ECO2 PLASTICS, INC. CONVERTIBLE NOTE PURCHASE AGREEMENT June 2, 2009
Exhibit
10.1
ECO2
PLASTICS, INC.
June 2,
2009
This
Convertible Note Purchase Agreement (this “Agreement”)
is made as of June 2, 2009 by and among ECO2 PLASTICS, INC., a Delaware
corporation (the “Company”),
PENINSULA PACKAGING, LLC, a California limited liability company (“Peninsula”),
TRIDENT CAPITAL FUND-VI, L.P. (“Trident Capital
I”), TRIDENT CAPITAL FUND-VI PRINCIPALS FUND, L.L.C. (“Trident Capital
II” and, collectively with Trident Capital I, the “Trident
Lenders”), ▇▇▇▇▇▇▇▇▇ CAPITAL PARTNERS, LLC (“▇▇▇▇▇▇▇▇▇
Capital”), ▇▇▇▇▇▇ LIVING TRUST DATED 12/10/1996 (“▇▇▇▇▇▇”),
and the other parties set forth on Schedule I (each, an
“Additional
Lender” and collectively, the “Additional
Lenders”). Each of Trident Capital I, Trident Capital II,
▇▇▇▇▇▇▇▇▇ Capital, ▇▇▇▇▇▇ and Peninsula, and each Additional Lender, is
sometimes referred to herein as a “Purchaser”
and collectively as the “Purchasers.”
WHEREAS,
Peninsula loaned an aggregate amount of Three Hundred Fifty Thousand Dollars
($350,000) to the Company pursuant to certain promissory notes dated as of April
13, 2009, May 5, 2009 and May 20, 2009 (collectively, the “Peninsula
Notes”); and
WHEREAS,
the Trident Lenders loaned an aggregate
amount of Three Hundred Fifty Thousand Dollars ($350,000) to the Company
pursuant to certain promissory notes dated as of April 13, 2009, May 5, 2009 and
May 20, 2009 (collectively, the “Trident
Notes”); and
WHEREAS,
▇▇▇▇▇▇▇▇▇ Capital loaned One Hundred Thousand Dollars ($100,000) to the Company
pursuant to a certain promissory note dated as of April 13, 2009 (the “▇▇▇▇▇▇▇▇▇ Capital
Note”); and
WHEREAS,
▇▇▇▇▇▇ loaned Fifty Thousand Dollars ($50,000) to the Company pursuant to a
certain promissory note dated as of May 5, 2009 (the “▇▇▇▇▇▇
Note”); and
WHEREAS,
the Peninsula Notes, Trident Notes, ▇▇▇▇▇▇▇▇▇ Capital Note, and ▇▇▇▇▇▇ Note are
each a “Bridge
Note,” and collectively, the “Bridge
Notes;” and
WHEREAS,
Peninsula, the Trident Lenders, ▇▇▇▇▇▇▇▇▇ Capital and the Additional Lenders
desire to lend at least an additional Nine Hundred Fifty Thousand Dollars
($950,000) to the Company, totaling at least One Million Eight Hundred Thousand
Dollars ($1,800,000) in the aggregate (the “Additional
Loans”); and
WHEREAS,
the Company and Peninsula desire to aggregate the Peninsula Notes into a single
amended and restated promissory note to evidence the aggregate principal amount
owed by the Company to Peninsula under the Peninsula Notes and Additional Loans;
and
WHEREAS,
the Company and the Trident Lenders desire to aggregate the Trident Notes into a
single amended and restated promissory note to evidence the aggregate principal
amount owed by the Company to the Trident Lenders under the Trident Notes and
Additional Loans; and
WHEREAS,
the Company and ▇▇▇▇▇▇▇▇▇ Capital desire to aggregate the ▇▇▇▇▇▇▇▇▇ Capital Note
into a single amended and restated promissory note to evidence the aggregate
principal amount owed by the Company to ▇▇▇▇▇▇▇▇▇ Capital under the ▇▇▇▇▇▇▇▇▇
Capital Note and Additional Loans; and
WHEREAS,
▇▇▇▇▇▇ desires to amend and restate the ▇▇▇▇▇▇ Note in order to conform such
note to the terms and conditions set forth in the amended and restated
Peninsula, Trident and ▇▇▇▇▇▇▇▇▇ Capital Notes; and
WHEREAS,
in connection with the Additional Loans, the Company desires to issue certain
promissory notes to the Additional Lenders;
NOW
THEREFORE, in consideration of the mutual covenants contained in this Agreement,
and for other good and valuable consideration, the receipt of which is hereby
acknowledged, the Company and each Purchaser (severally and not jointly),
intending to be legally bound, hereby agree as follows:
1. The Loans; Closing;
Delivery.
(a) The
Notes. Subject to the terms and conditions hereof, each
Purchaser shall loan to the Company the amount set forth opposite such
Purchaser’s name under the column heading, “Delivery Amount” on Schedule I attached
hereto. Each Purchaser shall surrender its respective Bridge Note(s)
to the Company, if any, and shall receive from the Company a promissory note in
the form relating to such Purchaser attached hereto as Exhibit A (a “Note” and, collectively with all
other promissory notes issued to the Purchasers hereunder, the “Notes”),
in the amount set forth opposite such Purchaser’s name under the column heading
“Aggregate Loan Amount” on Schedule I attached
hereto. The loans evidenced by the Notes shall be referred to herein
as the “Loans.”
(b) Place and Date of
Closing. The closing of the transactions provided for herein
shall take place at the offices of ▇▇▇▇▇▇▇▇ Ronon ▇▇▇▇▇▇▇ & ▇▇▇▇▇, LLP, ▇▇▇
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇, at not later than
5:00 p.m. (EST) on June 2, 2009 (the “Initial
Closing”), or at such date as the Purchasers and the Company may agree
upon, such time and date of delivery against payment being herein referred to as
the “Initial Closing
Date.” References
herein to the “Closing
Date” shall mean the Initial Closing Date or the date of any Additional
Closing (as defined below), as applicable.
(c) Delivery. At
each Closing, the Notes in definitive form evidencing the Loans that the
Purchasers have agreed to purchase pursuant to this Agreement shall be delivered
by or on behalf of the Company, against delivery by or on behalf of each of the
Purchasers of (i) the amount set forth opposite such Purchaser’s name under the
column heading, “Delivery Amount” on Schedule I by check
or wire transfer of immediately available funds to the account of the Company
previously designated by it in writing, and (ii) the original Bridge Notes
issued to such Purchaser, if any.
(d) Subsequent
Closings. The Purchasers understand and agree that at any time
and from time to time during the period following the Initial Closing Date but
not later than June 30. 2009, the Company may, at one or more additional
closings (each, an “Additional
Closing”), without obtaining the signature, consent or permission of any
of the Purchasers, offer and sell any authorized but unsold Notes to such
persons as shall be acceptable to the Board of Directors of the Company on the
terms and conditions set forth herein. The term “Closing”
as used herein shall refer to the “Initial
Closing” and/or each “Additional
Closing,” as appropriate.
(e) No
Usury. This Agreement and each Note issued pursuant to the
terms of this Agreement are hereby expressly limited so that in no event
whatsoever, whether by reason of deferment or advancement of loan proceeds,
acceleration of maturity of the loan evidenced hereby, or otherwise, shall the
amount paid or agreed to be paid to the Purchasers hereunder for the loan, use,
forbearance or detention of money exceed the maximum interest rate permitted by
the laws of the State of California. If at any time the performance
of any provision hereof or any Note involves a payment exceeding the limit of
the price that may be validly charged for the loan, use, forbearance or
detention of money under applicable law, then automatically and retroactively,
ipso facto, the obligation to be performed shall be reduced to such limit, it
being the specific intent of the Company and the Purchasers hereof that all
payments under this Agreement or any Note are to be credited first to interest
as permitted by law, but not in excess of (i) the agreed rate of interest
set forth in the Note, or (ii) that permitted by law, whichever is the
lesser, and the balance toward the reduction of principal. The
provisions of this Section 1(f) shall never be superseded or waived and shall
control every other provision of this Agreement and any Note.
(f) Security
Agreement. The Company and the Purchasers agree to execute the
Security Agreements, dated as of the date hereof, in the forms attached hereto
as Exhibit D-1
and Exhibit D-2
(the “Security
Agreements”), whereby the Purchasers will receive security interests in
the collateral of the Company described in the Security Agreements, pursuant to
the terms of the Security Agreements. It is agreed that all of the
Company’s indebtedness, whether outstanding on the date hereof or subsequently
incurred or assumed, except all indebtedness secured by perfected security
interests granted by the Company in connection with the Senior Debt (as such
term is defined in the Security Agreements), shall be junior in right of payment
to the indebtedness and other obligations of the Company pursuant to the
Notes.
(g) Subordination and
Intercreditor Agreement. The Company and the Purchasers agree
to execute the Second Amended and Restated Subordination and Intercreditor
Agreement, dated as of the date hereof, in the form attached hereto as Exhibit E (the “Subordination
Agreement”).
(h) Securities and
Disclosure. The Notes are referred to herein as the “Securities.” The
Securities will be offered and sold to the Purchasers without such offers and
sales being registered under the Securities Act of 1933, as amended (together
with the rules and regulations of the Securities and Exchange Commission (the
“SEC”)
promulgated thereunder, the “Securities
Act”), in reliance on exemptions therefrom.
In
connection with the sale of the Securities, the Company has made available
(including electronically via the SEC's ▇▇▇▇▇ system) to Purchasers its periodic
and current reports, forms, schedules, proxy statements and other documents
(including exhibits and all other information incorporated by reference) filed
with the SEC under the Securities Exchange Act of 1934, as amended (the “Exchange
Act”). These reports, forms, schedules, statements, documents,
filings and amendments, are collectively referred to as the “SEC
Documents.” All references
in this Agreement to financial statements and schedules and other information
which is “contained,” “included” or “stated” in the SEC Documents (or other
references of like import) shall be deemed to mean and include all such
financial statements and schedules, documents, exhibits and other information
which is incorporated by reference in the SEC Documents.
This
Agreement, the Notes, the Security Agreements and the Subordination Agreement
are sometimes herein collectively referred to as the “Transaction
Documents.” The shares of Common Stock issuable upon
conversion of the Series D Convertible Preferred Stock are herein collectively
referred to as the “Conversion
Shares.”
2. Representations and
Warranties of the Company. Except as set forth in the SEC
Documents and on the Disclosure Schedule attached hereto and made a part hereof
(the “Disclosure
Schedule”), the Company represents and warrants to and agrees with
Purchasers as follows:
(a) Except as
set forth in Section 2(a) of the Disclosure Schedule, the Company has filed in a
timely manner all documents that the Company was required to file with the SEC
under the Exchange Act since becoming subject to the requirements of the
Exchange Act. The SEC Documents as of their respective dates did not
and will not as of the Closing Date (after giving effect to any updated
disclosures therein), contain any untrue statement of a material fact or omit to
state a material fact necessary to make the statements therein, in the light of
the circumstances under which they were made, not misleading. The SEC
Documents and the documents incorporated or deemed to be incorporated by
reference therein, at the time they were filed or hereafter are filed with the
SEC, complied and will comply, at the time of filing, in all material respects
with the requirements of the Securities Act and/or the Exchange Act, as the case
may be, as applicable.
(b) The
Company has no subsidiaries. The Company has been duly
incorporated and is
validly existing in good standing as a corporation under the laws of its
jurisdiction of incorporation, with the requisite corporate power and authority
to own its properties and conduct its business as now conducted as described in
the SEC Documents and is duly qualified to do business as a foreign corporation
in good standing in all other jurisdictions where the ownership or leasing of
its properties or the conduct of its business requires such qualification,
except where the failure to be so qualified would not, individually or in the
aggregate, have a material adverse effect on the business, condition (financial
or other), earnings, management, properties, prospects or results of operations
of the Company (any such event, a “Material Adverse
Effect”); the Company does not own directly or indirectly any of the
capital stock or other equity or long-term debt securities of or have any equity
interest in any other individual, corporation, partnership, limited liability
company, joint venture, trust or unincorporated organization or a government or
agency or political subdivision thereof (a “Person”);
all of the outstanding shares of capital stock of the Company have been duly
authorized and validly issued, are fully paid and non-assessable, have been
issued in compliance with all federal and state securities laws, and were not
issued in violation of or subject to any preemptive or other rights to subscribe
for or purchase securities, and are owned free and clear of all liens,
encumbrances, equities, and restrictions on transferability (other than those
imposed by the Securities Act and the state securities or “Blue Sky” laws);
except as set forth in Section 2(b) of the Disclosure Schedule, no options,
warrants or other rights to purchase from the Company, agreements or other
obligations of the Company to issue or other rights to convert any obligation
into, or exchange any securities for, shares of capital stock of or ownership
interests in the Company are outstanding; and there is no agreement,
understanding or arrangement between the Company and any of its stockholders or
any other Person relating to the ownership or disposition of any capital stock
of the Company or the election of directors of the Company or the governance of
the Company’s affairs, and, if any, such agreements, understandings and
arrangements will not be breached or violated as a result of the execution and
delivery of, or the consummation of the transactions contemplated by, the
Transaction Documents; there are no bonds, debentures, notes or other
indebtedness having general voting rights (or convertible into securities having
such rights) (“Voting
Debt”) of the Company issued and outstanding; except as set forth in
Section 2(b) of the Disclosure Schedule, there are no existing options,
warrants, calls, subscriptions or other rights, agreements, arrangements or
commitments of any character, relating to the issued or unissued capital stock
of the Company, obligating the Company to issue, transfer, sell, redeem,
purchase, repurchase or otherwise acquire or cause to be issued, transferred,
sold, redeemed, purchased, repurchased or otherwise acquired any capital stock
or Voting Debt of, or other equity interest in, the Company or securities or
rights convertible into or exchangeable for such shares or equity interests or
obligations of the Company to grant, extend or enter into any such option,
warrant, call, subscription or other right, agreement, arrangement or
commitment; the issuance of the Notes or the Conversion Shares will not give
rise to any preemptive rights or rights of first refusal on behalf of any Person
or result in the triggering of any anti-dilution or other similar right; except
as set forth in Section 2(b) of the Disclosure Schedule, there are no agreements
or arrangements under which the Company is obligated to register the sale of any
of their securities under the Securities Act; there are no securities,
agreements, documents or instruments containing anti-dilution provisions that
will be triggered by the issuance of the Notes and the Conversion Shares; the
Company has made available to Purchasers a true, correct and complete copy of
its certificate of incorporation and bylaws, each as amended and as in effect on
the date hereof.
The
authorized capital stock of the Company (immediately prior to the Closing Date)
consists of 2,500,000,000 shares of Common Stock and 1,700,000,000 shares of
preferred stock, par value $0.001 per share (the “Preferred
Stock”), and 152,843,414 shares of Preferred Stock have been designated
as the Series A Convertible Preferred Stock (the “Series A
Preferred Stock”), 336,240,039 shares of Preferred Stock have been
designated as Series B-1 Convertible Preferred Stock (“Series B-1
Preferred Stock”), 140,000,000 shares of Preferred Stock have been
designated as Series B-2 Convertible Preferred Stock (“Series B-2
Preferred Stock”), and 400,000,000 shares of Preferred Stock have been
designated as Series C Convertible Preferred Stock (the “Series C
Preferred Stock”). The issued and outstanding capital stock of
the Company, as of immediately prior to the Closing Date and as of the Closing
Date, is as set forth in Section 2(c) of the Disclosure Schedule attached hereto
(other than for subsequent issuances, if any, pursuant to employee benefit plans
described in the SEC Documents or upon exercise of outstanding options, warrants
and other convertible securities described in the SEC
Documents). Each share of Preferred Stock is convertible into one
share of Common Stock. Except for preemptive rights or rights of
first refusal, which have been waived or complied with, the issuance of the
Securities will not give rise to any preemptive rights, rights of first refusal,
or similar rights on behalf of any person. There are no securities,
agreements, documents or instruments containing anti-dilution provisions that
will be triggered by the issuance of the Securities. The Company has
obtained the approval and consent of a majority of the outstanding shares of its
Series C Convertible Preferred Stock, as well as any other approvals required,
in order to authorize and designate a newly created series of the Company’s
preferred stock designated as Series D Convertible Preferred Stock (“Series D
Preferred Stock”). Subject to Section 3(d) hereof, the Series
D Preferred Stock shall initially have the rights, preferences and privileges as
are set forth in the Form of Certificate of Designations attached hereto as
Exhibit B (the
“Series D
Certificate of Designations”). Not later than July 31, 2009,
the authorized capital stock of the Company shall, pursuant to a duly authorized
and filed amendment to the Certificate of Incorporation of the Company, and
subject to appropriate adjustment for all stock splits, subdivisions,
combinations, recapitalizations and the like, consist of 4,000,000,000 shares of
Common Stock and 3,000,000,000 shares of Preferred Stock, with 152,843,414
shares of Preferred Stock designated as the Series A Preferred Stock,
336,240,039 shares of Preferred Stock designated as Series B-1 Stock,
140,000,000 shares of Preferred Stock designated as Series B-2 Preferred Stock,
400,000,000 shares of Preferred Stock designated as Series C Preferred Stock,
and 1,500,000,000 shares of Preferred Stock designated as Series D Preferred
Stock.
(c) The
Company has the requisite corporate power and authority to execute, deliver and
perform its obligations under the Transaction Documents. Each of the
Transaction Documents has been duly and validly authorized by the Company and,
when executed and delivered by the Company, will constitute a valid and legally
binding agreement of the Company, enforceable against the Company in accordance
with its terms, subject to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and similar laws of general applicability relating to
or affecting creditors’ rights generally and to general principles of
equity).
(d) Not later
than July 31, 2009, the shares of Series D Preferred Stock (and the shares of
Common Stock issuable upon conversion thereof) issuable upon conversion of the
Notes shall have been duly authorized and validly reserved for issuance, and
when issued upon conversion of the Notes in accordance with the terms thereof,
will have been validly issued, fully paid and non-assessable. The
Common Stock of the Company conforms to the description thereof contained in the
SEC Documents. No stockholder of the Company or other Person has any
preemptive, co-sale rights, rights of first refusal or any other similar rights
with respect to the Notes or the Common Stock, except for rights which have been
waived or fully complied with.
(e) No
consent, approval, order or authorization of, license, registration,
qualification, exemption or filing with any court or governmental agency or body
or third party is required for the performance of the Transaction Documents by
the Company or for the consummation by the Company of the transactions
contemplated thereby, or the application of the proceeds of the issuance of the
Securities as described in this Agreement, except for such consents, approvals,
authorizations, licenses, qualifications, exemptions or orders (i) as have
been obtained on or prior to the Closing Date, or (ii) as are not required
to be obtained on or prior to the Closing Date that will be obtained when
required.
(f) The
Company is not (i) in violation of its certificate of incorporation,
certificates of designations or bylaws (or similar organizational document),
(ii) in breach or violation of any statute, judgment, decree, order, rule
or regulation applicable to it or any of its properties or assets, or
(iii) in default (nor has any event occurred which with notice or passage
of time, or both, would constitute a default) in the performance or observance
of any obligation, agreement, covenant or condition contained in any contract,
indenture, mortgage, deed of trust, loan agreement, note, lease, license,
franchise agreement, permit, certificate or agreement or instrument to which it
is a party or to which it is subject.
(g) The
execution, delivery and performance by the Company of the Transaction Documents
and the consummation by the Company of the transactions contemplated thereby and
the fulfillment of the terms thereof will not (a) violate, conflict with or
constitute or result in a breach of or a default under (or an event that, with
notice or lapse of time, or both, would constitute a breach of or a default
under) any of (i) the terms or provisions of any contract, indenture,
mortgage, deed of trust, loan agreement, note, lease, license, franchise
agreement, permit, certificate or agreement or instrument to which the Company
is a party or to which any of its properties or assets are subject,
(ii) its certificate of incorporation, certificates of designations or
bylaws (or similar organizational document) or (iii) any statute, judgment,
decree, order, rule or regulation of any court or governmental agency or other
body applicable to the Company or any of its properties or assets or
(b) result in the imposition of any lien upon or with respect to any of the
properties or assets now owned or hereafter acquired by the Company; with
respect to (a)(i), (a)(iii) and (b) only, which violation, conflict, breach,
default or lien would, individually or in the aggregate, have a Material Adverse
Effect.
(h) The
audited financial statements included in the SEC Documents present fairly the
financial position, results of operations, cash flows and changes in
shareholders’ equity of the Company, at the dates and for the periods to which
they relate and have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis; the interim un-audited
financial statements included in the SEC Documents present fairly the financial
position, results of operations and cash flows of the Company, at the dates and
for the periods to which they relate subject to year-end audit adjustments and
have been prepared in accordance with generally accepted accounting principles
applied on a consistent basis with the audited financial statements included
therein; the selected financial and statistical data included in the SEC
Documents present fairly the information shown therein and have been prepared
and compiled on a basis consistent with the audited financial statements
included therein, except as otherwise stated therein; and each of the auditors
previously engaged by the Company or to be engaged in the future by the Company
is an independent certified public accountant as required by the Securities
Act. Except as set forth in the SEC Documents, since the date of the
latest interim un-audited balance sheet of the Company included in the SEC
Documents, (i) there has been no material change in total liabilities of the
Company and (ii) there have been no liabilities incurred outside of the
ordinary course of business. Except as set forth in the SEC
Documents, immediately after the Closing Date, the Company will not have any
indebtedness, except the Loans and indebtedness incurred in the ordinary course
of business and consistent with past practices. The Company is not a
guarantor or indemnitor of any indebtedness of any third party.
(i) There is
not pending or, to the knowledge of the Company, threatened, any action, suit,
proceeding, inquiry or investigation, governmental or otherwise, to which the
Company is a party, or to which its properties or assets are subject, before or
brought by any court, arbitrator or governmental agency or body, that, if
determined adversely to the Company, would, individually or in the aggregate,
have a Material Adverse Effect or that seeks to restrain, enjoin, prevent the
consummation of or otherwise challenge the issuance or sale of the Securities to
be sold hereunder or the application of the proceeds therefrom or the other
transactions described in the SEC Documents. The Company is not a party to or
subject to the provisions of any injunction, judgment, decree or order of any
court, regulatory body, administrative agency or other governmental agency or
body.
(j) Intellectual
Property.
(i) General. Section
2(k)(i) of the Disclosure Schedule sets forth with respect to the Company
Intellectual Property Rights: (A) for each patent and patent application, the
patent number or application serial number for each jurisdiction in which the
patent or application has been filed, the date filed or issued and the present
status thereof; (B) for each registered trademark, trade name or service ▇▇▇▇,
the application serial number or registration number for each applicable
country, province and/or state and the class of goods covered; (C) for each URL
or domain name, the registration date, any renewal date and name of registry;
and (D) for each registered copyrighted work, the number and date of
registration for each by country, province and/or state in which a copyright
application has been registered. In addition, true and correct copies
of all applications filed and registrations (including all pending applications
and application related documents) related to the Intellectual Property Rights
listed on Section 2(k)(i) of the Disclosure Schedule have been provided or made
available to Purchasers.
(ii) Sufficiency. The
Intellectual Property Rights and Technology owned or licensed by the Company
constitute all Intellectual Property Rights and Technology necessary for the
conduct of the Company’s business as presently conducted, including the design,
manufacture, license and sale of all products currently under development or in
production.
(iii) Royalties
and Licenses. Except pursuant to the licenses listed in Section
2(k)(iii) of the Disclosure Schedule, the Company has no obligation to
compensate or account to any person for the use of any of the Intellectual
Property Rights or Technology used by the Company in the conduct of the
business. Section 2(k)(iii) of the Disclosure Schedule sets forth all
third party components, whether hardware, firmware or software, that are
incorporated in or provided by the Company with its products, or that are
otherwise necessary for the manufacture of the Company’s
products. Section 2(k)(iii) of the Disclosure Schedule lists
all in-licenses of the Intellectual Property Rights and Technology applicable to
the Company’s products, other than standard, off-the-shelf software commercially
available on standard terms from third-party vendors.
(iv) Ownership. The
Company (A) owns all right, title and interest in and to the Company
Intellectual Property Rights and Company Technology, including the Intellectual
Property Rights and Technology listed in Section 2(k)(iv) of the Disclosure
Schedule, free and clear of any liens, claims or encumbrances and (B) has a
valid and enforceable right or license to use all other Intellectual Property
Rights and Technology used in the conduct of the business, and all such licensed
Intellectual Property Rights and rights to use Technology will not cease to be
valid and enforceable rights of the Company by reason of the execution, delivery
and performance of this Agreement or the consummation of the transactions
contemplated hereby. Without limiting the foregoing, the Company
Intellectual Property Rights and Company Technology have been: (1) developed by
employees of the Company within the scope of their employment and who have
assigned their rights to the Company pursuant to enforceable written agreements;
(2) developed by independent contractors or agents who have assigned their
rights to the Company pursuant to enforceable written agreements or (3)
otherwise acquired by the Company from a third party who has assigned all the
Intellectual Property Rights and ownership of all Technology it has developed on
the Company’s behalf to the Company.
(v) Absence
of Claims; Non-infringement. No claim or legal proceeding has been
instituted or is pending against the Company, or, to the knowledge of the
Company, is threatened, that challenges the right of the Company with respect to
the use or ownership of the Company Intellectual Property Rights or Company
Technology. Without limiting the foregoing, no interference,
opposition, reissue, reexamination, legal proceeding or other proceeding is or
has been pending or, to the best of the Company’s knowledge, threatened, in
which the scope, validity or enforceability of any of the Company Intellectual
Property Rights is being, has been or could reasonably be expected to be
contested or challenged. The Company’s past and present use of the
Company Intellectual Property Rights or Company Technology does not infringe
upon, misappropriate, breach or otherwise conflict with the rights of any other
Person anywhere in the world. The Company has not received any notice
alleging, and otherwise has no knowledge of (A) the invalidity of, or any
limitation on the Company’s right to use, any of the Company Intellectual
Property Rights or Company Technology or of (B) the alleged infringement,
misappropriation or breach of any Intellectual Property Rights of others by the
Company. The Company Intellectual Property Rights and Company
Technology are not subject to any judgment, decree, order, writ, award,
injunction or determination of an arbitrator, court or other governmental
authority affecting the rights of the Company with respect
thereto. To the knowledge of the Company, no person has interfered
with, infringed upon or misappropriated any of the Company Intellectual Property
Rights, or is currently doing so.
(vi) Licenses
to Third Parties. Section 2(k)(vi) of the Disclosure Schedule lists
all of the contracts pursuant to which any person has been granted any license
under, or otherwise has received or acquired any right (whether or not currently
exercisable) or interest in, any Company Intellectual Property Rights or Company
Technology. The Company is not bound by, and no Company Intellectual
Property Rights are subject to, any contract containing any covenant or other
provision that in any way limits or restricts the ability of the Company to use,
exploit, assert or enforce any of its Intellectual Property Rights anywhere in
the world. Without limiting the foregoing, the Company has not
granted any exclusive licenses to the Company Intellectual Property Rights or
Company Technology.
(vii) Protection
of Intellectual Property Rights. All of the registrations and pending
applications to governmental or regulatory bodies with respect to the Company
Intellectual Property Rights have been timely and duly filed, prosecution for
such applications has been attended to, all maintenance and related fees have
been paid and the Company has taken all other actions required to maintain their
validity and effectiveness. The Company has taken all steps
reasonably necessary or appropriate (including, entering into written
confidentiality and nondisclosure agreements with officers, directors,
subcontractors, employees, licensees and customers) to safeguard the Company
Intellectual Property Rights and maintain the secrecy and confidentiality of
trade secrets that are material to the Company. Without limiting the
foregoing, (A) there has been no misappropriation of any trade secrets or other
confidential Intellectual Property Rights or Technology used in connection with
the business by any person; (B) no employee, independent contractor or agent of
the Company has misappropriated any trade secrets of any other person in the
course of performance as an employee, independent contractor or agent of the
business and (C) no employee, independent contractor or agent of the Company is
in default or breach of any term of any employment agreement, nondisclosure
agreement, assignment of invention agreement or similar agreement or contract
relating in any way to the protection, ownership, development, use or transfer
of the Company Intellectual Property Rights and Company Technology.
(viii) Funding;
Certification with Standards Bodies. Except as set forth in Section 2(k)(viii)
of the Disclosure Schedule, no funding, facilities or personnel of any
governmental entity or educational institution were used, directly or
indirectly, to develop or create, in whole or in part, any of the Company
Intellectual Property Rights or Company Technology. The Company
has not made any submission or suggestion to, or otherwise participated in, and
is not subject to any agreement with, government, any standards bodies or other
entities that could obligate the Company to grant licenses to or otherwise
impair its control of Company Intellectual Property Rights.
(ix) “Intellectual
Property Rights” means all (A) United States and foreign patents and
patent applications and disclosures relating thereto (and any patents that issue
as a result of those patent applications), and any renewals, reissues,
reexaminations, extensions, continuations, continuations-in-part, divisions and
substitutions relating to any of the patents and patent applications; (B) United
States and foreign trademarks, service marks, trade dress, logos, 800 numbers,
trade names and corporate names, whether registered or unregistered, and the
goodwill associated therewith, together with any registrations and applications
for registration thereof; (C) United States and foreign copyrights and rights
under copyrights, whether registered or unregistered, including moral rights,
and any registrations and applications for registration thereof; (D) rights in
databases and data collections (including knowledge databases, customer lists
and customer databases) under the laws of the United States or any other
jurisdiction, whether registered or unregistered, and any applications for
registration therefor; (E) trade secrets and other rights in know-how and
confidential or proprietary information (including any business plans, designs,
technical data, customer data, financial information, pricing and cost
information, bills of material or other similar information); (F) URL and domain
name registrations; (G) inventions (whether or not patentable) and improvements
thereto; (H) all claims and causes of action arising out of or related to
infringement or misappropriation of any of the foregoing and (I) other
proprietary or intellectual property rights now known or hereafter recognized in
any jurisdiction.
(x) “Technology”
means tangible embodiments of the Intellectual Property Rights, whether in
electronic, written or other media, including software, technical documentation,
specifications, designs, bills of material, build instructions, test reports,
schematics, algorithms, application programming interfaces, user interfaces,
routines, formulae, databases, lab notebooks, processes, prototypes, samples,
studies or other know-how and other works of authorship.
(k) The
Company possesses all licenses, permits, certificates, consents, orders,
approvals and other authorizations from, and has made all declarations and
filings with, all federal, state, local and other governmental authorities
(including, but not limited to, those that may be required by the U.S. Food and
Drug Administration (the “FDA”)),
all self-regulatory organizations and all courts and other tribunals presently
required or necessary to own or lease, as the case may be, and to operate its
properties and to carry on its business as now or proposed to be conducted as
set forth in the SEC Documents (“Permits”),
except where the failure to obtain such Permits would not, individually or in
the aggregate, have a Material Adverse Effect. Each of such
Permits is in full force and effect, and the Company has not received any notice
of any proceeding relating to revocation or modification of any such Permit,
except where such revocation or modification would not, individually or in the
aggregate, be reasonably expected to have a Material Adverse
Effect.
(l) The
Company holds and is operating in compliance with such exceptions, permits,
licenses, franchises, authorizations and clearances of the FDA and/or any
committee thereof required, for the conduct of its business as currently
conducted (collectively, the “FDA
Permits”), and all such FDA Permits are in full force and
effect. The Company has fulfilled and performed all of its
obligations with respect to the FDA Permits, and, no event has occurred which
allows, or after notice or lapse of time would allow, revocation or termination
thereof or results in any other impairment of the rights of the holder of any
FDA Permit.
(m) The
Company: (i) is and at all times has been in material compliance with all
statutes, rules, regulations, or guidance applicable to the ownership, testing,
development, manufacture, packaging, processing, use, distribution, marketing,
labeling, promotion, sale, offer for sale, storage, import, export or disposal
of any product under development, manufactured or distributed by the Company
(“Applicable
Laws”); (ii) has not received any FDA Form 483, notice of adverse
finding, warning letter, untitled letter or other correspondence or notice from
the FDA or any other federal, state, local or foreign governmental or regulatory
authority alleging or asserting noncompliance with any Applicable Laws or any
licenses, certificates, approvals, clearances, authorizations, permits and
supplements or amendments thereto required by any such Applicable Laws (“Authorizations”);
(iii) has not received notice of any claim, action, suit, proceeding,
hearing, enforcement, investigation, arbitration or other action from the FDA or
any other federal, state, local or foreign governmental or regulatory authority
or third party alleging that any product operation or activity is in violation
of any Applicable Laws or Authorizations and has no knowledge that the FDA or
any other federal, state, local or foreign governmental or regulatory authority
or third party is considering any such claim, litigation, arbitration, action,
suit, investigation or proceeding; (iv) has not received notice that the
FDA or any other federal, state, local or foreign governmental or regulatory
authority has taken, is taking or intends to take action to limit, suspend,
modify or revoke any Authorizations and has no knowledge that the FDA or any
other federal, state, local or foreign governmental or regulatory authority is
considering such action; (v) has filed, obtained, maintained or submitted
all reports, documents, forms, notices, applications, records, claims,
submissions and supplements or amendments as required by any Applicable Laws or
Authorizations and that all such reports, documents, forms, notices,
applications, records, claims, submissions and supplements or amendments were
complete and correct on the date filed (or were corrected or supplemented by a
subsequent submission); and (vi) has not, either voluntarily or
involuntarily, initiated, conducted, or issued or caused to be initiated,
conducted or issued, any recall, market withdrawal or replacement, safety alert,
post sale warning, “dear doctor” letter, or other notice or action relating to
the alleged lack of safety or efficacy of any product or any alleged product
defect or violation and, to the Company’s knowledge, no third party has
initiated, conducted or intends to initiate any such notice or
action.
(n) (i) The
Company is not in material violation of any federal, state, local or foreign
statute, law, rule, regulation, ordinance, code, policy or rule of common law or
any judicial or administrative interpretation thereof, including any judicial or
administrative order, consent, decree or judgment, relating to pollution or
protection of human health, the environment (including, without limitation,
ambient air, surface water, groundwater, land surface or subsurface strata),
natural resources or wildlife, including, without limitation, laws and
regulations relating to the release or threatened release of chemicals,
pollutants, contaminants, wastes, toxic substances, hazardous substances,
petroleum, petroleum products or by-products, asbestos-containing materials or
mold (collectively, “Hazardous
Materials”) or to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling of, or exposure to,
Hazardous Materials (collectively, “Environmental
Laws”), including, without limitation, to the best of the Company’s
knowledge, the handling, transport, and disposal of the by-product generated by
the Company’s recycling operations, (ii) the Company has all permits,
authorizations and approvals required under any applicable Environmental Laws
for the operation of its business and facilities (“Environmental
Permits”) and is in material compliance with their requirements, (iii) no
material expenditures will be required to maintain compliance with applicable
Environmental Laws or Environmental Permits; (iv) there are no pending or
threatened administrative, regulatory or judicial actions, suits, demands,
demand letters, claims, liens, notices of noncompliance or violation,
investigation or proceedings relating to any Environmental Law against the
Company and (v) there are no events or circumstances that would reasonably be
expected to form the basis of an order for clean-up or remediation, or an
action, suit or proceeding by any private party or governmental body or agency,
against or affecting the Company relating to Hazardous Materials or
Environmental Laws, including, without limitation, the Company’s leasing of
facilities located at the Riverbank Army Ammunition Plant Superfund site (EPA
ID# CA7210020759).
(o) Subsequent
to the respective dates as of which information is given in the SEC Documents,
(i) the Company has not incurred any material liabilities or obligations,
direct or contingent, or entered into any material transactions not in the
ordinary course of business or (ii) the Company has not purchased any of
its outstanding capital stock, or declared, paid or otherwise made any dividend
or distribution of any kind on any of its capital stock or otherwise,
(iii) there has not been any material increase in the indebtedness of the
Company, (iv) there has not occurred any event or condition, individually
or in the aggregate, that has had a Material Adverse Effect, (v) the
Company has not sustained any material loss or interference with respect to its
business or properties from fire, flood, hurricane, earthquake, accident or
other calamity, whether or not covered by insurance, or from any labor dispute
or any legal or governmental proceeding; (vi) the Company has not received any
notice from the SEC in connection with any investigation or action by the SEC
that seeks to, or could reasonably be expected to result in, the restatement by
the Company of any of its current or previously disclosed financial statements;
(vii) there has not been any material change in compensation agreement or
arrangement with any executive officer or director of the Company; (viii) there
has not been any loan or guarantees made by the Company to or for the benefit of
its employees, officer or directors or any members of their immediate families,
other than travel advances and other advances made in the ordinary course of
business and consistent with past practice; and (ix) the Company has not altered
its method of accounting or changed its auditors. The Company has not
taken any steps to seek protection pursuant to any bankruptcy law nor does the
Company have any knowledge or reason to believe that its creditors intend to
initiate involuntary bankruptcy proceedings or any actual knowledge of any fact,
which would reasonably lead a creditor to do so. Based on the
financial condition of the Company as of the Closing Date, after giving effect
to transactions contemplated hereby to occur on the Closing Date, the Company
reasonably expects to have sufficient cash on hand to pay all of its currently
foreseeable expenses for at least the next four months.
(p) There are
no material legal or governmental proceedings nor are there any material
contracts or other documents required by the Securities Act to be described in a
prospectus that are not described in the SEC Documents. The Company
is not in default under any of the contracts described in the SEC Documents, has
not received a notice or claim of any such default and does not have knowledge
of any breach of such contracts by the other party or parties thereto, except
for such defaults or breaches as would not, individually or in the aggregate,
have a Material Adverse Effect.
(q) The
Company has good and marketable title to all real property described in the SEC
Documents as being owned by it and good and marketable title to the leasehold
estate in the real property described therein as being leased by it, free and
clear of all liens, charges, encumbrances or restrictions, except, in each case,
as would not, individually or in the aggregate, have a Material Adverse
Effect. All material leases, contracts and agreements to which the
Company is a party or by which it is bound are valid and enforceable against the
Company, are, to the knowledge of the Company, valid and enforceable against the
other party or parties thereto and are in full force and effect.
(r) The
Company has filed all necessary federal, state and foreign income and franchise
tax returns, except where the failure to so file such returns would not,
individually or in the aggregate, have a Material Adverse Effect, and has paid
all taxes shown as due thereon; and other than tax deficiencies which the
Company is contesting in good faith and for which adequate reserves have been
provided in accordance with generally accepted accounting principles,
there is no material tax deficiency that has been asserted against the
Company.
(s) The
Company is not, and immediately after the Closing Date will not be, required to
register as an “investment company” or a company “controlled by” an “investment
company” within the meaning of the Investment Company Act of 1940, as amended
(the “Investment
Company Act”).
(t) None of
the Company or, to the knowledge of the Company, any of its directors, officers,
employees, agents or controlling persons, has taken, directly or indirectly, any
action designed, or that might reasonably be expected, to cause or result in the
stabilization or manipulation of the price of the Common Stock.
(u) None of
the Company or any of its affiliates (as defined in Rule 501(b) of
Regulation D under the Securities Act) directly, or through any agent,
engaged in any form of general solicitation or general advertising (as those
terms are used in Regulation D under the Securities Act) in connection with
the offering of the Securities or engaged in any other conduct that would cause
such offering to be constitute a public offering within the meaning of
Section 4(2) of the Securities Act. Assuming the accuracy of the
representations and warranties of the Purchasers in Section 5 hereof, it is
not necessary in connection with the offer, sale and delivery of the Securities
to the Purchasers in the manner contemplated by this Agreement to register any
of the Securities under the Securities Act.
(v) There is
no strike, labor dispute, slowdown or work stoppage with the employees of the
Company which is pending or, to the knowledge of the Company,
threatened.
(w) The
Company maintains insurance underwritten by insurers of recognized financial
responsibility covering its properties, operations, personnel and businesses
comparable to other companies of its size and similar business, including,
without limitation, appropriate general business, environmental and directors’
and officers’ liability insurance. All such insurance is in full
force and effect.
(x) The
Company maintains internal accounting controls which provide reasonable
assurance that (A) transactions are executed in accordance with
management’s authorization, (B) transactions are recorded as necessary to
permit preparation of its financial statements and to maintain accountability
for its assets, (C) access to its material assets is permitted only in
accordance with management’s authorization and (D) the values and amounts
reported for its material assets are compared with its existing assets at
reasonable intervals.
(y) Except as
disclosed in the SEC Documents, the Company maintains disclosure
controls and procedures (as such term is defined in Rule 13a-15(e) of the
Exchange Act) that comply with the requirements of the Exchange Act; such
disclosure controls and procedures have been designed to ensure that material
information relating to the Company is made known to the Company’s principal
executive officer and principal financial officer by others within those
entities; and such disclosure controls and procedures are
effective.
(z) No Person
has or will have a claim for services, either in the nature of a finder’s fee or
financial advisory fee, with respect to the offering of the Securities and the
transactions contemplated by the Transaction Documents.
(aa) The
Common Stock is traded on the National Association of Securities Dealers OTC
Bulletin Board (the “OTC Bulletin
Board”). The Company currently is not in violation of, and the
consummation of the transactions contemplated by the Transaction Documents will
not violate, any rule of the OTC Bulletin Board.
(bb) The
Company is eligible to use Form S-1 for the resale of the Conversion Shares by Purchasers or their
transferees. The Company has no reason to believe that it is not
capable of satisfying the registration or qualification requirements (or an
exemption therefrom) necessary to permit the resale of the Conversion
Shares under the
securities or “blue sky” laws of any jurisdiction within the United
States.
(cc) None of
the Company, any of its affiliates, or any Person acting on their behalf has,
directly or indirectly, made any offers or sales of any security or solicited
any offers to buy any security, under circumstances that would require
registration of any of the Securities under the Securities Act or cause this
offering of the Securities to be integrated with prior offerings by the Company
for purposes of the Securities Act or any applicable stockholder approval
provisions, including without limitation, under the rules and regulations of the
OTC Bulletin Board.
(dd) The
Company and its Board of Directors have taken all necessary action, if any, to
render inapplicable any control share acquisition, business combination, poison
pill (including any distribution under a rights agreement) or other similar
anti-takeover provision under the Company’s charter documents or the laws of its
state of incorporation that is applicable to any of the Purchasers as a result
of the Purchasers and the Company fulfilling their obligations or exercising
their rights under the Transaction Documents, including, without limitation, as
a result of the Company’s issuance of the Securities and the Purchasers’
ownership of the Securities.
(ee) The
Company has described in, or filed as an exhibit to, the SEC Documents filed
prior to the date of this Agreement all of the following types of documents,
agreements, plans or arrangements that are required by federal securities laws
to be described in, or filed as an exhibit to, the SEC
Documents: employment agreements, consulting agreements, deferred
compensation, pension or retirement agreements or arrangements (including all
“employee pension benefit plans” as defined in Section 3(2) of ERISA, bonus,
incentive or profit-sharing plans or arrangements, or labor or collective
bargaining agreements in effect by the Company) (the “ERISA
Documents”). Except for any compliance failures that,
individually or in the aggregate, are not reasonably likely to have a Material
Adverse Effect, (a) the Company is in compliance in all material respects with
all applicable laws and regulations relating to labor, employment, fair
employment practices, terms and conditions of employment, and wages and hours,
and with the terms of the ERISA Documents; and (b) each such ERISA Document is
in compliance in all material respects with all applicable requirements of
ERISA. To the Company’s knowledge, none of the Company’s employees
are obligated under any contract (including licenses, covenants or commitments
of any nature) or other agreement, or subject to any judgment, decree or order
of any court or administrative agency, that would interfere with the use of his
or her employment obligations to the Company or that would conflict with the
Company’s business as now conducted or proposed to be conducted, except for such
contracts and other agreements, judgments, decrees and orders that would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.
(ff) Except as
disclosed in the SEC Documents, no transaction has occurred: (A) between or
among the Company and any of its officers or directors, stockholders or any
affiliate of any such officer or director or stockholder; and (B) to the
Company’s knowledge, between or among any stockholders of the
Company.
3. Certain Covenants of the
Company. The Company covenants and agrees with each Purchaser
as follows:
(a) Use of
Proceeds. The proceeds of the issuance of the Securities as
described in this Agreement shall be used to fund the ordinary course working
capital needs of the Company. None of the proceeds of the Loans will
be used to reduce or retire any existing debt of the Company (other than for
trade payables), except to the extent any such notes or debt are being cancelled
as consideration for purchase of Securities by a Purchaser hereunder and as
specifically set forth on Schedule I
hereto.
(b) No Integrated
Offering. None of the Company or any of its affiliates will
sell, offer for sale or solicit offers to buy or otherwise negotiate in respect
of any “security” (as defined in the Securities Act) that could be integrated
with the sale of the Securities in a manner which would require the registration
under the Securities Act of the Securities.
(c) Investment Company Act
Status. The Company will not become, at any time prior to the
expiration of three years after the Closing Date, an open-end investment
company, unit investment trust, closed-end investment company or face-amount
certificate company that is or is required to be registered under the Investment
Company Act.
(d) Voting
Rights. The Company shall file the Series D Certificate of
Designations with the Delaware Secretary of State no later than July 31, 2009.
The Company shall file an amendment to the Series C Certificate of Designations
changing the conversion rate set forth in Section (c) from $.015 to $.004 no
later than July 31, 2009. The Company shall file the amendment to the
Certificate of Incorporation of the Company referenced in Section 2(c) hereof no
later than July 31, 2009. Until such time that the Loans have been
paid in full, the Company shall not, without the prior written consent of the
holders of at least 60% of the aggregate principal amount of the Notes then
outstanding, and notwithstanding the absence of any issuances of Series D
Preferred Stock to the Purchasers, amend the Series D Certificate of
Designations as initially filed by the Company, nor engage in any action that
would, pursuant to the terms of the Series D Certificate of Designations,
require the affirmative vote of a majority or more of the then outstanding
shares of Series D Preferred Stock. For so long as the Notes to
Peninsula are outstanding, or Peninsula is still the holder of at least fifty
percent (50%) of any shares of Series D Preferred Stock originally issued to
Peninsula, Peninsula shall have the right to elect one (1) director to the
Company’s Board of Directors. The individual elected to such seat
shall not be removed absent gross misconduct. In the case of any
vacancy in the office of a director elected by Peninsula to the Board of
Directors, Peninsula may elect a successor to hold office for the unexpired term
of the director whose place shall be vacant. Additionally, for so
long as the Notes to Peninsula are outstanding, or Peninsula is still the holder
of at least fifty percent (50%) of any shares of Series D Preferred Stock
originally issued to Peninsula, the Company shall establish an Operations
Committee of the Board of Directors, and Peninsula shall have the right to elect
its one (1) director to such Operations Committee. The
individual elected to such seat shall not be removed absent gross
misconduct. In the case of any vacancy in the office of a director
elected by Peninsula to the Operations Committee, Peninsula may elect a
successor to hold office for the unexpired term of the director whose place
shall be vacant.
(e) Further
Action. The Company will use its best efforts to do and
perform all things required to be done and performed by it under this Agreement
and the other Transaction Documents and to satisfy all conditions precedent on
its part to the obligations of the Purchasers to purchase and accept delivery of
the Securities.
(f) Investor Rights
Agreement. The Purchasers
shall be entitled, with respect to any shares of the Company’s capital stock
issued upon conversion of the Notes to all of the registration and
other rights set forth in the Company’s Investor Rights Agreement dated as of
June 4, 2008, as amended September 15, 2008 and December 17, 2008 (the “Rights
Agreement”), to the same extent and on the same terms and conditions as
possessed by the investors thereunder and as if such were included in the
definition of “Registrable Securities” in the Rights
Agreement. Peninsula shall also be entitled to all of the rights of a
“Major Holder” under the Rights Agreement as if its Note had been converted into
equity in the Company (and notwithstanding the absence of such conversion). No
later than July 31, 2009, the Company shall take such action as may be
reasonably necessary to assure that the granting of such rights to the
Purchasers does not violate the provisions of the Rights Agreement or any of the
Company’s charter documents or rights of prior grantees of registration
rights.
(g) Further Indebtedness. The Company hereby covenants and
agrees that so long as any principal amount and accrued interest remains
outstanding under the Notes issued pursuant to the terms of this Agreement, that
it shall not, without the written consent of Purchasers holding Notes
representing at least 60% of the principal amount of all Notes then outstanding,
incur, guaranty, assume or otherwise become obligated to pay indebtedness, other
than amounts under equipment leases existing as of the Initial Closing Date,
accounts payable and other obligations incurred in the ordinary course of
business, other than pursuant to this Agreement.
4. Conditions of the
Purchasers’ Obligations. The obligation of each Purchaser to
purchase and pay for the Securities at each Closing Date is subject to the
following conditions unless waived by the Purchaser:
(a) The
representations and warranties of the Company contained in this Agreement shall
be true and correct on and as of the Closing Date. The Company shall have
complied in all material respects with all agreements and satisfied all
conditions on its part to be performed or satisfied hereunder at or prior to the
Closing Date.
(b) None of
the issuance and sale of the Securities pursuant to this Agreement or any of the
transactions contemplated by any of the other Transaction Documents shall be
enjoined (temporarily or permanently) and no restraining order or other
injunctive order shall have been issued in respect thereof; and there shall not
have been any legal action, order, decree or other administrative proceeding
instituted or, to the Company’s knowledge, threatened against the Company or
against any Purchaser relating to the issuance of the Securities or any
Purchaser’s activities in connection therewith or any other transactions
contemplated by this Agreement, the other Transaction Documents or the SEC
Documents.
(c) The
Purchasers shall have received certificates, dated the Closing Date and signed
by the Chief Executive Officer and the Chief Financial Officer of the Company,
to the effect of Sections 4(a) and 4(b).
(d) The
Purchasers shall have received the Notes in the forms attached hereto as Exhibit
A.
(e) The
Purchasers shall have received an opinion of legal counsel to the Company, with
respect to the Securities and other customary matters in the form attached
hereto as Exhibit C.
(f) The
Purchasers shall have received the Security Agreements in the forms attached
hereto as Exhibit
D-1 and Exhibit
D-2.
(g) The
Purchasers shall have received the Subordination Agreement in the form attached
hereto as Exhibit
E.
(h) The
Purchasers shall be satisfied, in their sole discretion, with the results of
their due diligence investigation with respect to the Company.
(i) The
Company shall have received all necessary governmental and third party waivers,
consents and approvals.
(j) The
Company shall have complied with all applicable securities laws.
(k) As soon
as reasonably practicable following the Initial Closing, the Company shall
receive a fairness opinion with regard to valuation matters.
(l) On or
prior to the date of the Initial Closing, the Company shall have filed (or
authorized the filing of) all UCC and similar financing statements in form and
substance satisfactory to the Purchasers at the appropriate offices to create a
valid and perfected security interest in the Collateral (as defined in the
Security Agreements).
(m) On or
prior to the Closing Date, the Company shall have furnished to the Purchasers
such additional information, certificates and documents as they may reasonably
require for the purpose of enabling them to pass upon the issuance and sale of
the Securities as contemplated herein, or to evidence the accuracy of any of the
representations or warranties, or the fulfillment of any of the conditions,
herein contained, or otherwise in connection with the transaction contemplated
hereby; and all opinions and certificates mentioned above or elsewhere in this
Agreement shall be reasonably satisfactory in form and substance to the
Purchasers.
5. Representations and
Warranties of the Purchasers.
(a) Each
Purchaser represents and warrants to the Company that the Securities to be
acquired by it hereunder (including the Conversion Shares that it may acquire
upon conversion thereof) are being acquired for its own account for investment
and with no present intention of distributing or reselling such Securities
(including the Conversion Shares that it may acquire upon conversion thereof) or
any part thereof or interest therein in any transaction which would be in
violation of the securities laws of the United States of America or any
State. Nothing in this Agreement, however, shall prejudice or
otherwise limit a Purchaser’s right to sell or otherwise dispose of all or any
part of such Conversion Shares under an effective registration statement under
the Securities Act and in compliance with applicable state securities laws or
under an exemption from such registration.
(b) Each
Purchaser understands that the Securities and Conversion Shares have not been
registered under the Securities Act and may not be offered, resold, pledged or
otherwise transferred except (a) pursuant to an exemption from registration
under the Securities Act (and, if requested by the Company, based upon an
opinion of counsel acceptable to the Company) or pursuant to an effective
registration statement under the Securities Act and (b) in accordance with
all applicable securities laws of the states of the United States and other
jurisdictions.
(c) Each
Purchaser agrees to the imprinting, so long as appropriate, of the following
legend on the Securities (including the Conversion Shares that it may acquire
upon conversion thereof):
THE
SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES
SECURITIES ACT OF 1933, AS AMENDED (THE "1933 ACT"), OR UNDER THE PROVISIONS OF
ANY APPLICABLE STATE SECURITIES LAWS, BUT HAVE BEEN ACQUIRED BY THE REGISTERED
HOLDER HEREOF FOR PURPOSES OF INVESTMENT AND IN RELIANCE ON STATUTORY EXEMPTIONS
UNDER THE 1933 ACT, AND UNDER ANY APPLICABLE STATE SECURITIES
LAWS. THESE SECURITIES MAY NOT BE SOLD, PLEDGED, TRANSFERRED OR
ASSIGNED EXCEPT IN A TRANSACTION WHICH IS EXEMPT UNDER THE PROVISIONS OF THE
1933 ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT.
(d) The
legend set forth above may be removed if and when the Securities or Conversion
Shares are disposed of pursuant to an effective registration statement under the
Securities Act or, in the opinion of counsel to the Company experienced in the
area of United States Federal securities laws, such legends are no longer
required under applicable requirements of the Securities Act. The
Company agrees that it will provide each Purchaser, upon request, with a
substitute certificate, not bearing such legend at such time as such legend is
no longer applicable.
(e) Each
Purchaser is an “accredited investor” within the meaning of Rule 501(a) of
Regulation D under the Securities Act. None of the Purchasers learned
of the opportunity to acquire Securities or any other security issuable by the
Company through any form of general advertising or public
solicitation.
(f) Each
Purchaser represents and warrants to the Company that it 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, having been represented by counsel, and has so evaluated the merits
and risks of such investment and is able to bear the economic risk of such
investment and, at the present time, is able to afford a complete loss of such
investment.
(g) Each
Purchaser represents and warrants to the Company that the purchase of the
Securities to be purchased by it has been duly and properly authorized and this
Agreement has been duly executed and delivered by it or on its behalf and
constitutes the valid and legally binding obligation of the Purchaser,
enforceable against the Purchaser in accordance with its terms, subject to
bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and
similar laws of general applicability relating to or affecting creditors’ rights
generally and to general principles of equity.
(h) Each
Purchaser represents and warrants to the Company that neither it nor any of its
directors, officers, employees, agents, partners, members, or controlling
persons has taken, or will take, directly or indirectly, any actions designed,
or that might reasonably be expected to cause or result in, the destabilization
or manipulation of the price of the Common Stock.
(i) Each
Purchaser acknowledges it or its representatives have reviewed the SEC Documents
and further acknowledges that it or its representatives have 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; and (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 in the Securities.
(j) Each
Purchaser represents and warrants to the Company that it has based its
investment decision solely upon the information contained in the SEC Documents
and such other information as may have been provided to it or its
representatives by the Company in response to its inquiries, and has not based
its investment decision on any research or other report regarding the Company
prepared by any third party (“Third Party
Reports”). Each Purchaser understands and acknowledges that
(i) the Company does not endorse any Third Party Reports and (ii) its
actual results may differ materially from those projected in any Third Party
Report.
(k) Each
Purchaser understands and acknowledges that (i) any forward-looking
information included in the SEC Documents is subject to risks and uncertainties,
including those risks and uncertainties set forth in the SEC Documents; and
(ii) the Company’s actual results may differ materially from those
projected by the Company or its management in such forward-looking
information.
(l) Each
Purchaser understands and acknowledges that (i) the Securities are offered
and sold 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 that the
Company and its counsel will rely upon, the accuracy and truthfulness of the
foregoing representations and Purchaser hereby consents to such
reliance. Each Purchaser also understands that there is no assurance
that any exemption from registration under the Securities Act will be available
and that, even if available, such exemption may not allow Purchaser to transfer
all or any portion of the Securities or Conversion Shares under the
circumstances, in the amounts or at the times Purchaser might
propose.
(m) None of
the Purchasers is a broker or dealer registered pursuant to Section 15 of
the Exchange Act (a “registered
broker-dealer”) or is affiliated with a registered
broker-dealer.
6. Covenants of
Purchasers.
(a) No Short
Sale. Purchasers, on behalf of themselves and their affiliates
and the permitted assignee of any Conversion Shares, hereby covenant and agree
not to, directly or indirectly, offer to “short sell”, contract to “short sell”
or otherwise “short sell” any securities of the Company prior to the Closing
Date.
(b) Agreement to Convert or
Subordinate Notes. All Notes may be converted or subordinated
at any time upon approval of the same by holders of at least 60% of the
principal amount of the Notes then outstanding. In the event of such
conversion of the Notes pursuant to this Section 6(b), the Notes shall
immediately accrue the full amount of interest that would otherwise be payable
as of the Maturity Date (as defined in such Notes), as if such Notes were
outstanding on such date, notwithstanding the fact such Notes would have been
converted prior to that date.
7. [Intentionally
Left Blank]
8. Indemnification. The
Company agrees to indemnify and hold harmless each of the Purchasers, any
affiliates of the Purchasers, and each Person, if any, who controls, is
controlled by or under common control with any Purchaser within the meaning of
the Securities Act (each, an “Indemnified
Party”), against any losses, claims, actions, damages, liabilities or
expenses (collectively, “Losses”),
joint or several, to which such Indemnified Party may become subject under the
Securities Act, the Exchange Act, or any other federal or state statutory law or
regulation, or at common law or otherwise (including in settlement of any
litigation, if such settlement is effected with the written consent of the
Company), insofar as such Losses (or actions in respect thereof as contemplated
below) arise out of or are based in whole or in part on any inaccuracy in the
representations and warranties of the Company contained in this Agreement or any
failure of the Company to perform its obligations hereunder, and will reimburse
each Indemnified Party for any legal and other expenses reasonably incurred as
such expenses are incurred by such Indemnified Party in connection with
investigating, defending, settling, compromising or paying any such Loss; provided, however, that the
Company will not be liable in any such case to the extent that any such Loss
arises out of or is based upon the inaccuracy of any representations made by
such Indemnified Party herein.
9. Termination.
(a) This
Agreement may be terminated by Peninsula or the Trident Lenders by notice to the
Company given in the event that (i) the Company shall have failed, refused
or been unable to satisfy all material conditions on its part to be performed or
satisfied hereunder on or prior to the Closing Date or (ii) if after the
date of this Agreement but prior to the Closing Date, trading in securities of
the Company on the OTC Bulletin Board shall have been suspended and the Company
ceases to be publicly traded.
(b) This
Agreement may be terminated by mutual written consent of the Company and the
Purchasers.
10. Notices. All
communications hereunder shall be in writing and shall be hand delivered, mailed
by first-class mail, couriered by next-day air courier or by facsimile and
confirmed in writing (i) if to the Company, at the addresses set forth
below, or (ii) if to a Purchaser, to the address set forth for such party
on the signature pages hereto.
If to the
Company:
ECO2
Plastics, Inc.
▇▇ ▇▇▇
▇▇▇
▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Chief
Executive Officer
Telephone:
▇▇▇-▇▇▇-▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
with a
copy to:
The ▇▇▇▇
Law Group, PLLC
▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇
▇▇▇▇
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
All such
notices and communications shall be deemed to have been duly
given: (i) when delivered by hand, if personally delivered;
(ii) five business days after being deposited in the mail, postage prepaid,
if mailed certified mail, return receipt requested; (iii) one business day
after being timely delivered to a next-day air courier guaranteeing overnight
delivery; (iv) the date of transmission if sent via facsimile to the
facsimile number as set forth in this Section or the signature page hereof prior
to 5:00 pm in the time zone of the recipient on a business day, with
confirmation of successful transmission or (v) the business day following
the date of transmission if sent via facsimile at a facsimile number set forth
in this Section or on the signature page hereof after 5:00 p.m. in the time zone
of the recipient or on a date that is not a business day. Change of a
party’s address or facsimile number may be designated hereunder by giving notice
to all of the other parties hereto in accordance with this Section.
11. Survival
Clause. The respective representations, warranties, agreements
and covenants of the Company and the Purchasers set forth in this Agreement
shall survive until the first anniversary of the Closing.
12. Enforcement. If
any action at law or in equity is necessary to enforce or interpret the terms of
this Agreement or the Certificates of Designations, the prevailing party or
parties shall be entitled to receive from the other party or parties reasonable
attorneys’ fees, costs and necessary disbursements in addition to any other
relief to which the prevailing party or parties may be entitled.
13. Successors and
Assigns. This Agreement shall inure to the benefit of and be
binding upon Purchasers and the Company and their respective successors and
legal representatives. Neither the Company nor any Purchaser may
assign this Agreement or any rights or obligation hereunder without the prior
written consent of the other parties; provided, that
Peninsula may assign this Agreement to an Affiliate without such
consent. For purposes of this Agreement, “Affiliate” means any
other party that, directly or indirectly, through one or more intermediaries,
controls, is controlled by, or is under control with, such party.
14. Amendment and
Waiver. Except as otherwise expressly provided herein,
this Agreement may be amended or modified, and any obligations of the Company
and rights of the Purchasers hereunder may waived, in each case only upon the
written consent of (i) the Company and (ii) the holders of at least 60% of the
principal amount of then outstanding Notes; provided, however, that no
amendment of this Agreement shall materially and adversely affect the rights of
a Purchaser in a manner that materially and disproportionately discriminates
against such Purchaser by its express terms in relation to the other Purchasers
without such Purchaser's written consent. Notwithstanding anything to
the contrary herein, Schedule I hereto may
be amended and revised by the Company in connection with Additional Closings (as
defined in Section 1(e) above) without requiring the consent of any of the other
parties hereto. Any amendment or waiver effected in accordance with
this Section 14 shall be binding upon each Purchaser, each future Purchaser, and
the Company. The Purchasers and their respective successors and
assigns acknowledge that by the operation of this Section 14, the holders of at
least 60% of the Notes then outstanding, acting in conjunction with the Company,
will have the right and power to diminish or eliminate any or all rights
pursuant to this Agreement.
15. Entire Agreement; No Third
Party Beneficiary. This Agreement, together with the other
Transaction Documents, constitutes the entire agreement among the parties hereto
and supersedes all prior agreements, understandings and arrangements, oral or
written, among the parties hereto with respect to the subject matter hereof and
thereof. Disclosure by the Company in any Schedule to this Agreement
shall be deemed applicable to all applicable provisions hereof. This
Agreement is not intended to confer upon any Person not a party hereto (or their
successors and permitted assigns) any rights or remedies hereunder, except as
provided in Section 8 hereof.
16. Severability. If
any provision of this Agreement is held to 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 affected or impaired
thereby.
17. APPLICABLE
LAW. THE VALIDITY AND INTERPRETATION OF THIS AGREEMENT, AND
THE TERMS AND CONDITIONS SET FORTH HEREIN SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA, WITHOUT GIVING EFFECT TO
PROVISIONS RELATING TO CONFLICTS OF LAW TO THE EXTENT THE APPLICATION OF THE
LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY. THE PARTIES
HEREBY IRREVOCABLY AND UNCONDITIONALLY AGREE THAT ACTIONS, SUITS OR PROCEEDINGS
ARISING OUT OF OR RELATING TO THIS AGREEMENT MAY BE BROUGHT ONLY IN STATE OR
FEDERAL COURTS LOCATED IN THE STATE OF CALIFORNIA AND HEREBY SUBMIT TO THE
EXCLUSIVE JURISDICTION OF SUCH COURTS FOR SUCH PURPOSE.
18. Waiver of Participation
Rights. By execution of this Agreement, each Purchaser
expressly waives any right of first refusal, pre-emptive right, right of first
offer or other participation right (and any related document delivery and notice
rights) with respect to the issuance of the Notes and any shares of the
Company’s capital stock issuable upon conversion, including without limitation,
all rights under Section 7 of the Rights Agreement to the extent the Purchaser
is a party thereto and qualifies as a “Major Holder” thereunder.
19. Default. Notwithstanding
anything to the contrary contained in this Agreement or the Notes, upon a
default by the Company of Section 3(d) or 3(f) hereof, which default, if
curable, is not cured within ten (10) days following written notice from
Peninsula to the Company specifying the default in reasonable detail, Peninsula
shall have the right, without the affirmative vote of 60% of the holders of the
aggregate principal amount of the Notes then outstanding, to call an Event of
Default under its Note and exercise all remedies provided therein.
20. No
Novation. The Bridge Notes shall be amended and restated
pursuant to this Agreement, but nothing herein shall discharge the obligations
of, nor constitute a novation with respect to, the indebtedness of the Company
pursuant to the Bridge Notes.
21. Subordination
Agreement. Each Purchaser obtaining Notes in connection with
an Additional Closing and executing a counterpart signature to this Agreement
hereby agrees to be bound by the Subordination Agreement as a “Senior Lender”
thereunder without further action required on the part of such Purchaser or any
other party.
22. Counterparts. This
Agreement may be executed in two or more counterparts and may be delivered by
facsimile transmission, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
[signature
pages follow]
IN WITNESS WHEREOF, the
parties hereto have caused this Agreement to be executed by their duly
authorized representatives as of the day and year first above
written.
ECO2
PLASTICS, INC.
By:
Name: ▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇
Title: Chief
Financial Officer
Trident
Capital Fund-VI, L.P.
Trident
Capital Fund-VI Principals Fund, L.L.C.
Executed
by the undersigned as an authorized signatory of the General Partner of Trident
Capital Fund-VI, L.P. and of the Managing Member of Trident Capital Fund-VI
Principals Fund, L.L.C.
(signature)
(print name)
|
|
Address: ▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
|
|
|
▇▇▇▇
▇▇▇▇, ▇▇ ▇▇▇▇▇
|
|
|
Attn: ▇▇▇▇▇▇
▇. ▇▇▇▇▇▇
|
|
|
Chief
Administrative Officer and General Counsel
|
|
Fax:
(▇▇▇) ▇▇▇-▇▇▇▇
|
▇▇▇▇▇▇▇▇▇ Capital Partners,
LLC
By:
______________________________________
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇,
Manager
Address: ______________
______________
Fax: ______________
Peninsula
Packaging, LLC
By:
____________________________________
Name: ▇▇▇▇ ▇▇▇▇▇▇
Title: Managing Director
Address: c/o
Stradley Ronon ▇▇▇▇▇▇▇ & ▇▇▇▇▇, LLP
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇. ▇▇▇▇▇▇,
Esquire
Fax: (▇▇▇)
▇▇▇-▇▇▇▇
▇▇▇▇▇▇ Living Trust Dated
12/10/1996
By:
______________________________________
▇. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇,
Trustee
Address:
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Fax: (▇▇▇)
▇▇▇-▇▇▇▇
ADDITIONAL
LENDERS:
If an entity:
_______________________________________
(Company
name)
By:
____________________________________
Name:
__________________________________
Title:
___________________________________
Address: ________________________________
________________________________
________________________________
________________________________
Fax: ________________________________
Amount
of Note: $_________________________
If
an individual:
_______________________________________
(Signature
of individual)
Printed
Name: ____________________________
Address:
________________________________
________________________________
________________________________
________________________________
Fax: ________________________________
Amount of Note:
$_________________________
Schedule
I
Schedule
of Purchasers
June 2,
2009
|
Purchaser
|
Delivery
Amount
|
Aggregate
Loan Amount
|
|
Peninsula
Packaging, LLC
|
$250,000.00
|
$602,115.00
|
|
Trident
Capital Fund-VI, L.P.
|
$192,532.92
|
$531,470.53
|
|
Trident
Capital Fund-VI Principals Fund, L.L.C.
|
$7,467.08
|
$20,612.47
|
|
▇▇▇▇▇▇▇▇▇
Capital Partners, LLC
|
$500,000.00
|
$601,074.00
|
|
▇▇▇▇▇▇ Living Trust Dated
12/10/1996
|
$0
|
$50,307.00
|
Disclosure
Schedule
This
Disclosure Schedule is being furnished by ECO2 Plastics, Inc., a Delaware
corporation, (the “Company”),
to the Purchasers listed on Schedule I to that
certain Convertible Note Purchase Agreement of even date herewith by and among
the Company and such Purchasers (the “Agreement”)
in connection with the execution and delivery of the Agreement, pursuant to
Section 2 of the Agreement. Unless the context otherwise requires,
all capitalized terms used in this Disclosure Schedule shall have the respective
meanings ascribed to such terms in the Agreement.
This
Disclosure Schedule and the information, descriptions and disclosures included
herein is intended to set forth exceptions to the representations and warranties
of the Company contained in the Agreement. The contents of all
agreements and other documents referred to in a particular section of this
Disclosure Schedule is incorporated by reference into such particular section as
though fully set forth in such section.
[Attached separately]
Exhibit
A
Forms of
Notes
THE
SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES
SECURITIES ACT OF 1933, AS AMENDED (THE "1933 ACT"), OR UNDER THE PROVISIONS OF
ANY APPLICABLE STATE SECURITIES LAWS, BUT HAVE BEEN ACQUIRED BY THE REGISTERED
HOLDER HEREOF FOR PURPOSES OF INVESTMENT AND IN RELIANCE ON STATUTORY EXEMPTIONS
UNDER THE 1933 ACT, AND UNDER ANY APPLICABLE STATE SECURITIES
LAWS. THESE SECURITIES MAY NOT BE SOLD, PLEDGED, TRANSFERRED OR
ASSIGNED EXCEPT IN A TRANSACTION WHICH IS EXEMPT UNDER THE PROVISIONS OF THE
1933 ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT.
AMENDED
AND RESTATED PROMISSORY NOTE
Riverbank,
California
Date
of Issuance: June 2, 2009
FOR
VALUE RECEIVED, ECO2 PLASTICS, INC., a Delaware
corporation (the “Promisor”) hereby
promises to pay to the order of PENINSULA PACKAGING, LLC, a
California limited liability company (the “Promisee” or the
“Holder”), in
lawful money of the United States at the address of the Holder set forth herein,
the principal amount of Six Hundred Two Thousand One Hundred Fifteen Dollars
($602,115) (the “Note
Amount”), together with Interest, as defined below. This
Amended and Restated Promissory Note (this “Note”) has been
executed by the Promisor on the date set forth above (the “Effective
Date”).
This Note is one of a series of
promissory notes issued by the Promisor pursuant to that certain Convertible
Note Purchase Agreement, dated as of June 2, 2009, by and among the Promisor,
the Promisee, Trident Capital Fund-VI, L.P., Trident Capital Fund-VI Principals
Fund, L.L.C., ▇▇▇▇▇▇▇▇▇ Capital Partners, LLC, ▇▇▇▇▇▇ Living Trust Dated
12/10/1996 and the other parties set forth on Schedule I thereto (the “Purchase
Agreement”). This Note and such other promissory notes issued
by the Promisor pursuant to the Purchase Agreement are herein collectively
referred to as the “Notes.” This
Note is secured by a security interest in certain collateral of the Promisor
pursuant to a certain Security Agreement, dated as of June 2, 2009, as amended,
supplemented, restated or otherwise modified from time to time, by and between
the Promisor and the Promisee (the “Security
Agreement”) and is entitled to all
the benefits and obligations provided therein. All payments of
interest and principal shall be in lawful money of the United States of America
and shall be made pro rata among all holders of the Notes. The
following is a statement of the rights of the Holder of this Note and the terms
and conditions to which this Note is subject, and to which the Holder hereof, by
the acceptance of the Note agrees:
1. Interest. Interest
shall accrue at eight percent (8%) per annum on the outstanding principal amount
of this Note (the “Interest”). Upon
the occurrence of an Event of Default and for so long as such Event of Default
continues, Interest shall accrue on the outstanding Note Amount at the rate of
eight percent (8%) per annum (the “Default Interest
Rate”).
2. Maturity
Date. The Note Amount, any accrued Interest thereon and all
other sums due hereunder, shall be due and payable three (3) years from the
Effective Date (the “Maturity
Date”).
3. Security. This
Note is secured pursuant to the terms of the Security Agreement by a security
interest in the Collateral (as such term is defined in the Security
Agreement). This Note is subject to the provisions of the Security
Agreement. It is agreed that all Promisor’s indebtedness, whether outstanding on
the date hereof or subsequently incurred or assumed, except all indebtedness
secured by perfected security interests granted by Promisor in connection with
the Senior Debt (as such term is defined in the Security Agreement) shall be
junior in right of payment to the indebtedness and other obligations of Promisor
pursuant to the Notes.
4. Application of
Payments.
4.1. Except
as otherwise expressly provided herein, payments under this Note shall be
applied, (i) first to the repayment of any sums incurred by the Holder for the
payment of any expenses in enforcing the terms of this Note, (ii) then to the
payment of any accrued but unpaid Interest under this Note, and (iii) then to
the reduction of the Note Amount.
4.2. The
Promisor may only prepay principal upon the written consent of holders of 60% or
more of the aggregate principal amount of the Notes then
outstanding.
4.3. Upon
payment in full of the Note Amount, any applicable accrued and unpaid Interest
thereon, and any other sums due hereunder, this Note shall be marked “Paid in
Full” and returned to the Promisor.
5. Waiver of
Notice. The Promisor hereby waives presentment for payment,
demand, notice of nonpayment, notice of protest and protest of this Note, and
all other notices in connection with the delivery, acceptance, performance,
default or enforcement of the payment of this Note, and agrees that the
liability of the Promisor shall be unconditional without regard to the liability
of any other party and shall not be in any manner affected by any indulgence,
extension of time, renewal, waiver or modification granted or consented to by
the Promisee.
6. Events of
Default. The occurrence of any of the following events (each
an “Event of
Default”) shall constitute an Event of Default of the
Promisor:
6.1. the failure of the Promisor to make any
payment due hereunder within three (3) days after the due date
thereof;
6.2. a material default by the Promisor
under the Purchase Agreement or any other document or agreement executed by the
Promisor pursuant thereto, which default, if curable, is not cured within thirty
(30) days following written notice by the Promisee to the Promisor specifying
the default in reasonable detail; and
6.3. (i)
the application for the appointment of a receiver or custodian for the Promisor
or the property of the Promisor, (ii) the entry of an order for relief or the
filing of a petition by or against the Promisor under the provisions of any
bankruptcy or insolvency law, (iii) any assignment for the benefit of creditors
by or against the Promisor, or (iv) the Promisor’s insolvency (which term is
defined for purposes of this paragraph as the failure or inability of the
Promisor to meet its obligations as the same fall due).
Upon
the occurrence of any Event of Default that is not cured within any applicable
cure period, if any, the Holder may, upon the consent of holders of at least 60%
of the aggregate principal amount of the Notes then outstanding (except in the
case of an Event of Default pursuant to Section 6.3(i), (ii) or (iii), in which
case no such consent shall be necessary), elect to take at any time any or all
of the following actions: (i) declare this Note to be forthwith due and payable,
whereupon the entire unpaid Note Amount, together with all accrued and unpaid
Interest thereon (including the Default Interest Rate), and all other cash
obligations hereunder, shall become forthwith due and payable, without
presentment, demand, protest or any other notice of any kind, all of which are
hereby expressly waived by the Promisor, anything contained herein to the
contrary notwithstanding, (ii) set-off any amounts owed by the Promisee or any
Affiliate of the Promisee (each of which is an intended third party beneficiary
hereunder), to the Promisor whatsoever against any amounts owed by the Promisor
to the Promisee hereunder; and (iii) exercise any and all other remedies
provided hereunder or available at law or in equity. For purposes of
this Note, “Affiliate” means any
other party that, directly or indirectly, through one or more intermediaries,
controls, is controlled by, or is under control with, such party.
If an Event of Default occurs by the
Promisor, the Promisor agrees to pay, in addition to the Note Amount, reasonable
attorneys' fees and any other reasonable costs incurred by the Holder in
connection with its pursuit of its remedies under this Note.
7. Conversion.
7.1 At
any time upon written notice by the Promisee to the Promisor, the principal
amount and all Interest due under this Note shall be converted into shares of
Series D Convertible Preferred Stock of the Promisor (“Securities”) at a
price per share equal to $0.0017 (subject to appropriate adjustment for all
stock splits, subdivisions, combinations, recapitalizations and the
like). No fractional shares of Securities will be issued upon such
conversion of this Note. In lieu thereof, the number of Securities to
be issued to the Holder shall be rounded to the nearest whole
share. Upon conversion of this Note pursuant to this Section 7, the
Holder shall surrender this Note, duly endorsed, at the principal offices of the
Promisor or any transfer agent of the Promisor. At its expense, the
Promisor will, as soon as practicable thereafter, issue and deliver to such
Holder, at such principal office, a certificate or certificates for the number
of shares to which such Holder is entitled upon such conversion, together with
any other securities and property to which the Holder is entitled upon such
conversion under the terms of this Note, including a check payable to the Holder
for any cash amounts payable as described herein. Upon conversion of
this Note, the Promisor will be forever released from all of its obligations and
liabilities under this Note with regard to that portion of the principal amount
and accrued interest being converted including without limitation the obligation
to pay such portion of the principal amount and accrued interest.
7.2 At
any time upon the written election at their discretion of holders of 60% or more
of the aggregate principal amount of Notes then outstanding, the principal
amount and all Interest due under each Note shall be converted into shares of
Securities in the same manner described in Section 7.1 above.
8. Miscellaneous.
8.1 Successors and
Assigns. The terms and conditions of this Note shall inure to
the benefit of and be binding upon the respective executors, administrators,
heirs, successors and permitted assigns of the parties. This Note (or
a portion hereof) may be assigned by the Holder without the consent of the
Promisor. This Note may not be assigned by the Promisor without the
prior written consent of the Promisee.
8.2 Loss or Mutilation of
Note. Upon receipt by the Promisor of evidence reasonably
satisfactory to the Promisor of the loss, theft, destruction or mutilation of
this Note, together with indemnity reasonably satisfactory to the Promisor, in
the case of loss, theft or destruction, or the surrender and cancellation of
this Note, in the case of mutilation, the Promisor shall execute and deliver to
the Holder a new promissory note of like tenor and denomination as this
Note.
8.3 Notices. Any
notice or other communication required or permitted to be given pursuant to the
terms of this Note shall be in writing and shall be deemed effectively given the
earlier of, (i) when received, (ii) when delivered personally, (iii) one
business day after being delivered by facsimile (with receipt of appropriate
confirmation), or (iv) one (1) business day after being deposited with an
overnight courier service, and addressed to the recipient at the addresses set
forth below unless another address is provided to the other party in
writing:
If to Promisee,
to:
Peninsula
Packaging, LLC
c/o
Stradley Ronon ▇▇▇▇▇▇▇ & ▇▇▇▇▇, LLP
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇
▇. ▇▇▇▇▇▇
Fax: (▇▇▇)
▇▇▇-▇▇▇▇
If to the Promisor,
to:
ECO2 Plastics,
Inc.
▇▇ ▇▇▇ ▇▇▇
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇
▇. ▇▇▇▇▇▇▇
Fax: (▇▇▇)
▇▇▇-▇▇▇▇
with a copy
to:
The
▇▇▇▇ Law Group, PLLC
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇
▇. ▇▇▇▇
Fax: (▇▇▇)
▇▇▇-▇▇▇▇
8.4 Governing
Law. This Note shall be governed in all respects by the laws
of the State of California as applied to agreements entered into and performed
entirely within the State of California by residents thereof, without regard to
any provisions thereof relating to conflicts of laws among different
jurisdictions.
8.5 Waiver and
Amendment. Any term of this Note may be amended, waived or
modified with the written consent of the Promisor and the Holder; provided
however, that (a) the terms of this Note may be amended or modified, and
any obligations of Promisor and the rights of Holder may be waived, in each case
upon the written consent of Promisor and the holders of at least 60% of the
aggregate principal amount of Notes then outstanding, and (b) this Note may
be converted as set forth herein or subordinated without any action of Holder
upon approval by holders of at least 60% of the aggregate principal amount of
Notes then outstanding.
8.6 Remedies. No
delay or omission by the Holder in exercising any of its rights, remedies,
powers or privileges hereunder or at law or in equity and no course of dealing
between the Holder and the undersigned or any other person shall be deemed a
waiver by the Holder of any such rights, remedies, powers or privileges, even if
such delay or omission is continuous or repeated, nor shall any single or
partial exercise of any right, remedy, power or privilege preclude any other or
further exercise thereof by the Holder or the exercise of any other right,
remedy, power or privilege by the Holder. The rights and remedies of
the Holder described herein shall be cumulative and not restrictive of any other
rights or remedies available under any other instrument, at law or in equity
provided that such rights or remedies are not inconsistent with the express
provisions hereof.
8.7 Usury Savings
Clause. In the event any interest is paid on this Note which
is deemed to be in excess of the then legal maximum rate, then that portion of
the interest payment representing an amount in excess of the then legal maximum
rate shall be deemed a payment of principal and applied against the principal of
this Note.
8.8 Severability. If
any provision hereof is found by a court of competent jurisdiction to be
prohibited or unenforceable, it shall be ineffective only to the extent of such
prohibition or unenforceability, and such prohibition or unenforceability shall
not invalidate the balance of such provision to the extent it is not prohibited
or unenforceable, nor invalidate the other provisions hereof, all of which shall
be liberally construed in favor of the Promisee in order to effect the
provisions of this Note.
8.9 Setoff. Notwithstanding
the absence of an Event of Default, the Promisee shall have the right to set-off
any amounts owed by the Promisee or any Affiliate of the Promisee (each of which
is an intended third party beneficiary hereunder) to the Promisor whatsoever
against any amounts owed by the Promisor to the Promisee hereunder.
8.10 Amendment and
Restatement. This Note amends, restates and supersedes, but
does not discharge the obligations of, nor constitute a novation with respect
to, the indebtedness of the Promisor to the Promisee pursuant to those certain
Promissory Notes in the principal amounts of $100,000, $100,000 and $150,000,
dated April 13, 2009, May 5, 2009 and May 20, 2009, respectively.
IN
WITNESS WHEREOF, the Promisor has caused this Note to be signed on the Effective
Date.
ECO2 PLASTICS,
INC.
_______________________________
Name:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title:
Chief Financial Officer
CALIFORNIA ALL-PURPOSE
ACKNOWLEDGMENT
State of California
County of
__________________________
On ______________________ before me,
_____________________________________
(Date) (Insert
Name and Title of Officer)
Personally appeared
______________________________________________________
(Name(s) of Signer(s))
________________________________________________________________________
Who
approved me on the basis of satisfactory evidence to be the person(s) whose
name(s) is/are subscribed to the within instrument and acknowledged to me that
he/she/they executed the same in his/her/their authorized capacity(ities), and
by his/her/their signature(s) on the instrument the person(s), or the entity
upon behalf of which the person(s) acted, executed the instrument.
I certify
that under PENALTY OF PERJURY under the laws of the State of California that the
foregoing paragraph is true and correct.
WITNESS
my hand and official seal.
Place
Notary Seal Above
Signature __________________________________
(Signature of Notary
Public)
THE
SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES
SECURITIES ACT OF 1933, AS AMENDED (THE "1933 ACT"), OR UNDER THE PROVISIONS OF
ANY APPLICABLE STATE SECURITIES LAWS, BUT HAVE BEEN ACQUIRED BY THE REGISTERED
HOLDER HEREOF FOR PURPOSES OF INVESTMENT AND IN RELIANCE ON STATUTORY EXEMPTIONS
UNDER THE 1933 ACT, AND UNDER ANY APPLICABLE STATE SECURITIES
LAWS. THESE SECURITIES MAY NOT BE SOLD, PLEDGED, TRANSFERRED OR
ASSIGNED EXCEPT IN A TRANSACTION WHICH IS EXEMPT UNDER THE PROVISIONS OF THE
1933 ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT.
PROMISSORY
NOTE
Riverbank,
California
Date
of Issuance: June 2, 2009
FOR
VALUE RECEIVED, ECO2 PLASTICS, INC., a Delaware
corporation (the “Promisor”) hereby
promises to pay to the order of [______________] (the “Promisee” or the
“Holder”), in
lawful money of the United States at the address of the Holder set forth herein,
the principal amount of [____________] Dollars ($[______]) (the “Note Amount”),
together with Interest, as defined below. This Promissory Note (this
“Note”) has
been executed by the Promisor on the date set forth above (the “Effective
Date”).
This Note is one of a series of
promissory notes issued by the Promisor pursuant to that certain Convertible
Note Purchase Agreement, dated as of June 2, 2009, by and among the Promisor,
the Promisee, Trident Capital Fund-VI, L.P., Trident Capital Fund-VI Principals
Fund, L.L.C., ▇▇▇▇▇▇▇▇▇ Capital Partners, LLC, ▇▇▇▇▇▇ Living Trust Dated
12/10/1996 and the other parties set forth on Schedule I thereto (the “Purchase
Agreement”). This Note and such other promissory notes issued
by the Promisor pursuant to the Purchase Agreement are herein collectively
referred to as the “Notes.” This
Note is secured by a security interest in certain collateral of the Promisor
pursuant to a certain Security Agreement, dated as of June 2, 2009, as amended,
supplemented, restated or otherwise modified from time to time, by and between
the Promisor and the Promisee (the “Security
Agreement”) and is entitled to all
the benefits and obligations provided therein. All payments of
interest and principal shall be in lawful money of the United States of America
and shall be made pro rata among all holders of the Notes. The
following is a statement of the rights of the Holder of this Note and the terms
and conditions to which this Note is subject, and to which the Holder hereof, by
the acceptance of the Note agrees:
1. Interest. Interest
shall accrue at eight percent (8%) per annum on the outstanding principal amount
of this Note (the “Interest”). Upon
the occurrence of an Event of Default and for so long as such Event of Default
continues, Interest shall accrue on the outstanding Note Amount at the rate of
eight percent (8%) per annum (the “Default Interest
Rate”).
2. Maturity
Date. The Note Amount, any accrued Interest thereon and all
other sums due hereunder, shall be due and payable three (3) years from the
Effective Date (the “Maturity
Date”).
3. Security. This
Note is secured pursuant to the terms of the Security Agreement by a security
interest in the Collateral (as such term is defined in the Security
Agreement). This Note is subject to the provisions of the Security
Agreement. It is agreed that all Promisor’s indebtedness, whether outstanding on
the date hereof or subsequently incurred or assumed, except all indebtedness
secured by perfected security interests granted by Promisor in connection with
the Senior Debt (as such term is defined in the Security Agreement) shall be
junior in right of payment to the indebtedness and other obligations of Promisor
pursuant to the Notes.
4. Application of
Payments.
4.1. Except
as otherwise expressly provided herein, payments under this Note shall be
applied, (i) first to the repayment of any sums incurred by the Holder for the
payment of any expenses in enforcing the terms of this Note, (ii) then to the
payment of any accrued but unpaid Interest under this Note, and (iii) then to
the reduction of the Note Amount.
4.2. The
Promisor may only prepay principal upon the written consent of holders of 60% or
more of the aggregate principal amount of the Notes then
outstanding.
4.3. Upon
payment in full of the Note Amount, any applicable accrued and unpaid Interest
thereon, and any other sums due hereunder, this Note shall be marked “Paid in
Full” and returned to the Promisor.
5. Waiver of
Notice. The Promisor hereby waives presentment for payment,
demand, notice of nonpayment, notice of protest and protest of this Note, and
all other notices in connection with the delivery, acceptance, performance,
default or enforcement of the payment of this Note, and agrees that the
liability of the Promisor shall be unconditional without regard to the liability
of any other party and shall not be in any manner affected by any indulgence,
extension of time, renewal, waiver or modification granted or consented to by
the Promisee.
6. Events of
Default. The occurrence of any of the following events (each
an “Event of
Default”) shall constitute an Event of Default of the
Promisor:
6.1. the failure of the Promisor to make any
payment due hereunder within three (3) days after the due date
thereof;
6.2. a material default by the Promisor
under the Purchase Agreement or any other document or agreement executed by the
Promisor pursuant thereto, which default, if curable, is not cured within thirty
(30) days following written notice by the Promisee to the Promisor specifying
the default in reasonable detail; and
6.3. (i)
the application for the appointment of a receiver or custodian for the Promisor
or the property of the Promisor, (ii) the entry of an order for relief or the
filing of a petition by or against the Promisor under the provisions of any
bankruptcy or insolvency law, (iii) any assignment for the benefit of creditors
by or against the Promisor, or (iv) the Promisor’s insolvency (which term is
defined for purposes of this paragraph as the failure or inability of the
Promisor to meet its obligations as the same fall due).
Upon
the occurrence of any Event of Default that is not cured within any applicable
cure period, if any, the Holder may, upon the consent of holders of at least 60%
of the aggregate principal amount of the Notes then outstanding (except in the
case of an Event of Default pursuant to Section 6.3(i), (ii) or (iii), in which
case no such consent shall be necessary), elect to take at any time any or all
of the following actions: (i) declare this Note to be forthwith due and payable,
whereupon the entire unpaid Note Amount, together with all accrued and unpaid
Interest thereon (including the Default Interest Rate), and all other cash
obligations hereunder, shall become forthwith due and payable, without
presentment, demand, protest or any other notice of any kind, all of which are
hereby expressly waived by the Promisor, anything contained herein to the
contrary notwithstanding, (ii) set-off any amounts owed by the Promisee or any
Affiliate of the Promisee (each of which is an intended third party beneficiary
hereunder), to the Promisor whatsoever against any amounts owed by the Promisor
to the Promisee hereunder; and (iii) exercise any and all other remedies
provided hereunder or available at law or in equity. For purposes of
this Note, “Affiliate” means any
other party that, directly or indirectly, through one or more intermediaries,
controls, is controlled by, or is under control with, such party.
If an Event of Default occurs by the
Promisor, the Promisor agrees to pay, in addition to the Note Amount, reasonable
attorneys' fees and any other reasonable costs incurred by the Holder in
connection with its pursuit of its remedies under this Note.
7. Conversion.
7.1 At
any time upon written notice by the Promisee to the Promisor, the principal
amount and all Interest due under this Note shall be converted into shares of
Series D Convertible Preferred Stock of the Promisor (“Securities”) at a
price per share equal to $0.0017 (subject to appropriate adjustment for all
stock splits, subdivisions, combinations, recapitalizations and the
like). No fractional shares of Securities will be issued upon such
conversion of this Note. In lieu thereof, the number of Securities to
be issued to the Holder shall be rounded to the nearest whole
share. Upon conversion of this Note pursuant to this Section 7, the
Holder shall surrender this Note, duly endorsed, at the principal offices of the
Promisor or any transfer agent of the Promisor. At its expense, the
Promisor will, as soon as practicable thereafter, issue and deliver to such
Holder, at such principal office, a certificate or certificates for the number
of shares to which such Holder is entitled upon such conversion, together with
any other securities and property to which the Holder is entitled upon such
conversion under the terms of this Note, including a check payable to the Holder
for any cash amounts payable as described herein. Upon conversion of
this Note, the Promisor will be forever released from all of its obligations and
liabilities under this Note with regard to that portion of the principal amount
and accrued interest being converted including without limitation the obligation
to pay such portion of the principal amount and accrued interest.
7.2 At
any time upon the written election at their discretion of holders of 60% or more
of the aggregate principal amount of Notes then outstanding, the principal
amount and all Interest due under each Note shall be converted into shares of
Securities in the same manner described in Section 7.1 above.
8. Miscellaneous.
8.1 Successors and
Assigns. The terms and conditions of this Note shall inure to
the benefit of and be binding upon the respective executors, administrators,
heirs, successors and permitted assigns of the parties. This Note (or
a portion hereof) may be assigned by the Holder without the consent of the
Promisor. This Note may not be assigned by the Promisor without the
prior written consent of the Promisee.
8.2 Loss or Mutilation of
Note. Upon receipt by the Promisor of evidence reasonably
satisfactory to the Promisor of the loss, theft, destruction or mutilation of
this Note, together with indemnity reasonably satisfactory to the Promisor, in
the case of loss, theft or destruction, or the surrender and cancellation of
this Note, in the case of mutilation, the Promisor shall execute and deliver to
the Holder a new promissory note of like tenor and denomination as this
Note.
8.3 Notices. Any
notice or other communication required or permitted to be given pursuant to the
terms of this Note shall be in writing and shall be deemed effectively given the
earlier of, (i) when received, (ii) when delivered personally, (iii) one
business day after being delivered by facsimile (with receipt of appropriate
confirmation), or (iv) one (1) business day after being deposited with an
overnight courier service, and addressed to the recipient at the addresses set
forth below unless another address is provided to the other party in
writing:
If to Promisee,
to:
_________________
_________________
_________________
Attn:
_________________
Fax:
_________________
If to the Promisor,
to:
ECO2 Plastics,
Inc.
▇▇ ▇▇▇ ▇▇▇
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇
▇. ▇▇▇▇▇▇▇
Fax: (▇▇▇)
▇▇▇-▇▇▇▇
with a copy
to:
The ▇▇▇▇ Law Group, PLLC
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇
▇. ▇▇▇▇
Fax: (▇▇▇)
▇▇▇-▇▇▇▇
8.4 Governing
Law. This Note shall be governed in all respects by the laws
of the State of California as applied to agreements entered into and performed
entirely within the State of California by residents thereof, without regard to
any provisions thereof relating to conflicts of laws among different
jurisdictions.
8.5 Waiver and
Amendment. Any term of this Note may be amended, waived or
modified with the written consent of the Promisor and the Holder; provided
however, that (a) the terms of this Note may be amended or modified, and
any obligations of Promisor and the rights of Holder may be waived, in each case
upon the written consent of Promisor and the holders of at least 60% of the
aggregate principal amount of Notes then outstanding, and (b) this Note may
be converted as set forth herein or subordinated without any action of Holder
upon approval by holders of at least 60% of the aggregate principal amount of
Notes then outstanding.
8.6 Remedies. No
delay or omission by the Holder in exercising any of its rights, remedies,
powers or privileges hereunder or at law or in equity and no course of dealing
between the Holder and the undersigned or any other person shall be deemed a
waiver by the Holder of any such rights, remedies, powers or privileges, even if
such delay or omission is continuous or repeated, nor shall any single or
partial exercise of any right, remedy, power or privilege preclude any other or
further exercise thereof by the Holder or the exercise of any other right,
remedy, power or privilege by the Holder. The rights and remedies of
the Holder described herein shall be cumulative and not restrictive of any other
rights or remedies available under any other instrument, at law or in equity
provided that such rights or remedies are not inconsistent with the express
provisions hereof.
8.7 Usury Savings
Clause. In the event any interest is paid on this Note which
is deemed to be in excess of the then legal maximum rate, then that portion of
the interest payment representing an amount in excess of the then legal maximum
rate shall be deemed a payment of principal and applied against the principal of
this Note.
8.8 Severability. If
any provision hereof is found by a court of competent jurisdiction to be
prohibited or unenforceable, it shall be ineffective only to the extent of such
prohibition or unenforceability, and such prohibition or unenforceability shall
not invalidate the balance of such provision to the extent it is not prohibited
or unenforceable, nor invalidate the other provisions hereof, all of which shall
be liberally construed in favor of the Promisee in order to effect the
provisions of this Note.
8.9 Setoff. Notwithstanding
the absence of an Event of Default, the Promisee shall have the right to set-off
any amounts owed by the Promisee or any Affiliate of the Promisee (each of which
is an intended third party beneficiary hereunder) to the Promisor whatsoever
against any amounts owed by the Promisor to the Promisee hereunder.
IN
WITNESS WHEREOF, the Promisor has caused this Note to be signed on the Effective
Date.
ECO2 PLASTICS,
INC.
_______________________________
Name:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title:
Chief Financial Officer
CALIFORNIA
ALL-PURPOSE ACKNOWLEDGMENT
State of
California
County of
__________________________
On
______________________ before me,
_____________________________________
(Date) (Insert
Name and Title of Officer)
Personally
appeared ______________________________________________________
(Name(s) of Signer(s))
________________________________________________________________________
Who
approved me on the basis of satisfactory evidence to be the person(s) whose
name(s) is/are subscribed to the within instrument and acknowledged to me that
he/she/they executed the same in his/her/their authorized capacity(ities), and
by his/her/their signature(s) on the instrument the person(s), or the entity
upon behalf of which the person(s) acted, executed the instrument.
I certify
that under PENALTY OF PERJURY under the laws of the State of California that the
foregoing paragraph is true and correct.
WITNESS
my hand and official seal.
Place
Notary Seal Above
Signature __________________________________
(Signature of Notary
Public)
Exhibit
B
Form of
Certificate of Designations setting forth the Rights, Preferences and Privileges
of
Series D
Convertible Preferred Stock
of
ECO2
Plastics, Inc.
CERTIFICATE
OF DESIGNATIONS OF PREFERENCES AND RIGHTS OF
SERIES
D CONVERTIBLE PREFERRED STOCK
OF
ECO2
PLASTICS, INC.
a
Delaware corporation
Pursuant
to Section 151 of the Delaware General Corporation Law
The
undersigned, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, certifies that:
1. He
is the duly acting Chief Executive Officer and Secretary of ECO2 PLASTICS, INC.,
a corporation organized and existing under the Delaware General Corporation Law
(the “Corporation”).
2. Pursuant
to authority conferred upon the Board of Directors by the [Third] Amended and
Restated Certificate of Amendment to the Certificate of Incorporation of the
Corporation (the “Certificate of
Incorporation”), which authorizes [3,000,000,000] shares of preferred
stock, par value $0.001 per share (“Preferred
Stock”), of which 489,083,453 shares are issued and outstanding, and
pursuant to the provisions of the Delaware General Corporation Law, said Board
of Directors, pursuant to unanimous written consent dated [_________________],
adopted a resolution establishing the rights, preferences, privileges and
restrictions of, and the number of shares comprising, the Corporation's Series D
Convertible Preferred Stock, which resolution is as follows:
RESOLVED,
that a series of preferred stock in the Corporation, having the rights,
preferences, privileges and restrictions, and the number of shares constituting
such series and the designation of such series, set forth below be, and it
hereby is, authorized by the Board of Directors of the Corporation pursuant to
authority given by the Corporation's Certificate of Incorporation.
NOW,
THEREFORE, BE IT RESOLVED, that the Board of Directors hereby fixes and
determines the designations of, the number of shares constituting, and the
rights, preferences, privileges and restrictions relating to, such new series of
preferred stock as follows:
(a) Designation. The
series of preferred stock is hereby designated Series D Convertible Preferred
Stock (the “Series
D Preferred
Stock”).
(b) Authorized
Shares. The number of authorized shares constituting the
Series D Preferred Stock shall be [1,500,000,000].
(c) Original
Issue Price. The Original Issue Price of the Series D
Preferred Stock shall be $0.0017 per share (as adjusted for any stock dividends,
combinations, splits, recapitalizations and the like with respect to such
shares).
(d) Dividends. Commencing
on the dates of issuance of the Series D Preferred Stock, the Series A
Convertible Preferred Stock of the Corporation (the “Series A
Preferred Stock”), the Series B-1 Convertible Preferred Stock of the
Corporation (the “Series
B-1 Preferred
Stock”) and the Series B-2 Convertible Preferred Stock of the Corporation
(the “Series B-2
Preferred Stock” and, together with the Series B-1 Preferred Stock, the
“Series B
Preferred Stock”), and the Series C Convertible Preferred Stock of the
Corporation (the “Series C
Preferred Stock” and, collectively with the Series D Preferred Stock, the
Series A Preferred Stock and the Series B Preferred Stock, the “Senior
Preferred Stock”), and subject to the rights of any series of Preferred
Stock that may from time to time come into existence, each holder of an
outstanding share of Senior Preferred Stock shall be entitled to receive, on a
pari
passu basis, when, as and if declared by the Board of Directors, out of
any assets of the Corporation legally available therefor, dividends at a rate
equal to 5% per share of the Original Issue Price of such share of Senior
Preferred Stock (in each case, as adjusted for any stock dividends,
combinations, splits, recapitalizations and the like with respect to such
shares) per annum prior and in preference to the holders of the Corporation’s
Common Stock (the “Common
Stock”), and in preference to the holders of any other equity securities
of the Corporation that may from time to time come into existence to which the
Senior Preferred Stock ranks senior (such junior securities, together with the
Common Stock, “Junior
Securities”). No dividends will be paid on Junior Securities
in any year unless such dividends of the Senior Preferred Stock are paid in full
or declared and set apart. Additionally, whenever the Corporation
shall pay a dividend on the Common Stock, each holder of a share of Senior
Preferred Stock shall be entitled to receive, at the same time the dividend is
paid on the Common Stock, out of the assets of the Corporation legally available
therefor, a dividend equal to the amount that would have been paid in respect of
the Common Stock issuable upon conversion of such share of Senior Preferred
Stock immediately prior to the close of business on the record date for
determining the holders entitled to receive such dividend on the Common Stock,
or, if no such record is taken, the date on which the record holders of Common
Stock entitled to such dividend is determined.
(e) Liquidation Preference.
(i) Preference upon
Liquidation, Dissolution or Winding Up. In the event of any
dissolution or winding up of the Corporation, whether voluntary or involuntary,
and subject to the rights of any series of Preferred Stock that may from time to
time come into existence, holders of each outstanding share of Series D
Preferred Stock shall be entitled to be paid first out of the assets of the
Corporation available for distribution to shareholders, whether such assets are
capital, surplus or earnings, before any payment shall be made to the holders of
the Common Stock, the Series A Preferred Stock, the Series B Preferred Stock,
the Series C Preferred Stock or any other stock of the Corporation ranking
junior to the Series D Preferred Stock with regard to any distribution of assets
upon liquidation, dissolution or winding up of the Corporation, an amount per
share of Series D Preferred Stock equal to (x) the Original Issue Price of such
Series D Preferred Stock (as adjusted for any
stock splits, stock dividends or recapitalizations of the Series D Preferred
Stock) plus (y) any declared but unpaid dividends on such share. The
foregoing preferential amount shall be subject to increase as set forth in
Section 2(e)(vii) below. If, upon any liquidation, dissolution or
winding up of the Corporation, the assets available to be distributed to the
holders of the Series D Preferred Stock shall be insufficient to permit payment
to such shareholders of the full preferential amounts aforesaid, then all of the
assets of the Corporation available for distribution to the holders of Series D
Preferred Stock shall be distributed to the holders of Series D Preferred Stock
on a pro rata basis. Each holder of the Series D Preferred Stock shall be
entitled to receive that portion of the assets available for distribution to the
holders of Series D Preferred Stock as the number of outstanding shares of
Series D Preferred Stock held by such holder bears to the total number of shares
of Series D Preferred Stock. Such payment shall constitute payment in
full to the holders of the Series D Preferred Stock upon the liquidation,
dissolution or winding up of the Corporation. After such payment
shall have been made in full, or funds necessary for such payment shall have
been set aside by the Corporation in trust for the account of the holders of
Series D Preferred Stock, so as to be available for such payment, such holders
of Series D Preferred Stock shall be entitled to no further participation in the
distribution of the assets of the Corporation.
(ii) Consolidation,
Merger and Other Corporate Events. Unless otherwise agreed by
holders of at least 60% of the Series D Preferred Stock of the Corporation then
outstanding, (A) a consolidation or merger of the Corporation (except into or
with a subsidiary corporation), (B) any reclassification of the stock of the
Corporation (other than a change in par value or from no par to par, or from par
to no par or as the result of an event described in subsection (v), (vi), (vii)
or (ix) of paragraph (g)), or (C) a sale, lease, exclusive license or other
disposition of all or substantially all of the assets of the Corporation
requiring approval of the Corporation’s stockholders shall be regarded as a
liquidation, dissolution or winding up of the affairs of the Corporation
within the meaning of this paragraph (e); provided,
however,
in the case of a merger, if (a) the Corporation is the surviving entity, (b) the
Corporation’s shareholders retain, solely in respect of the shares of capital
stock of the Corporation held by them prior to the merger, a majority of the
shares of the surviving entity, and (c) the Corporation’s directors hold a
majority of the seats on the board of directors of the surviving entity, then
such merger shall not be regarded as a liquidation, dissolution or winding up
within the meaning of this paragraph (e). In no event shall the
issuance of new classes of stock, whether senior, junior or on a parity with the
Series D Preferred Stock, or any stock splits, be deemed a
“reclassification” under or otherwise limited by the terms
hereof.
(iii) Change of
Control. A
“Change
of Control” of the Corporation means such time as (A) the Corporation
shall consummate a merger, consolidation or similar transaction approved by the
Board of Directors, or there shall occur the consummation of a tender offer for,
or other acquisition of, Common Stock, in which an individual, corporation,
partnership, limited liability company, joint venture, trust or unincorporated
organization or a government or agency or political subdivision thereof (a
“Person”)
or group (as such term is defined in Rule 13d-5 under the Exchange Act) of
Persons who are not stockholders of the Company immediately following the
initial issuance of the Series D Preferred Stock become the beneficial owners
(as determined pursuant to Rule 13d-3 under the Exchange Act), directly or
indirectly, of 45% or more of the voting power of the outstanding shares of
Common Stock, (B) the majority of the seats of the Board of Directors is
occupied by persons other than the directors occupying such seats as of the date
of the initial issuance of shares of Series D Preferred Stock (the “Current
Directors”) or persons nominated by Current Directors or their nominated
successors, or (C) there shall occur a change in the Chief Executive Officer of
the Corporation without the consent of holders of a majority of the outstanding
shares of Series D Preferred Stock. A Change of
Control will be treated as a liquidation, dissolution or winding up of the
affairs of the Corporation within the meaning of this paragraph (e), except
as otherwise agreed by holders of a majority of the then outstanding Series D
Preferred Stock.
(iv) Distribution of
Cash and Other Assets. In the event of a liquidation,
dissolution or winding up of the Corporation resulting in the availability of
assets other than cash for distribution to the holders of the Series D Preferred
Stock, the holders of the Series D Preferred Stock shall be entitled to a
distribution of cash and/or assets equal to the value of the liquidation
preference stated in subsection (i) of this paragraph (e), which valuation shall
be determined in good faith by the Board of Directors and shall be
conclusive. Any securities shall be valued as
follows:
(A) Securities
not subject to investment letter or other similar restrictions on free
marketability covered by (B) below:
(1) If
traded on a securities exchange, the value shall be deemed to be the average of
the closing prices of the securities on such quotation system over the thirty
(30) day period ending three (3) days prior to the closing;
(2) If
actively traded over-the-counter, the value shall be deemed to be the average of
the closing bid or sale prices (whichever is applicable) over the thirty (30)
day period ending three (3) days prior to the closing; and
(3) If
there is no active public market, the value shall be the fair market value
thereof, as determined in good faith by the Board of
Directors.
(B) The
method of valuation of securities subject to investment letter or other
restrictions on free marketability (other than restrictions arising solely by
virtue of a stockholder’s status as an affiliate or former affiliate) shall be
to make an appropriate discount from the market value determined as above in (A)
(1), (2) or (3) to reflect the approximate fair market value thereof, as
determined in good faith by the Board of Directors.
(v) Distribution to
Junior Security Holders. After the payment or distribution to
the holders of the Series D Preferred Stock of the full preferential amounts
aforesaid, the holders of the Series A Preferred Stock, Series B Preferred
Stock, the Series C Preferred Stock and Common Stock then outstanding, or any
other stock of the Corporation ranking junior to the Series D Preferred Stock as
to assets upon liquidation, dissolution or winding up of the Corporation, shall
be entitled to receive the remaining assets of the Corporation available for
distribution.
(vi) Preference;
Priority. References to a stock that is “senior”
to, on a “parity”
with or “junior”
to other stock as to liquidation shall refer, respectively, to rights of
priority of one series or class of stock over another in the distribution of
assets on any liquidation, dissolution or winding up of the Corporation. The
Series D Preferred Stock shall be senior to the Series A Preferred Stock, the
Series B Preferred Stock, the Series C Preferred Stock and the Common Stock of
the Corporation with regard to liquidation, dissolution or winding up of the
Corporation.
(vii) Greater-of
Treatment. Notwithstanding Section 2(e)(i) above, for purposes
of determining the amount each holder of Series D Preferred Stock is entitled to
receive with respect to a liquidation, dissolution or winding up of the
Corporation (including without limitation the events to be treated as a
liquidation, dissolution or winding up as set forth in Sections 2(e)(ii) and
2(e)(iii) above), the holders of Series D Preferred Stock shall receive at the
closing of such event (and at each date after the closing of such event on which
additional amounts, such as earn out payments, escrow amounts or other
contingent payments are paid to stockholders of the Corporation as a result of
the event, but only to the extent of such additional amount), an amount equal to
the greater of (A) the amount specified in Section 2(e)(i) above, and
(B) the amount that the holders of Series D Preferred Stock would have been
entitled to receive had the holders of all Senior Preferred Stock and, if any,
all convertible stock ranking junior to the Series D Preferred Stock with regard
to any distribution of assets upon liquidation, dissolution or winding up of the
Corporation, converted their shares into Common Stock immediately prior to such
event at the then applicable conversion price for such
shares.
(f) Voting
Rights.
(i) Each
share of Series D Preferred Stock shall entitle the holder thereof to vote, in
person or by proxy, at a special or annual meeting of the stockholders of the
Corporation, on all matters except as required by law or as set forth herein,
voted on by holders of Common Stock, voting together as a single class with the
holders of the Common Stock and all other shares entitled to vote thereon as a
single class with the Common Stock. With respect to all such matters,
each issued and outstanding share of Series D Preferred Stock shall entitle the
holder thereof to cast that number of votes per share as is equal to the number
of votes that such holder would be entitled to cast had such holder converted
such holder’s Series D Preferred Stock into Common Stock on the record date for
determining the stockholders of the Corporation eligible to vote on any such
matters.
(ii) For
so long as any shares of Series D Preferred Stock remain outstanding, the
affirmative vote of at least 60% of the holders of the then outstanding shares
of Series D Preferred Stock, voting separately as a single class, shall be
necessary to take any of the following actions, however effected, whether by
amendment, merger, consolidation, recapitalization or otherwise:
(A) any
transactions with affiliates, except on an arms-length basis;
(B) authorize,
create or issue any class or classes of any now or hereafter authorized capital
stock of the Corporation ranking senior to, or on a parity with (as to rights
upon a liquidation, dissolution or winding up of the affairs of the Corporation
or upon a Change of Control, or dividend rights or rights of redemption) the
Series D Preferred Stock or any securities exercisable or exchangeable for, or
convertible into, any now or hereafter authorized capital stock of the
Corporation ranking senior to, or on a parity with (as to rights upon a
liquidation, dissolution or winding up of the affairs of the Corporation or upon
a Change of Control, or dividend rights or rights of redemption) the Series D
Preferred Stock (including, without limitation, the issuance of any shares of
Series D Preferred Stock (other than shares of Series D Preferred Stock issued
as a stock dividend or in a stock split) after the date the Series D Preferred
Stock is originally issued), or reclassify any existing security to be senior
to, or on a parity with, the Series D Preferred Stock as to such
rights;
(C) any
increase or decrease in the total authorized shares of Series A Preferred Stock,
Series B Preferred Stock, Series C Preferred Stock, or Series D Preferred
Stock;
(D) any
amendment to the rights, preferences or privileges of the Series D Preferred
Stock, Series C Preferred Stock, Series B Preferred Stock or Series A Preferred
Stock;
(E) any
bankruptcy filing or liquidation of the Corporation or any significant
subsidiary;
(F) any
payment of any dividend or distribution on any shares of capital stock of the
Corporation (other than dividends paid on the Preferred Stock); and
(G) the
purchase or redemption of any shares of now or hereafter authorized capital
stock (except for the purchase or redemption from service providers, employees,
directors and consultants, at a price not to exceed the original issue price
thereof, pursuant to agreements providing the Corporation with repurchase rights
upon termination of their services to the Corporation).
(g) Conversion
Rights. The holders of Series D Preferred Stock will have the
following conversion rights:
(i) Right to
Convert. Subject to and in compliance with the provisions of
this paragraph (g), any issued and outstanding shares of Series D Preferred
Stock may, at the option of the holder, be converted at any time or from time to
time into fully paid and non-assessable shares of Common Stock at the conversion
rate in effect at the time of conversion, determined as provided
herein.
(ii) Automatic
Conversion. Subject to and in compliance with the provisions
of this paragraph (g), upon election by holders of at least 60% of the then
outstanding shares of Series D Preferred Stock, all issued and outstanding
shares of Senior Preferred Stock shall be automatically converted into fully
paid and non-assessable shares of Common Stock at the conversion rate in effect
at the time of conversion.
(iii) Mechanics of
Conversion. Before any holder of Series D Preferred Stock
shall be entitled to convert the same into shares of Common Stock, he shall
surrender the certificate or certificates therefor, duly endorsed, at the office
of the Corporation or of any transfer agent for the Common Stock, and shall give
written notice to the Corporation at such office that he elects to convert the
same and shall state therein the number of shares of Series D Preferred Stock
being converted. Thereupon, the Corporation shall promptly issue and
deliver at such office to such holder of Series D Preferred Stock a certificate
or certificates for the number of shares of Common Stock to which he shall be
entitled. Such conversion shall be deemed to have been made
immediately prior to the close of business on the date of such surrender of the
shares of Series D Preferred Stock to be converted, and the Person or Persons
entitled to receive the shares of Common Stock issuable upon such conversion
shall be treated for all purposes as the record holder or holders of such shares
of Common Stock on such date. Promptly following a conversion
pursuant to paragraph (g)(ii) above, the Corporation shall send each holder of
Series D Preferred Stock a written notice thereof. Thereafter, as
soon as practicable following the surrender of one or more certificates
representing the Series D Preferred Stock that is so converted, the Corporation
shall issue and deliver to such holder one or more certificates for the number
of whole shares of Common Stock issuable upon conversion in accordance with the
provisions hereof.
(iv) Conversion
Price. The number of shares into which one share of Series D
Preferred Stock shall be convertible shall be determined by dividing the
Original Issue Price of the Series D Preferred Stock by the then existing Series
D Conversion Price (as set forth below). The “Series D
Conversion Price” shall initially be equal to the Original Issue Price of
the Series D Preferred Stock, and the foregoing shall be subject to adjustment
upon the occurrence of any event in paragraph (g)(v)-(vii).
(v) Adjustment
for Stock
Splits and Combinations. If the Corporation shall at any time,
or from time to time after the date shares of the Series D Preferred Stock are
first issued (the “Original Issue
Date”), effect a subdivision of the outstanding Common Stock, the Series
D Conversion Price in effect immediately prior thereto shall be proportionately
decreased, and conversely, if the Corporation shall at any time or from time to
time after the Original Issue Date combine the outstanding shares of Common
Stock, the Series D Conversion Price then in effect immediately before the
combination shall be proportionately increased. Any adjustment under
this paragraph (g)(v) shall become effective at the close of business on the
date the subdivision or combination becomes effective.
(vi) Adjustment for
Certain Dividends and Distributions. In the event the
Corporation at any time, or from time to time after the Original Issue Date,
shall make or issue, or fix a record date for the determination of holders of
Common Stock entitled to receive, a dividend or other distribution payable in
additional shares of Common Stock, then and in each such event the Series D
Conversion Price then in effect shall be decreased as of the time of such
issuance or, in the event such a record date shall have been fixed, as of the
close of business on such record date, by multiplying the Series D Conversion
Price then in effect by a fraction:
(A) the
numerator of which shall be the total number of shares of Common Stock issued
and outstanding immediately prior to the time of such issuance or the close of
business on such record date, and
(B) the
denominator of which shall be the total number of shares of Common Stock issued
and outstanding immediately prior to the time of such issuance or the close of
business on such record date plus the number of shares of Common Stock issuable
in payment of such dividend or distribution; provided,
however,
if such record date shall have been fixed and such dividend is not fully paid or
if such distribution is not fully made on the date fixed therefor, the Series D
Conversion Price shall be recomputed accordingly as of the close of business on
such record date and thereafter, the Series D Conversion Price shall be adjusted
pursuant to this paragraph (g)(vi) as of the time of actual payment of such
dividends or distributions.
(vii) Adjustments for
Other Dividends and Distributions. In the event the
Corporation at any time or from time to time after the Original Issue Date shall
make or issue, or fix a record date for the determination of holders of Common
Stock entitled to receive, a dividend or other distribution payable in
securities of the Corporation other than shares of Common Stock, then and in
each such event provision shall be made so that the holders of such Series D
Preferred Stock shall receive upon conversion thereof in addition to the number
of shares of Common Stock receivable thereupon, the amount of securities of the
Corporation that they would have received had their Series D Preferred Stock
been converted into Common Stock on the date of such event and had thereafter,
during the period from the date of such event to and including the conversion
date, retained such securities receivable by them as aforesaid during such
period giving application to all adjustments called for during such period under
this paragraph (g) with respect to the rights of the holders of the Series D
Preferred Stock.
(viii) Adjustment for
Reclassification Exchange or
Substitution. If the Common Stock issuable upon the conversion
of the Series D Preferred Stock shall be changed into the same or a different
number of shares of any class or classes of stock, whether by capital
reorganization, reclassification or otherwise (other than a subdivision or
combination of shares or stock dividend provided for above, or a reorganization,
merger, consolidation or sale of assets provided for elsewhere in this paragraph
(g)), then and in each such event the holder of each share of Series D Preferred
Stock shall have the right thereafter to convert such share into the kind and
amount of shares of stock and other securities and property receivable upon such
reorganization, reclassification or other change, by holders of the number of
shares of Common Stock into which such shares of Series D Preferred Stock might
have been converted immediately prior to such reorganization, reclassification,
or change, all subject to further adjustment as provided
herein.
(ix) Reorganization,
Mergers, Consolidations or Sales of Assets. If at any time or
from time to time there shall be a capital reorganization of the Common Stock
(other than a subdivision, combination, reclassification or exchange of shares
provided for elsewhere in this paragraph (g)) or a merger or consolidation of
the Corporation with or into another corporation, or the sale of all or
substantially all of the Corporation’s properties and assets to any other
Person, then, as a part of such reorganization, merger, consolidation or sale,
provision shall be made so that the holders of the Series D Preferred Stock
shall thereafter be entitled to receive upon conversion of such Series D
Preferred Stock, the number of shares of stock or other securities or property
of the Corporation or of the successor corporation resulting from such merger or
consolidation or sale, to which a holder of Common Stock deliverable upon
conversion would have been entitled on such capital reorganization, merger,
consolidation or sale. In any such case, appropriate adjustment shall
be made in the application of the provisions of this paragraph (g) with respect
to the rights of the holders of the Series D Preferred Stock after the
reorganization, merger, consolidation or sale to the end that the provisions of
this paragraph (g) (including adjustment of the Series D Conversion Price then
in effect and the number of shares purchasable upon conversion of the Series D
Preferred Stock) shall be applicable after that event as nearly equivalent as
may be practicable.
(x) Certificate of
Adjustment. In each case of an adjustment or readjustment of
the Series D Conversion Price or the securities issuable upon conversion of the
Series D Preferred Stock, the Corporation shall compute such adjustment or
readjustment in accordance herewith and the Corporation’s Chief Financial
Officer shall prepare and sign a certificate showing such adjustment or
readjustment, and shall mail such certificate by first class mail, postage
prepaid, to each registered holder of the Series D Preferred Stock at the
holder’s address as shown in the Corporation’s books. The certificate shall set
forth such adjustment or readjustment, showing in detail the facts upon which
such adjustment or readjustment is based.
(xi) Notices of
Record Date. In the event of (A) any taking by the Corporation
of a record of the holders of any class or series of securities for the purpose
of determining the holders thereof who are entitled to receive any dividend or
other distribution or (B) any reclassification or recapitalization of the
capital stock of the Corporation, any merger or consolidation of the Corporation
or any transfer of all or substantially all of the assets of the Corporation to
any other corporation, entity or Person, or any voluntary or involuntary
dissolution, liquidation or winding up of the Corporation, the Corporation shall
mail, via facsimile, regular or electronic mail or nationally recognized
overnight courier service, to each holder of Series D Preferred Stock at least
10 days prior to the record date specified therein, a notice specifying (1) the
date on which any such record is to be taken for the purpose of such dividend or
distribution and a description of such dividend or distribution, (2) the date on
which any such reorganization, reclassification, transfer, consolidation,
merger, dissolution, liquidation or winding up is expected to become effective
and (3) the time, if any is to be fixed, as to when the holders of record of
Common Stock (or other securities) shall be entitled to exchange their shares,
of Common Stock (or other securities) for securities or other property
deliverable upon such reorganization, reclassification, transfer, consolidation,
merger, dissolution, liquidation or winding up.
(xii) Fractional
Shares. No fractional shares of Common Stock shall be issued
upon conversion of the Series D Preferred Stock. All shares of Common
Stock (including fractions thereof) issuable upon conversion of more than one
share of Series D Preferred Stock by a holder thereof shall be aggregated for
purposes of determining whether the conversion would result in the issuance of
any fractional share. In lieu of any fractional shares to which the
holder would otherwise be entitled, the Corporation shall pay cash equal to the
product of such fraction multiplied by the fair market value of one share of the
Corporation’s Common Stock on the date of conversion, as determined in good
faith by the Board of Directors.
(xiii) Reservation of
Stock Issuable Upon Conversion. The Corporation shall at all
times 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 the Series D 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 Series D Preferred Stock. If at any time the number of
authorized but unissued shares of Common Stock shall not be sufficient to effect
the conversion of all then outstanding shares of Series D Preferred Stock, the
Corporation will take such corporate action as may, in the opinion of its
counsel, be necessary to increase its authorized but unissued shares of Common
Stock to such number of shares as shall be sufficient for such
purpose.
(xiv) Notices.
Any notice required by the provisions of this paragraph (g) to be given to the
holders of shares of Series D Preferred Stock shall be deemed given (A) if
deposited in the United States mail, postage prepaid, or (B) if given by any
other reliable or generally accepted means (including by facsimile, electronic
mail or by a nationally recognized overnight courier service), in each case
addressed to each holder of record at his address (or facsimile number)
appearing on the books of the Corporation.
(xv) Payment of
Taxes. The Corporation will pay all transfer taxes and other
governmental charges that may be imposed in respect of the issue or delivery of
shares of Common Stock upon conversion of shares of Series D Preferred
Stock.
(xvi) No Dilution or
Impairment. The Corporation shall not amend its Certificate of
Incorporation or participate in any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, for the purpose of avoiding or seeking to avoid the observance
or performance of any of the terms to be observed or performed hereunder by the
Corporation, without the approval of at least 60% of the then outstanding Series
D Preferred Stock.
(h) No
Reissuance of Preferred Stock. Any shares of Series D
Preferred Stock acquired by the Corporation by reason of purchase, conversion or
otherwise shall be canceled, retired and eliminated from the shares of Series D
Preferred Stock that the Corporation shall be authorized to
issue. All such shares shall upon their cancellation become
authorized but unissued shares of preferred stock and may be reissued as part of
a new series of preferred stock subject to the conditions and restrictions on
issuance set forth in the Certificate of Incorporation or in any certificate of
designations creating a series of preferred stock or any similar stock or as
otherwise required by law.
(i) Not
Redeemable. The Series D Preferred Stock is not redeemable,
except that, in the event of a Change of Control that is deemed by the
Corporation to be a liquidation, dissolution or winding up of the Corporation
pursuant to Section 2(e)(iii) above, holders of at least 60% of the then
outstanding shares of Series D Preferred Stock can require redemption of
the Series D Preferred Stock at a redemption price
per share equal to the amount per share to which holders of Series D Preferred
Stock would be entitled upon a liquidation, dissolution or winding up pursuant
to Section 2(e)(i) or 2(e)(vii) above, as applicable (the “Redemption
Price”), and any such shares of
Series D Preferred Stock so requested to be redeemed, but not repurchased on the
designated repurchase date, will begin to accrue dividends at an annual rate
equal to 6% of the Redemption Price per share of Series D Preferred Stock held,
compounded semiannually from the date originally set for redemption, and will at
all times until actual redemption remain convertible into Common
Stock.
(j) Severability. If
any right, preference or limitation of the Series D Preferred Stock set forth
herein is invalid, unlawful or incapable of being enforced by reason of any
rule, law or public policy, all other rights, preferences and limitations set
forth herein that can be given effect without the invalid, unlawful or
unenforceable right, preference or limitation shall nevertheless remain in full
force and effect, and no right, preference or limitation herein shall be deemed
dependent upon any other such right, preference or limitation unless so
expressed herein.
3. The
number of authorized shares of preferred stock of the Corporation is [three
billion (3,000,000,000)]. The number of shares of Series D Preferred
Stock, none of which has been issued, is [one billion five hundred million
(1,500,000,000)].
The
undersigned declares under penalty of perjury that the matters set out in the
foregoing Certificate are true of his own knowledge. Executed at
Riverbank, California, on [________________].
Name: ▇▇▇▇▇▇
▇. ▇▇▇▇▇▇▇▇
Title: Chief
Executive Officer and Secretary
Exhibit
C
Form of
Legal Opinion
(To be
Delivered to Purchasers at the Closing)
1. The
Company is a corporation duly incorporated, validly existing and in good
standing under the laws of the State of Delaware, with corporate power to own
its properties and to conduct its business. The Company is qualified
to do business and is in good standing in the State of California.
2. The
Company has the corporate power to execute, deliver and perform each of the
Agreement, the Notes, the Security Agreements and the Subordination Agreement
(collectively, the “Transaction
Documents”). Each of the Transaction Documents has been duly
authorized by all requisite corporate action of the Company and has been duly
executed and delivered by the Company. Each of the Transaction
Documents constitutes the legally valid and binding obligation of the Company,
enforceable in accordance with its terms (subject to bankruptcy, equitable
principles and other customary exceptions).
(a) As of the
date hereof, in accordance with its certificate of incorporation on file with
the Secretary of State of Delaware, the authorized capital stock of the Company
consists of 2,500,000,000 shares of Common Stock and 1,700,000,000 shares
of Preferred Stock, of which 152,843,414 shares are Series A Convertible
Preferred Stock, 336,240,039 shares are Series B-1
Convertible Preferred Stock, 140,000,000 shares are Series B-2 Convertible
Preferred Stock and 400,000,000 shares are Series C Convertible Preferred Stock.
(b) The
shares of the Company’s Series D Convertible Preferred Stock (and the shares of
the Company’s Common Stock issuable upon conversion thereof (the “Series D Conversion Shares”))
initially issuable upon conversion of the Notes shall be duly authorized and
reserved for issuance and, upon issuance and delivery upon conversion of the
Notes in accordance with the terms of the Notes and the Agreement, shall be
validly issued, fully paid and nonassessable and issued free of preemptive
rights or similar contractual rights against the Company.
3. The
execution and delivery of each of the Transaction Documents, the issuance and
sale of the Notes by the Company to the Purchasers pursuant to the Agreement and
the performance of the Company’s obligations under the Transaction Documents
will not: (a) violate the Company’s certificate of incorporation
or bylaws; (b) violate any federal or California statute, rule or regulation
applicable to the Company, or the Delaware General Corporation Law (“the DGCL”); (c) require any
consents, approvals, or authorizations to be obtained by the Company from, or
any registrations, declarations or filings to be made by the Company with, any
governmental authority under any federal or California statute, rule or
regulation applicable to the Company or the DGCL; or (d) result in the breach of
or a default under any of the Company’s material agreements (which agreements
shall include, without limitation, all instruments, documents and agreements
filed as exhibits to the Company’s most recently filed Form 10-K, as well as any
subsequently filed Exchange Act reports).
4. No
consent, approval, order or authorization of, and no notice to or filing with,
any governmental agency or body or any court is required to be obtained or made
by the Company for the issuance and sale of the Notes pursuant to the
Transaction Documents, except such as have been obtained or made and such as may
be required under applicable securities laws.
5. On the
assumption that the representations of the Company and the Purchasers in the
Agreement are correct and complete, (a) the offer and sale of the Notes pursuant
to the terms of the Agreement are exempt from the registration requirements of
Section 5 of the Securities Act of 1933, as amended, (b) the issuance of the
Company’s Series D Convertible Preferred Stock, when designated, upon conversion
of the Notes would also be exempt from such registration, and (c) the issuance
of the Series D Conversion Shares would also be exempt from such
registration.
6. To such
counsel’s knowledge, there is no action, suit, proceeding or governmental
investigation pending, or threatened in writing, against the Company with
respect to the transactions contemplated by the Transaction Documents or which
questions the right of the Company to enter into the Transaction
Documents.
7. The
Series D Certificate of Designations will be duly filed in the State of Delaware
and, when filed, will be in full force and effect.
8. The
rights, preferences, privileges, designations powers and limitations of the
Series D Convertible Preferred Stock included in the Series D Certificate of
Designations, when filed with the State of Delaware, and the Company’s
certificate of incorporation are permitted by, and will be made in accordance
with, the DGCL.
9. The
Company is not, and immediately after giving effect to the issuance and sale of
the Notes in accordance with Agreement, will not be, required to register as an
“investment company” or a company “controlled by” an “investment company” within
the meaning of the Investment Company Act of 1940, as amended.
Exhibit
D-1
Security
Agreement
ECO2
PLASTICS, INC.
SECURITY
AGREEMENT
June 2,
2009
This
Security Agreement is dated as of June 2, 2009 (the “Effective Date”), by
and between ECO2 Plastics
Inc., a Delaware corporation (the “Company”), and
Peninsula Packaging, LLC, a California limited liability company (“Peninsula”).
WHEREAS,
Peninsula has loaned an aggregate amount of Six Hundred Thousand Dollars
($600,000) to the Company evidenced by a certain Amended and Restated Promissory
Note, dated as of the Effective Date, by the Company for the benefit of
Peninsula (the “Note”);
and
WHEREAS,
the Company has agreed to execute and deliver this Security Agreement to grant
to Peninsula a security interest in all of the Company’s assets to secure the
borrowings and other obligations under the Note.
NOW,
THEREFORE, for good and valuable consideration, the receipt of which is hereby
acknowledged, the parties hereto agree as follows:
1. Defined
Terms. The following terms shall have the following meanings,
unless the context otherwise requires:
“Code” shall mean the
Uniform Commercial Code as in effect in the State of California on the Effective
Date.
“Encumbrance” shall
mean any security interest, mortgage, pledge, lien, claim, charge, encumbrance,
title retention agreement, lessor’s interest under a financing lease or any
analogous arrangements in any of properties or assets of the Company, intended
as, or having the effect of, security.
“Event of Default”
shall have the meaning assigned in the Note.
“Financing Documents”
shall mean the Note, this Security Agreement, the Purchase Agreement, the
Subordination Agreement, and all other documents, instruments or agreements
relating to the financing transactions contemplated by such
documents.
“Obligations” shall
mean the obligations of the Company to Peninsula under the Note, this Security
Agreement and the other Financing Documents, including all costs of
collection.
“Person” shall mean an
individual, partnership, corporation, limited liability company, business trust,
joint stock company, trust, unincorporated association, joint venture or other
entity, whether public or private.
“Purchase Agreement”
shall mean that certain Convertible Note Purchase Agreement, dated as of June 2,
2009, by and among ECO2 Plastics,
Inc., Peninsula Packaging, LLC, Trident Capital Fund-VI, L.P., Trident Capital
Fund-VI Principals Fund, L.L.C., ▇▇▇▇▇▇▇▇▇ Capital Partners, LLC, ▇▇▇▇▇▇ Living
Trust Dated 12/10/1996 and the other parties set forth on Schedule I
thereto.
“Security Agreement”
means this Security Agreement, as amended, supplemented, restated or otherwise
modified from time to time.
“Senior Debt” shall
mean all indebtedness for all principal, fees, expenses, interest, penalties,
post bankruptcy petition interest, and all other amounts payable for money
borrowed in connection with the $2,000,000 loan from the California Integrated
Waste Management Board.
“Subordination
Agreement” shall mean that certain Second Amended and Restated
Subordination and Intercreditor Agreement, dated as of June 2, 2009 to which
Peninsula is a party.
2. Grant of Security
Interest. As collateral security for the prompt and complete
payment and performance when due of all the Obligations, the Company grants to
Peninsula a security interest in all of the Company's right, title and interest
in, to and under the following, whether now existing or hereafter acquired (all
of which collateral being hereinafter collectively called the “Collateral”); provided, however, that the
security interest hereunder shall be subordinate to any perfected security
interest granted by the Company in connection with the Senior
Debt. Peninsula is entitled to a security interest in the
following:
ACCOUNTS
All
present and future accounts owned by the Company, including accounts receivable,
including and together with any and all contract rights, security deposits
(where not otherwise prohibited by law or agreement), together with agreements,
customer lists, client lists, and accounts, invoices, agings, verification
reports and other records relating in any way to such accounts;
CONTRACTS
All
contracts, contract rights, royalties, license rights, leases, instruments,
undertakings, documents or other agreements in or under which the Company may
now or hereafter have any right, title or interest whether now existing or
hereinafter created and all forms of obligations owing to the Company arising
out of the sale or lease of goods, the licensing of technology or the rendering
of services by the Company, whether or not earned by performance, and any and
all credit insurance, guaranties, and other security therefore, as well as all
merchandise returned to or reclaimed by the Company;
EQUIPMENT, FURNISHINGS AND
MISCELLANEOUS PERSONAL PROPERTY
All
presently owned and hereafter acquired furniture, furnishings, equipment,
machinery, inventory, vehicles (including motor vehicles and trailers) computer
hardware and software, accounting or bookkeeping systems, client or customer
lists and information, data sheets and other records of any kind, wherever
located, stored or inventoried, which are used or which may be used in the
Company’s business;
FIXTURES
All
materials used by the Company in connection with its business operations,
including, but not limited to, supplies, trade equipment, appliances, apparatus
and any other items, now owned or hereafter acquired by the Company, and now or
hereafter attached to, or installed in (temporarily or permanently) any real
property now or in the future owned or leased by the Company;
GENERAL
INTANGIBLES
All
general intangibles and other personal property of the Company, now owned or
hereinafter acquired, including, without limitation, the
following: (a) permits, authorizations and approvals presently and
hereafter issued by any federal, state, municipal or local governmental or
regulatory authority in favor of the Company; (b) all plans, specifications,
renderings and other similar materials presently owned or hereafter acquired by
the Company; (c) all presently existing and hereafter created contracts, leases,
licenses and agreements to which the Company is a party; (d) all presently and
hereafter existing policies and agreements of insurance in favor of the Company;
(e) all presently and hereafter existing equity contribution agreements and
other equity financing arrangements in favor of the Company; (f) all copyrights,
chattel paper, electronic chattel paper, licenses, money, insurance proceeds,
contract rights, subscription lists, mailing lists, licensing agreements,
patents, trademarks, service marks, trade styles, patents, patent applications,
franchise agreements, blueprints, drawings, purchase orders, customer lists,
route lists, infringements, claims, computer programs, computer discs, computer
tapes, literature, reports, catalogs, design rights, income tax refunds,
payments of insurance and rights to payment of any kinds, trade names,
refundable, returnable or reimbursable fees, deposits or other funds or
evidences of credit or indebtedness deposited by or on behalf of the Company
with any governmental agencies, boards, corporations, providers of utility
services, public or private; (g) all presently existing and hereafter acquired
computer programs, computer software and other electronic systems and materials
of any kind of the Company; (h) goodwill; and (i) all other presently existing
and hereafter acquired documents, accounts, general intangibles and intangible
personal property of any kind;
DOCUMENTS
All
documents, cash, deposit accounts, securities, securities entitlements,
securities accounts, investment property, financial assets, letters of credit,
certificates of deposit, instruments, chattel paper, and electronic chattel
paper now owned or hereafter acquired and the Company’s books relating to the
foregoing;
INTELLECTUAL
PROPERTY
All
copyright rights, copyright applications, copyright registrations and like
protections in each work of authorship and derivative work thereof, whether
published or unpublished, now owned or hereafter acquired; all rights in and to
issued patents and patents pending; all trade secret rights, including all
rights to unpatented inventions, know-how, operating manuals, license rights and
agreements and confidential information, now owned or hereafter acquired; all
mask work or similar rights available for the protection of semiconductor chips,
now owned or hereafter acquired; all trade marks and trade names and associated
goodwill; all claims for damages by way of any past, present and future
infringement of any of the foregoing; and
PROCEEDS
All of
the Company’s books and records relating to the foregoing and any and all
present and future accounts, general intangibles, chattel paper, electronic
chattel paper, products, accessions, replacements, betterments and substitutions
for any of the foregoing described property, and all proceeds arising from or by
virtue of, or from the sale or disposition of, or collections with respect to,
or insurance proceeds payable with respect to, or claims against any other
Person with respect to, all or any part of the foregoing described property and
interests.
3. Rights of Peninsula;
Limitations on Peninsula’s Obligations. It is expressly agreed
by the Company that, anything herein to the contrary notwithstanding, the
Company shall remain liable under each of its contracts and documents to observe
and perform all the conditions and obligations to be observed and performed by
it thereunder, all in accordance with and pursuant to the terms and provisions
of its contracts and documents. Peninsula shall have no obligation or
liability under any of the Company’s contracts and documents by reason of or
arising out of this Security Agreement or the granting to Peninsula of a
security interest therein or the receipt by Peninsula of any payment relating to
any of the Company’s contracts and documents pursuant hereto, nor shall
Peninsula be required or obligated in any manner to perform or fulfill any of
the obligations of the Company under or pursuant to any of its contracts and
documents, or to make any payment, or to make any inquiry as to the nature or
the sufficiency of any payment received by it or the sufficiency of any
performance by any party under any of its contracts and documents, or to present
or file any claim, or to take any action to collect or enforce any performance
or the payment of any amounts which may have been assigned to it or to which it
may be entitled at any time or times.
4. Representations and
Warranties. The Company hereby represents and warrants that
the chief executive office and chief place of business of the Company is ▇.▇.
▇▇▇ ▇▇▇, ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇, and the Company will not change
such chief executive office and chief place of business or remove such records
unless the Company shall have given Peninsula at least 10 days prior written
notice thereof. The Company hereby represents and warrants that the
execution, delivery and performance of this Agreement shall not conflict with,
constitute a breach or default under, or result in the termination of, any
agreement executed by the Company in connection with the Senior
Debt.
5. Covenants. The
Company covenants and agrees with Peninsula that from and after the date of this
Security Agreement and until the Obligations are fully satisfied:
a. Further
Documentation. At any time and from time to time, upon the
written request of Peninsula, and at the sole expense of the Company, the
Company will promptly and duly execute and deliver any and all such further
documents and take such further action as Peninsula may reasonably request in
carrying out the terms and conditions of this Security Agreement and the rights
and powers herein granted, including, without limitation, the filing of any
financing or continuation statements under the Uniform Commercial Code in effect
in any jurisdiction with respect to the security interests granted
hereby. The Company also hereby authorizes Peninsula to file a
financing statement under the Uniform Commercial Code in any jurisdiction with
respect to the security interests granted hereby.
b. Continuous
Perfection. The Company will not change its name, identity or
corporate structure in any manner unless the Company shall have given Peninsula
at least 10 days' prior written notice thereof and shall have taken all action
(or made arrangements to take such action substantially simultaneously with such
change if it is impossible to take such action in advance) necessary or
reasonably requested by Peninsula to amend any financing statement or
continuation statement filed with respect to the Collateral so that it is not
misleading.
c. Insurance. The
Company will insure the Collateral against such risks and hazards as other
companies similarly situated insure against, in amounts and under policies which
it currently holds and under such additional or substituted amounts or policies
as it may from time to time determine, which shall be reasonably acceptable to
Peninsula (providing that no cancellation of such insurance shall be effective
without 30 days written notice to Peninsula and containing loss payable clauses
to Peninsula as its interest may appear) and all premiums thereon shall be paid
by the Company.
d. Limitation on Encumbrances
on Collateral. The Company will not create, incur or permit to exist,
will defend the Collateral against, and will take such other action as is
necessary to remove, any Encumbrance or claim on or to the Collateral, other
than the Encumbrances created hereby or otherwise permitted pursuant to the
Purchase Agreement, and will defend the right, title and interest of Peninsula
in and to any of the Collateral against other claims and demands of all Persons
whomsoever.
e. Limitations on Dispositions
of Collateral. The Company will not sell, transfer, lease or otherwise
dispose of any of the Collateral, or attempt, offer or contract to do so except
for (x) sales of inventory in the ordinary course of its business and
(y) so long as no Event of Default has occurred, the disposition in the
ordinary course of business of property not material to the conduct of its
business.
6. Remedies, Event of
Default. If any dissolution, liquidation, winding up of the affairs of
the Company or other Event of Default shall occur and be continuing and subject
to (a) the subordination provisions of Section 2 above and (b) the terms of the
Subordination Agreement, Peninsula may exercise in addition to all other rights
and remedies granted in this Security Agreement or in any other instrument or
agreement securing, evidencing or relating to the Obligations or at law or in
equity, all rights and remedies of Peninsula under the
Code. Peninsula shall be deemed not to have knowledge of any Event of
Default unless and until notice thereof is given to Peninsula by the
Company. Without limiting the generality of the foregoing, the
Company expressly agrees that in any such event, Peninsula, without demand of
performance or other demand (except the notice specified below of time and place
of public or private sale) to or upon the Company or any other Person may
forthwith collect, receive, appropriate and realize upon the Collateral, or any
part thereof, and/or may forthwith sell, lease, assign, give option or options
to purchase, or sell or otherwise dispose of and deliver said Collateral (or
contract to do so), or any part thereof, in one or more parcels at public or
private sale or sales, at any exchange broker's board or at any of Peninsula’s
offices or elsewhere at such prices as it may deem best, for cash or on credit
or for future delivery without assumption of any credit
risk. Peninsula shall have the right upon any such public sale or
sales, and, to the extent permitted by law, upon any such private sale or sales,
to purchase the whole or any part of said Collateral so sold, free of any right
or equity of redemption, which equity of redemption the Company hereby
releases. The Company further agrees, at Peninsula’s request, to
assemble the Collateral, make it available to Peninsula at places which
Peninsula shall reasonably select, whether at the Company's premises or
elsewhere. Peninsula shall apply the net proceeds of any such
collection, recovery, receipt, appropriation, realization or sale, after
deducting all reasonable costs and expenses of every kind incurred therein or
incidental to the care, safe keeping or otherwise of any or all of the
Collateral or in any way relating to the rights of Peninsula hereunder,
including reasonable attorneys' fees and legal expenses, to the payment in whole
or in part of the Obligations, the Company remaining liable for any deficiency
remaining unpaid after the application, and only after so paying over such net
proceeds and after the payment by Peninsula of any other amount required by any
provision of law. To the extent permitted by applicable law, the
Company waives all claims, damages, and demands against Peninsula arising out of
the repossession, retention or sale of the Collateral. The Company
agrees that Peninsula need not give more than 10 days notice of the time and
place of any public sale or of the time after which a private sale may take
place and that such notice is reasonable notification of such
matters. The Company shall remain liable for any deficiency if the
proceeds of any sale or disposition of the Collateral are insufficient to pay
all amounts to which Peninsula is entitled.
The
Company hereby waives presentment, demand, protest or any notice (to the extent
permitted by applicable law) of any kind in connection with this Security
Agreement or any collateral.
7. Application of
Proceeds. Subject to the subordination provisions contained in
Section 2 above and the terms of the Subordination Agreement, the proceeds of
all sales and collections in respect of any Collateral shall be applied as
follows:
First, to
the payment of the costs and expenses of such sales and collections, the
expenses of Peninsula and the reasonable fees and expenses of counsel to
Peninsula;
Second,
any surplus then remaining to the payment of the Obligations in such order and
manner as Peninsula may in its sole discretion determine; and
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Third,
any surplus then remaining shall be paid to the
Company.
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8. Limitation on Peninsula’s
Duty in Respect of Collateral. Beyond the use of reasonable
care in the custody thereof, Peninsula shall have no duty as to any Collateral
in its possession or control or in the possession or control of any agent or
nominee of it or any income thereon or as to the preservation of rights against
prior secured parties or any other rights pertaining thereto.
9. Notices. Any
notice, request or other communication required or permitted hereunder shall be
in writing and shall be delivered personally or by facsimile (receipt confirmed
electronically) or shall be sent by a reputable express delivery service or by
certified mail, postage prepaid with return receipt requested, addressed as
follows:
if to the Company,
to:
ECO2 Plastics,
Inc.
▇▇ ▇▇▇
▇▇▇
▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇
▇. ▇▇▇▇▇▇▇
Fax: (▇▇▇)
▇▇▇-▇▇▇▇
with a copy
to:
The ▇▇▇▇ Law Group, PLLC
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇
▇. ▇▇▇▇
Fax: (▇▇▇)
▇▇▇-▇▇▇▇
if to Peninsula,
to:
Peninsula
Packaging, LLC
c/o
Stradley Ronon ▇▇▇▇▇▇▇ & ▇▇▇▇▇, LLP
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇
▇. ▇▇▇▇▇▇, Esquire
Fax: (▇▇▇)
▇▇▇-▇▇▇▇
All such
notices and communications shall be deemed to have been duly
given: (i) when delivered by hand, if personally delivered;
(ii) five business days after being deposited in the mail, postage prepaid,
if mailed certified mail, return receipt requested; (iii) one business day
after being timely delivered to a next-day air courier guaranteeing overnight
delivery; (iv) the date of transmission if sent via facsimile to the
facsimile number as set forth in this Section prior to 5:00 pm in the time zone
of the recipient on a business day, with confirmation of successful transmission
or (v) the business day following the date of transmission if sent via
facsimile to the facsimile number as set forth in this Section after 5:00 p.m.
in the time zone of the recipient or on a date that is not a business
day. Change of a party’s address, facsimile number or specified
recipient may be designated hereunder by giving notice to all of the other
parties hereto in accordance with this Section.
10. Severability. Any
provision of this Security Agreement which is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
11. No Waiver; Cumulative
Remedies. Peninsula shall not, by any act, delay, omission or
otherwise, be deemed to have waived any of its rights or remedies hereunder and
no waiver shall be valid unless in writing, signed by Peninsula, and then only
to the extent therein set forth. A waiver by Peninsula shall not be
construed as a bar to any right or remedy which Peninsula would otherwise have
had on any future occasion. No failure to exercise nor any delay by
Peninsula in exercising any right, power or privilege hereunder shall operate as
a waiver thereof, nor shall any single or partial exercise of any right, power
or privilege hereunder preclude any other or future exercise thereof or the
exercise or any other right, power or privilege. The rights and
remedies hereunder provided are cumulative and may be exercised singly or
concurrently, and are not exclusive of any rights and remedies provided by
law.
12. Successors and
Assigns. This Security Agreement and all obligations of the
Company hereunder shall be binding upon the successors and permitted assigns of
the Company, and shall, together with the rights and remedies of Peninsula
hereunder, inure to the benefit of Peninsula and its successors and permitted
assigns; provided that
the Company may not assign any of its rights or obligations hereunder without
the prior written consent of Peninsula.
13. Amendment. None
of the terms or provisions of this Security Agreement may be altered, modified
or amended except by an instrument in writing, duly executed by the Company and
the holders of at least 60% of the aggregate principal amount of the promissory
notes then outstanding under the Purchase Agreement.
14. Governing
Law. This Security Agreement shall be governed by and
construed in accordance with the domestic laws of the State of California
without giving effect to any choice of law or conflict of law provision or rule
(whether of the State of California or any other jurisdiction) that would cause
the application of the laws of any jurisdiction other than the State of
California.
15. Counterparts. This
Security Agreement may be executed in separate counterparts each of which will
be an original and all of which taken together will constitute one and the same
agreement.
16. Facsimile. This
Security Agreement may be executed using facsimiles of signatures, and a
facsimile of a signature shall be deemed to be the same, and equally
enforceable, as an original of such signature.
17. Termination. At
such time all Obligations have been fully satisfied, the security interest
created hereby shall automatically terminate. Peninsula shall take
all such actions as may be requested by the Company to evidence such termination
and to release the liens created hereby, at the Company's expense.
Signature
Page Follows
IN
WITNESS WHEREOF, the parties hereto have caused this Security Agreement to be
duly executed and delivered as of the Effective Date.
ECO2 PLASTICS,
INC.
By:________________________
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Chief Financial Officer
PENINSULA PACKAGING, LLC
By:
_________________________
▇▇▇▇
▇▇▇▇▇▇
Managing
Director
Exhibit
D-2
Security
Agreement
ECO2
PLASTICS, INC.
SECURITY
AGREEMENT
June 2,
2009
This
Security Agreement is dated as of June 2, 2009 (the “Effective Date”), by
and between ECO2 Plastics
Inc., a Delaware corporation (the “Company”), Trident
Capital Fund-VI, L.P. and Trident Capital Fund-VI Principals, L.P.
(collectively, “Trident”), ▇▇▇▇▇▇
Living Trust dated 12/10/1996 (”▇▇▇▇▇▇”), ▇▇▇▇▇▇▇▇▇
Capital Partners, LLC (“▇▇▇▇▇▇▇▇▇”) and the
other Investors listed on Schedule A attached
hereto (collectively with Trident, ▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇▇, the “Investors”) and
Trident Capital, Inc. as collateral agent for the Investors (in such capacity as
collateral agent, the “Collateral
Agent”).
WHEREAS,
Trident has loaned an aggregate amount of approximately Six Hundred Thousand
Dollars ($600,000) to the Company evidenced by certain Amended and Restated
Promissory Notes, dated as of the Effective Date, by the Company for the benefit
of Trident (the “Trident Notes”);
and
WHEREAS,
▇▇▇▇▇▇ has loaned approximately Fifty Thousand Dollars ($50,000) to the Company
evidenced by a certain Amended and Restated Promissory Note, dated as of the
Effective Date, by the Company for the benefit of ▇▇▇▇▇▇ (the “▇▇▇▇▇▇ Note”);
and
WHEREAS,
▇▇▇▇▇▇▇▇▇ has loaned approximately One Hundred Thousand Dollars ($100,000) to
the Company evidenced by a certain Amended and Restated Promissory Note, dated
as of the Effective Date, by the Company for the benefit of ▇▇▇▇▇▇▇▇▇ (the
“▇▇▇▇▇▇▇▇▇
Note”, and collectively with the Trident Notes, the ▇▇▇▇▇▇ Note, and any
other note issued to an Investor under the Purchase Agreement, the “Notes”);
and
WHEREAS,
on the date hereof the Company is borrowing from Investors other than Trident,
▇▇▇▇▇▇ or ▇▇▇▇▇▇▇▇▇ the additional amounts indicated on Schedule A hereto;
and
WHEREAS,
the Company has agreed to execute and deliver this Security Agreement to grant
to the Collateral Agent on behalf of all of the Investors a security interest in
all of the Company’s assets to secure the borrowings and other obligations under
the Notes.
NOW,
THEREFORE, for good and valuable consideration, the receipt of which is hereby
acknowledged, the parties hereto agree as follows:
1. Defined
Terms. The following terms shall have the following meanings,
unless the context otherwise requires:
“Code” shall mean the
Uniform Commercial Code as in effect in the State of California on the Effective
Date.
“Encumbrance” shall
mean any security interest, mortgage, pledge, lien, claim, charge, encumbrance,
title retention agreement, lessor’s interest under a financing lease or any
analogous arrangements in any of properties or assets of the Company, intended
as, or having the effect of, security.
“Event of Default”
shall have the meaning assigned in the Notes.
“Financing Documents”
shall mean the Notes, this Security Agreement, the Purchase Agreement, the
Subordination Agreement, and all other documents, instruments or agreements
relating to the financing transactions contemplated by such
documents.
“Obligations” shall
mean the obligations of the Company to the Investors under the Notes, this
Security Agreement and the other Financing Documents, including all costs of
collection.
“Person” shall mean an
individual, partnership, corporation, limited liability company, business trust,
joint stock company, trust, unincorporated association, joint venture or other
entity, whether public or private.
“Purchase Agreement”
shall mean that certain Convertible Note Purchase Agreement, dated as of June 2,
2009, by and among ECO2 Plastics,
Inc., Peninsula Packaging, LLC, Trident Capital Fund-VI, L.P., Trident Capital
Fund-VI Principals Fund, L.L.C., ▇▇▇▇▇▇▇▇▇ Capital Partners, LLC, ▇▇▇▇▇▇ Living
Trust Dated 12/10/1996 and the other parties set forth on Schedule I
thereto.
“Security Agreement”
means this Security Agreement, as amended, supplemented, restated or otherwise
modified from time to time.
“Senior Debt” shall
mean all indebtedness for all principal, fees, expenses, interest, penalties,
post bankruptcy petition interest, and all other amounts payable for money
borrowed in connection with the $2,000,000 loan from the California Integrated
Waste Management Board.
“Subordination
Agreement” shall mean that certain Second Amended and Restated
Subordination and Intercreditor Agreement, dated as of June 2, 2009 to which the
Investors are party.
2. Grant of Security
Interest. As collateral security for the prompt and complete
payment and performance when due of all the Obligations, the Company grants to
the Collateral Agent as collateral agent on behalf of the Investors a security
interest in all of the Company's right, title and interest in, to and under the
following, whether now existing or hereafter acquired (all of which collateral
being hereinafter collectively called the “Collateral”); provided, however, that the
security interest hereunder shall be subordinate to any perfected security
interest granted by the Company in connection with the Senior
Debt. Collateral Agent is entitled to a security interest in the
following:
ACCOUNTS
All
present and future accounts owned by the Company, including accounts receivable,
including and together with any and all contract rights, security deposits
(where not otherwise prohibited by law or agreement), together with agreements,
customer lists, client lists, and accounts, invoices, agings, verification
reports and other records relating in any way to such accounts;
CONTRACTS
All
contracts, contract rights, royalties, license rights, leases, instruments,
undertakings, documents or other agreements in or under which the Company may
now or hereafter have any right, title or interest whether now existing or
hereinafter created and all forms of obligations owing to the Company arising
out of the sale or lease of goods, the licensing of technology or the rendering
of services by the Company, whether or not earned by performance, and any and
all credit insurance, guaranties, and other security therefore, as well as all
merchandise returned to or reclaimed by the Company;
EQUIPMENT, FURNISHINGS AND
MISCELLANEOUS PERSONAL PROPERTY
All
presently owned and hereafter acquired furniture, furnishings, equipment,
machinery, inventory, vehicles (including motor vehicles and trailers) computer
hardware and software, accounting or bookkeeping systems, client or customer
lists and information, data sheets and other records of any kind, wherever
located, stored or inventoried, which are used or which may be used in the
Company’s business;
FIXTURES
All
materials used by the Company in connection with its business operations,
including, but not limited to, supplies, trade equipment, appliances, apparatus
and any other items, now owned or hereafter acquired by the Company, and now or
hereafter attached to, or installed in (temporarily or permanently) any real
property now or in the future owned or leased by the Company;
GENERAL
INTANGIBLES
All
general intangibles and other personal property of the Company, now owned or
hereinafter acquired, including, without limitation, the
following: (a) permits, authorizations and approvals presently and
hereafter issued by any federal, state, municipal or local governmental or
regulatory authority in favor of the Company; (b) all plans, specifications,
renderings and other similar materials presently owned or hereafter acquired by
the Company; (c) all presently existing and hereafter created contracts, leases,
licenses and agreements to which the Company is a party; (d) all presently and
hereafter existing policies and agreements of insurance in favor of the Company;
(e) all presently and hereafter existing equity contribution agreements and
other equity financing arrangements in favor of the Company; (f) all copyrights,
chattel paper, electronic chattel paper, licenses, money, insurance proceeds,
contract rights, subscription lists, mailing lists, licensing agreements,
patents, trademarks, service marks, trade styles, patents, patent applications,
franchise agreements, blueprints, drawings, purchase orders, customer lists,
route lists, infringements, claims, computer programs, computer discs, computer
tapes, literature, reports, catalogs, design rights, income tax refunds,
payments of insurance and rights to payment of any kinds, trade names,
refundable, returnable or reimbursable fees, deposits or other funds or
evidences of credit or indebtedness deposited by or on behalf of the Company
with any governmental agencies, boards, corporations, providers of utility
services, public or private; (g) all presently existing and hereafter acquired
computer programs, computer software and other electronic systems and materials
of any kind of the Company; (h) goodwill; and (i) all other presently existing
and hereafter acquired documents, accounts, general intangibles and intangible
personal property of any kind;
DOCUMENTS
All
documents, cash, deposit accounts, securities, securities entitlements,
securities accounts, investment property, financial assets, letters of credit,
certificates of deposit, instruments, chattel paper, and electronic chattel
paper now owned or hereafter acquired and the Company’s books relating to the
foregoing;
INTELLECTUAL
PROPERTY
All
copyright rights, copyright applications, copyright registrations and like
protections in each work of authorship and derivative work thereof, whether
published or unpublished, now owned or hereafter acquired; all rights in and to
issued patents and patents pending; all trade secret rights, including all
rights to unpatented inventions, know-how, operating manuals, license rights and
agreements and confidential information, now owned or hereafter acquired; all
mask work or similar rights available for the protection of semiconductor chips,
now owned or hereafter acquired; all trade marks and trade names and associated
goodwill; all claims for damages by way of any past, present and future
infringement of any of the foregoing; and
PROCEEDS
All of
the Company’s books and records relating to the foregoing and any and all
present and future accounts, general intangibles, chattel paper, electronic
chattel paper, products, accessions, replacements, betterments and substitutions
for any of the foregoing described property, and all proceeds arising from or by
virtue of, or from the sale or disposition of, or collections with respect to,
or insurance proceeds payable with respect to, or claims against any other
Person with respect to, all or any part of the foregoing described property and
interests.
3. Pro Rata Distributions Among
Investors. It is expressly agreed by each Investor that all
payments received by the Company under or in connection with the sale or
liquidation of the Collateral, subject to any Senior Debt, shall be divided
pari passu among all
holders of promissory notes issued under the Purchase Agreement, consistent with
the terms of the Subordination Agreement. Each Investor further
agrees that if any Investor shall obtain payment in respect of any principal of
or interest on any of its Notes resulting in such Investor’s receiving payment
greater than the pro rata share contemplated by the Subordination Agreement,
then the Investor receiving such greater proportion shall (i) notify the
Collateral Agent of such fact and (ii) hold the amount exceeding its pro rata
share and promptly pay such amount to the Collateral Agent, or make such other
adjustments as shall be equitable in order to effectuate the terms of the
Subordination Agreement.
4. Collateral
Agent.
a. Appointment and
Authority. Trident Capital, Inc. is hereby appointed Collateral Agent
hereunder, and each Investor hereby authorizes Collateral Agent to act as its
agent in accordance with the terms hereof. Each Investor authorizes
Collateral Agent to take such actions on its behalf and to exercise such powers
as are delegated to Collateral Agent by the terms hereof, together with such
actions and powers as are reasonably incidental thereto.
b. Exculpatory
Provisions. Collateral Agent shall not have any duties or
obligations except those expressly set forth herein. Without limiting
the generality of the foregoing, Collateral Agent:
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i.
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shall
not be subject to any fiduciary or other implied duties, regardless of
whether an Event of Default has occurred and is
continuing,
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ii.
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shall
not have any duty to take any discretionary action or exercise any
discretionary powers, except discretionary rights and powers expressly
contemplated hereby that Collateral Agent is required to exercise as
directed in writing (as shall be expressly provided for herein); provided that
Collateral Agent shall not be required to take any action that, in its
opinion or the opinion of its counsel, may expose Collateral Agent to
liability or that is contrary to this Security Agreement, any Financing
Document or applicable law,
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iii.
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shall
not, except as expressly set forth herein, have any duty to disclose, and
shall not be liable for the failure to disclose, any information relating
to the Company or any of its affiliates that is communicated to or
obtained by Collateral Agent or any of its affiliates in any
capacity,
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iv.
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shall
not be liable for any action taken or not taken by it with the consent or
at the request of the holders of at least 60% of the aggregate principal
amount of Notes then outstanding,
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v.
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shall
not be liable for any action taken or not taken by it in accordance with
the advice of any legal counsel (who may be counsel for the Company),
independent accountants and other experts selected by
it,
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vi.
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shall
not be liable for any action taken or not taken by it in accordance with
an order from a court of competent
jurisdiction,
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vii.
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shall
not be responsible for or have any duty to ascertain or inquire into
(i) any statement, warranty or representation made in or in
connection with this Security Agreement or any Financing Document, (ii)
the contents of any certificate, report or other document delivered
hereunder or thereunder or in connection herewith or therewith, (iii) the
performance or observance of any of the covenants, agreements or other
terms or conditions set forth herein or therein or the occurrence of any
Event of Default, or (iv) the validity, enforceability, effectiveness or
genuineness of this Security Agreement, any Financing Document or any
other agreement, instrument or document,
and
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viii.
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shall
be entitled to rely upon, and shall not incur any liability for relying
upon, any notice, request, certificate, consent, statement, instrument,
document or other writing (including any electronic message, Internet or
intranet website posting or other distribution) believed by it to be
genuine and to have been signed, sent or otherwise authenticated by the
proper Person. Collateral Agent also may rely upon any
statement made to it orally or by telephone and believed by it to have
been made by the proper Person, and shall not incur any liability for
relying thereon.
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c. Replacement of Collateral
Agent. With the consent or at the request of the holders of at
least 60% of the aggregate principal amount of Notes then outstanding,
Collateral Agent shall be replaced with a successor to be appointed by such
holders. Upon the acceptance of a successor’s appointment as
Collateral Agent hereunder, such successor shall succeed to and become vested
with all of the rights, powers, privileges and duties of the retiring Collateral
Agent, and the retiring Collateral Agent shall be discharged from all of its
duties and obligations hereunder or under the Financing Documents.
5. Rights of Investors;
Limitations on Investor’s Obligations. It is expressly agreed
by the Company that, anything herein to the contrary notwithstanding, the
Company shall remain liable under each of its contracts and documents to observe
and perform all the conditions and obligations to be observed and performed by
it thereunder, all in accordance with and pursuant to the terms and provisions
of its contracts and documents. Collateral Agent and Investors shall
have no obligation or liability under any of the Company’s contracts and
documents by reason of or arising out of this Security Agreement or the granting
to the Collateral Agent on behalf of the Investors of a security interest
therein or the receipt by Collateral Agent or any Investor of any payment
relating to any of the Company’s contracts and documents pursuant hereto, nor
shall Collateral Agent or any Investor be required or obligated in any manner to
perform or fulfill any of the obligations of the Company under or pursuant to
any of its contracts and documents, or to make any payment, or to make any
inquiry as to the nature or the sufficiency of any payment received by it or the
sufficiency of any performance by any party under any of its contracts and
documents, or to present or file any claim, or to take any action to collect or
enforce any performance or the payment of any amounts which may have been
assigned to it or to which it may be entitled at any time or times.
6. Representations and
Warranties. The Company hereby represents and warrants that
the chief executive office and chief place of business of the Company is ▇.▇.
▇▇▇ ▇▇▇, ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇, and the Company will not change
such chief executive office and chief place of business or remove such records
unless the Company shall have given Investor at least 10 days prior written
notice thereof. The Company hereby represents and warrants that the
execution, delivery and performance of this Agreement shall not conflict with,
constitute a breach or default under, or result in the termination of, any
agreement executed by the Company in connection with the Senior
Debt.
7. Covenants. The
Company covenants and agrees with Investors and Collateral Agent that from and
after the date of this Security Agreement and until the Obligations are fully
satisfied:
a. Further
Documentation. At any time and from time to time, upon the
written request of the Collateral Agent, and at the sole expense of the Company,
the Company will promptly and duly execute and deliver any and all such further
documents and take such further action as Collateral Agent may reasonably
request in carrying out the terms and conditions of this Security Agreement and
the rights and powers herein granted, including, without limitation, the filing
of any financing or continuation statements under the Uniform Commercial Code in
effect in any jurisdiction with respect to the security interests granted
hereby. The Company also hereby authorizes Collateral Agent to file a
financing statement under the Uniform Commercial Code in any jurisdiction with
respect to the security interests granted hereby.
b. Continuous
Perfection. The Company will not change its name, identity or
corporate structure in any manner unless the Company shall have given Collateral
Agent at least 10 days' prior written notice thereof and shall have taken all
action (or made arrangements to take such action substantially simultaneously
with such change if it is impossible to take such action in advance) necessary
or reasonably requested by Collateral Agent to amend any financing statement or
continuation statement filed with respect to the Collateral so that it is not
misleading.
c. Insurance. The
Company will insure the Collateral against such risks and hazards as other
companies similarly situated insure against, in amounts and under policies which
it currently holds and under such additional or substituted amounts or policies
as it may from time to time determine, which shall be reasonably acceptable to
the Collateral Agent (providing that no cancellation of such insurance shall be
effective without 30 days written notice to Collateral Agent containing loss
payable clauses to Collateral Agent as its interests may appear) and all
premiums thereon shall be paid by the Company.
d. Limitation on Encumbrances
on Collateral. The Company will not create, incur or permit to exist,
will defend the Collateral against, and will take such other action as is
necessary to remove, any Encumbrance or claim on or to the Collateral, other
than the Encumbrances created hereby or otherwise permitted pursuant to the
Purchase Agreement, and will defend the right, title and interest of Collateral
Agent and Investors in and to any of the Collateral against other claims and
demands of all Persons whomsoever.
e. Limitations on Dispositions
of Collateral. The Company will not sell, transfer, lease or otherwise
dispose of any of the Collateral, or attempt, offer or contract to do so except
for (x) sales of inventory in the ordinary course of its business and
(y) so long as no Event of Default has occurred, the disposition in the
ordinary course of business of property not material to the conduct of its
business.
8. Remedies, Event of
Default. If any dissolution, liquidation, winding up of the affairs of
the Company or other Event of Default shall occur and be continuing and subject
to (a) the subordination provisions of Section 2 above and (b) the terms of the
Subordination Agreement, Collateral Agent may exercise in addition to all other
rights and remedies granted in this Security Agreement or in any other
instrument or agreement securing, evidencing or relating to the Obligations or
at law or in equity, all rights and remedies of Collateral Agent under the Code.
Collateral Agent shall be deemed not to have knowledge of any Event of Default
unless and until notice thereof is given to Collateral Agent by the
Company. Without limiting the generality of the foregoing, the
Company expressly agrees that in any such event, the Collateral Agent, without
demand of performance or other demand (except the notice specified below of time
and place of public or private sale) to or upon the Company or any other Person
may forthwith collect, receive, appropriate and realize upon the Collateral, or
any part thereof, and/or may forthwith sell, lease, assign, give option or
options to purchase, or sell or otherwise dispose of and deliver said Collateral
(or contract to do so), or any part thereof, in one or more parcels at public or
private sale or sales, at any exchange broker's board or at any of the
Collateral Agent’s offices or elsewhere at such prices as it may deem best, for
cash or on credit or for future delivery without assumption of any credit risk.
Collateral Agent shall have the right upon any such public sale or sales, and,
to the extent permitted by law, upon any such private sale or sales, to purchase
the whole or any part of said Collateral so sold, free of any right or equity of
redemption, which equity of redemption the Company hereby
releases. The Company further agrees, at Collateral Agent’s request,
to assemble the Collateral, make it available to Collateral Agent at places
which Collateral Agent shall reasonably select, whether at the Company's
premises or elsewhere. Collateral Agent shall apply the net proceeds of any such
collection, recovery, receipt, appropriation, realization or sale, after
deducting all reasonable costs and expenses of every kind incurred therein or
incidental to the care, safe keeping or otherwise of any or all of the
Collateral or in any way relating to the rights of the Collateral Agent or
Investors hereunder, including reasonable attorneys' fees and legal expenses, to
the payment in whole or in part of the Obligations, the Company remaining liable
for any deficiency remaining unpaid after the application, and only after so
paying over such net proceeds and after the payment by the Collateral Agent of
any other amount required by any provision of law. To the extent
permitted by applicable law, the Company waives all claims, damages, and demands
against Collateral Agent arising out of the repossession, retention or sale of
the Collateral. The Company agrees that the Collateral Agent need not
give more than 10 days notice of the time and place of any public sale or of the
time after which a private sale may take place and that such notice is
reasonable notification of such matters. The Company shall remain
liable for any deficiency if the proceeds of any sale or disposition of the
Collateral are insufficient to pay all amounts to which the Collateral Agent and
the Investors are entitled.
The
Company hereby waives presentment, demand, protest or any notice (to the extent
permitted by applicable law) of any kind in connection with this Security
Agreement or any collateral.
9. Application of
Proceeds. Subject to the subordination provisions contained in
Section 2 above and the terms of the Subordination Agreement, the proceeds of
all sales and collections in respect of any Collateral shall be applied as
follows:
First, to
the payment of the costs and expenses of such sales and collections, the
expenses of Collateral Agent and the reasonable fees and expenses of counsel to
Collateral Agent;
Second,
any surplus then remaining to the payment of the Obligations in such order and
manner consistent with the provisions of Section 3 above as the Collateral Agent
may in its sole discretion determine; and
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Third,
any surplus then remaining shall be paid to the
Company.
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10. Limitation on Collateral
Agent’s and Investor’s Duty in Respect of Collateral. Beyond
the use of reasonable care in the custody thereof, Collateral Agent and
Investors shall have no duty as to any Collateral in their possession or control
or in the possession or control of any agent or nominee of them or any income
thereon or as to the preservation of rights against prior secured parties or any
other rights pertaining thereto.
11. Notices. Any
notice, request or other communication required or permitted hereunder shall be
in writing and shall be delivered personally or by facsimile (receipt confirmed
electronically) or shall be sent by a reputable express delivery service or by
certified mail, postage prepaid with return receipt requested, addressed as
follows:
if to the Company,
to:
ECO2 Plastics,
Inc.
▇▇ ▇▇▇
▇▇▇
▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇
▇. ▇▇▇▇▇▇▇
Fax: (▇▇▇)
▇▇▇-▇▇▇▇
with a copy
to:
The ▇▇▇▇ Law Group, PLLC
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇
▇. ▇▇▇▇
Fax: (▇▇▇)
▇▇▇-▇▇▇▇
if to Collateral Agent,
to:
Trident
Capital, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇
▇. ▇▇▇▇▇▇, Chief Administrative Officer and General Counsel
Fax: (▇▇▇)
▇▇▇-▇▇▇▇
if to the Investors,
to:
The addresses of such Investors set
forth on the signature pages hereto.
All such
notices and communications shall be deemed to have been duly
given: (i) when delivered by hand, if personally delivered;
(ii) five business days after being deposited in the mail, postage prepaid,
if mailed certified mail, return receipt requested; (iii) one business day
after being timely delivered to a next-day air courier guaranteeing overnight
delivery; (iv) the date of transmission if sent via facsimile to the
facsimile number as set forth in this Section prior to 5:00 pm in the time zone
of the recipient on a business day, with confirmation of successful transmission
or (v) the business day following the date of transmission if sent via
facsimile to the facsimile number as set forth in this Section after 5:00 p.m.
in the time zone of the recipient or on a date that is not a business
day. Change of a party’s address, facsimile number or specified
recipient may be designated hereunder by giving notice to all of the other
parties hereto in accordance with this Section.
12. Severability. Any
provision of this Security Agreement which is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
13. No Waiver; Cumulative
Remedies. Neither Collateral Agent nor any Investor shall, by
any act, delay, omission or otherwise, be deemed to have waived any of its
rights or remedies hereunder and no waiver shall be valid unless in writing,
signed by Collateral Agent or such Investor, as the case may be, and then only
to the extent therein set forth. A waiver by Collateral Agent or an
Investor shall not be construed as a bar to any right or remedy which Collateral
Agent or such Investor would otherwise have had on any future
occasion. No failure to exercise nor any delay by Collateral Agent or
an Investor in exercising any right, power or privilege hereunder shall operate
as a waiver thereof, nor shall any single or partial exercise of any right,
power or privilege hereunder preclude any other or future exercise thereof or
the exercise or any other right, power or privilege. The rights and
remedies hereunder provided are cumulative and may be exercised singly or
concurrently, and are not exclusive of any rights and remedies provided by
law.
14. Successors and
Assigns. This Security Agreement and all obligations of the
Company hereunder shall be binding upon the successors and permitted assigns of
the Company, and shall, together with the rights and remedies of Collateral
Agent and Investors hereunder, inure to the benefit of Collateral Agent and
Investors and their successors and permitted assigns; provided that the Company may
not assign any of its rights or obligations hereunder without the prior written
consent of Collateral Agent.
15. Amendment. None
of the terms or provisions of this Security Agreement may be altered, modified
or amended except by an instrument in writing, duly executed by the Company and
the holders of at least 60% of the aggregate principal amount of the promissory
notes then outstanding under the Purchase Agreement.
16. Governing
Law. This Security Agreement shall be governed by and
construed in accordance with the domestic laws of the State of California
without giving effect to any choice of law or conflict of law provision or rule
(whether of the State of California or any other jurisdiction) that would cause
the application of the laws of any jurisdiction other than the State of
California.
17. Counterparts. This
Security Agreement may be executed in separate counterparts each of which will
be an original and all of which taken together will constitute one and the same
agreement.
18. Facsimile. This
Security Agreement may be executed using facsimiles of signatures, and a
facsimile of a signature shall be deemed to be the same, and equally
enforceable, as an original of such signature.
19. Termination. At
such time all Obligations have been fully satisfied, the security interest
created hereby shall automatically terminate. Collateral Agent shall
take all such actions as may be requested by the Company to evidence such
termination and to release the liens created hereby, at the Company's
expense.
Signature
Page Follows
IN
WITNESS WHEREOF, the parties hereto have caused this Security Agreement to be
duly executed and delivered as of the Effective Date.
ECO2
PLASTICS, INC.
By: ________________________
▇▇▇▇▇▇▇
▇. ▇▇▇▇▇▇▇
Chief
Financial Officer
TRIDENT
CAPITAL, INC.,
as
Collateral Agent
Executed
by the undersigned as an authorized signatory of Trident Capital,
Inc.
(signature)
(print name)
▇▇▇▇▇▇ LIVING TRUST DATED
12/10/1996
By:
______________________________________
Name: ▇. ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇
Title: Trustee
Address: ▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇
CAPITAL PARTNERS, LLC
By:
______________________________________
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Title: Manager
Address:
__________________________________
TRIDENT CAPITAL FUND-VI, L.P.
TRIDENT CAPITAL FUND-VI PRINCIPALS FUND, L.L.C.
Executed
by the undersigned as an authorized signatory of the General Partner of Trident
Capital Fund-VI, L.P. and of the Managing Member of Trident Capital Fund-VI
Principals Fund, L.L.C.
(signature)
(print name)
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Address: ▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
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▇▇▇▇
▇▇▇▇, ▇▇ ▇▇▇▇▇
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Attn: ▇▇▇▇▇▇
▇. ▇▇▇▇▇▇
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Chief
Administrative Officer and General
Counsel
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Fax:
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▇▇
(▇▇▇) ▇▇▇-▇▇▇▇
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OTHER
INVESTORS:
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By: _________________________________
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Name: _________________________________
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Title: _________________________________
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Address: _______________________________
_______________________________
Fax: ______________________________
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E-Mail: ______________________________
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Schedule
A
Other
Investors
Exhibit E
Second
Amended and Restated Subordination and Intercreditor Agreement
SECOND AMENDED AND RESTATED
SUBORDINATION AND INTERCREDITOR AGREEMENT
This
Second Amended and Restated Subordination and Intercreditor Agreement (this
“Agreement”)
is made as of this 2nd day of
June, 2009, among TRIDENT CAPITAL, INC. (“Collateral
Agent”), TRIDENT CAPITAL FUND-VI, L.P. (“Trident
Capital I”), TRIDENT CAPITAL FUND-VI PRINCIPALS FUND, L.L.C. (“Trident
Capital II”), ▇▇▇▇▇▇ LIVING TRUST DATED 12/10/1996 (“▇▇▇▇▇▇”),
PENINSULA PACKAGING, LLC, a California limited liability company (“Peninsula”),
▇▇▇▇▇▇▇▇▇ CAPITAL PARTNERS, LLC (“▇▇▇▇▇▇▇▇▇”),
the other parties that are signatories hereto as “Additional September
Investors,” “Additional December Investors” or “Additional June Investors,” and
any other party who becomes bound by this Agreement as a senior lender pursuant
to Section 21 of the June Purchase Agreement, as defined below.
WITNESSETH
WHEREAS,
ECO2
Plastics, Inc., a Delaware corporation (“Borrower”)
is indebted to Trident Capital I, Trident Capital II, ▇▇▇▇▇▇, the Additional
September Investors and certain other investors (collectively, the “September
Investors”) pursuant to the terms of a certain Convertible Note and
Warrant Purchase Agreement dated as of September 2, 2008 (the “September
Purchase Agreement”) and certain promissory notes that were issued
thereunder (collectively, together with the September Purchase Agreement, the
“September
Subordinated Debt Documents”). The September Subordinated Debt
Documents and the September Security Agreement (defined below), together with
all other documents, agreements, instruments and/or certificates relating
thereto, are hereinafter collectively referred to as the “September
Debt Documents”; and
WHEREAS,
all indebtedness, liabilities and obligations of Borrower to the September
Investors, together with all interest and other monies due or to become due
thereunder, and any fees, costs and expenses in connection therewith, and any
amounts payable by Borrower in connection with any purchase rights, are referred
to as the “September
Subordinated Debt”; and
WHEREAS,
the payment and performance of all of the September Subordinated Debt is secured
by a security interest in certain assets of the Borrower, some or all of which
constitute the Collateral, pursuant to an Amended and Restated Security
Agreement dated as of September 2, 2008, given by Borrower in favor of the
Collateral Agent, as collateral agent for the September Investors (as amended,
the September
Security Agreement”); and
WHEREAS,
Borrower is indebted to Trident Capital I, Trident Capital II, ▇▇▇▇▇▇,
Peninsula, the Additional December Investors and certain other investors
(collectively, the “December
Investors”) pursuant to the terms of a certain Convertible Note and
Warrant Purchase Agreement dated as of December 17, 2008 (the “December
Purchase Agreement”) and certain promissory notes that were issued
thereunder (collectively, together with the December Purchase Agreement, the
“December
Subordinated Debt Documents”). The December Subordinated Debt
Documents and the December Security Agreements (defined below), together with
all other documents, agreements, instruments and/or certificates relating
thereto, are hereinafter collectively referred to as the “December
Debt Documents”; and
WHEREAS,
all indebtedness, liabilities and obligations of Borrower to the December
Investors, together with all interest and other monies due or to become due
thereunder, and any fees, costs and expenses in connection therewith, and any
amounts payable by Borrower in connection with any purchase rights, are referred
to as the “December
Subordinated Debt”; and
WHEREAS,
the payment and performance of all of the December Subordinated Debt is secured
by security interests in certain assets of the Borrower, some or all of which
constitute the Collateral, pursuant to (i) an Amended and Restated Security
Agreement dated as of December 17, 2008, given by Borrower in favor of the
Collateral Agent, as collateral agent for certain of the December Investors, and
(ii) an Amended and Restated Security Agreement dated as of December 17, 2008,
given by Borrower in favor of Peninsula (collectively, the December
Security Agreements”); and
WHEREAS,
on December 17, 2008, the Collateral Agent, the September Investors and the
December Investors entered into a certain Amended and Restated Subordination
Agreement (the “Original
Subordination Agreement”), pursuant to which the parties agreed that the
September Subordinated Debt would be subordinated to the December Subordinated
Debt; and
WHEREAS, on or about the date hereof,
Borrower shall become indebted to Trident Capital I, Trident Capital II, ▇▇▇▇▇▇,
Peninsula, ▇▇▇▇▇▇▇▇▇, the Additional June Investors, and any other party who
becomes bound by this Agreement as a senior lender pursuant to Section 21 of the
June Purchase Agreement (collectively, the “Senior
Lenders”) pursuant to the terms of a certain Convertible Note Purchase
Agreement dated as of June 2, 2009 (the “June
Purchase Agreement”) and certain promissory notes to be issued thereunder
(individually, a “Senior
Note” and collectively the “Senior
Notes”) evidencing certain of Borrower’s obligations, liabilities and
indebtedness to Senior Lenders and as secured by Security Agreements dated as of
the date hereof made by Borrower in favor of Senior Lenders (each, a “June
Security Agreement” and collectively the “June
Security Agreements”) (the June Security Agreements, the Senior Notes and
the June Purchase Agreement, together with the other documents, instruments and
agreements executed in connection therewith, as they may from time to time be
modified, amended, restated or replaced, are hereinafter collectively referred
to as the “Senior
Loan Documents”), pursuant to which Senior Lenders shall loan to Borrower
the aggregate principal amount of approximately $1.5 million to $3.0 million
(collectively the “Loans”),
upon and subject to the terms of, the Senior Loan
Documents. Capitalized terms used and not otherwise defined herein
shall have the meanings given to such terms in the Senior Loan Documents;
and
WHEREAS,
all of the indebtedness, liabilities and obligations of Borrower to Senior
Lenders in connection with the Senior Loan Documents, including all extensions
thereof and all debt issued to the Senior Lenders in respect thereof, are
hereinafter collectively called the “Senior
Debt”; and
WHEREAS,
the payment and performance of the Senior Debt is secured by security
interests in, among other things, all of the present and future goods,
equipment, inventory, investment property, instruments, chattel paper,
documents, letter-of-credit rights, accounts, deposit accounts, commercial tort
claims and general intangibles of Borrower, wherever located, and the products
and proceeds thereof (collectively, the “Collateral”);
and
WHEREAS,
the undersigned desire to amend and restate the Original Subordination Agreement
in its entirety to evidence the understanding that the December Subordinated
Debt shall be subordinated to the Senior Debt and the September Subordinated
Debt shall be subordinated to both the December Subordinated Debt and the Senior
Debt; and
NOW,
THEREFORE, in order to induce Senior Lenders to make the Loans provided for in
the Senior Loan Documents and in consideration therefor, and in consideration of
the mutual covenants set forth herein, the parties hereto hereby agree as
follows:
1. CONSENT. Collateral
Agent, the September Investors and the December Investors hereby consent to and
approve of the execution, delivery and performance by Borrower of the Senior
Loan Documents and the consummation of the transactions contemplated thereby,
notwithstanding anything to the contrary contained in any of the agreements,
instruments and documents executed in connection with the September Subordinated
Debt or the December Subordinated Debt. The September Investors
executing this Agreement hereby represent and warrant to Senior Lenders that
they hold at least sixty percent (60%) of the principal amount of the
outstanding Notes, as such term is defined in the September Purchase
Agreement. The December Investors executing this Agreement hereby
represent and warrant to Senior Lenders that they hold at least seventy percent
(70%) of the principal amount of the outstanding Notes, as such term is defined
in the December Purchase Agreement.
2. SUBORDINATION.
2.1 Subordination
of Payment. Except as set forth in Section 2.2 below, the
payment of any and all of the principal amount of, interest on and any fees,
costs and expenses on the December Subordinated Debt is hereby expressly
subordinated and made junior to the payment of the principal amount, all
interest, all liquidated damages, fees, costs, expenses and any other amounts
due on the Senior Debt. Except as set forth in Section 2.2 below, the
payment of any and all of the principal amount of, interest on and any fees,
costs and expenses on the September Subordinated Debt is hereby expressly
subordinated and made junior to (i) the payment of the principal amount, all
interest, all liquidated damages, fees, costs, expenses and any other amounts
due on the Senior Debt, and (ii) the payment of the principal amount, all
interest, all liquidated damages, fees, costs, expenses and any other amounts
due on the December Subordinated Debt.
2.2 Payments.
(a) Anything
in any other agreement, instrument or document executed and delivered in
connection with the September Subordinated Debt or December Subordinated Debt to
the contrary notwithstanding, Borrower shall not make, and neither Collateral
Agent nor any September Investor or December Investor shall receive, accept or
retain, any direct or indirect payment, or prepayment on account, or any
reduction (whether by way of loan, set-off or otherwise) in respect of the
principal of, premium on, or interest on the September Subordinated Debt or
December Subordinated Debt until the Senior Debt has been paid in full; provided, however, that so long
as at the time of and after giving effect to any such payment, no Event of
Default has occurred under the Senior Loan Documents, or would occur as a result
thereof, Borrower may make, and Collateral Agent, the September Investors
(subject to Section 2.2(b) below) and the December Investors may accept,
regularly scheduled payments of principal and interest on the September
Subordinated Debt and December Subordinated Debt, without
acceleration.
(b) Anything
in any other agreement, instrument or document executed and delivered in
connection with the September Subordinated Debt to the contrary notwithstanding,
Borrower shall not make, and neither Collateral Agent nor any September Investor
shall receive, accept or retain, any direct or indirect payment, or prepayment
on account, or any reduction (whether by way of loan, set-off or otherwise) in
respect of the principal of, premium on, or interest on the September
Subordinated Debt until the December Subordinated Debt has been paid in full;
provided, however, that so long
as at the time of and after giving effect to any such payment, no Event of
Default has occurred under the December Debt Documents, or would occur as a
result thereof, Borrower may make, and Collateral Agent and the September
Investors may accept, regularly scheduled payments of principal and interest on
the September Subordinated Debt, without acceleration.
2.3 Subordination
of Lien. Notwithstanding the date, manner or order of
creation, attachment or perfection of (i) those security interests and liens in
favor of Senior Lenders now or hereafter existing in the Collateral or (ii)
those security interests and liens in favor of Collateral Agent or Peninsula now
or hereafter existing in the Collateral (and notwithstanding any provisions of
the Uniform Commercial Code or other applicable law or of any agreement(s)
granting such security interests or liens to Collateral Agent, Peninsula or
Senior Lenders), the Senior Lenders, Collateral Agent, Peninsula, the September
Investors and the December Investors hereby agree that: (a) any security
interests and liens in and/or on the Collateral securing the December
Subordinated Debt shall be, in all respects, subject to and subordinate to the
security interests and liens in and/or on the Collateral securing the Senior
Debt, to the full extent thereof; (b) any security interests and liens in and/or
on the Collateral securing the September Subordinated Debt shall be, in all
respects, subject to and subordinate to the security interests and liens in
and/or on the Collateral securing the Senior Debt and the December Subordinated
Debt, to the full extent thereof; (c) any security interests and liens in and/or
on the Collateral securing Senior Debt shall be, in all respects, of equal lien
priority to any security interests and liens in and/or on the Collateral
securing other Senior Debt, and any payments or proceeds of Collateral received
under the Senior Loan Documents shall be made pro rata to the Senior Lenders on
a pari passu basis
until such time as all obligations under the Senior Loan Documents have been
paid in full; provided, that each
Senior Lender shall first be entitled to recover any expenses or fees incurred
in connection with the exercise of its rights and remedies with respect to the
Collateral under this Agreement; and (d) any security interests and liens in
and/or on the Collateral securing December Subordinated Debt shall be, in all
respects, of equal lien priority to any security interests and liens in and/or
on the Collateral securing other December Subordinated Debt, and any payments or
proceeds of Collateral received under the December Debt Documents shall be made
pro rata to the December Investors on a pari passu basis until such
time as all obligations under the December Debt Documents have been paid in
full; provided,
that each December Investor shall first be entitled to recover any expenses or
fees incurred in connection with the exercise of its rights and remedies with
respect to the Collateral under this Agreement. Collateral Agent or
Peninsula, as appropriate, will indicate in any financing statement filed
(whether before or after the date hereof, including if necessary by amendment)
in connection with the September Subordinated Debt or December Subordinated
Debt, that its security interests and liens in the Collateral are subordinated
to the security interests and liens of Senior Lenders in the Collateral, subject
to the terms of this Agreement.
2.4 Default/Remedies. In
the event of (a) the application for the appointment of a receiver or custodian
for Borrower or the property of Borrower, (b) the entry of an order for relief
or the filing of a petition by or against Borrower under the provisions of the
Bankrupcty Code (as defined below), (c) any assignment for the benefit of
creditors by or against Borrower, or (d) Borrower’s insolvency (which term is
defined for purposes of this paragraph as the failure or inability of Borrower
to meet its obligations as the same fall due) (collectively, an “Insolvency
Event”), then and in any such event:
(i) All of
the Senior Debt shall first be paid in full before any payment or distribution
of any character, whether in cash, securities, obligations or other property,
shall be made in respect of the December Subordinated Debt and the September
Subordinated Debt, and then all of the December Subordinated Debt shall first be
paid in full before any payment or distribution of any character, whether in
cash, securities, obligations or other property, shall be made in respect of the
September Subordinated Debt;
(ii) Any
payment or distribution of any character, which would otherwise (but for the
terms hereof) be payable or deliverable in respect of the December Subordinated
Debt or September Subordinated Debt (including any payment or distribution of
any other indebtedness of Borrower being subordinated thereto), shall be paid or
delivered directly to Senior Lenders, or their representatives, until the
payment in full of the Senior Debt, and then to the December Investors, or their
representatives, until the payment in full of the December Subordinated Debt,
and Collateral Agent, December Investors and September Investors irrevocably
authorize, empower and direct all receivers, custodians, trustees, liquidators,
conservators and others having authority in the property and premises of
Collateral Agent, December Investors and September Investors to effect all such
payments and deliveries; and
(iii) Notwithstanding
any statute, including, without limitation, the United States Bankruptcy Code
(the “Bankruptcy
Code”), any rule of law or bankruptcy procedures to the contrary, (A) the
right of Senior Lenders hereunder to have all of the Senior Debt paid and
satisfied in full prior to the payment of any of the December Subordinated Debt
and the September Subordinated Debt shall include, without limitation, the right
of Senior Lenders to be paid in full all interest accruing on the Senior Debt
due to the Senior Lenders after the filing of any petition by or against
Borrower in connection with any bankruptcy or similar proceeding or any other
proceeding referred to in this paragraph, hereof, prior to the payment of any
amounts in respect to the December Subordinated Debt or the September
Subordinated Debt, including, without limitation, any interest due to the
December Investors or September Investors accruing after such date, and (B) the
right of the December Investors hereunder to have all of the December
Subordinated Debt paid and satisfied in full prior to the payment of any of the
September Subordinated Debt shall include, without limitation, the right of the
December Investors to be paid in full all interest accruing on the December
Subordinated Debt due to the December Investors after the filing of any petition
by or against Borrower in connection with any bankruptcy or similar proceeding
or any other proceeding referred to in this paragraph, hereof, prior to the
payment of any amounts in respect to the September Subordinated Debt, including,
without limitation, any interest due to the September Investors accruing after
such date.
2.5 Power of
Attorney.
(a) In
the event of any Insolvency Event involving Borrower prior to the Termination
Date, the Senior Lenders are hereby appointed as the attorney-in-fact for
Collateral Agent and the December Investors with respect to the December
Subordinated Debt to take the following actions if Senior Lenders choose to do
so and if Collateral Agent or the December Investors have failed to take any
such actions at least ten (10) days in advance of any applicable bar date: (a)
demand, ▇▇▇ for, collect and receive any and all such cash or other assets, file
any claim, proof of claim or similar instrument, and institute such other
proceedings which Senior Lenders may in their sole and absolute discretion deem
necessary, advisable or appropriate to have the December Subordinated Debt claim
allowed in such Insolvency Event, to collect the December Subordinated Debt, and
to enforce the terms of this Agreement, and (b) to vote for Collateral Agent and
the December Investors with respect to the December Subordinated Debt in
connection with any matter before a bankruptcy court requiring approval by
Collateral Agent or the December Investors, provided that Senior Lenders shall
have no right to compromise the rights of Collateral Agent or the December
Investors with respect to any creditor junior thereto. In the event
of any Insolvency Event involving Borrower prior to the Termination Date, the
Senior Lenders are hereby appointed as the attorney-in-fact for Collateral Agent
and the September Investors with respect to the September Subordinated Debt to
take the following actions if Senior Lenders choose to do so and if Collateral
Agent or the September Investors have failed to take any such actions at least
ten (10) days in advance of any applicable bar date: (a) demand, ▇▇▇ for,
collect and receive any and all such cash or other assets, file any claim, proof
of claim or similar instrument, and institute such other proceedings which
Senior Lenders may in their sole and absolute discretion deem necessary,
advisable or appropriate to have the September Subordinated Debt claim allowed
in such Insolvency Event, to collect the September Subordinated Debt, and to
enforce the terms of this Agreement, and (b) to vote for Collateral Agent and
the September Investors with respect to the September Subordinated Debt in
connection with any matter before a bankruptcy court requiring approval by
Collateral Agent or the September Investors, provided that Senior Lenders shall
have no right to compromise the rights of Collateral Agent or the September
Investors with respect to any creditor junior thereto.
(b) In
the event of any Insolvency Event involving Borrower prior to the Termination
Date, after the Senior Debt has been paid in full, the December Investors are
hereby appointed as the attorney-in-fact for Collateral Agent and the September
Investors with respect to the September Subordinated Debt to take the following
actions if the December Investors choose to do so and if Collateral Agent or the
September Investors have failed to take any such actions at least ten (10) days
in advance of any applicable bar date: (a) demand, ▇▇▇ for, collect and receive
any and all such cash or other assets, file any claim, proof of claim or similar
instrument, and institute such other proceedings which the December Investors
may in their sole and absolute discretion deem necessary, advisable or
appropriate to have the September Subordinated Debt claim allowed in such
Insolvency Event, to collect the September Subordinated Debt, and to enforce the
terms of this Agreement, and (b) to vote for Collateral Agent and the September
Investors with respect to the September Subordinated Debt in connection with any
matter before a bankruptcy court requiring approval by Collateral Agent or the
September Investors, provided that the December Investors shall have no right to
compromise the rights of Collateral Agent or the September Investors with
respect to any creditor junior thereto.
2.6 Payments
in Trust. If, notwithstanding the provisions of this
Agreement, any payment or distribution of any character (whether in cash,
securities, or other property) or any security shall be received by any Senior
Lender or by any September Investor or December Investor in contravention of the
terms of this Agreement, such payment, distribution or security shall not be
commingled with any asset of a Senior Lender, September Investor or December
Investor, shall be held in trust for the benefit of, and shall be paid over or
delivered and transferred to the other party, or its representative, for
application to the payment of the applicable debt remaining unpaid.
2.7 Transfer/Assignment
of Senior Debt. This Agreement, without further reference,
shall pass to and may be relied on and enforced by any transferee or subsequent
holder of any Senior Debt. In the event of any sale, assignment,
disposition or other transfer of any December Subordinated Debt or September
Subordinated Debt, the transferor thereof shall cause the transferee thereof to
execute and deliver to the Senior Lenders an agreement (substantially identical
with this Agreement or otherwise in form and substance satisfactory to Senior
Lenders) providing for the continued subordination of the December Subordinated
Debt and the September Subordinated Debt to the Senior Debt as provided herein
and for the continued effectiveness of all of the rights of Senior Lenders
arising under this Agreement.
3. CONTINUED
EFFECTIVENESS OF THIS AGREEMENT.
(a) The
terms of this Agreement, the subordination effected hereby, and the rights of
Senior Lenders and the obligations of Collateral Agent, the September Investors
and the December Investors arising hereunder, shall not be affected, modified or
impaired in any manner or to any extent by:
(i) any
amendment, modification or termination of or supplement to the Senior Loan
Documents or any other agreement, instrument or document executed or delivered
pursuant thereto;
(ii) the
validity or enforceability of any such documents;
(iii) the
release, sale, exchange or surrender, in whole or in part, of any collateral
security, now or hereafter existing, for any of the Senior Debt or any other
indebtedness, liability or obligation of Borrower to Senior Lenders, now
existing or hereafter arising;
(iv) any
exercise or failure to exercise any right, power or remedy under or in respect
of the Senior Debt or any of such instruments and documents referred to in
clause (a) above or arising at law; or
(v) any
waiver, consent, release, indulgence, extension, renewal, modifications, delay
or other action, inaction or omission in respect of the Senior Debt or any of
the agreements instruments or documents executed and delivered in respect of any
collateral security for the Senior Debt or any other indebtedness, liability or
obligation of Borrower to Senior Lenders, now existing or hereafter arising, all
whether or not Collateral Agent, the September Investors or the December
Investors shall have had notice or knowledge of any of the foregoing and whether
or not they shall have consented thereto.
(b) The
terms of this Agreement, the subordination effected hereby, and the rights of
the December Investors and the obligations of Collateral Agent and the September
Investors arising hereunder, shall not be affected, modified or impaired in any
manner or to any extent by:
(i) any
amendment, modification or termination of or supplement to the December Debt
Documents or any other agreement, instrument or document executed or delivered
pursuant thereto;
(ii) the
validity or enforceability of any such documents;
(iii) the
release, sale, exchange or surrender, in whole or in part, of any collateral
security, now or hereafter existing, for any of the December Subordinated Debt
or any other indebtedness, liability or obligation of Borrower to the December
Investors, now existing or hereafter arising;
(iv) any
exercise or failure to exercise any right, power or remedy under or in respect
of the December Subordinated Debt or any of such instruments and documents
referred to in clause (a) above or arising at law; or
(v) any
waiver, consent, release, indulgence, extension, renewal, modifications, delay
or other action, inaction or omission in respect of the December Subordinated
Debt or any of the agreements instruments or documents executed and delivered in
respect of any collateral security for the December Subordinated Debt or any
other indebtedness, liability or obligation of Borrower to the December
Investors, now existing or hereafter arising, all whether or not Collateral
Agent or the September Investors shall have had notice or knowledge of any of
the foregoing and whether or not they shall have consented thereto.
4. RESTRICTIONS;
RIGHTS AND REMEDIES; WAIVER OF CLAIMS.
4.1 Restrictions.
(a) Senior Debt
Outstanding
(i) Prior
to the date that the Senior Debt is paid in full and notwithstanding anything
contained in any December Debt Documents or September Debt Documents to the
contrary, Collateral Agent, September Investors and December Investors shall
not, without the prior written consent of Senior Lenders, do any of the
following:
(ii) amend,
modify or supplement or agree to any amendment, modification or supplement of,
or to, the December Subordinated Debt, the September Subordinated Debt or any of
the December Debt Documents or September Debt Documents in any
manner;
(iii) accelerate
the maturity of all or any portion of the December Subordinated Debt, the
September Subordinated Debt, or take any action towards collection of all or any
portion of the December Subordinated Debt, the September Subordinated Debt, or
enforcement of any rights, powers or remedies under the December Debt Documents
or the September Debt Documents against any of the property, real or personal,
of Borrower, or any interest therein or under other agreements entered into
pursuant thereto or against any of the property, real or personal, of Borrower
or any interest therein upon the occurrence of any event of default under the
December Subordinated Debt, the September Subordinated Debt, or as defined in
the December Debt Documents or September Debt Documents or any event, which with
the passage of time, or giving of notice, or both would constitute such a
default (including, without limitation, the occurrence of an Event of Default
under any of the Senior Loan Documents);
(iv) contest,
protest or object to any foreclosure proceeding, post petition financing, use of
cash collateral or action brought by a Senior Lender or any other exercise by a
Senior Lender of any rights or remedies under the Senior Loan Documents or
applicable law; or
(v) obtain
any additional security interest in or liens upon any of Borrower’s existing or
hereafter acquired real or personal property including, without limitation, the
Collateral without the Senior Lenders’ prior written consent. In the
event that any such party shall, despite the provisions of this paragraph,
obtain any such additional security interest or lien, then without any further
action any such security interest or lien shall be deemed assigned to Senior
Lenders as collateral security for the Senior Debt.
(b) December Subordinated Debt
Outstanding
(i) Prior
to the date that the December Subordinated Debt is paid in full and
notwithstanding anything contained in any September Debt Documents to the
contrary, Collateral Agent and the September Investors shall not, without the
prior written consent of the December Investors, do any of the
following:
(ii) amend,
modify or supplement or agree to any amendment, modification or supplement of,
or to, the September Subordinated Debt or any of the September Debt Documents in
any manner;
(iii) accelerate
the maturity of all or any portion of the September Subordinated
Debt, or take any action towards collection of all or any portion of
the September Subordinated Debt, or enforcement of any rights, powers
or remedies under the September Debt Documents against any of the property, real
or personal, of Borrower, or any interest therein or under other agreements
entered into pursuant thereto or against any of the property, real or personal,
of Borrower or any interest therein upon the occurrence of any event of default
under the September Subordinated Debt, or as defined in the September Debt
Documents or any event, which with the passage of time, or giving of notice, or
both would constitute such a default (including, without limitation, the
occurrence of an Event of Default under any of the December Debt
Documents);
(iv) contest,
protest or object to any foreclosure proceeding, post petition financing, use of
cash collateral or action brought by a December Investor or any other exercise
by a December Investor of any rights or remedies under the December Debt
Documents or applicable law; or
(v) obtain
any additional security interest in or liens upon any of Borrower’s existing or
hereafter acquired real or personal property including, without limitation, the
Collateral without December Investors’ prior written consent. In the
event that Collateral Agent or any September Investor shall, despite the
provisions of this paragraph, obtain any such additional security interest or
lien, and the Senior Debt has been repaid, then without any further action any
such security interest or lien shall be deemed assigned to the December
Investors as collateral security for the December Subordinated
Debt.
4.2 Lenders’
Rights and Remedies.
(a) Until
such time that the Senior Debt is paid in full, the Senior Lenders shall have
the exclusive right to enforce rights and exercise remedies with respect to the
Collateral and shall not be required to marshal any Collateral. In
exercising rights and remedies with respect to the Collateral, the Senior
Lenders may enforce the provisions of the Senior Loan Documents and exercise
remedies thereunder, all in such order and in such manner as they may determine
in the exercise of their sole business judgment. Such exercise and enforcement
shall include, without limitation, the rights to sell or otherwise dispose of
Collateral, to incur expenses in connection with such sale or disposition and to
exercise all the rights and remedies of a secured lender under the Uniform
Commercial Code of any applicable jurisdiction.
(b) Following
the payment in full of the Senior Debt and until such time that the December
Subordinated Debt has been paid in full, the December Investors shall have the
exclusive right to enforce rights and exercise remedies with respect to the
Collateral and shall not be required to marshal any Collateral. In
exercising rights and remedies with respect to the Collateral, the December
Investors may enforce the provisions of the December Debt Documents and exercise
remedies thereunder, all in such order and in such manner as they may determine
in the exercise of their sole business judgment. Such exercise and enforcement
shall include, without limitation, the rights to sell or otherwise dispose of
Collateral, to incur expenses in connection with such sale or disposition and to
exercise all the rights and remedies of a secured lender under the Uniform
Commercial Code of any applicable jurisdiction.
4.3 Right to
Release.
(a) Until
such time that the Senior Debt is paid in full, the Senior Lenders’ rights with
respect to the Collateral include the right to release any or all of the
Collateral from the security interest and lien of any Senior Loan Documents or
December Debt Documents or September Debt Documents in connection with the sale
of such Collateral, notwithstanding that the net proceeds of any such sale may
not be used to permanently prepay any Senior Debt, December Subordinated Debt or
September Subordinated Debt. If Senior Lenders shall determine, in
connection with any sale of Collateral, that the release of such security
interest and lien of any December Debt Document or September Debt Document on
such Collateral in connection with such sale is necessary or advisable,
Collateral Agent, December Investors and September Investors shall execute such
release documents and instruments and shall take such further actions as Senior
Lenders shall request. Collateral Agent, December Investors and September
Investors hereby irrevocably constitute and appoint the Senior Lenders and any
officer thereof, with full power of substitution, as their true and lawful
attorney-in-fact with full irrevocable power and authority in the place and
stead of such parties and in the name of such parties or in Senior Lenders’ own
names, from time to time in Senior Lenders’ discretion, for the purpose of
carrying out the terms of this paragraph, to take any and all appropriate action
and to execute any and all documents and instruments which may be necessary or
desirable to accomplish the purposes of this paragraph, including, without
limitation, any financing statements, endorsements, assignments or other
instruments of transfer or release.
(b) Following
the payment of the Senior Debt and until such time that the December
Subordinated Debt is paid in full, the December Investors’ rights with respect
to the Collateral include the right to release any or all of the Collateral from
the security interest and lien of any December Debt Documents or September Debt
Documents in connection with the sale of such Collateral, notwithstanding that
the net proceeds of any such sale may not be used to permanently prepay any
December Subordinated Debt or September Subordinated Debt. If the
December Investors shall determine, in connection with any sale of Collateral,
that the release of such security interest and lien of any September Debt
Document on such Collateral in connection with such sale is necessary or
advisable, Collateral Agent and the September Investors shall execute such
release documents and instruments and shall take such further actions as the
December Investors shall request. Collateral Agent and the September Investors
hereby irrevocably constitute and appoint the December Investors and any officer
thereof, with full power of substitution, as their true and lawful
attorney-in-fact with full irrevocable power and authority in the place and
stead of such parties and in the name of such parties or in the December
Investors’ own names, from time to time in the December Investors’ discretion,
for the purpose of carrying out the terms of this paragraph, to take any and all
appropriate action and to execute any and all documents and instruments which
may be necessary or desirable to accomplish the purposes of this paragraph,
including, without limitation, any financing statements, endorsements,
assignments or other instruments of transfer or release.
4.4 Waiver of
Claims.
(a) To
the maximum extent permitted by law, Collateral Agent, the December Investors
and the September Investors waive any claim they might have against Senior
Lenders with respect to, or arising out of, any action or failure to act or any
error of judgment, negligence, or mistake or oversight whatsoever on the part of
Senior Lenders, or their respective directors, officers, employees or agents
with respect to any exercise of rights or remedies under the Senior Loan
Documents or any transaction relating to the Collateral. No Senior
Lender nor any of its directors, officers, employees or agents shall be liable
for failure to demand, collect or realize upon any of the Collateral or for any
delay in doing so or shall be under any obligation to sell or otherwise dispose
of any Collateral upon the request of Borrower or any other Person or to take
any other action whatsoever with regard to the Collateral or any part
thereof.
(b) To
the maximum extent permitted by law, Collateral Agent and the September
Investors waive any claim they might have against the December Investors with
respect to, or arising out of, any action or failure to act or any error of
judgment, negligence, or mistake or oversight whatsoever on the part of the
December Investors, or their respective directors, officers, employees or agents
with respect to any exercise of rights or remedies under the December Debt
Documents or any transaction relating to the Collateral. No December
Investor nor any of its directors, officers, employees or agents shall be liable
for failure to demand, collect or realize upon any of the Collateral or for any
delay in doing so or shall be under any obligation to sell or otherwise dispose
of any Collateral upon the request of Borrower or any other Person or to take
any other action whatsoever with regard to the Collateral or any part
thereof.
4.5 Lender
Restrictions. Until such time
that the Senior Debt is paid in full, no Senior Lender shall obtain any
additional security interests in or liens upon any of Borrower’s existing or
hereafter acquired real or personal property including, without limitation, the
Collateral, without the prior written consent of Senior Lenders holding at least
60% of the principal amount of the outstanding Senior Notes. Until
such time that the December Subordinated Debt is paid in full, no December
Investor shall obtain any additional security interests in or liens upon any of
Borrower’s existing or hereafter acquired real or personal property including,
without limitation, the Collateral, without the prior written consent of
December Investors holding at least 70% of the principal amount of the
outstanding promissory notes under the December Purchase Agreement. No Senior
Lender shall challenge the enforceability of another Senior Lender’s claim with
respect to Senior Debt or challenge the enforceability of any lien or security
interest granted under the Senior Loan Documents. No December
Investor shall challenge the enforceability of another December Investor’s claim
with respect to the December Subordinated Debt or challenge the enforceability
of any lien or security interest granted under the December Debt
Documents. No September Investor shall challenge the enforceability
of any December Investor’s claim with respect to the December Subordinated Debt
or challenge the enforceability of any lien or security interest granted under
the December Debt Documents. No December Investor shall challenge the
enforceability of any Senior Lender’s claim with respect to the Senior Loan
Documents or challenge the enforceability of any lien or security interest
granted under the Senior Loan Documents.
5. PROVISIONS
APPLICABLE AFTER BANKRUPTCY. The provisions of this Agreement
shall continue in full force and effect notwithstanding the occurrence of any
Insolvency Event.
(a) To
the extent that Collateral Agent, the December Investors or the September
Investors have or acquire any rights under Section 362, 363 or 364 of the
Bankruptcy Code with respect to the Collateral, and the Senior Debt remains
unpaid, Collateral Agent, the December Investors and the September Investors
hereby agree not to assert such rights without the prior written consent of
Senior Lenders; provided that, if
requested by Senior Lenders, Collateral Agent, the December Investors and the
September Investors shall seek to exercise such rights in the manner requested
by Senior Lenders, including the rights in payments in respect of such rights.
Collateral Agent, the December Investors and the September Investors (both in
their capacities as Collateral Agent, the December Investors and the September
Investors and in their capacities as parties which may be obligated to Borrower
or any of Borrower’s affiliates with respect to contracts which are part of
Senior Lenders’ Collateral) agree not to initiate or prosecute or encourage any
other Person to initiate or prosecute any claim, action, objection or other
proceeding (i) challenging the enforceability of a Senior Lender's claim with
respect to Senior Debt, (ii) challenging the enforceability of any liens or
security interests in assets securing the Senior Debt, (iii) asserting any
claims which Borrower may hold with respect to a Senior Lender, or (iv)
objecting to any sale or other disposition of Borrower’s assets consented to by
Senior Lenders in any bankruptcy or other proceeding or any borrowing or grant
of any lien by Borrower consented to by Senior Lenders in any such
proceeding.
(b) To
the extent that Collateral Agent or the September Investors have or acquire any
rights under Section 362, 363 or 364 of the Bankruptcy Code with respect to the
Collateral, and the December Subordinated Debt remains unpaid, Collateral Agent
and the September Investors hereby agree not to assert such rights without the
prior written consent of the December Investors; provided that, if
requested by the December Investors, Collateral Agent and the September
Investors shall seek to exercise such rights in the manner requested by the
December Investors, including the rights in payments in respect of such rights.
Collateral Agent and the September Investors (both in their capacities as
Collateral Agent and the September Investors and in their capacities as parties
which may be obligated to Borrower or any of Borrower’s affiliates with respect
to contracts which are part of the December Investors’ Collateral) agree not to
initiate or prosecute or encourage any other Person to initiate or prosecute any
claim, action, objection or other proceeding (i) challenging the enforceability
of a December Investor’s claim with respect to the December Subordinated Debt,
(ii) challenging the enforceability of any liens or security interests in assets
securing the December Subordinated Debt, (iii) asserting any claims which
Borrower may hold with respect to a December Investor, or (iv) objecting to any
sale or other disposition of Borrower’s assets consented to by the December
Investors in any bankruptcy or other proceeding or any borrowing or grant of any
lien by Borrower consented to by the December Investors in any such
proceeding.
6. GENERAL
PROVISIONS.
6.1 Successors
and Assigns. This Agreement is entered into for the benefit of
the parties hereto and their successors and permitted assigns. It
shall be binding upon and shall inure to the benefit of the parties, their
successors and assigns. The Collateral Agent, the December Investors
and the September Investors shall not assign this Agreement, or its rights and
obligations hereunder, without the prior written consent of Senior
Lenders. Any Senior Lender may only assign this Agreement to any
assignee of its Senior Note from Borrower.
6.2 Subrogation.
(a) No
payment or distribution to a Senior Lender pursuant to the provisions of this
Agreement shall entitle Collateral Agent, any December Investor or any September
Investor to exercise any rights of subrogation in respect thereof prior to the
date that the Senior Debt is fully paid. After such date, and
provided that no payments are voidable, Collateral Agent and the December
Investors shall be subrogated to the rights of Senior Lenders to receive
distributions applicable to Senior Debt to the extent that distributions
otherwise payable to Collateral Agent or the December Investors have been
applied to the payment of Senior Debt. A distribution made under this
Agreement to Senior Lenders, which otherwise would have been made to Collateral
Agent or any December Investor, is not, as between Collateral Agent, the
December Investors and Borrower, a payment by Borrower on the December
Subordinated Debt. A distribution made under this Agreement to Senior
Lenders, which otherwise would have been made to Collateral Agent or any
September Investor, is not, as between Collateral Agent, the September Investors
and Borrower, a payment by Borrower on the September Subordinated
Debt.
(b) No
payment or distribution to a December Investor pursuant to the provisions of
this Agreement shall entitle Collateral Agent or any September Investor to
exercise any rights of subrogation in respect thereof prior to the date that the
December Subordinated Debt is fully paid. After such date, and
provided that no payments are voidable, the September Investors shall be
subrogated to the rights of the December Investors to receive distributions
applicable to the December Subordinated Debt to the extent that distributions
otherwise payable to Collateral Agent or the September Investors have been
applied to the payment of the December Subordinated Debt. A
distribution made under this Agreement to the December Investors, which
otherwise would have been made to Collateral Agent or any September Investor, is
not, as between Collateral Agent, the September Investors and Borrower, a
payment by Borrower on the September Subordinated Debt.
(c) After
the Senior Debt and the December Subordinated Debt has been paid in full, and
provided that no payments are voidable, the September Investors shall be
subrogated to the rights of Senior Lenders to receive distributions applicable
to the Senior Debt to the extent that distributions otherwise payable to
Collateral Agent or the September Investors have been applied to the payment of
the Senior Debt.
6.3 Reinstatement. The
obligations of the parties under this Agreement shall continue to be effective,
or be reinstated, as the case may be, if at any time any payment in respect of
any Senior Debt, December Subordinated Debt or September Subordinated Debt is
rescinded or must otherwise be restored or returned by reason of any bankruptcy,
reorganization, arrangement, composition or similar proceeding or as a result of
the appointment of a receiver, intervenor or conservator of, or trustee or
similar officer for, the Borrower or any substantial part of Borrower’s
property, or otherwise, all as though such payment had not been
made.
6.4 Notice. Wherever
this Agreement provides for notice to any party (except as expressly provided to
the contrary), it shall be given by messenger, facsimile, certified U.S. mail
with return receipt requested, or nationally recognized overnight courier with
receipt requested, effective when received or receipt rejected by the party to
whom addressed, and shall be addressed as follows, or to such other address as
the party affected may hereafter designate:
If to a
Senior
Lender: As
set on the signature page for such Senior Lender
If to any
Additional
December
Investor,
Additional
September
Investor
or Additional
June
Investor:
As set on the signature page for such party
If to
Trident
Capital,
Inc.: Trident
Capital, Inc.
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▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇
▇. ▇▇▇▇▇▇, Chief Administrative Officer and General Counsel
Fax: (▇▇▇)
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6.5 Conflicts
of Terms. In the event of any conflict between any term,
covenant or condition of this Agreement and any term, covenant or condition of
the December Subordinated Debt or the September Subordinated Debt, or any
document executed in connection therewith or the indebtedness evidenced thereby,
the provisions of this Agreement shall control and govern. In the
event of any conflict between any term, covenant or condition of this Agreement
and any term, covenant or condition of the December Security Agreements or the
June Security Agreements, the provisions of this Agreement shall control and
govern.
6.6 Further
Assurances. Each party, at its own expense and at any time from time to
time, upon the written request of another party, will promptly and duly execute
and deliver such further instruments and documents and take such further actions
as such other party reasonably may request for the purposes of obtaining or
preserving the full benefits of this Agreement and of the rights and powers
herein granted.
6.7 Expenses. Borrower
will pay or reimburse a Senior Lender or December Investor, upon demand, for all
its costs and expenses in connection with the enforcement or preservation of any
rights under this Agreement, including, without limitation, fees and
disbursements of counsel to such Senior Lender or December
Investor. Borrower will pay, indemnify, and hold each Senior Lender
and December Investor harmless from and against any and all other liabilities,
obligations, losses, damages, penalties, actions (whether sounding in contract,
tort or on any other ground), judgments, suits, costs, expenses or disbursements
of any kind or nature whatsoever with respect to the execution, delivery,
enforcement, performance and administration of, or in any other way arising out
of or relating to this Agreement or any action taken or omitted to be taken by
any Senior Lender or December Investor with respect to any of the
foregoing.
6.8 Entire
Agreement; Amendments. This Agreement constitutes the entire
agreement between the parties hereto with respect to the subject matter
hereof. This Agreement may not be amended or modified orally but may
be amended or modified in writing if signed by Collateral Agent, holders of at
least sixty percent (60%) of the principal amount of the outstanding promissory
notes under the September Purchase Agreement, holders of at least seventy
percent (70%) of the principal amount of the outstanding promissory notes under
the December Purchase Agreement, and holders of at least sixty percent (60%) of
the principal amount of the outstanding Senior Notes. This Agreement
amends and restates the Original Subordination Agreement. No amendment or waiver
of provision of this Agreement shall in any event be effective unless it is in
writing, making specific reference to this Agreement and signed by the party
against whom such waiver is sought to be enforced.
6.9 No
Third-Party Beneficiaries. Notwithstanding anything contained
herein to the contrary, no provision of this Agreement is intended to benefit
any party other than the signatories hereto, nor shall any such provision be
enforceable by any other party.
6.10 Termination. This
Agreement shall terminate upon the indefeasible payment in full of the Senior
Debt and termination of the Senior Loan Documents and the pament in full of the
December Subordinated Debt and the termination of the December Debt Documents
(such date being referred to as the “Termination
Date”).
6.11 Counterparts;
Facsimile. This Agreement may be executed in any number of
counterparts (each of which may be transmitted via facsimile or pdf), each of
which when so executed shall be deemed to be an original and all of which when
taken together shall constitute one and the same agreement.
6.12 Action by
Senior Lenders or December Investors.
(a) Except
as otherwise expressly set forth herein, any action or consent required or
permitted hereunder on the part of the Senior Lenders (including, without
limitation, the exercise of any remedies under the Senior Loan Documents on the
part of the Senior Lenders) may only be taken on behalf of the Senior Lenders by
(a) Peninsula, in the event that such party holds at least 20% of the principal
amount of the outstanding Senior Notes, or (b) by Senior Lenders holding a
majority in interest of the Senior Notes, in the event that Peninsula does not
hold at least 20% of the principal amount of the outstanding Senior Notes; provided, however,
that in either case, if any Senior Lender would be affected by any such action
in a manner materially and adversely different than other Senior Lenders (solely
in respect of each such party’s holdings of Senior Notes), regardless of whether
such action was taken by a majority in interest of the Senior Notes, then the
consent of such adversely affected Senior Lender shall also be
required. No Senior Lender shall owe any duty to the other Senior
Lenders except as expressly set forth herein; provided, that the foregoing shall
not abrogate any duties that Collateral Agent may have in its capacity as
collateral agent.
(b) Except
as otherwise expressly set forth herein, any action or consent required or
permitted hereunder on the part of the December Investors (including, without
limitation, the exercise of any remedies under the December Debt Documents on
the part of the December Investors) may only be taken on behalf of the December
Investors by (a) Peninsula, in the event that such party holds at least 30% of
the principal amount of the outstanding promissory notes issued under the
December Purchase Agreement, or (b) by December Investors holding a majority in
interest of the outstanding promissory notes issued under the December Purchase
Agreement, in the event that Peninsula does not hold at least 30% of the
principal amount of the outstanding promissory notes issued under the December
Purchase Agreement; provided, however,
that in either case, if any December Investor would be affected by any such
action in a manner materially and adversely different than other December
Investors (solely in respect of each such party’s holdings of promissory notes
issued under the December Purchase Agreement), regardless of whether such action
was taken by a majority in interest, then the consent of such adversely affected
December Investor shall also be required. No December Investor shall
owe any duty to the other December Investors except as expressly set forth
herein; provided, that the foregoing shall not abrogate any duties that
Collateral Agent may have in its capacity as collateral agent.
7. GOVERNING
LAW; CONSENT TO JURISDICTION.
(A) THIS
AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL
LAWS OF THE STATE OF CALIFORNIA; PROVIDED, HOWEVER, THAT IF ANY OF THE
COLLATERAL SHALL BE LOCATED IN ANY JURISDICTION OTHER THAN CALIFORNIA, THE LAWS
OF SUCH JURISDICTION SHALL GOVERN THE METHOD, MANNER AND PROCEDURE FOR
FORECLOSURE OF SENIOR LENDERS’ OR DECEMBER INVESTORS’ LIENS UPON SUCH
COLLATERAL AND THE ENFORCEMENT OF SENIOR LENDERS’ OR DECEMBER INVESTORS’
OTHER REMEDIES IN RESPECT OF SUCH COLLATERAL TO THE EXTENT THAT THE LAWS OF SUCH
JURISDICTION ARE DIFFERENT FROM OR INCONSISTENT WITH THE LAWS OF
CALIFORNIA.
(B) EACH
PARTY HEREBY CONSENTS AND AGREES THAT ANY FEDERAL OR STATE COURT LOCATED IN ANY
COUNTY IN THE STATE OF CALIFORNIA, SHALL HAVE EXCLUSIVE JURISDICTION TO HEAR AND
DETERMINE ANY CLAIMS OR DISPUTES BETWEEN THE PARTIES PERTAINING TO THIS
AGREEMENT OR TO ANY MATTER ARISING OUT OF OR RELATED TO THIS AGREEMENT;
PROVIDED, HOWEVER, THAT A SENIOR LENDER OR DECEMBER INVESTOR MAY, AT ITS OPTION,
COMMENCE ANY ACTION, SUIT OR PROCEEDING IN ANY OTHER APPROPRIATE FORUM OR
JURISDICTION TO OBTAIN POSSESSION OF OR FORECLOSE UPON ANY COLLATERAL, TO OBTAIN
EQUITABLE RELIEF OR TO ENFORCE ANY JUDGMENT OR ORDER OBTAINED BY SUCH SENIOR
LENDER OR DECEMBER INVESTOR WITH RESPECT TO ANY COLLATERAL, OR TO ENFORCE ANY
OTHER RIGHT OR REMEDY OR OBTAIN ANY OTHER RELIEF DEEMED APPROPRIATE BY SUCH
PARTY WITH RESPECT TO ANY COLLATERAL. EACH PARTY EXPRESSLY SUBMITS
AND CONSENTS IN ADVANCE TO SUCH JURISDICTION IN ANY ACTION OR SUIT COMMENCED IN
ANY SUCH COURT, AND HEREBY WAIVES ANY OBJECTION WHICH IT MAY HAVE BASED UPON
LACK OF PERSONAL JURISDICTION, IMPROPER VENUE OR FORUM NON CONVENIENS AND HEREBY
CONSENTS TO THE GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF AS IS DEEMED
APPROPRIATE BY SUCH COURT. EACH PARTY REPRESENTS AND WARRANTS THAT IT
HAS REVIEWED THIS CONSENT TO JURISDICTION PROVISION WITH ITS LEGAL COUNSEL, AND
HAS MADE THIS WAIVER KNOWINGLY AND VOLUNTARILY.
[Signature Pages
Follow]
IN WITNESS WHEREOF, the
undersigned have executed this Agreement on the day and year first above
written.
Peninsula Packaging, LLC
By:
▇▇▇▇ ▇▇▇▇▇▇, Managing
Director
c/o Stradley Ronon ▇▇▇▇▇▇▇ &
▇▇▇▇▇, LLP
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▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇. ▇▇▇▇▇▇,
Esquire
Fax: (▇▇▇)
▇▇▇-▇▇▇▇
Trident
Capital Fund-VI, L.P.
Trident
Capital Fund-VI Principals Fund, L.L.C.
Executed
by the undersigned as an authorized signatory of the General Partner of Trident
Capital Fund-VI, L.P. and of the Managing Member of Trident Capital Fund-VI
Principals Fund, L.L.C.
____________________________
(signature)
____________________________
(print name)
c/o Trident Capital, Inc.
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Attn: ▇▇▇▇▇▇
▇. ▇▇▇▇▇▇, Chief Administrative Officer and General Counsel
Fax: (▇▇▇)
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Living Trust Dated 12/10/1996
By:
▇. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇,
Trustee
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Fax:
(▇▇▇) ▇▇▇-▇▇▇▇
▇▇▇▇▇▇▇▇▇
Capital Partners, LLC
By:
____________________________________
Name:
__________________________________
Title:
___________________________________
Address: ________________________________
________________________________
________________________________
Fax:
________________________________
Trident
Capital, Inc.
By:
____________________________________
Name:
__________________________________
Title:
___________________________________
Address: ________________________________
________________________________
________________________________
Fax: ________________________________
|
|
ADDITIONAL
JUNE INVESTORS:
|
If an entity:
_______________________________________
(Company name)
By: ____________________________________
Name: __________________________________
Title: ___________________________________
Address: ________________________________
________________________________
________________________________
________________________________
Fax:
________________________________
If an individual:
_______________________________________
(Signature of individual)
Printed Name: ____________________________
Address: ________________________________
________________________________
________________________________
________________________________
Fax: ________________________________
ADDITIONAL DECEMBER INVESTORS:
If
an entity:
_______________________________________
(Company name)
By:
____________________________________
Name: __________________________________
Title: ___________________________________
Address:________________________________
________________________________
________________________________
________________________________
Fax: ________________________________
If an individual:
_______________________________________
(Signature
of individual)
Printed Name: ____________________________
Address: ________________________________
________________________________
________________________________
________________________________
Fax: ________________________________
ADDITIONAL
SEPTEMBER INVESTORS:
If
an entity:
_______________________________________
(Company name)
By:
____________________________________
Name: __________________________________
Title: ___________________________________
Address:________________________________
________________________________
________________________________
________________________________
Fax: ________________________________
If an individual:
_______________________________________
(Signature
of individual)
Printed Name: ____________________________
Address: ________________________________
________________________________
________________________________
________________________________
Fax: ________________________________
BORROWER
AGREEMENT
The
undersigned, the Borrower mentioned in the foregoing Second Amended and Restated
Subordination and Intercreditor Agreement, hereby acknowledges receipt of a copy
thereof, acknowledges that the December Subordinated Debt and September
Subordinated Debt mentioned therein is payable as stated
therein. Borrower shall make no payment of principal of or interest
on the December Subordinated Debt and September Subordinated Debt, other than as
expressly permitted under Section 2.2 of the Second Amended and Restated
Subordination and Intercreditor Agreement.
Dated as
of June 2, 2009
ECO2 PLASTICS,
INC.
By:
Name:
Title: