable by (i) check or
money order made payable to "▇▇▇▇▇▇ & ▇▇▇▇▇ LLP Escrow Agent, F/B/O Conversion
Technologies International, Inc." or (ii) wire transfer in accordance with the
wire transfer instructions set forth on Exhibit A hereto, contemporaneously with
the execution and delivery of this Agreement. Certificates representing the
Series B Preferred Stock purchased by each Subscriber will be delivered by the
Company within ten (10) days following the consummation of the relevant Closing
Date as set forth in Article III hereof. The Subscriber understands, however,
that this purchase of Units is contingent upon (i) the Company making sales of a
minimum of five hundred eighty (580) Units prior to the termination date of the
Offering, (ii) the Company obtaining the consent of the holders of 66.67% of the
outstanding shares of Series A Preferred Stock (the "Requisite Supermajority")
for the authorization and issuance of the Series B Preferred Stock comprising
the Units offered hereby and (iii) the holders of a majority of the outstanding
voting stock approving the Merger and related transactions (as defined in the
Memorandum).
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1.2 The Subscriber recognizes that the purchase of the Units involves a
high degree of risk in that: (i) the Company has incurred losses since
inception, and, at June 30, 1998, had an accumulated deficit of $35,308,000 and
requires substantial funds in addition to the proceeds of this private placement
to continue its plan of operations; (ii) an investment in the Company is highly
speculative and only investors who can afford the loss of their entire
investment should consider investing in the Company and the Units; (iii) the
Subscriber may not be able to liquidate the Subscriber's investment; (iv)
transferability of the securities comprising the Units is extremely limited; and
(v) in the event of a disposition, an investor could sustain the loss of the
investor's entire investment. Furthermore, the proceeds of this private
placement are projected to last only a limited period of time. For a discussion
of significant risks involved with an investment in the Units, see the
Memorandum furnished by the Company to the Subscriber and the Company's Form
10-KSB for the year ended June 30, 1998 (the "Form 10-KSB")
1.3 The Subscriber represents that the Subscriber is an "accredited
investor" as such term is defined in Rule 501 of Regulation D promulgated under
the United States Securities Act of 1933, as amended (the "Act"), as indicated
by the Subscriber's responses to the questions contained in Article VII hereof,
and that the Subscriber is able to bear the economic risk of an investment in
the Units.
1.4 The Subscriber acknowledges that the Subscriber has prior investment
experience, including investment in non-listed and non-registered securities, or
the Subscriber has employed the services of an investment advisor, attorney or
accountant to evaluate the merits and risks of an investment in the Units on the
Subscriber's behalf, and that the Subscriber recognizes the highly speculative
nature of the Subscriber's investment.
1.5 The Subscriber acknowledges receipt and careful review of this
Agreement and all attachments hereto and the Memorandum, including the Form
10-KSB, the form of Certificate of Designation of Series B Preferred Stock and
the other exhibits thereto (collectively, the "Offering Documents"). The
Subscriber hereby represents that the Subscriber has been furnished by the
Company during the course of this transaction with all information regarding the
Company which the Subscriber had requested or desired to know, that all
documents which could be reasonably provided have been made available for the
Subscriber's inspection and review, and that such information and documents
have, in the Subscriber's opinion, afforded the Subscriber with substantially
all of the same information that would be provided the Subscriber in a
registration statement filed under the Act; and that the Subscriber has been
afforded the opportunity to ask questions of and receive answers from duly
authorized officers or other representatives of the Company concerning the terms
and conditions of the private placement, and any additional information which
the Subscriber had requested. The Subscriber hereby represents that, except as
set forth in the Offering Documents, no representations or warranties have been
made to the Subscriber by the Company or any agent, employee or affiliate of the
Company and in entering into this transaction, the Subscriber is not relying on
any information, other than that contained in the Offering Documents and the
results of independent investigation by the Subscriber.
1.6 The Subscriber hereby acknowledges that the private placement has not
been reviewed by the United States Securities and Exchange Commission ("SEC") or
any state regulatory authority, because of the Company's representations that
this is intended to be a
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nonpublic offering pursuant to Sections 3(b) or 4(2) of the Act. The Subscriber
represents that the Units are being purchased for the Subscriber's own account,
for investment and not for distribution or resale to others. The Subscriber
agrees that the Subscriber will not sell or otherwise transfer the securities
comprising the Units unless they are registered under the Act or unless an
exemption from such registration is available.
1.7 The Subscriber understands that the securities comprising the Units
have not been registered under the Act by reason of a claimed exemption under
the provisions of the Act which depends, in part, upon the Subscriber's
investment intention. In this connection, the Subscriber understands that it is
the position of the SEC that the statutory basis for such exemption would not be
present if the Subscriber's representation merely meant that the Subscriber's
present intention was to hold such securities for a short period, such as the
capital gains period of tax statutes, for a deferred sale, for a market rise,
assuming that a market develops, or for any other fixed period.
1.8 The Subscriber understands that Rule 144 (the "Rule") promulgated
under the Act requires, among other conditions, a one-year holding period prior
to the resale (in limited amounts) of securities acquired in a non-public
offering without having to satisfy the registration requirements under the Act.
The Subscriber understands that the Company makes no representation or warranty
regarding its fulfillment in the future of any reporting requirements under the
Securities Exchange Act of 1934, as amended, or its dissemination to the public
of any current financial or other information concerning the Company, as is
required by the Rule as one of the conditions of its availability and that the
Company is not presently in compliance with certain of such requirements. The
Subscriber understands and hereby acknowledges that the Company is under no
obligations to register any of the Units or any of the Securities comprising the
Units under the Act or any state securities or "blue sky" laws other than as set
forth in Article V. The Subscriber consents that the Company may, if it desires,
permit the transfer of the Securities out of the Subscriber's name only when the
Subscriber's request for transfer is accompanied by an opinion of counsel
reasonably satisfactory to the Company that neither the sale nor the proposed
transfer results in a violation of the Act or any applicable state "blue sky"
laws. The Subscriber agrees to hold the Company and its directors, officers and
controlling persons and their respective heirs, representatives, successors and
assigns harmless and to indemnify them against all liabilities, costs and
expenses incurred by them as a result of (i) any misrepresentation made by the
Subscriber contained herein (including the Confidential Purchaser Questionnaire,
contained in Article VII herein), (ii) any sale or distribution by the
undersigned Subscriber in violation of the Act or any applicable state
securities or "blue sky" laws, or (iii) any untrue statements of a material fact
made by the Subscriber and contained herein.
1.9 The Subscriber consents to the placement of a legend on any
certificate or other document evidencing the Securities stating that they have
not been registered under the Act and setting forth or referring to the
restrictions on transferability and sale thereof.
1.10 The Subscriber understands that the Company will review this
Agreement and is hereby given authority by the Subscriber to call the
Subscriber's bank or place of employment or otherwise review the financial
standing of the Subscriber; and it is further agreed that the Company reserves
the unrestricted right to reject or limit any subscription, to accept
subscriptions for fractional Units, and to close the Offering to the Subscriber
at any time.
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1.11 The Subscriber hereby represents that the address of Subscriber
furnished by the Subscriber at the end of this Agreement is the undersigned's
principal residence if the Subscriber is an individual or its principal business
address if it is a corporation or other entity.
1.12 The Subscriber acknowledges that if the Subscriber is a Registered
Representative of an NASD member firm, the Subscriber must give such firm the
notice required by the NASD's Rules of Fair Practice, receipt of which must be
acknowledged by such firm on the signature page hereof.
1.13 The Subscriber represents that the Subscriber has full power and
authority (corporate, statutory, and otherwise) to execute and deliver this
Agreement and to purchase the Units and the Securities. This Agreement
constitutes the legal, valid and binding obligation of the Subscriber,
enforceable against the Subscriber in accordance with its terms.
1.14 If the Subscriber is a corporation, partnership, limited liability
company, trust, employee benefit plan, individual retirement account, ▇▇▇▇▇
Plan, or other entity, (a) it is authorized and qualified to become an investor
in the Company and the person signing this Agreement on behalf of such entity
has been fully authorized by such entity to do so and (b) it is duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
organization.
1.15 The Subscriber acknowledges that if he or she is a Registered
Representative of an NASD member firm, he or she must give such firm the notice
required by the NASD's Rules of Fair Practice, receipt of which must be
acknowledged by such firm in Section 7.4 below.
1.16 The Subscriber acknowledges that at such time, if ever, as the
Securities are registered, sales of the Securities will be subject to state
securities laws, including those of the State of New Jersey which require any
securities sold in New Jersey to be sold through a registered broker-dealer or
in reliance upon an exemption from registration.
1.17 Subject to the proviso below, the Subscriber hereby agrees that from
the date hereof and continuing for a period of nine (9) months (the "Lock-Up
Period") from the effective date of the Shelf Registration Statement (as defined
in Section 5.2 hereof), the Subscriber will not, without the prior written
consent of the Company, offer, pledge, sell, contract to sell, grant any option
for the sale, of, or otherwise dispose of, directly or indirectly, 75% of the
Registrable Securities (as defined in Section 5.1) purchased or acquired by the
Subscriber, provided, however, that, following each three month period after the
Effective Date, an amount of Registrable Securities equal to 25% of the number
of Registrable Securities purchased or acquired by the Subscriber shall become
exempt from the lock-up provisions contained in this sentence. For the sake of
clarity, 25% of the Registrable Securities will not be subject to any lock-up.
In addition, the Subscriber agrees that during the period from the date that the
Subscriber was first contacted with respect to the potential purchase of
Securities through the last date upon which the Subscriber holds any Securities
or Registrable Securities, the Subscriber will not directly or indirectly,
through related parties, affiliates or otherwise sell "short" or "short against
the box" (as those terms are generally understood) or otherwise engage in any
"hedging" transactions with respect to any equity security of the Company;
provided, however, that it shall not be a violation of this Section 1.17, if the
Subscriber places a sell order for Registrable
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Securities prior to the conversion of the Series B Preferred Stock or at the
time the conversion is requested, relies on the Company to deliver such
Registrable Securities in accordance with Section 5.4(h) and completes the sale
of such Registrable Securities before the Company delivers the Registrable
Securities to the Subscriber. In addition, the Subscriber agrees that during any
applicable Lock-Up Period it will not convert any of the Series B Preferred
Stock with respect to which the underlying Registrable Securities are subject to
such Lock-Up Period.
1.18 By tendering a subscription hereunder, the Subscriber, as a holder of
Series A Convertible Preferred Stock of the Company, (i)consents to the
authorization and issuance of all shares of Series B Preferred Stock comprising
the Units offered in the Offering, and (ii) covenants to deliver a written
consent in the form provided in the Memorandum to approve a merger of the
Company's wholly-owned subsidiary, CTI Subsidiary Corp., with and into the
Company and (iii) an increase in the authorized shares of Common Stock of the
Company to 175,000,000 in connection with such merger..
II. REPRESENTATIONS BY AND COVENANTS OF THE COMPANY
2.1 The Company represents and warrants to the Subscriber that, as of the
date of the execution of this Subscription Agreement by the Company:
(a) Organization, Good Standing and Qualification. Each of the
Company and Dunkirk International Glass and Ceramics Corporation and Advanced
Particle Technologies, Inc. (collectively, the "Subsidiaries") is a corporation
duly organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation and has full corporate power and authority to
conduct its business as described in the Memorandum. Each of the Company and the
Subsidiaries is duly qualified to do business as a foreign corporation and is in
good standing in each jurisdiction in which the laws require the Company or the
Subsidiaries to be so qualified and/or authorized to do business.
(b) Authorization. The execution, delivery and performance of this
Agreement by the Company will have been duly approved by the Board of Directors
of the Company and all other actions required to authorize and effect the offer
and sale of the Securities will have been duly taken and approved.
(c) Capitalization and Voting Rights. The authorized, issued and
outstanding capital stock of the Company is as set forth in the Memorandum under
"Capitalization"; all issued and outstanding shares of the Company are validly
issued, fully paid and nonassessable. The Series B Preferred Stock comprising
the Units have been duly and validly authorized and, when issued and paid for
pursuant to this Agreement, will be validly issued, fully paid and
nonassessable. Except as set forth in the Offering Documents, there are no
outstanding options, warrants, agreements, convertible securities, preemptive
rights or other rights to subscribe for or to purchase any shares of capital
stock of the Company. Except as set forth in the Offering Documents, in this
Agreement and as otherwise required by law, there are no restrictions upon the
voting or transfer of the Series B Preferred Stock pursuant to the Company's
Certificate of Incorporation, as amended (the "Certificate of Incorporation"),
By-Laws or other governing documents or any agreement or other instruments to
which the Company is a party or by which the Company is bound.
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(d) No Conflict; Governmental and Other Consents.
(i) The execution and delivery of this Agreement, the issuance
of the Units and the Securities comprising the Units, and the incurrence of the
obligations herein set forth and the consummation of the transactions herein
contemplated, will not result in a violation of, or constitute a default under,
the certificate of incorporation (except that the issuance of Common Stock
underlying the Series B Preferred Stock is subject to increase in the authorized
Common Stock of the Company) or by-laws of the Company or of either of the
Subsidiaries or in the performance or observance of any material obligations,
agreement, covenant or condition contained in any bond, debenture, note or other
evidence of indebtedness to which the Company or either of the Subsidiaries is a
party, or by which it or any of its properties may be bound or in violation of
any material order, rule, regulations, writ, injunction, or decree of any
government, governmental instrumentality or court, domestic or foreign.
(ii) No consent, approval, authorization or other order of any
governmental authority or other third-party is required to be obtained by the
Company or the Subsidiaries in connection with the authorization, execution and
delivery of this Agreement or with the authorization, issue and sale of the
Units or the Securities comprising the Units, except such filings as may be
required to be made with the SEC, the National Association of Securities
Dealers, Inc. and with any state or blue sky or securities regulatory authority.
2.2 Offering Documents; Disclosure. No information set forth in any of the
Offering Documents contains any untrue statement of a material fact or omits to
state a material fact necessary in order to make the statements contained
therein, in light of the circumstances under which they were made, not
misleading.
2.3 Investment Company. The Company is not an "investment company" within
the meaning of such term under the Investment Company Act of 1940, as amended,
and the rules and regulations of the SEC thereunder.
2.4 Authorized Shares. The Company shall (i) use its best efforts to
effect the Merger (as defined in the Memorandum), and in connection therewith to
increase the authorized shares of Common Stock of the Company to 175,000,000 on
or prior to the initial closing, (ii) at all times after the date upon which
such Common Stock is authorized, reserve and keep available out of its
authorized but unissued shares of Common Stock solely for the purpose of
effecting the conversion of the shares of Series B Preferred Stock, such number
of shares of Common Stock as shall from time to time be sufficient to effect the
conversion of all outstanding shares of the Series B Preferred Stock and (iii)
use its best efforts to obtain the consent of the Requisite Supermajority for
the authorization and issuance of the Series B Preferred Stock on or prior to
the initial closing. No shares of Series B Preferred Stock shall be convertible
into Common Stock unless and until the authorized Common Stock has been
increased as described in the preceding sentence.
III. TERMS OF SUBSCRIPTION
3.1 The offering period (the "Offering Period") shall begin on the date of
the Memorandum. Upon receipt of the Minimum Offering amount and consents of the
Requisite
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Supermajority, the Company may conduct a closing and may conduct subsequent
closings on an interim basis thereafter (each a "Closing") until the Maximum
Offering amount has been reached (the "Final Closing Date"). After sale of the
Minimum Offering, the Offering will continue until the earlier of the sale of
all the Units has been completed or such later date as the Company agrees to
terminate this Offering. The purchase price is payable by check or money order
made payable to "▇▇▇▇▇▇ & ▇▇▇▇▇ LLP, Escrow Agent, F/B/O Conversion Technologies
International, Inc.", or payable by wire transfer to the account of ▇▇▇▇▇▇ &
▇▇▇▇▇ LLP, the escrow agent (the "Escrow Agent"), in accordance with the wire
transfer instructions set forth on Exhibit A hereto.
3.2 To induce ▇▇▇▇▇▇ & ▇▇▇▇▇ LLP to serve as the Escrow Agent and to act
in such capacity hereunder, the Company and the Escrow Agent have entered into a
separate agreement (the "Escrow Agreement"), a copy of which is annexed hereto
as Exhibit B. In connection therewith, it is further agreed by the parties
hereto that:
(a) The Escrow Agent shall not be liable, except for its own gross
negligence or willful misconduct and, except with respect to claims based upon
such gross negligence or willful misconduct that are successfully asserted
against the Escrow Agent, the undersigned and the Company hereby agree to
jointly and severally indemnify and hold harmless the Escrow Agent from and
against any and all losses, liabilities, claims, actions, damages and expenses,
including, without limitation, reasonable attorneys' fees and disbursements,
arising out of or in connection with this Escrow Agreement.
(b) The Subscriber understands and agrees that, notwithstanding its
duties as Escrow Agent under the Escrow Agreement, the Escrow Agent is the
attorney for the Company, and, accordingly, neither any services provided by the
Escrow Agent as Escrow Agent nor any provisions of the Escrow Agreement, either
express or implied, shall restrict or otherwise limit the Escrow Agent in any
way from representing the Company or its affiliates in any action, dispute,
controversy, arbitration, suit or negotiation arising under this Agreement, the
Escrow Agreement or under any other agreement or in any manner or context
whatsoever, whether or not directly or indirectly involving the Company or its
affiliates.
3.3 The Units will by offered by the Company on a pro rata basis to each
of the Current Holders. In the event that any of the Current Holders do not
purchase their pro rata portion of the Units within ten (10) business days of
receiving the Offering Documents, the Units may be reoffered on a pro rata basis
to the Current Holders who elect to purchase their pro rata portion of the
Units.
3.4 Pending the sale of the Units, all funds paid hereunder shall be held
in an account under the control of the Escrow Agent in accordance with the terms
of the Escrow Agreement. If the Company shall not have obtained subscriptions
(including this subscription) for purchases of five hundred eighty (580) Units
on or before the Final Closing Date, then this subscription shall be void and
all funds paid hereunder by the Subscriber shall be promptly returned to the
Subscriber, without interest, subject to paragraph 3.6 hereof.
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3.5 The Subscriber hereby authorizes and directs the Company to deliver
the Securities to be issued to the Subscriber pursuant to this Agreement to the
residential or business address indicated on the signature page hereto.
3.6 The Subscriber hereby authorizes and directs the Escrow Agent to
return any funds for unaccepted subscriptions to the same account from which the
funds were drawn or to return such funds to the residential or business address
indicated on the signature page hereto.
IV. CONDITIONS TO OBLIGATIONS OF THE SUBSCRIBERS
4.1 The Subscribers' obligation to purchase the Units at the closings
(each, a "Closing") is subject to the fulfillment on or prior to each Closing of
the following conditions, which conditions may be waived at the option of each
Subscriber to the extent permitted by law:
(a) The representations and warranties made by the Company in
Article II hereof shall be true and correct in all material respects when made,
and shall be true and correct in all material respects on each Closing with the
same force and effect as if they had been made on and as of said date.
(b) All covenants, agreements and conditions contained in this
Agreement to be performed by the Company on or prior to such purchase shall have
been performed or complied with in all material respects.
(c) There shall not then be in effect any legal or other order
enjoining or restraining the transactions contemplated by this Agreement.
(d) There shall not be in effect any law, rule or regulation
prohibiting or restricting such sale or requiring any consent or approval of any
person which shall not have been obtained to issue the Securities (except as
otherwise provided in this Agreement).
(e) The Company shall have received binding subscriptions for at
least five hundred eighty (580) Units.
(f) The Company shall have received consents of the Requisite
Supermajority.
(g) The Company shall have received consents of the holders of a
majority of the outstanding voting stock approving the Merger and related
transactions (as defined in the Memorandum).
V. REGISTRATION RIGHTS
5.1 As used in this Agreement, the following terms shall have the
following meanings:
(a) "Affiliate" shall mean, with respect to any Person (as defined
below), any other Person controlling, controlled by or under direct or indirect
common control with such Person (for the purposes of this definition "control,"
when used with respect to any specified Person, shall mean the power to direct
the management and policies of such person, directly or
8
indirectly, whether through ownership of voting securities, by contract or
otherwise; and the terms "controlling" and "controlled" shall have meanings
correlative to the foregoing).
(b) "Business Day" shall mean a day Monday through Friday on which
banks are generally open for business in New York.
(c) "Holders" shall mean the Subscribers and any person holding
Registrable Securities (including the shares of Common Stock issuable upon
conversion of the Series B Preferred Stock) or any person to whom the rights
under Section 5 have been transferred in accordance with Section 5.9 hereof.
(d) "Person" shall mean any person, individual, corporation, limited
liability company, partnership, trust or other nongovernmental entity or any
governmental agency, court, authority or other body (whether foreign, federal,
state, local or otherwise).
(e) The terms "register," "registered" and "registration" refer to
the registration effected by preparing and filing a registration statement in
compliance with the Act, and the declaration or ordering of the effectiveness of
such registration statement.
(f) "Registrable Securities" shall mean (i) the shares of Common
Stock issuable upon the conversion of the Series B Preferred Stock, and (ii) any
shares of Common Stock issued as (or issuable upon the conversion of any
warrant, right or other security which is issued as) a dividend or other
distribution with respect to or in replacement of the Securities; provided,
however, that securities shall only be treated as Registrable Securities if and
only for so long as they (A) have not been disposed of pursuant to a
registration statement declared effective by the SEC, (B) have not been sold in
a transaction exempt from the registration and prospectus delivery requirements
of the Act so that all transfer restrictions and restrictive legends with
respect thereto are removed upon the consummation of such sale or (C) are held
by a Holder or a permitted transferee pursuant to Section 5.9.
(g) "Registration Expenses" shall mean all expenses incurred by the
Company in complying with Section 5.2 hereof, including, without limitation, all
registration, qualification and filing fees, printing expenses, escrow fees,
fees and expenses of counsel for the Company, blue sky fees and expenses and the
expense of any special audits incident to or required by any such registration
(but excluding the fees of legal counsel for any Holder)
(h) "Shelf Registration Statement" shall have the meaning ascribed
to such term in Section 5.2.
(i) "Registration Period" shall have the meaning ascribed to such
term in Section 5.4.
(j) "Selling Expenses" shall mean all underwriting discounts and
selling commissions applicable to the sale of Registrable Securities and all
fees and expenses of legal counsel for any Holder.
5.2 No later than sixty (60) days after the Final Closing Date (the
"Filing Date"), the Company shall use its best efforts to file a registration
statement (the "Shelf Registration
9
Statement") with respect to the Registrable Securities with the SEC and use its
best efforts to cause the Shelf Registration Statement to be declared effective
by the SEC prior to the date which is 120 days following the Final Closing Date
(the "Targeted Effective Date") and use its best efforts to effect the
registration, qualifications or compliances (including, without limitation, the
execution of any required undertaking to file post-effective amendments,
appropriate qualifications or exemptions under applicable blue sky or other
state securities laws and appropriate compliance with applicable securities
laws, requirements or regulations) as may be requested and as would permit or
facilitate the sale and distribution of all Registrable Securities.
Notwithstanding the foregoing, the Company will not be obligated to enter into
any underwriting agreement for the sale of any of the Registrable Securities.
5.3 All Registration Expenses incurred in connection with any
registration, qualification, exemption or compliance pursuant to Section 5.2
shall be borne by the Company. All Selling Expenses relating to the sale of
securities registered by or on behalf of Holders shall be borne by such Holders
pro rata on the basis of the number of securities so registered.
5.4 In the case of the registration, qualification, exemption or
compliance effected by the Company pursuant to this Agreement, the Company
shall, upon reasonable request, inform each Holder as to the status of such
registration, qualification, exemption and compliance. At its expense the
Company shall:
(a) use its best efforts to keep such registration, and any
qualification, exemption or compliance under state securities laws which the
Company determines to obtain, continuously effective until the Holders have
completed the distribution described in the registration statement relating
thereto. The period of time during which the Company is required hereunder to
keep the Shelf Registration Statement effective is referred to herein as "the
Registration Period." Notwithstanding the foregoing, at the Company's election,
the Company may cease to keep such registration, qualification, exemption or
compliance effective with respect to any Registrable Securities, and the
registration rights of a Holder shall expire, at such time as the Holder has
completed the distribution described in the Shelf Registration Statement or
until the Holder may sell under Rule 144(k) under the Act (or other exemption
from registration acceptable to the Company) in a three-month period all
Registrable Securities then held by such Holder; and
(b) advise the Holders:
(i) when the Shelf Registration Statement or any amendment
thereto has been filed with the SEC and when the Shelf Registration Statement or
any post-effective amendment thereto has become effective;
(ii) of any request by the SEC for amendments or supplements
to the Shelf Registration Statement or the prospectus included therein or for
additional information;
(iii) of the issuance by the SEC of any stop order suspending
the effectiveness of the Shelf Registration Statement or the initiation of any
proceedings for such purpose;
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(iv) of the receipt by the Company of any notification with
respect to the suspension of the qualification of the Registrable Securities
included therein for sale in any jurisdiction or the initiation or threatening
of any proceeding for such purpose; and
(v) of the happening of any event that requires the making of
any changes in the Shelf Registration Statement or the prospectus so that, as of
such date, the statements therein are not misleading and do not omit to state a
material fact required to be stated therein or necessary to make the statements
therein (in the case of the prospectus, in the light of the circumstances under
which they were made) not misleading;
(c) make every reasonable effort to obtain the withdrawal of any
order suspending the effectiveness of any Shelf Registration Statement at the
earliest possible time;
(d) furnish to each Holder, without charge, at least one copy of
such Shelf Registration Statement and any post-effective amendment thereto,
including financial statements and schedules, and, if the Holder so requests in
writing, all exhibits (including those incorporated by reference) in the form
filed with the SEC;
(e) during the Registration Period, deliver to each Holder, without
charge, as many copies of the prospectus included in such Shelf Registration
Statement and any amendment or supplement thereto as such Holder may reasonably
request; and the Company consents to the use, consistent with the provisions
hereof, of the prospectus or any amendment or supplement thereto by each of the
selling Holders of Registrable Securities in connection with the offering and
sale of the Registrable Securities covered by the prospectus or any amendment or
supplement thereto. In addition, upon the reasonable request of the Holder and
subject in all cases to confidentiality protections reasonably acceptable to the
Company, the Company will meet with a Holder or a representative thereof at the
Company's headquarters to discuss all information relevant for disclosure in the
Shelf Registration Statement covering the Registrable Securities, and will
otherwise cooperate with any Holder conducting an investigation for the purpose
of reducing or eliminating such Holder's exposure to liability under the Act,
including the reasonable production of information at the Company's
headquarters;
(f) during the Registration Period, deliver to each Holder, without
charge, (i) as soon as practicable (but in the case of the annual report of the
Company to its stockholders, within 120 days after the end of each fiscal year
of the Company) one copy of: (A) its annual report to its stockholders, if any
(which annual report shall contain financial statements audited in accordance
with generally accepted accounting principles in the United States of America by
a firm of certified public accountants of recognized standing); (B) if not
included in substance in its annual report to stockholders, its annual report on
Form 10-KSB (or similar form); (C) each of its quarterly reports to its
stockholders, and, if not included in substance in its quarterly reports to
stockholders, its quarterly report on Form l0-QSB (or similar form), and (D) a
copy of the full Shelf Registration Statement (the foregoing, in each case,
excluding exhibits); and (ii) upon reasonable request, all exhibits excluded by
the parenthetical to the immediately preceding clause (D), and all other
information that is generally available to the public;
(g) prior to any public offering of Registrable Securities pursuant
to any Shelf Registration Statement, register or qualify or obtain an exemption
for offer and sale under the
11
securities or blue sky laws of such jurisdictions as any such Holders reasonably
request in writing, provided that the Company shall not for any such purpose be
required to qualify generally to transact business as a foreign corporation in
any jurisdiction where it is not so qualified or to consent to general service
of process in any such jurisdiction, and do any and all other acts or things
necessary or advisable to enable the offer and sale in such jurisdictions of the
Registrable Securities covered by such Shelf Registration Statement;
(h) cooperate with the Holders to facilitate the timely preparation
and delivery of certificates representing Registrable Securities to be sold
pursuant to any Shelf Registration Statement free of any restrictive legends to
the extent not required at such time and in such denominations and registered in
such names as Holders may request at least three (3) business days prior to
sales of Registrable Securities pursuant to such Shelf Registration Statement;
(i) upon the occurrence of any event contemplated by Section
5.4(b)(v) above, the Company shall promptly prepare a post-effective amendment
to the Shelf Registration Statement or a supplement to the related prospectus,
or file any other required document so that, as thereafter delivered to
purchasers of the Registrable Securities included therein, the prospectus will
not include any untrue statement of a material fact or omit to state any
material fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading; and
(j) use its best efforts to comply with all applicable rules and
regulations of the SEC, and will make generally available to the Holders not
later than 45 days (or 90 days if the fiscal quarter is the fourth fiscal
quarter) after the end of its fiscal quarter in which the first anniversary date
of the effective date of the Shelf Registration Statement occurs, an earnings
statement satisfying the provisions of Section 11(a) of the Act.
5.5 The Holders shall have no right to take any action to restrain, enjoin
or otherwise delay any registration pursuant to Section 5.2 hereof as a result
of any controversy that may arise with respect to the interpretation or
implementation of this Agreement.
5.6 (a) To the extent permitted by law, the Company shall indemnify each
Holder, each underwriter of the Registrable Securities and each person
controlling such Holder within the meaning of Section 15 of the Act, with
respect to which any registration, qualification or compliance has been effected
pursuant to this Agreement, against all claims, losses, damages and liabilities
(or action in respect thereof), including any of the foregoing incurred in
settlement of any litigation, commenced or threatened (subject to Section 5.6(c)
below), arising out of or based on any untrue statement (or alleged untrue
statement) of a material fact contained in any registration statement,
prospectus or offering circular, or any amendment or supplement thereof,
incident to any such registration, qualification or compliance, or based on any
omission (or alleged omission) to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, in
light of the circumstances in which they were made, and will reimburse each
Holder, each underwriter of the Registrable Securities and each person
controlling such Holder, for legal and any other expenses reasonably incurred in
connection with investigating or defending any such claim, loss, damage,
liability or action as incurred; provided that the Company will not be liable in
any such case to the extent that any untrue statement or omission or allegation
thereof is made in reliance upon and in conformity
12
with written information furnished to the Company by or on behalf of such Holder
and stated to be specifically for use in preparation of such registration
statement, prospectus or offering circular; provided that the Company will not
be liable in any such case where the claim, loss, damage or liability arises out
of or is related to the failure of the Holder to comply with the covenants and
agreements contained in this Agreement respecting sales of Registrable
Securities, and except that the foregoing indemnity agreement is subject to the
condition that, insofar as it relates to any such untrue statement or alleged
untrue statement or omission or alleged omission made in the preliminary
prospectus but eliminated or remedied in the amended prospectus on file with the
SEC at the time the registration statement becomes effective or in the amended
prospectus filed with the SEC pursuant to Rule 424(b) or in the prospectus
subject to completion and term sheet under Rule 434 of the Act, which together
meet the requirements of Section 10(a) of the Act (the "Final Prospectus"), such
indemnity agreement shall not inure to the benefit of any such Holder, any such
underwriter or any such controlling person, if a copy of the Final Prospectus
furnished by the Company to the Holder for delivery was not furnished to the
person or entity asserting the loss, liability, claim or damage at or prior to
the time such furnishing is required by the Act and the Final Prospectus would
have cured the defect giving rise to such loss, liability, claim or damage.
(b) Each Holder will severally, if Registrable Securities held by
such Holder are included in the securities as to which such registration,
qualification or compliance is being effected, indemnify the Company, each of
its directors and officers, each underwriter of the Registrable Securities and
each person who controls the Company within the meaning of Section 15 of the
Securities Act, against all claims, losses, damages and liabilities (or actions
in respect thereof), including any of the foregoing incurred in settlement of
any litigation, commenced or threatened (subject to Section 5.6(c) below),
arising out of or based on any untrue statement (or alleged untrue statement) of
a material fact contained in any registration statement, prospectus or offering
circular, or any amendment or supplement thereof, incident to any such
registration, qualification or compliance, or based on any omission (or alleged
omission) to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, in light of the
circumstances in which they were made, and will reimburse the Company, such
directors and officers, each underwriter of the Registrable Securities and each
person controlling the Company for reasonable legal and any other expenses
reasonably incurred in connection with investigating or defending any such
claim, loss, damage, liability or action as incurred, in each case to the
extent, but only to the extent, that such untrue statement or omission or
allegation thereof is made in reliance upon and in conformity with written
information furnished to the Company by or on behalf of the Holder and stated to
be specifically for use in preparation of such registration statement,
prospectus or offering circular; provided that the indemnity shall not apply to
the extent that such claim, loss, damage or liability results from the fact that
a current copy of the prospectus was not made available to the Holder and such
current copy of the prospectus would have cured the defect giving rise to such
loss, claim, damage or liability. Notwithstanding the foregoing, in no event
shall a Holder be liable for any such claims, losses, damages or liabilities in
excess of the proceeds received by such Holder in the offering, except in the
event of fraud by such Holder.
(c) Each party entitled to indemnification under this Section 5.6
(the "Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim
13
as to which indemnity may be sought, and shall permit the Indemnifying Party to
assume the defense of any such claim or any litigation resulting therefrom,
provided that counsel for the Indemnifying Party, who shall conduct the defense
of such claim or litigation, shall be approved by the Indemnified Party (whose
approval shall not unreasonably be withheld), and the Indemnified Party may
participate in such defense at such Indemnified Party's expense, and provided
further that the failure of any Indemnified Party to give notice as provided
herein shall not relieve the Indemnifying Party of its obligations under this
Agreement, unless such failure is materially prejudicial to the Indemnifying
Party in defending such claim or litigation. An Indemnifying Party shall not be
liable for any settlement of an action or claim effected without its written
consent (which consent will not be unreasonably withheld).
(d) If the indemnification provided for in this Section 5.6 is held
by a court of competent jurisdiction to be unavailable to an Indemnified Party
with respect to any loss, liability, claim, damage or expense referred to
therein, then the Indemnifying Party, in lieu of indemnifying such Indemnified
Party thereunder, shall contribute to the amount paid or payable by such
Indemnified Party as a result of such loss, liability, claim, damage or expense
in such proportion as is appropriate to reflect the relative fault of the
Indemnifying Party on the one hand and of the Indemnified Party on the other in
connection with the statements or omissions which resulted in such loss,
liability, claim, damage or expense as well as any other relevant equitable
considerations. The relative fault of the Indemnifying Party and of the
Indemnified Party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission to state a material fact relates to information supplied by the
Indemnifying Party or by the Indemnified Party and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission.
5.7 (a) Upon receipt of any notice from the Company of the happening of
any event requiring the preparation of a supplement or amendment to a prospectus
relating to Registrable Securities so that, as thereafter delivered to the
Holders, such prospectus shall not contain an untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading, each Holder will
forthwith discontinue disposition of Registrable Securities pursuant to the
registration statement contemplated by Section 5.2 until its receipt of copies
of the supplemented or amended prospectus from the Company and, if so directed
by the Company, each Holder shall deliver to the Company all copies, other than
permanent file copies then in such Holder's possession, of the prospectus
covering such Registrable Securities current at the time of receipt of such
notice.
(b) Each Holder shall suspend, upon request of the Company, any
disposition of Registrable Securities pursuant to the Shelf Registration
Statement and prospectus contemplated by Section 5.2 during (i) any period not
to exceed two 30-day periods within any one 12-month period the Company requires
in connection with a primary underwritten offering of equity securities and (ii)
any period, not to exceed one 30-day period per circumstance or development,
when the Company determines in good faith that offers and sales pursuant thereto
should not be made by reason of the presence of material undisclosed
circumstances or developments with respect to which the disclosure that would be
required in such a prospectus is premature, would have an adverse effect on the
Company or is otherwise inadvisable.
14
(c) As a condition to the inclusion of its Registrable Securities,
each Holder shall furnish to the Company such information regarding such Holder
and the distribution proposed by such Holder as the Company may request in
writing or as shall be required in connection with any registration,
qualification or compliance referred to in this Article V.
(d) Each Holder hereby covenants with the Company (i) not to make
any sale of the Registrable Securities without effectively causing the
prospectus delivery requirements under the Act to be satisfied, and (ii) if such
Registrable Securities are to be sold by any method or in any transaction other
than on a national securities exchange, Nasdaq National Market, Nasdaq Small Cap
Market or in the over-the-counter market, in privately negotiated transactions,
or in a combination of such methods, to notify the Company at least five (5)
business days prior to the date on which the Holder first offers to sell any
such Registrable Securities.
(e) Each Holder acknowledges and agrees that the Registrable
Securities sold pursuant to the Shelf Registration Statement described in this
Section are not transferable on the books of the Company unless the stock
certificate submitted to the transfer agent evidencing such Registrable
Securities is accompanied by a certificate reasonably satisfactory to the
Company to the effect that (i) the Registrable Securities have been sold in
accordance with such Shelf Registration Statement and (ii) the requirement of
delivering a current prospectus has been satisfied.
(f) Each Holder agrees not to take any action with respect to any
distribution deemed to be made pursuant to such registration statement that
constitutes a violation of Regulation M under the Exchange Act or any other
applicable rule, regulation or law.
(g) At the end of the period during which the Company is obligated
to keep the Shelf Registration Statement current and effective as described
above, the Holders of Registrable Securities included in the Shelf Registration
Statement shall discontinue sales of shares pursuant to such Shelf Registration
Statement upon receipt of notice from the Company of its intention to remove
from registration the shares covered by such Shelf Registration Statement which
remain unsold, and such Holders shall notify the Company of the number of shares
registered which remain unsold immediately upon receipt of such notice from the
Company.
5.8 With a view to making available to the Holders the benefits of certain
rules and regulations of the SEC which at any time permit the sale of the
Registrable Securities to the public without registration, the Company shall use
its reasonable best efforts to:
(a) make and keep public information available, as those terms are
understood and defined in Rule 144 under the Act, at all times;
(b) file with the SEC in a timely manner all reports and other
documents required of the Company under the Exchange Act; and
(c) so long as a Holder owns any unregistered Registrable
Securities, furnish to such Holder upon any reasonable request a written
statement by the Company as to its compliance with Rule 144 under the Act, and
of the Exchange Act, a copy of the most recent annual or quarterly report of the
Company, and such other reports and documents of the
15
Company as such Holder may reasonably request in availing itself of any rule or
regulation of the SEC allowing a Holder to sell any such securities without
registration.
5.9 The rights to cause the Company to register Registrable Securities
granted to the Holders by the Company under this Article 5 may be assigned in
full by a Holder in connection with a transfer by such Holder of its Registrable
Securities, provided, however, that (i) such transfer may otherwise be effected
in accordance with applicable securities laws; (ii) such Holder gives prior
written notice to the Company; and (iii) such transferee agrees to comply with
the terms and provisions of this Agreement, and such transfer is otherwise in
compliance with this Agreement. Except as specifically permitted by this Section
5.9, the rights of a Holder with respect to Registrable Securities as set out
herein shall not be transferable to any other Person, and any attempted transfer
shall cause all rights of such Holder therein to be forfeited.
5.10 With the written consent of the Company and the Holders holding at
least a majority of the Registrable Securities that are then outstanding, any
provision of this Article V may be waived (either generally or in a particular
instance, either retroactively or prospectively and either for a specified
period of time or indefinitely) or amended. Upon the effectuation of each such
waiver or amendment, the Company shall promptly give written notice thereof to
the Holders, if any, who have not previously received notice thereof or
consented thereto in writing
VI. MISCELLANEOUS
6.1 Any notice or other communication given hereunder shall be deemed
sufficient if in writing and sent by registered or certified mail, return
receipt requested, or delivered by hand against written receipt therefor,
addressed to Conversion Technologies International, Inc., ▇ ▇▇▇ ▇▇▇▇▇▇▇ ▇▇., ▇▇.
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇, Attn: President, and to the Subscriber at the Subscriber's
address indicated on the signature page of this Agreement. Notices shall be
deemed to have been given or delivered on the date of mailing, except notices of
change of address, which shall be deemed to have been given or delivered when
received.
6.2 Except as provided in Section 5.10 above, this Agreement shall not be
changed, modified or amended except by a writing signed by the parties to be
charged, and this Agreement may not be discharged except by performance in
accordance with its terms or by a writing signed by the party to be charged.
6.3 Subject to the provisions of Section 5.9, this Agreement shall be
binding upon and inure to the benefit of the parties hereto and to their
respective heirs, legal representatives, successors and assigns. This Agreement
sets forth the entire agreement and understanding between the parties as to the
subject matter hereof and merges and supersedes all prior discussions,
agreements and understandings of any and every nature among them.
6.4 Upon the execution and delivery of this Agreement by the Subscriber,
this Agreement shall become a binding obligation of the Subscriber with respect
to the purchase of Units as herein provided and subject to the conditions set
forth herein and in the Memorandum; subject, however, to the right hereby
reserved to the Company to enter into the same agreements with other subscribers
and to add and/or delete other persons as subscribers.
16
6.5 NOTWITHSTANDING THE PLACE WHERE THIS AGREEMENT MAY BE EXECUTED BY ANY
OF THE PARTIES HERETO, THE PARTIES EXPRESSLY AGREE THAT ALL THE TERMS AND
PROVISIONS HEREOF SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS
OF THE STATE OF NEW YORK WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW. IN
THE EVENT THAT A JUDICIAL PROCEEDING IS NECESSARY, THE SOLE FORUM FOR RESOLVING
DISPUTES ARISING OUT OF OR RELATING TO THIS AGREEMENT IS THE SUPREME COURT OF
THE STATE OF NEW YORK IN AND FOR THE COUNTY OF NEW YORK OR THE FEDERAL COURTS
FOR SUCH STATE AND COUNTY, AND ALL RELATED APPELLATE COURTS, THE PARTIES HEREBY
IRREVOCABLY CONSENT TO THE JURISDICTION OF SUCH COURTS AND AGREE TO SAID VENUE.
6.6 In order to discourage frivolous claims the parties agree that unless
a claimant in any proceeding arising out of this Agreement succeeds in
establishing his claim and recovering a judgment against another party
(regardless of whether such claimant succeeds against one of the other parties
to the action), then the other party shall be entitled to recover from such
claimant all of its/their reasonable legal costs and expenses relating to such
proceeding and/or incurred in preparation therefor.
6.7 The holding of any provision of this Agreement to be invalid or
unenforceable by a court of competent jurisdiction shall not affect any other
provision of this Agreement, which shall remain in full force and effect. If any
provision of this Agreement shall be declared by a court of competent
jurisdiction to be invalid, illegal or incapable of being enforced in whole or
in part, such provision shall be interpreted so as to remain enforceable to the
maximum extent permissible consistent with applicable law and the remaining
conditions and provisions or portions thereof shall nevertheless remain in full
force and effect and enforceable to the extent they are valid, legal and
enforceable, and no provisions shall be deemed dependent upon any other covenant
or provision unless so expressed herein.
6.8 It is agreed that a waiver by either party of a breach of any
provision of this Agreement shall not operate, or be construed, as a waiver of
any subsequent breach by that same party.
6.9 The parties agree to execute and deliver all such further documents,
agreements and instruments and take such other and further action as may be
necessary or appropriate to carry out the purposes and intent of this Agreement.
6.10 This Agreement may be executed in two or more counterparts each of
which shall be deemed an original, but all of which shall together constitute
one and the same instrument.
6.11 (a) The Subscribers severally agree not to issue any public statement
with respect to the Subscribers' investment or proposed investment in the
Company or the terms of any agreement or covenant between them and the Company
without the Company's prior written consent, except such disclosures as may be
required under applicable law or under any applicable order, rule or regulation.
17
(b) The Company agrees not to disclose the names, addresses or any
other information about the Subscribers, except as required by law; provided,
that the Company may use the name (but not the address) of the Subscriber in the
Shelf Registration Statement.
6.12 Each Subscriber severally represents and warrants that it has not
engaged, consented to nor authorized any broker, finder or intermediary to act
on its behalf, directly or indirectly, as a broker, finder or intermediary in
connection with the transactions contemplated by this Agreement. Each Subscriber
hereby severally agrees to indemnify and hold harmless the Company from and
against all fees, commissions or other payments owing to any such person or firm
acting on behalf of such Subscriber hereunder.
6.13 Nothing in this Agreement shall create or be deemed to create any
rights in any person or entity not a party to this Agreement, except for the
holders of Registrable Securities.
VII. CONFIDENTIAL INVESTOR QUESTIONNAIRE
7.1 The Subscriber represents and warrants that he, she or it comes within
one category marked below, and that for any category marked, he, she or it has
truthfully set forth, where applicable, the factual basis or reason the
Subscriber comes within that category. ALL INFORMATION IN RESPONSE TO THIS
SECTION WILL BE KEPT STRICTLY CONFIDENTIAL. The undersigned agrees to furnish
any additional information which the Company deems necessary in order to verify
the answers set forth below.
Category A ___ The undersigned is an individual (not a partnership,
corporation, etc.) whose individual net worth, or joint net
worth with his or her spouse, presently exceeds $1,000,000.
Explanation. In calculating net worth you may include
equity in personal property and real estate, including
your principal residence, cash, short-term investments,
stock and securities. Equity in personal property and
real estate should be based on the fair market value of
such property less debt secured by -such property
Category B ___ The undersigned is an individual (not a partnership,
corporation, etc.) who had an individual income in excess of
$200,000 in each of the two most recent years, or joint income
with his or her spouse in excess of $300,000 in each of those
years (in each case including foreign income, tax exempt
income and full amount of capital gains and losses but
excluding any income of other family members and any
unrealized capital appreciation) and has a reasonable
expectation of reaching the same income level in the current
year.
Category C ___ The undersigned is a director or executive officer of the
Company which is issuing and selling the Units.
Category D ___ The undersigned is a bank; a savings and loan association;
insurance company; registered investment company; registered
business development
18
company; licensed small business investment company (`SBIC");
or employee benefit plan within the meaning of Title 1 of
ERISA and (a) the investment decision is made by a plan
fiduciary which is either a bank, savings and loan
association, insurance company or registered investment
advisor, or (b) the plan has total assets in excess of
$5,000,000 or (c) is a self directed plan with investment
decisions made solely by persons that are accredited
investors.
-----------------
-----------------
(describe entity)
Category E The undersigned is a private business development company as
defined in section 202(a)(22) of the Investment Advisors Act
of 1940.
-----------------
-----------------
(describe entity)
Category F The undersigned is either a corporation, partnership,
Massachusetts business trust, or non-profit organization
within the meaning of Section 501(c)(3) of the Internal
Revenue Code, in each case not formed for the specific purpose
of acquiring the Units and with total assets in excess of
$5,000,000.
-----------------
-----------------
(describe entity)
Category G The undersigned is a trust with total assets in excess of
$5,000,000, not formed for the specific purpose of acquiring
the Units, where the purchase is directed by a "sophisticated
investor" as defined in Regulation 506(b)(2)(ii) under the
Act.
-----------------
-----------------
(describe entity)
Category H The undersigned is an entity (other than a trust) all the
equity owners of which are "accredited investors' within one
or more of the above categories. If relying upon this Category
alone, each equity owner must complete a separate copy of this
Agreement.
-----------------
-----------------
(describe entity)
Category I The undersigned is not within any of the categories above and
is therefore not an accredited investor.
19
7.2 SUITABILITY (please answer each question)
(a) For an individual Subscriber, please describe your current employment,
including the company by which you are employed and its principal business:
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(b) For an individual Subscriber, please describe any college or graduate
degrees held by you:
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(c) For all Subscribers, please list types of prior investments:
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(d) For all Subscribers, please state whether you have participated in other
private placements before:
YES |_| NO |_|
(e) If your answer to question (d) above was "YES", please indicate frequency of
such prior participation in private placements of:
Public Private Public or Private
Companies Companies Biotechnology Companies
Frequently _________ _________ _______________________
Occasionally _________ _________ _______________________
Never _________ _________ _______________________
(f) For individual Subscribers, do you expect your current level of income to
significantly decrease in the foreseeable future:
YES |_| NO |_|
(g) For trust, corporate, partnership and other institutional Subscribers, do
you expect your total assets to significantly decrease in the foreseeable
future:
YES |_| NO |_|
(h) For all Subscribers, do you have any other investments or contingent
liabilities which you
20
reasonably anticipate could cause you to need sudden cash requirements in excess
of cash readily available to you:
YES |_| NO |_|
(i) For all Subscribers, are you familiar with the risk aspects and the
non-liquidity of investments such as the securities for which you seek to
subscribe?
YES |_| NO |_|
(j) For all Subscribers, do you understand that there is no guarantee of
financial return on this investment and that you run the risk of losing your
entire investment?
YES |_| NO |_|
7.3 MANNER IN WHICH TITLE IS TO BE HELD. (circle one)
(a) Individual Ownership
(b) Community Property
(c) Joint Tenant with Right of Survivorship (both parties
must sign)
(d) Partnership*
(e) Tenants in Common
(f) Company*
(g) Trust*
(h) Other
*If Units are being subscribed for by an entity, the attached Certificate
of Signatory must also be completed.
7.4 NASD AFFILIATION.
Are you affiliated or associated with an NASD member firm (please check one):
YES |_| NO |_|
If Yes, please describe:
*If Subscriber is a Registered Representative with an NASD member firm, have the
following acknowledgment signed by the appropriate party:
The undersigned NASD member firm acknowledges receipt of the notice required by
Article 3, Sections 28(a) and (b) of the Rules of Fair Practice.
21
______________________________
Name of NASD Member Firm
By:___________________________
Authorized Officer
Date:_________________________
7.5 The undersigned is informed of the significance to the Company of the
foregoing representations and answers contained in the Confidential Investor
Questionnaire contained in this Section 7 and such answers have been provided
under the assumption that the Company will rely on them.
7.6 The undersigned (a) represents that it has read and understands the
Agreement, (b) represents that the answers contained in the Confidential
Investor Questionnaire contained in this Section 7 are complete and accurate,
and (c) agrees that it will notify the Company at any time on or prior to the
Final Closing Date in the event that the representations and warranties in this
Agreement shall cease to be true, accurate and complete.
22
[Signature Page]
NUMBER OF UNITS ______ X $3,000 =____________ (the "Purchase Price")
______________________________ ____________________________________
Signature Signature (if purchasing jointly)
______________________________ ____________________________________
Name Typed or Printed Name Typed or Printed
______________________________ ____________________________________
Entity Name Entity Name
______________________________ ____________________________________
Address Address
______________________________ ____________________________________
City, State and Zip Code City, State and Zip Code
______________________________ ____________________________________
Telephone-Business Telephone--Business
______________________________ ____________________________________
Telephone-Residence Telephone--Residence
______________________________ ____________________________________
Facsimile-Business Facsimile--Business
______________________________ ____________________________________
Facsimile-Residence Facsimile--Residence
______________________________ ____________________________________
Tax ID # or Social Security # Tax ID # or Social Security #
Name in which securities should be issued:___________________________
Dated ____________________, 1999
23
This Subscription Agreement is agreed to and accepted as of _____________
1999.
CONVERSION TECHNOLOGIES
INTERNATIONAL, INC.
By:___________________________________
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
Title: Acting President and CEO
24
CERTIFICATE OF SIGNATORY
(To be completed if Units are
being subscribed for by an entity)
I,__________________________, am the ___________________________ of
_____________________________ (the "Entity").
I certify that I am empowered and duly authorized by the Entity to execute
and carry out the terms of the Subscription Agreement and to purchase and hold
the Units, and certify further that the Subscription Agreement has been duly and
validly executed on behalf of the Entity and constitutes a legal and binding
obligation of the Entity.
IN WITNESS WHEREOF, I have set my hand this _____ day of _________ 1999.
___________________________________
(Signature)
25
EXHIBIT A
WIRE TRANSFER INSTRUCTIONS
Wire transfers should be made to the account of ▇▇▇▇▇▇ & ▇▇▇▇▇ LLP, the escrow
agent:
Citibank, N.A.
New York, New York
Account Number: ▇▇▇▇▇▇▇▇
ABA Routing Number: ▇▇▇▇▇▇▇▇▇
For the account of : "Conversion Technologies International, Inc. Escrow"
Name of Subscriber: [Insert Investor Name]