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CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT
Between
COMPOSITECH LTD.
and
JNC OPPORTUNITY FUND LTD.
Dated as of May 29, 1998
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CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT (this "Agreement"), dated as
of May 29, 1998, between Compositech Ltd., a Delaware corporation (the
"Company"), and JNC Opportunity Fund Ltd., a Cayman Islands corporation (the
"Purchaser").
WHEREAS, subject to the terms and conditions set forth in this Agreement,
the Company desires to issue and sell to the Purchaser and the Purchaser desires
to purchase from the Company, shares of the Company's 7% Series B Convertible
Preferred Stock, par value $.01per share (the "Preferred Stock"), which is
convertible into shares of the Company's common stock, par value $.01 per share
(the "Common Stock").
IN CONSIDERATION of the mutual covenants contained in this Agreement, and
for other good and valuable consideration the receipt and adequacy are hereby
acknowledged, the Company and Purchaser agree as follows:
ARTICLE I
PURCHASE AND SALE OF PREFERRED STOCK
1.1 The Closing
(a) The Closing. (i) Subject to the terms and conditions set forth in this
Agreement, the Company shall issue and sell to the Purchaser, and the Purchaser
shall purchase, 220 shares of Preferred Stock (the "Shares") for an aggregate
purchase price of $2,200,000. The closing of the purchase and sale of the Shares
(the "Closing") shall take place at the offices of ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP (the "Escrow Agent"), ▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇
▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, immediately following the execution hereof or such later
date as the parties shall agree. The date of the Closing is hereinafter referred
to as the "Closing Date."
(ii) Prior to the Closing, the parties shall deliver or shall cause to be
delivered to the Escrow Agent such items as are required to be delivered by them
in accordance with and subject to the terms and conditions of the Escrow
Agreement, dated as of the date hereof, by and among the Company, the Purchaser
and the Escrow Agent, in the form of Exhibit E (the "Escrow Agreement"),
including the following: (A) the Company shall deliver (1) stock certificates
representing the Shares, registered in the name of the Purchaser, (2) the legal
opinion of Patterson, Belknap, ▇▇▇▇ & Tyler LLP outside counsel to the Company,
substantially in the form of Exhibit C, and (3) all other documents, instruments
and writings required to have been delivered at or prior to the Closing Date by
the Company pursuant to this Agreement, including an executed Registration
Rights Agreement, dated the date hereof, between the Company and the Purchaser,
in the form of Exhibit B (the "Registration Rights Agreement"), and the
Irrevocable Transfer Agent Instructions, in the form of Exhibit D, delivered to
and acknowledged by the Company's transfer agent (the "Transfer Agent
Instructions"); and (B) the Purchaser shall deliver (1) $2,200,000 in United
States dollars in immediately available funds by wire transfer to an account
designated in writing by the Company for such purpose, and (2) all documents,
instruments and writings required to have been delivered at or prior to the
Closing Date by the Purchaser pursuant
to this Agreement, including an executed Registration Rights Agreement; and (C)
each party hereto shall deliver all other executed instruments, agreements and
certificates as are required to be delivered hereunder by or on their behalf at
the Closing.
1.2 Form of Preferred Stock. The Preferred Stock shall have the rights
preferences and privileges set forth in Exhibit A, and shall be incorporated
into a Certificate of Designation ("Certificate of Designation"), in form and
substance approved by the Purchaser.
For purposes of this Agreement, "Conversion Price," "Original Issue Date,"
"Conversion Date" and "Trading Day" shall have the meanings set forth in Exhibit
A; "Business Day" shall mean any day except Saturday, Sunday and any day which
shall be a federal legal holiday or a day on which banking institutions in the
State of New York are authorized or required by law or other governmental action
to close.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
2.1. Representations, Warranties and Agreements of the Company. The Company
hereby makes the following representations and warranties to the Purchaser:
(a) Organization and Qualification. The Company is a corporation, duly
incorporated, validly existing and in good standing under the laws of the
State of Delaware, with the requisite corporate power and authority to own
and use its properties and assets and to carry on its business as currently
conducted. The Company has no subsidiaries. The Company is duly qualified
to do business and is in good standing as a foreign corporation in each
jurisdiction in which the nature of the business conducted or property
owned by it makes such qualification necessary, except where the failure to
be so qualified or in good standing, as the case may be, could not,
individually or in the aggregate, (x) adversely affect the legality,
validity or enforceability of the Securities (as defined below) or any of
this Agreement, the Certificate of Designation, the Registration Rights
Agreement or the Escrow Agreement (collectively, the "Transaction
Documents"), (y) have or result in a material adverse effect on the results
of operations, assets, prospects, or condition (financial or otherwise) of
the Company, or (z) adversely impair the Company's ability to perform fully
on a timely basis its obligations under any of the Transaction Documents
(any of (x), (y) or (z), a "Material Adverse Effect").
(b) The Company has the requisite corporate power and authority to
enter into and to consummate the transactions contemplated by each of the
Transaction Documents, and otherwise to carry out its obligations
thereunder. The execution and delivery of each of the Transaction Documents
by the Company and the consummation by it of the transactions contemplated
thereby have been duly authorized by all necessary action on the part of
the Company and no further action is required by the Company. Each of the
Transaction Documents has been duly executed by the Company and, when
delivered (or filed, as the case may be) in accordance with the terms
hereof, will constitute the valid and binding obligation of the Company
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enforceable against the Company in accordance with its terms. The Company
is not in violation of any of the provisions of its certificate of
incorporation, by-laws or other charter documents.
(c) Capitalization. The number of authorized, issued and outstanding
capital stock of the Company is set forth in Schedule 2.1(c). No shares of
Common Stock are entitled to preemptive or similar rights, nor is any
holder of the Common Stock entitled to preemptive or similar rights arising
out of any agreement or understanding with the Company by virtue of any of
the Transaction Documents. Except as disclosed in Schedule 2.1(c), there
are no outstanding options, warrants, script rights to subscribe to, calls
or commitments of any character whatsoever relating to, or, except as a
result of the purchase and sale of the Shares, securities, rights or
obligations convertible into or exchangeable for, or giving any Person any
right to subscribe for or acquire any shares of Common Stock, or contracts,
commitments, understandings, or arrangements by which the Company is or may
become bound to issue additional shares of Common Stock, or securities or
rights convertible or exchangeable into shares of Common Stock. To the
knowledge of the Company, except as specifically disclosed in the SEC
Documents (as defined below) or Schedule 2.1(c), no Person or group of
related Persons beneficially owns (as determined pursuant to Rule 13d-3
promulgated under the Securities Exchange Act of 1934, as amended (the
"Exchange Act")) or has the right to acquire by agreement with or by
obligation binding upon the Company beneficial ownership of in excess of 5%
of the Common Stock. A "Person" means an individual or corporation,
partnership, trust, incorporated or unincorporated association, joint
venture, limited liability company, joint stock company, government (or an
agency or subdivision thereof) or other entity of any kind.
(d) Issuance of the Shares. The Shares are duly authorized, and, when
issued and paid for in accordance with the terms hereof, shall have been
validly issued, fully paid and nonassessable, free and clear of all liens,
encumbrances and rights of first refusal of any kind (collectively,
"Liens"). The Company has on the date hereof and will, at all times while
the Shares are outstanding, maintain an adequate reserve of duly authorized
shares of Common Stock, reserved for issuance to the holders of the Shares,
to enable it to perform its conversion and other obligations under this
Agreement and the Certificate of Designation. Such number of reserved and
available shares of Common Stock is not less than the sum of (i) subject to
the application of any floor to the Conversion Price set forth in the
Certificate of Designation, 200% of the number of shares of Common Stock
which would be issuable upon conversion in full of the Shares, assuming
such conversion occurred on the Original Issue Date or the Filing Date (as
defined in the Registration Rights Agreement), whichever yields a lower
Conversion Price, and (ii) the number of shares Common Stock which would be
issuable upon payment of dividends on the Shares, assuming each Share is
outstanding for two years and all dividends are paid in shares of Common
Stock. The shares of Common Stock issuable upon conversion of the Shares
and as payment of dividends thereon are collectively referred to herein as
the "Underlying Shares." The Shares and Underlying Shares are,
collectively, the "Securities." When issued in accordance with the
Certificate of Designation, the Underlying Shares shall have been duly
authorized, validly issued, fully paid and nonassessable, free and clear of
all Liens.
(e) No Conflicts. The execution, delivery and performance of the
Transaction Documents by the Company and the consummation by the Company of
the transactions contemplated thereby do not and will not (i) conflict with
or violate any provision of its certificate of incorporation,
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bylaws or other charter documents (each as amended through the date
hereof), or (ii) subject to obtaining the Required Approvals (as defined
below), conflict with, or constitute a default (or an event which with
notice or lapse of time or both would become a default) under, or give to
others any rights of termination, amendment, acceleration or cancellation
(with or without notice, lapse of time or both) of, any agreement, credit
facility, indenture or instrument (evidencing a Company debt or otherwise)
to which the Company is a party or by which any property or asset of the
Company is bound or affected, or (iii) result in a violation of any law,
rule, regulation, order, judgment, injunction, decree or other restriction
of any court or governmental authority to which the Company is subject
(including Federal and state securities laws and regulations), or by which
any property or asset of the Company is bound or affected, except in the
case of each of clauses (ii) and (iii), as could not, individually or in
the aggregate, have or result in a Material Adverse Effect. The business of
the Company is not being conducted in violation of any law, ordinance or
regulation of any governmental authority, except for violations which,
individually or in the aggregate, could not have or result in a Material
Adverse Effect.
(f) Consents and Approvals. The Company is not required to obtain any
consent, waiver, authorization or order of, give any notice to, or make any
filing or registration with, any court or other Federal, state, local or
other governmental authority or other Person in connection with the
execution, delivery and performance by the Company of the Transaction
Documents, other than (i) the filing of the Certificate of Designation with
the Secretary of State of Delaware, (ii) the filing of the Underlying
Securities Registration Statement with the Securities and Exchange
Commission (the "Commission") pursuant to the Registration Rights
Agreement, (iii) the application to the Nasdaq SmallCap Market ("NASDAQ")
for the listing of the Underlying Shares with the NASDAQ, (iv) the filing
of a Form D with the Commission, and (v) in all other cases where the
failure to obtain such consent, waiver, authorization or order, or to give
such notice or make such filing or registration could not have or result
in, individually or in the aggregate, a Material Adverse Effect (the
consents, waivers, authorizations, orders, notices and filings referred to
in (i)-(v) of this Section are, collectively, the "Required Approvals").
(g) Litigation; Proceedings. Except as specifically disclosed in the
SEC Documents, there is no action, suit, notice of violation, proceeding or
investigation pending or, to the knowledge of the Company, threatened
against or affecting the Company or any of its properties before or by any
court, governmental or administrative agency or regulatory authority
(Federal, state, county, local or foreign) which (i) adversely affects or
challenges the legality, validity or enforceability of any of the
Transaction Documents or the Securities or (ii) could, individually or in
the aggregate, have or result in a Material Adverse Effect.
(h) No Default or Violation. The Company is not (i) in default under
or in violation of (and no event has occurred which has not been waived
which, with notice or lapse of time or both, would result in a default by
the Company under), nor has the Company received notice of a claim that it
is in default under or that it is in violation of, any indenture, loan or
credit agreement or any other agreement or instrument to which it is a
party or by which it or any of its properties is bound, (ii) in violation
of any order of any court, arbitrator or governmental body, or (iii) in
violation of any statute, rule or regulation of any governmental authority,
except as could not individually or in the aggregate, have or result in a
Material Adverse Effect.
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(i) Private Offering. Assuming the accuracy of the representations and
warranties of the Purchaser set forth in Sections 2.2(b)-(g), the offer,
issuance and sale of the Securities to the Purchaser as contemplated hereby
are exempt from the registration requirements of the Securities Act of
1933, as amended (the "Securities Act"). Neither the Company nor any Person
acting on its behalf has taken any action could subject the offering,
issuance or sale of the Securities to the registration requirements of the
Securities Act.
(j) SEC Documents; Financial Statements. The Company has filed all
reports required to be filed by it under the Exchange Act, including
pursuant to Section 13(a) or 15(d) thereof, for the two years preceding the
date hereof (or such shorter period as the Company was required by law to
file such material) (the foregoing materials being collectively referred to
herein as the "SEC Documents" and, together with the Schedules to this
Agreement the "Disclosure Materials") on a timely basis or has received a
valid extension of such time of filing and has filed any such SEC Documents
prior to the expiration of any such extension. As of their respective
dates, the SEC Documents complied in all material respects with the
requirements of the Securities Act and the Exchange Act and the rules and
regulations of the Commission promulgated thereunder, and none of the SEC
Documents, when filed, contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary
in order to make the statements therein, in light of the circumstances
under which they were made, not misleading. All material agreements to
which the Company is a party or to which the property or assets of the
Company are subject have been filed as exhibits to the SEC Documents. The
financial statements of the Company included in the SEC Documents comply in
all material respects with applicable accounting requirements and the rules
and regulations of the Commission with respect thereto as in effect at the
time of filing. Such financial statements were prepared by the Company in
accordance with generally accepted accounting principles applied on a
consistent basis ("GAAP") during the periods involved, except as may be
otherwise specified in such financial statements or the notes thereto, and
fairly present in all material respects the financial position of the
Company as of and for the dates thereof and the results of operations and
cash flows for the periods then ended, subject, in the case of unaudited
statements, to normal, immaterial, year-end audit adjustments. The
financial statements for the years ended December 31, 1996 and December 31,
1997 were audited and reported upon by the Company's independent auditors
in accordance with generally accepted accounting standards. Since December
31, 1997, except as specifically disclosed in the SEC Documents, (a) there
has been no event, occurrence or development that could have or result in a
Material Adverse Effect, (b) the Company has not incurred any liabilities
(contingent or otherwise) other than (x) liabilities incurred in the
ordinary course of business consistent with past practice and (y)
liabilities not required to be reflected in the Company's financial
statements pursuant to GAAP, (c) the Company has not altered its method of
accounting or the identity of its auditors and (d) the Company has not
declared or made any payment or distribution of cash or other property to
its stockholders or officers or directors (other than in compliance with
existing Company stock option plans) with respect to its capital stock, or
purchased, redeemed (or made any agreements to purchase or redeem) any
shares of its capital stock. The Company last filed audited financial
statements with the Commission on March 31, 1998, and has not received any
comments from the Commission in respect thereof.
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(k) Investment Company. The Company is not, and is not an Affiliate
(as defined in Rule 405 under the Securities Act) ) of, an "investment
company" within the meaning of the Investment Company Act of 1940, as
amended.
(l) Certain Fees. Except for certain fees payable by the Company to
CDC Consulting, Inc. and to ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ & Company, Inc., no fees or
commissions will be payable by the Company to any broker, financial advisor
or consultant, finder, placement agent, investment banker, or bank with
respect to the transactions contemplated by this Agreement. The Purchaser
shall have no obligation with respect to any fees or with respect to any
claims made by or on behalf of other Persons for fees of a type
contemplated in this Section that may be due in connection with the
transactions contemplated by this Agreement. The Company shall indemnify
and hold harmless the Purchaser, its employees, officers, directors,
agents, and partners, and their respective Affiliates, from and against all
claims, losses, damages, costs (including the costs of preparation and
attorney's fees) and expenses suffered in respect of any such claimed or
existing fees, as such fees and expenses are incurred.
(m) Solicitation Materials. Neither the Company nor any Person acting
on the Company's behalf has (i) distributed any offering materials in
connection with the offering and sale of the Securities other than the
Disclosure Materials, or (ii) solicited any offer to buy or sell the
Securities by means of any form of general solicitation or advertising.
(n) Form S-3 Eligibility. The Company is eligible to register
securities for resale with the Commission under Form S-3 promulgated under
the Securities Act.
(o) Exclusivity. The Company shall not issue and sell the Shares to
any Person other than the Purchaser other than with the specific prior
written consent of the Purchaser.
(p) Seniority. No class of equity securities of the Company is senior
to the Shares in right of payment, whether upon liquidation or dissolution,
or otherwise.
(q) Patents and Trademarks. The Company has, or has rights to use, all
patents, patent applications, trademarks, trademark applications, service
marks, trade names, copyrights, licenses and rights (collectively, the
"Intellectual Property Rights") which are necessary or material for use in
connection with its business, and which the failure to so have would have a
Material Adverse Effect. To the best knowledge of the Company, all such
Intellectual Property Rights are enforceable and there is no existing
infringement by another Person of any of the Intellectual Property Rights.
(r) Listing and Maintenance Requirements Compliance. Except as set
forth on Schedule 2.1(r), the Company has not in the two years preceding
the date hereof received notice (written or oral) from the NASDAQ or any
other stock exchange, market or trading facility on which the Common Stock
is or has been listed (or on which it has been quoted) to the effect that
the Company is not in compliance with the listing or maintenance
requirements of such exchange or market. The Company has provided the
Purchaser with complete copies of all notices described on Schedule 2.1(r).
The Company is in compliance with all such maintenance requirements.
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(s) Registration Rights; Rights of Participation. Except as set forth
on Schedule 6(b) to the Registration Rights Agreement, (i) the Company has
not granted or agreed to grant to any Person any rights (including
"piggy-back" registration rights) to have any securities of the Company
registered with the Commission or any other governmental authority which
has not been satisfied and (ii) no Person, has any right of first refusal,
preemptive right, right of participation, or any similar right to
participate in the transactions contemplated by the Transaction Documents.
(t) Regulatory Permits. The Company possesses all certificates,
authorizations and permits issued by the appropriate Federal, state or
foreign regulatory authorities necessary to conduct their respective
businesses as described in the SEC Documents, except where the failure to
possess such permits could not, individually or in the aggregate, have or
result in a Material Adverse Effect ("Material Permits"), and the Company
has not received any notice of proceedings relating to the revocation or
modification of any Material Permit.
(u) Disclosure. The Company confirms that it has not provided the
Purchaser or its agents or counsel with any information that constitutes or
might constitute material non-public information. The Company understands
and confirms that the Purchaser shall be relying on the foregoing
representations in effecting transactions in securities of the Company. All
disclosure provided to the Purchaser regarding the Company, its business
and the transactions contemplated hereby, including the Schedules to this
Agreement, furnished by or on behalf of the Company are true and correct
and do not contain any untrue statement of a material fact or omit to state
any material fact necessary in order to make the statements made therein,
in light of the circumstances under which they were made, not misleading.
2.2 Representations and Warranties of the Purchaser. The Purchaser hereby
represents and warrants to the Company as follows:
(a) Organization; Authority. The Purchaser is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation with the requisite corporate power and
authority, to enter into and to consummate the transactions contemplated by
the Transaction Documents and otherwise to carry out its obligations
thereunder. The purchase by the Purchaser of the Securities hereunder has
been duly authorized by all necessary action on the part of the Purchaser.
Each of this Agreement, the Registration Rights Agreement and the Escrow
Agreement has been duly executed and delivered by the Purchaser and
constitutes the valid and legally binding obligation of the Purchaser,
enforceable against it in accordance with its terms.
(b) Investment Intent. The Purchaser is acquiring the Securities for
its own account for investment purposes only and not with a view to or for
distributing or reselling such Securities or any part thereof or interest
therein, without prejudice, however, to the Purchaser's right, subject to
the provisions of this Agreement and the Registration Rights Agreement, at
all times to sell or otherwise dispose of all or any part of such
Securities pursuant to an effective registration statement under the
Securities Act and in compliance with applicable state securities laws or
under an exemption from such registration.
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(c) Purchaser Status. At the time the Purchaser was offered the
Shares, it was, and at the date hereof, it is, an "accredited investor" as
defined in Rule 501(a) under the Securities Act.
(d) Experience of the Purchaser. The Purchaser either alone or
together with its representatives, has such knowledge, sophistication and
experience in business and financial matters so as to be capable of
evaluating the merits and risks of the prospective investment in the
Securities, and has so evaluated the merits and risks of such investment.
(e) Ability of the Purchaser to Bear Risk of Investment. The Purchaser
is able to bear the economic risk of an investment in the Securities and,
at the present time, is able to afford a complete loss of such investment.
(f) Access to Information. The Purchaser acknowledges receipt of the
Disclosure Materials and further acknowledges that it has reviewed the
Disclosure Materials and has been afforded (i) the opportunity to ask such
questions as it has deemed necessary of, and to receive answers from,
representatives of the Company concerning the terms and conditions of the
offering of the Securities and the merits and risks of investing in the
Securities; (ii) access to information about the Company and the Company's
financial condition, results of operations, business, properties,
management and prospects sufficient to enable it to evaluate its
investment; and (iii) the opportunity to obtain such additional information
which the Company possesses or can acquire without unreasonable effort or
expense that is necessary to make an informed investment decision with
respect to the investment and to verify the accuracy and completeness of
the information contained in the Disclosure Materials.
(g) General Solicitation. The Purchaser is not purchasing the Shares
as a result of or subsequent to any advertisement, article, notice or other
communication published in any newspaper, magazine or similar media or
broadcast over television or radio or presented at any seminar.
(h) Certain Trading Activities. On the date of this Agreement the
Purchaser does not have a short position on any shares of Common Stock, and
from the date of this Agreement to the Closing Date the Purchaser will not
establish a short position in the Common Stock.
(i) Reliance. The Purchaser understands and acknowledges that (i) the
Securities are being offered and sold to it without registration under the
Securities Act in a private placement that is exempt from the registration
provisions of the Securities Act and (ii) the availability of such
exemption, depends in part on, and the Company will rely upon the accuracy
and truthfulness of, the foregoing representations and the Purchaser hereby
consents to such reliance.
The Company acknowledges and agrees that the Purchaser makes no
representations or warranties with respect to the transactions contemplated
hereby other than those specifically set forth in this Section 2.2.
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ARTICLE III
OTHER AGREEMENTS OF THE PARTIES
3.1 Transfer Restrictions. (a) Securities may only be disposed of pursuant
to an effective registration statement under the Securities Act, to the Company
or pursuant to an available exemption from or in a transaction not subject to
the registration requirements of the Securities Act. In connection with any
transfer of Securities other than pursuant to an effective registration
statement or to the Company, except as otherwise set forth herein, the Company
may require the transferor thereof to provide to the Company an opinion of
counsel selected by the transferor, the form and substance of which opinion
shall be reasonably satisfactory to the Company, to the effect that such
transfer does not require registration under the Securities Act. Notwithstanding
the foregoing, the Company hereby consents to and agrees to register on the
books of the Company and with any transfer agent for the securities of the
Company any transfer of Securities by the Purchaser to an Affiliate of the
Purchaser or to a fund under common management with the Purchaser, and any
transfer among any such Affiliates or funds, provided that transferee certifies
to the Company that it is an "accredited investor" as defined in Rule 501(a)
under the Securities Act and that it is acquiring the Securities solely for
investment purposes. Any such transferee shall agree in writing to be bound by
the terms of this Agreement and shall have the rights of a Purchaser under this
Agreement and the Registration Rights Agreement.
(b) The Purchaser agrees to the imprinting, so long as is required by this
Section 3.1(b), of the following legend on the Securities:
NEITHER THESE SECURITIES NOR THE SECURITIES INTO WHICH THESE
SECURITIES ARE CONVERTIBLE HAVE BEEN REGISTERED WITH THE SECURITIES
AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN
RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT
BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE
EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE
STATE SECURITIES LAWS.
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN
RESTRICTIONS ON CONVERSION SET FORTH IN A CONVERTIBLE PREFERRED STOCK
PURCHASE AGREEMENT, DATED AS OF MAY 29, 1998, BETWEEN COMPOSITECH LTD.
(THE "COMPANY") AND THE ORIGINAL HOLDER HEREOF. A COPY OF THAT
AGREEMENT IS ON FILE AT THE PRINCIPAL OFFICE OF THE COMPANY.
Underlying Shares shall not contain the legend set forth above nor any
other legend if the conversion of Shares, the payment of dividends thereon, or
other issuances of Underlying Shares as contemplated hereby or by the
Certificate of Designation occurs at any time while an Underlying Securities
Registration Statement is effective under the Securities Act or, in the event
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there is not an effective Underlying Securities Registration Statement at such
time, if in the opinion of counsel to the Company such legend is not required
under applicable requirements of the Securities Act (including judicial
interpretations and pronouncements issued by the staff of the Commission). The
Company shall cause its counsel to issue the legal opinion included in the
Transfer Agent Instructions to the Company's transfer agent on the day that the
Underlying Securities Registration Statement is declared effective by the
Commission. The Company agrees that it will provide the Purchaser, upon request,
with a certificate or certificates representing Underlying Shares, free from
such legend at such time as such legend is no longer required hereunder. The
Company may not make any notation on its records or give instructions to any
transfer agent of the Company which enlarge the restrictions of transfer set
forth in this Section.
3.2 Acknowledgment of Dilution. The Company acknowledges that the issuance
of the Underlying Shares upon conversion of the Shares and payment of dividends
thereon in accordance with the terms of the Certificate of Designation may
result in dilution of the outstanding shares of Common Stock, which dilution may
be substantial under certain market conditions. The Company further acknowledges
that its obligation to issue Underlying Shares upon conversion of the Shares and
payment of dividends thereon in accordance with the terms of the Certificate of
Designation is unconditional and absolute, subject to the limitations set forth
herein and in the Certificate of Designation (including any floor to the
Conversion Price set forth therein), regardless of the effect of any such
dilution.
3.3 Furnishing of Information. As long as the Purchaser owns Securities,
the Company covenants to timely file (or obtain extensions in respect thereof
and file within the applicable grace period) all reports required to be filed by
the Company after the date hereof pursuant to Section 13(a) or 15(d) of the
Exchange Act. As long as the Purchaser owns Securities, if the Company is not
required to file reports pursuant to such sections, it will prepare and furnish
to the Purchaser and make publicly available in accordance with Rule 144(c)
promulgated under the Securities Act annual and quarterly financial statements,
together with a discussion and analysis of such financial statements in form and
substance substantially similar to those that would otherwise be required to be
included in reports required by Section 13(a) or 15(d) of the Exchange Act, as
well as any other information required thereby, in the time period that such
filings would have been required to have been made under the Exchange Act. The
Company further covenants that it will take such further action as any holder of
Securities may reasonably request, all to the extent required from time to time
to enable such Person to sell Underlying Shares without registration under the
Securities Act within the limitation of the exemptions provided by Rule 144
promulgated under the Securities Act, including the legal opinion referenced
above in this Section. Upon the request of any such Person, the Company shall
deliver to such Person a written certification of a duly authorized officer as
to whether it has complied with such requirements.
3.4 Blue Sky Laws. In accordance with the Registration Rights Agreement,
the Company shall qualify or exempt the issuance and sale of the Underlying
Shares under the securities or Blue Sky laws of such jurisdictions as the
Purchaser may reasonably request and shall continue such qualification or
exemption at all times until the Purchaser notifies the Company in writing that
it no longer owns Securities; provided, however, that the Company shall not be
required in connection therewith to qualify as a foreign corporation it is not
now so qualified or to take any action that
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would subject the Company to general service of process in any such jurisdiction
where it is not then subject.
3.5 Integration. The Company shall not, and shall use its best efforts to
ensure that, no Affiliate shall, sell, offer for sale or solicit offers to buy
or otherwise negotiate in respect of any security (as defined in Section 2 of
the Securities Act) that would be integrated with the offer or sale of the
Securities in a manner that would require the registration under the Securities
Act of the sale of the Securities to the Purchaser.
3.6 Increase in Authorized Shares. At such times as the Company would be,
if a notice of conversion were to be delivered on such date, precluded from
converting 200% of the Shares outstanding (and paying any earned and unpaid
dividends in respect thereof in shares of Common Stock) that remain unconverted
at such date (subject to the application of any floor to the Conversion Price
that may be set forth in the Certificate of Designation) due to the
unavailability of a sufficient number of shares of authorized but unissued or
reserved Common Stock, the Board of Directors of the Company shall promptly (and
in any case, within 30 Business Days from such date) prepare and mail to the
stockholders of the Company proxy materials requesting authorization to amend
the Company's Certificate of Incorporation to increase the number of shares of
Common Stock which the Company is authorized to issue to at least such number of
shares as reasonably requested by the Purchaser in order to provide for such
number of authorized and unissued shares of Common Stock to enable the Company
to comply with its conversion and reservation of shares obligations as set forth
in this Agreement and the Certificate of Designation (the sum of (x) the number
of shares of Common Stock then authorized, (y) the number of shares of Common
Stock then outstanding plus all shares of Common Stock issuable upon exercise of
all outstanding options, warrants and convertible instruments, and (z) (subject
to the application of any floor to the Conversion Price that may be set forth in
the Certificate of Designation) 200% of the number of Underlying Shares as are
then issuable upon a conversion in full of all Shares and as payment of
dividends thereon, shall be a reasonable number). In connection therewith, the
Board of Directors shall (a) adopt proper resolutions authorizing such increase,
(b) recommend to and otherwise use its best efforts to promptly and duly obtain
stockholder approval to carry out such resolutions (and hold a special meeting
of the stockholders no later than the 60th day after delivery of the proxy
materials relating to such meeting) and (c) within 5 business Days of obtaining
such stockholder authorization, file an appropriate amendment to the Company's
Certificate of Incorporation to evidence such increase.
3.7 Listing and Reservation of Underlying Shares. (a) The Company shall (i)
not later than the 20th day following the Closing Date, prepare and file with
the NASDAQ (as well as any other national securities exchange or market or
trading or quotation facility on which the Common Stock is then listed) an
additional shares listing application covering a number of shares of Common
Stock which is at least equal to the number of shares required to be reserved
pursuant to Section 2.1(d), (ii) take all steps necessary to cause the such
shares to be approved for listing in the NASDAQ (as well as on any other
national securities exchange or market or trading or quotation facility on which
the Common Stock is then listed) as soon as possible thereafter, and (iii)
provide to the Purchaser evidence of such listing, and the Company shall
maintain the listing of its Common Stock thereon. If the number of Underlying
Shares as are issuable upon conversion in full of the number of Shares then
outstanding and as payment of dividends thereon exceeds 85% of the number of
Underlying
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Shares previously listed on account thereof with NASDAQ (and other required
exchanges), the Company shall take the necessary actions to immediately list a
number of Underlying Shares as equals 200% of the number of Underlying Shares
then issuable upon conversion of the Shares and as payment of dividends thereon
(subject to the application of any floor to the Conversion Price that may be set
forth in the Certificate of Designation).
(b) The Company shall maintain a reserve of Common Stock for issuance upon
conversion of the Shares (and for payment of dividends thereon in shares of
Common Stock) in such amount as may be required to perform its obligations in
full under the Transaction Documents, which reserve shall include a number of
shares of Common Stock equal to (subject to the application of any floor to the
Conversion Price that may be set forth in the Certificate of Designation) no
less than two times the number of shares of Common Stock as would be issuable
upon conversion in full of the Shares and upon payment of dividends thereon.
3.8 Purchaser Ownership of Common Stock. The Purchaser agrees not to
convert Shares to the extent such conversion would result in the Purchaser
beneficially owning (as determined in accordance with Section 13(d) of the
Exchange Act and the rules thereunder) in excess of 4.999% of the shares of
Common Stock then issued and outstanding, including shares issuable upon
conversion of the Shares held by such Purchaser after application of this
Section. To the extent that the limitation contained in this Section applies,
the determination of whether Shares are convertible (in relation to other
securities owned by a Purchaser) and of which Shares are convertible shall be in
the sole discretion of the Purchaser, and the submission of Shares for
conversion shall be deemed to be such Purchaser's determination of whether such
Shares are convertible (in relation to other securities owned by a Purchaser)
and of which portion of such Shares are convertible, in each case subject to
such aggregate percentage limitation, and the Company shall have no obligation
to verify or confirm the accuracy of such determination. Nothing contained
herein shall be deemed to restrict the right of the Purchaser to convert Shares
at such time as such conversion will not violate the provisions of this Section.
The provisions of this Section will not apply to any conversion pursuant to
Section 5(a)(ii) of the Certificate of Designation, and may be waived by the
Purchaser upon not less than 75 days prior notice to the Company, and the
provisions of this Section shall continue to apply until such 75th day (or
later, if stated in the notice of waiver).
3.9 Conversion Procedures. The Transfer Agent Instructions and Conversion
Notice (as defined in Exhibit A) set forth the totality of the procedures with
respect to the conversion of the Shares, including the form of legal opinion, if
necessary, that shall be rendered to the Company's transfer agent and such other
information and instructions as may be reasonably necessary to enable the
Purchaser to convert its Shares as contemplated in the Certificate of
Designation.
3.10 Notice of Breaches. (a) Each of the Company and the Purchaser shall
give prompt written notice to the other of any breach by it of any
representation, warranty or other agreement contained in any Transaction
Document, as well as any events or occurrences arising after the date hereof
which would reasonably be likely to cause any representation or warranty or
other agreement of such party, as the case may be, contained therein to be
incorrect or breached. However, no disclosure by either party pursuant to this
Section shall be deemed to cure any breach of any representation, warranty or
other agreement contained in any Transaction Document.
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(b) Notwithstanding the generality of Section 3.10(a), the Company shall
promptly notify the Purchaser of any notice or claim (written or oral) that it
receives from any lender of the Company to the effect that the consummation of
the transactions contemplated by the Transaction Documents violates or would
violate any written agreement or understanding between such lender and the
Company, and the Company shall promptly furnish by facsimile to the holders of
the Shares a copy of any written statement in support of or relating to such
claim or notice.
3.11 Conversion Obligations of the Company. The Company shall honor
conversions of the Shares and shall deliver Underlying Shares in accordance with
the terms, conditions and time periods set forth in the Certificate of
Designation.
3.12 Right of First Refusal; Subsequent Registrations. (a) The Company
shall not, directly or indirectly, without the prior written consent of Encore
Capital Management, L.L.C. ("Encore"), offer, sell, grant any option to
purchase, or otherwise dispose of (or announce any offer, sale, grant or any
option to purchase or other disposition) any of its or its Affiliates' equity or
equity-equivalent securities in a transaction intended to be exempt or not
subject to registration under the Securities Act (a "Subsequent Placement") for
a period of 180 days after the Closing Date, except (i) the granting of options
or warrants to employees, officers, consultants (other than placement agents,
securities bankers or finders) and directors, and the issuance of shares upon
exercise of options granted, under any stock option plan heretofore or
hereinafter duly adopted by the Company, (ii) shares issued upon exercise of any
currently outstanding warrants and upon conversion of any currently outstanding
convertible securities of the Company, in each case disclosed in Schedule
2.1(c), (iii) shares of Common Stock issued upon conversion of Preferred Stock
and as payment of dividends thereon in accordance with the Certificate of
Designation, and (iv) securities of Composite Technologies, Inc. and Lamines
CTEK Inc.(provided such securities are not convertible into or exchangeable for
Common Stock), unless (A) the Company delivers to Encore a written notice (the
"Subsequent Placement Notice") of its intention to effect such Subsequent
Placement, which Subsequent Placement Notice shall describe in reasonable detail
the proposed terms of such Subsequent Placement, the amount of proceeds intended
to be raised thereunder, the Person with whom such Subsequent Placement shall be
effected, and attached to which shall be a term sheet or similar document
relating thereto and (B) Encore shall not have notified the Company by 5:00 p.m.
(New York City time) on the tenth (10th) Business Day after its receipt of the
Subsequent Placement Notice of its willingness to cause the Purchaser to provide
(or to cause its sole designee to provide), subject to completion of mutually
acceptable documentation, financing to the Company on substantially the terms
set forth in the Subsequent Placement Notice. If Encore shall fail to notify the
Company of its intention to enter into such negotiations within such time
period, the Company may effect the Subsequent Placement substantially upon the
terms and to the Persons (or Affiliates of such Persons) set forth in the
Subsequent Placement Notice; provided, that the Company shall provide Encore
with a second Subsequent Placement Notice, and Encore shall again have the right
of first refusal set forth above in this paragraph (a), if the Subsequent
Placement subject to the initial Subsequent Placement Notice shall not have been
consummated for any reason on the terms set forth in such Subsequent Placement
Notice within thirty (30) Business Days after the date of the initial Subsequent
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Placement Notice with the Person (or an Affiliate of such Person) identified in
the Subsequent Placement Notice.
(b) Except for (x) Underlying Shares, (y) other "Registrable Securities"
(as such term is defined in the Registration Rights Agreement) to be registered
in accordance with the Registration Rights Agreement, and (z) Common Stock to be
registered for resale in connection with financings permitted pursuant to
paragraph (a)(i) and (ii) of Section 3.12(a), the Company shall not, without the
prior written consent of the Purchaser (i) issue or sell any of its or any of
its Affiliates' equity or equity-equivalent securities pursuant to Regulation S
promulgated under the Securities Act, or (ii) register for resale any securities
of the Company, both in the case of (i) and (ii) for a period of not less than
90 Trading Days after the date that the Underlying Securities Registration
Statement is declared effective by the Commission. Any days that a Purchaser is
not permitted to sell Underlying Securities under the Underlying Securities
Registration Statement shall be added to such 90 Trading Day period for the
purposes of (i) and (ii) above.
3.13 Certain Securities Laws Disclosures; Publicity. The Company shall: (i)
issue a press release acceptable to the Purchaser disclosing the transactions
contemplated hereby on the Closing Date, (ii) file with the Commission a Report
on Form 8-K disclosing the transactions contemplated hereby within ten (10)
Business Days after the Closing Date, and (iii) timely file with the Commission
a Form D promulgated under the Securities Act as required under Regulation D
promulgated under the Securities Act and provide a copy thereof to the Purchaser
promptly after the filing thereof. The Company shall, no less than two (2)
Business Days prior to the filing of any disclosure required by clauses (ii) and
(iii) above, provide a copy thereof to Encore. No such filing or disclosure may
be made that mentions the Purchaser or Encore by name without the prior consent
of Encore.
3.14 Use of Proceeds. The Company shall use the net proceeds from the sale
of the Securities hereunder for working capital purposes and for the purchase of
equipment and not for the satisfaction of any portion of Company debt or to
redeem any Company equity or equity-equivalent securities. Pending application
of the proceeds of this placement in the manner permitted hereby, the Company
will invest such proceeds in interest bearing accounts and/or short-term,
investment grade interest bearing securities.
3.15 Transfer of Intellectual Property Rights. Except in connection with
the sale of all or substantially all of the assets of the Company or in
connection with licensing transactions approved by the Company's Board of
Directors, the Company shall not transfer, sell or otherwise dispose of any
Intellectual Property Rights, or allow any of the Intellectual Property Rights
to become subject to any Liens, or fail to renew such Intellectual Property
Rights (if renewable and it would otherwise lapse if not renewed), without the
prior written consent of the Purchaser.
3.16 Reimbursement. If the Purchaser, other than by reason of its gross
negligence or willful misconduct, becomes involved in any capacity in any
action, proceeding or investigation brought by or against any Person, including
stockholders of the Company, in connection with or as a result of the
consummation of the transactions contemplated by Transaction Documents, the
Company will reimburse the Purchaser for its reasonable legal and other expenses
(including the cost of any investigation and preparation) incurred in connection
therewith, as such expenses are incurred.
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In addition, other than with respect to any matter in which the Purchaser is a
named party, the Company will pay the Purchaser the charges, as reasonably
determined by the Purchaser, for the time of any officers or employees of the
Purchaser devoted to appearing and preparing to appear as witnesses, assisting
in preparation for hearings, trials or pretrial matters, or otherwise with
respect to inquiries, hearings, trials, and other proceedings relating to the
subject matter of this Agreement. The reimbursement obligations of the Company
under this paragraph shall be in addition to any liability which the Company may
otherwise have, shall extend upon the same terms and conditions to any
Affiliates of the Purchaser who are actually named in such action, proceeding or
investigation, and partners, directors, agents, employees and controlling
persons (if any), as the case may be, of the Purchaser and any such Affiliate,
and shall be binding upon and inure to the benefit of any successors, assigns,
heirs and personal representatives of the Company, the Purchaser and any such
Affiliate and any such Person. The Company also agrees that neither the
Purchaser nor any such Affiliates, partners, directors, agents, employees or
controlling persons shall have any liability to the Company or any person
asserting claims on behalf of or in right of the Company in connection with or
as a result of the consummation of the Transaction Documents except to the
extent that any losses, claims, damages, liabilities or expenses incurred by the
Company result from the gross negligence or willful misconduct of the Purchaser
or an Affiliate of Purchaser in connection with the transactions contemplated by
this Agreement.
ARTICLE IV
MISCELLANEOUS
4.1 Fees and Expenses. At the Closing the Company shall (i) pay $15,000 to
Escrow Agent in connection with the preparation and negotiation of the
Transaction Documents, and (ii) pay to $10,000 to Encore for its due diligence
expenses and disbursements in connection with the transactions contemplated
hereby. Other than the amounts contemplated in the immediately preceding
sentence, and except as otherwise set forth in the Registration Rights
Agreement, each party shall pay the fees and expenses of its advisers, counsel,
accountants and other experts, if any, and all other expenses incurred by such
party incident to the negotiation, preparation, execution, delivery and
performance of this Agreement. The Company shall pay all stamp and other taxes
and duties levied in connection with the issuance of the Securities.
4.2 Entire Agreement; Amendments. This Agreement, together with the
Exhibits and Schedules hereto, the Registration Rights Agreement, the
Certificate of Designation and the Escrow Agreement contain the entire
understanding of the parties with respect to the subject matter hereof and
supersede all prior agreements and understandings, oral or written, with respect
to such matters, which the parties acknowledge have been merged into such
documents, exhibits and schedules.
4.3 Notices. Any and all notices or other communications or deliveries
required or permitted to be provided hereunder shall be in writing and shall be
deemed given and effective on the earliest of (i) the date of transmission, if
such notice or communication is delivered via facsimile at the facsimile
telephone number specified in this Section prior to 8:00 p.m. (New York City
time) on a Business Day, (ii) the Business Day after the date of transmission,
if such notice or
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communication is delivered via facsimile at the facsimile telephone number
specified in the Purchase Agreement later than 8:00 p.m. (New York City time) on
any date and earlier than 11:59 p.m. (New York City time) on such date, (iii)
the Business Day following the date of mailing, if sent by overnight delivery by
nationally recognized overnight courier service, or (iv) upon actual receipt by
the party to whom such notice is required to be given. The address for such
notices and communications shall be as follows:
If to the Company: Compositech Ltd.
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile No.: (▇▇▇)▇▇▇-▇▇▇▇
Attn: Chief Financial Officer
With copies to: Patterson, Belknap, ▇▇▇▇ & ▇▇▇▇▇ LLP
▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Facsimile No.: 212-336-2222
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇
If to the
Purchaser: JNC Opportunity Fund Ltd.
c/o Olympia Capital (Cayman) Ltd.
▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: Director
With copies to: Encore Capital Management, L.L.C.
▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: Managing Member
With copies to: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ &
▇▇▇▇▇▇ LLP
▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇▇▇ ▇. ▇▇▇▇▇
or such other address as may be designated in writing hereafter, in the same
manner, by such Person.
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4.4 Amendments; Waivers. No provision of this Agreement may be waived or
amended except in a written instrument signed, in the case of an amendment, by
both the Company and the Purchaser; or, in the case of a waiver, by the party
against whom enforcement of any such waiver is sought. No waiver of any default
with respect to any provision, condition or requirement of this Agreement shall
be deemed to be a continuing waiver in the future or a waiver of any other
provision, condition or requirement hereof, nor shall any delay or omission of
either party to exercise any right hereunder in any manner impair the exercise
of any such right accruing to it thereafter.
4.5 Headings. The headings herein are for convenience only, do not
constitute a part of this Agreement and shall not be deemed to limit or affect
any of the provisions hereof.
4.6 Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of the parties and their successors and permitted assigns. The
Company may not assign this Agreement or any rights or obligations hereunder
without the prior written consent of the Purchaser. Except as set forth in
Section 3.1(a), the Purchaser may not assign this Agreement or any of the rights
or obligations hereunder without the consent of the Company. This provision
shall not limit the Purchaser's right to transfer securities or transfer or
assign rights hereunder or under the Registration Rights Agreement.
4.7 No Third-Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective successors and permitted
assigns and, other with respect to Encore who is an intended beneficiary of, and
entitled to enforce, Sections 3.12 and 4.11, is not for the benefit of, nor may
any provision hereof be enforced by, any other Person.
4.8 Governing Law. This Agreement shall be governed by and construed and
enforced in accordance with the internal laws of the State of New York without
regard to the principles of conflicts of law thereof. Each party hereby
irrevocably submits to the exclusive jurisdiction of the state and federal
courts sitting in the City of New York, borough of Manhattan, for the
adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein (including with respect to
the enforcement of the any of the Transaction Documents), and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that
such suit, action or proceeding is improper. Each party hereby irrevocably
waives personal service of process and consents to process being served in any
such suit, action or proceeding by mailing a copy thereof to such party at the
address in effect for notices to it under this Agreement and agrees that such
service shall constitute good and sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to limit in any way any right
to serve process in any manner permitted by law.
4.9 Survival. The representations, warranties, agreements and covenants
contained herein shall survive the Closing and the delivery and conversion of
the Shares.
4.10 Execution. This Agreement may be executed in two or more counterparts,
all of which when taken together shall be considered one and the same agreement
and shall become effective when counterparts have been signed by each party and
delivered to the other party, it being
- 17 -
understood that both parties need not sign the same counterpart. In the event
that any signature is delivered by facsimile transmission, such signature shall
create a valid and binding obligation of the party executing (or on whose behalf
such signature is executed) the same with the same force and effect as if such
facsimile signature page were an original thereof.
4.11 Publicity. The Company and the Purchaser shall consult with each other
in issuing any press releases or otherwise making public statements or filings
and other communications with the Commission or any regulatory agency or stock
market or trading facility with respect to the transactions contemplated hereby
and neither party shall issue any such press release or otherwise make any such
public statement, filings or other communications without the prior written
consent of the other, which consent shall not be unreasonably withheld or
delayed, except that no prior consent shall be required if such disclosure is
required by law or by the Commission or the Nasdaq Stock Market (as the case may
be), in which such case the disclosing party shall provide the other party with
prior notice of such public statement, filing or other communication.
Notwithstanding the foregoing, the Company shall not publicly disclose the name
of the Purchaser or Encore, or include the name of the Purchaser or Encore in
any filing with the Commission, or any regulatory agency, trading facility or
stock market without the prior written consent of Encore, except to the extent
such disclosure (but not any disclosure as to the controlling Persons thereof)
is required by law, in which case the Company shall provide the Purchaser and
Encore with prior notice of such disclosure.
4.12 Severability. In case any one or more of the provisions of this
Agreement shall be invalid or unenforceable in any respect, the validity and
enforceability of the remaining terms and provisions of this Agreement shall not
in any way be affecting or impaired thereby and the parties will attempt to
agree upon a valid and enforceable provision which shall be a reasonable
substitute therefor, and upon so agreeing, shall incorporate such substitute
provision in this Agreement.
4.13 Remedies. In addition to being entitled to exercise all rights
provided herein or granted by law, including recovery of damages, the Purchaser
will be entitled to specific performance of the obligations of the Company under
the Transaction Documents. Each of the Company and the Purchaser agree that
monetary damages may not be adequate compensation for any loss incurred by
reason of any breach of its obligations described in the foregoing sentence and
hereby agrees to waive in any action for specific performance of any such
obligation the defense that a remedy at law would be adequate.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the parties hereto have caused this Convertible
Preferred Stock Purchase Agreement to be duly executed by their respective
authorized signatories as of the date first indicated above.
COMPOSITECH LTD.
By:_________________________________
Name:
Title:
JNC OPPORTUNITY FUND LTD.
By:_________________________________
Name:
Title: