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EXHIBIT 10.35
CONVERTIBLE DEBENTURE PURCHASE AGREEMENT
CONVERTIBLE DEBENTURE PURCHASE AGREEMENT ("Agreement") dated as of
January 26, 1999 between U.S. Plastic Lumber Corporation, a Nevada corporation
(the "Company"), and each person or entity listed as an investor on Schedule I
attached to this Agreement (each individually an "Investor" and collectively the
"Investors").
W I T N E S S E T H:
WHEREAS, the Company desires to sell and issue to the Investors, and
the Investors wish to purchase from the Company, 5% Convertible Debentures due
January 26, 2004 (the "Debentures"), in the aggregate principal amount of
$2,500,000 at an aggregate price of $2,500,000, having the rights and privileges
set forth in the Debentures in the form of Exhibit 1.1A attached hereto (the
"Issuance"), on the terms and conditions set forth herein; and
WHEREAS, the Debentures will be convertible into shares ("Common
Shares") of common stock, par value $.0001 of the Company ("Common Stock"),
pursuant to the terms of the Debentures, and the Investors will have
registration rights with respect to such Common Shares and the Warrant Shares
(as defined herein), pursuant to the terms of that certain Registration Rights
Agreement to be entered into between the Company and the Investors substantially
in the form of Exhibit 4.2(f) hereto ("Registration Rights Agreement"); and
WHEREAS, to induce the Investors to purchase the Debentures, the
Company has agreed to issue to the Investors warrants exercisable for 62,500
shares of Common Stock in the form attached as Exhibit 1.1B (the "Warrants";
and, together with the Debentures, the "Securities");
NOW, THEREFORE, in consideration of the foregoing premises and the
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
ARTICLE I
Purchase and Sale of Debentures and Warrants
Section 1.1 Issuance of Debentures and Warrants.
(a) Issuance. Upon the following terms and conditions, the
Company shall issue and sell to each Investor severally, and each Investor
severally shall purchase from the
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Company, the outstanding principal amount of Debentures and the number of
Warrants indicated next to such Investor's name on Schedule I attached hereto.
(b) Purchase Price. The purchase price for the Debentures to
be acquired by each Investor (the "Purchase Price") shall be the Purchase Price
set forth next to such Investor's name on Schedule I.
(c) The Closing.
(i) The closing of the purchase and sale of the
Debentures and the Warrants (the "Closing") in the Issuance,
shall take place at the offices of Kleinberg, Kaplan, ▇▇▇▇▇ &
▇▇▇▇▇, P.C. ("Investors' Counsel") or at such other place as
is mutually agreeable, at 10:00 am., local time on the later
of the following: (x) the date on which the last to be
fulfilled or waived of the conditions set forth in Article IV
hereof and applicable to the Closing shall be fulfilled or
waived in accordance herewith, or (y) such other time and
place and/or on such other date as the Investors and the
Company may agree. The date on which the Closing occurs is
referred to herein as the "Closing Date".
(ii) On the Closing Date, the Company shall deliver
to each Investor (x) certificates (with the number of and
outstanding principal amount of such certificates requested by
such Investor) representing the Debentures purchased hereunder
by such Investor at the Closing registered in the name of such
Investor or its nominee and (y) the Warrants registered in the
name of Investor or its nominee in such denominations as
reasonably requested by such Investor, and such Investor shall
deliver to the Company the Purchase Price for the Debentures
purchased by such Investor hereunder by wire transfer in
immediately available funds to an account designated in
writing by the Company. The delivery of payment by each
Investor of the Purchase Price applicable to it as set forth
in this paragraph shall constitute a payment delivered to the
Company in satisfaction of such Investor's obligation to pay
the Purchase Price hereunder. In addition, each party shall
deliver all documents, instruments and writings required to be
delivered by such party pursuant to this Agreement at or prior
to the applicable Closing.
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ARTICLE II
Representations and Warranties
Section 2.1 Representations and Warranties of the Company. The Company
hereby makes the following representations and warranties to each of the
Investors as of the date hereof and on each Closing Date:
(a) Organization and Qualification; Material Adverse Effect.
The Company is a corporation duly incorporated and existing in good standing
under the laws of the State of Nevada and has the requisite corporate power to
own its properties and to carry on its business as now being conducted. The
Company does not have any direct or indirect subsidiaries other than the
subsidiaries listed on Schedule 2.1(a) attached hereto. Except where
specifically indicated to the contrary, all references in this Agreement to
subsidiaries shall be deemed to refer to all direct and indirect subsidiaries of
the Company. Each of the Company and its subsidiaries is duly qualified as a
foreign corporation to do business and is in good standing in every jurisdiction
in which the nature of the business conducted or property owned by it makes such
qualification necessary other than those in which the failure so to qualify
would not have a Material Adverse Effect. "Material Adverse Effect" means any
adverse effect on the business, operations, properties, prospects, or financial
condition of the entity with respect to which such term is used and which is
(either alone or together with all other adverse effects) material to such
entity and other entities controlling or controlled by such entity taken as a
whole, and any material adverse effect on the transactions contemplated under
this Agreement, the Registration Rights Agreement or any other agreement or
document contemplated hereby or thereby.
(b) Authorization; Enforcement. (i) The Company has all
requisite corporate power and authority to enter into and perform this
Agreement, the Warrants and the Registration Rights Agreement and to issue the
Debentures and Warrants in accordance with the terms hereof and thereof, (ii)
the execution and delivery of this Agreement, the Warrants and the Registration
Rights Agreement by the Company and the consummation by it of the transactions
contemplated hereby and thereby, including the issuance of the Debentures, the
Common Shares and the Warrant Shares, have been duly authorized by all necessary
corporate action, and no further consent or authorization of the Company or its
Board of Directors (or any committee or subcommittee thereof) or stockholders is
required, (iii) this Agreement, the Warrants, the Debentures and the
Registration Rights Agreement have been duly executed and delivered by the
Company, and (iv) this Agreement, the Warrants, the Debentures and the
Registration Rights Agreement constitute valid and binding obligations of the
Company enforceable against the Company in accordance with their terms, except
as such enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar laws relating to, or
affecting generally the enforcement of creditors' rights and remedies or by
other equitable principles of general application.
(c) Capitalization. The authorized capital stock of the
Company consists of 50,000,000 shares of Common Stock and 5,000,000 shares of
preferred stock; as of
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November 30, 1998 there were 17,802,649 shares of Common Stock and 382,794
shares of preferred stock issued and outstanding; and 9,723,138 shares of Common
Stock and no shares of preferred stock were reserved for issuance to persons
other than the Investors. All of the outstanding shares of the Company's Common
Stock and preferred stock have been validly issued and are fully paid and
nonassessable. Except as set forth in Schedule 2.1(c), no shares of capital
stock are entitled to preemptive rights; and there are as of November 30, 1998
outstanding options for 2,078,895 shares of Common Stock and no outstanding
warrants for shares of Common Stock (excluding the Warrants). The Company's
issued and outstanding preferred stock is, and will be, in all respects junior
to the Debentures. Except as set forth in Schedule 2.1(c), there are no other
scrip, rights to subscribe to, calls or commitments of any character whatsoever
relating to, or securities or rights exchangeable for or convertible into, any
shares of capital stock of the Company, or contracts, commitments,
understandings, or arrangements by which the Company is or may become bound to
issue additional shares of capital stock of the Company or options, warrants,
scrip, rights to subscribe to, or commitments to purchase or acquire, any
shares, or securities or rights convertible or exchangeable into shares, of
capital stock of the Company. Except where such information has been clearly set
forth in the SEC Documents (as defined below), the Company agrees to update the
information contained in the preceding sentences of this Section 2.1(c) and in
Schedule 2.1(c) in a certificate delivered to each Investor on a quarterly
basis. Attached hereto as Exhibit 2.1(c)(i) is a true and correct copy of the
Company's Certificate of Incorporation (the "Charter"), as in effect on the date
hereof, and attached hereto as Exhibit 2.1(c)(ii) is a true and correct copy of
the Company's By-Laws, as in effect on the date hereof (the "By-Laws").
(d) Issuance of Common Shares. The Common Shares and the
shares of Common Stock issuable upon the exercise of the Warrants (the "Warrant
Shares") are duly authorized and reserved for issuance and, upon such conversion
in accordance with the Debentures and/or exercise in accordance with the
Warrants such Common Shares and Warrant Shares will be validly issued, fully
paid and non-assessable, free and clear of any and all liens, claims and
encumbrances, and entitled to be traded on the Nasdaq Small Cap Market ("Nasdaq
SCM") (or the American Stock Exchange, the New York Stock Exchange or the Nasdaq
National Market System, collectively with the Nasdaq SCM, the "Approved
Markets"), and the holders of such Common Shares and Warrant Shares shall be
entitled to all rights and preferences accorded to a holder of Common Stock. The
outstanding shares of Common Stock are currently listed on the Nasdaq SCM.
(e) No Conflicts. The execution, delivery and performance of
this Agreement, the Registration Rights Agreement and the Warrants by the
Company and the consummation by the Company of the transactions contemplated
hereby and thereby and the issuance of the Debentures and the Warrants do not
and will not (i) result in a violation of the Company's Charter or By-Laws or
(ii) conflict with, or constitute a default (or an event which with notice or
lapse of time or both would become a default) under, or give to others any
rights of termination, amendment, acceleration or cancellation of, any
agreement, indenture, patent, patent license or instrument to which the Company
or any of its subsidiaries is a party (collectively, "Company Agreements"), or
(iii) result in a violation of any federal, state, local or foreign law, rule,
regulation, order, judgment or decree
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(including Federal and state securities laws and regulations) applicable to the
Company or any of its subsidiaries or by which any property or asset of the
Company or any of its subsidiaries is bound or affected. The business of the
Company and its direct and indirect subsidiaries is being conducted in material
compliance with (i) its charter and bylaws, (ii) all Company Agreements and
(iii) all applicable laws, ordinances or regulations of any governmental entity.
The Company is not required under Federal, state, local or foreign law, rule or
regulation to obtain any consent, authorization or order of, or make any filing
or registration with, any court or governmental agency in order for it to
execute, deliver or perform any of its obligations under this Agreement, the
Registration Rights Agreement, the Debentures and the Warrants or issue and sell
the Debentures in accordance with the terms hereof and issue the Common Shares
upon conversion thereof and issue the Warrant Shares on exercise of the Warrants
and for the registration provisions provided in the Registration Rights
Agreement.
(f) SEC Documents; No Non-Public Information; Financial
Statements. The Common Stock of the Company is registered pursuant to Section
12(g) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")
and the Company has filed all reports, schedules, forms, statements and other
documents required to be filed by it with the Securities and Exchange Commission
("SEC") pursuant to the reporting requirements of the Exchange Act, including
material filed pursuant to Section 13(a) or 15(d), in addition to one or more
registration statements and amendments thereto heretofore filed by the Company
with the SEC (all of the foregoing including filings incorporated by reference
therein being referred to herein as the "SEC Documents"). The Company has
delivered or made available to the Investors true and complete copies of all SEC
Documents (including, without limitation, proxy information and solicitation
materials and registration statements) filed with the SEC since December 31,
1997. The Company has not directly or indirectly provided to the Investors any
material non-public information or any information which, according to
applicable law, rule or regulation, should have been disclosed publicly by the
Company but which has not been so disclosed. As of their respective dates, the
SEC Documents complied in all material respects with the requirements of the
Exchange Act and the rules and regulations of the SEC promulgated thereunder and
other federal, state and local laws, rules and regulations applicable to such
SEC Documents, and none of the SEC Documents contained any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. The SEC Documents
contain all material information concerning the Company, and no event or
circumstance has occurred which would require the Company to disclose such event
or circumstance in order to make the statements in the SEC Documents not
misleading on the date hereof or on the Closing Date but which has not been so
disclosed. The financial statements of the Company included in the SEC Documents
comply as to form and substance in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC or
other applicable rules and regulations with respect thereto. Such financial
statements have been prepared in accordance with United States generally
accepted accounting principles applied on a consistent basis during the periods
involved (except (i) as may be otherwise indicated in such financial statements
or the notes thereto or (ii) in the case of unaudited interim statements, to the
extent they may not include
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footnotes or may be condensed or summary statements) and fairly present in all
material respects the financial position of the Company as of the dates thereof
and the results of operations and cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal year-end audit
adjustments).
(g) Principal Exchange/Market. The principal market on which
the Common Stock is currently traded is the Nasdaq SCM.
(h) No Material Adverse Change. Since December 31, 1997, no
Material Adverse Effect has occurred or exists, and no event or circumstance has
occurred that with notice or the passage of time or both is reasonably likely to
result in a Material Adverse Effect with respect to the Company or its
subsidiaries.
(i) No Undisclosed Liabilities. The Company and its
subsidiaries have no liabilities or obligations not disclosed in the
Pre-Agreement SEC Documents (as defined below), other than those liabilities
incurred in the ordinary course of the Company's or its subsidiaries' respective
businesses since December 31, 1997, which liabilities, individually or in the
aggregate, do not or would not have a Material Adverse Effect on the Company or
its direct or indirect subsidiaries.
(j) No Undisclosed Events or Circumstances. To the best
knowledge of the Company, no material event or circumstance has occurred or
exists with respect to the Company or its direct or indirect subsidiaries or
their respective businesses, properties, prospects, operations or financial
condition, which, under applicable law, rule or regulation, requires public
disclosure or announcement by the Company but which has not been so publicly
announced or disclosed.
(k) No General Solicitation. Neither the Company, nor any of
its affiliates, or, to its knowledge, any person acting on its or their behalf
has engaged in any form of general solicitation or general advertising (within
the meaning of Regulation D under the Securities Act of 1933, as amended (the
"Act")) in connection with the offer or sale of the Debentures or Common Shares.
(l) No Integrated Offering. Neither the Company, nor any of
its affiliates, nor to its knowledge any person acting on its or 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 the Debentures, the Warrants or the Common Shares or Warrant
Shares under the Act.
The issuance of the Debentures, Warrants, Common Shares, or
Warrant Shares to the Investors will not be integrated with any other issuance
of the Company's securities (past, current or future) which requires stockholder
approval under the rules of the Nasdaq SCM.
(m) Form SB-2. The Company is eligible to file the
Registration Statement (as defined in the Registration Rights Agreement) on Form
SB-2 under the Act and rules
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promulgated thereunder, and Form SB-2 is permitted to be used for the
transactions contemplated hereby under the Act and rules promulgated thereunder.
(n) Intellectual Property. The Company (and/or its
wholly-owned subsidiaries) owns or has licenses to use certain patents,
copyrights and trademarks ("intellectual property") associated with its
business. The Company and its subsidiaries have all intellectual property rights
which are needed to conduct the business of the Company and its subsidiaries as
it is now being conducted or as proposed to be conducted as disclosed in the SEC
Documents. The Company and its subsidiaries have no reason to believe that the
intellectual property rights which it owns are invalid or unenforceable or that
the use of such intellectual property by the Company or its subsidiaries
infringes upon or conflicts with any right of any third party, and neither the
Company nor any of its subsidiaries has received notice of any such infringement
or conflict. The Company and its subsidiaries have no knowledge of any
infringement of its intellectual property by any third party.
(o) Shareholder Rights Plan. None of the acquisition of
Debentures, Warrants, Common Shares or Warrant Shares nor the deemed beneficial
ownership of shares of Common Stock prior to, or the acquisition of such shares
pursuant to, the conversion of Debentures or the exercise of the Warrants will
in any event under any circumstance trigger the poison pill provisions of any
stockholders' rights or similar agreements, or a substantially similar
occurrence under any successor or similar plan.
(p) No Litigation. Except as set forth in the Pre-Agreement
SEC Documents (as defined in Section 2.2(c) (i) below), no litigation or claim
(including those for unpaid taxes) against the Company or any of its
subsidiaries is pending or, to the Company's knowledge, threatened, and no other
event has occurred, which if determined adversely could reasonably be expected
to have a Material Adverse Effect on the Company or could reasonably be expected
to materially and adversely effect the transactions contemplated hereby. The
legal proceedings described in the Pre-Agreement SEC Documents will not have an
effect on the transactions contemplated hereby, and will not have a Material
Adverse Effect on the Company.
(q) Brokers. The Company has taken no action which would give
rise to any claim by any person for brokerage commissions, finder's fees or
similar payments by the Company or any Investor relating to this Agreement or
the transactions contemplated hereby, except for amounts owing to Ananda Capital
Management, which amounts shall be paid exclusively by the Company at closing,
pursuant to a separate agreement.
(r) Acknowledgement of Dilution. The number of shares of
Common Stock constituting Common Shares or Warrant Shares may increase
substantially in certain circumstances, including the circumstance where the
trading price of the Common Stock declines. The Company acknowledges that its
obligation to issue Common Shares upon conversion of Debentures and Warrant
Shares upon exercise of the Warrants is absolute and unconditional, regardless
of the dilution that such issuance may have on other shareholders of the
Company.
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(s) Other Investors. Except as set forth on Schedule 2.1(s),
there are no outstanding securities issued by the Company that are entitled to
registration rights under the Act. Except as set forth in Schedule 2.1(s), there
are no outstanding securities issued by the Company that are directly or
indirectly convertible into, exercisable into, or exchangeable for, shares of
Common Stock of the Company, or that have anti-dilution or similar rights that
would be affected by the issuance of the Debentures, the Common Shares, the
Warrants or the Warrant Shares.
(t) Certain Transactions. Except as disclosed in the
Pre-Agreement SEC Documents, none of the officers, directors, or employees of
the Company is presently a party to any transaction with the Company or any of
its subsidiaries (other than for services as employees, officers and directors),
including any contract, agreement or other arrangement providing for the
furnishing of services to or by, providing for rental of real or personal
property to or from, or otherwise requiring payments to or from any officer,
director or such employee or, to the knowledge of the Company, any corporation,
partnership, trust or other entity in which any officer, director, or any such
employee has a substantial interest or is an officer, director, trustee or
partner.
(u) Permits; Compliance. The Company and each of its
subsidiaries is in possession of all franchises, grants, authorizations,
licenses, permits, easements, variances, exemptions, consents, certificates,
approvals and orders necessary to own, lease and operate its properties and to
carry on its business as it is now being conducted (collectively, the "Company
Permits"), and there is no action pending or, to the knowledge of the Company,
threatened regarding suspension or cancellation of any of the Company Permits
except for such Company Permits the failure of which to possess, or the
cancellation or suspension of which, would not, individually or in the
aggregate, have a material effect on the Company. To the best of its knowledge,
neither the Company nor any of its subsidiaries is in material conflict with, or
in material default or material violation of, any of the Company Permits. The
Company currently expects to, and knows of no reason why it should not, receive
a Beneficial Use Approval Order from the Pennsylvania Department of
Environmental Protection for the use of dredge material and municipal waste
incinerator ash mixed with pozzolanic grout ingredients for restoration of mine
site highwalls upon completion of its demonstration project with the
Pennsylvania Department of Environmental Protection. The contract between the
Company and Lehigh Coal and Navigation Company, dated April 30, 1998, is in full
force and effect and there are no breaches by either party thereof. Since
December 31, 1997, neither the Company nor any of its subsidiaries has received
any notification with respect to possible material conflicts, material defaults
or material violations of applicable laws.
(v) Insurance. The Company and each of its subsidiaries are
insured by insurers of recognized financial responsibility against such losses
and risks and in such amounts as management of the Company believes to be
prudent and customary in the businesses in which the Company and its direct and
indirect subsidiaries are engaged. Neither the Company nor any such subsidiary
has any reason to believe that it will not be able to renew its existing
insurance coverage as and when such coverage expires or to obtain
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similar coverage from similar insurers as may be necessary to continue its
business without a significant increase in cost.
(w) Internal Accounting Controls. The Company and each of its
subsidiaries maintain a system of internal accounting controls sufficient, in
the judgment of the Company's board of directors, to provide reasonable
assurance that (i) transactions are executed in accordance with management's
general or specific authorizations, (ii) transactions are recorded as necessary
to permit preparation of financial statements in conformity with generally
accepted accounting principles and to maintain asset accountability, (iii)
access to assets is permitted only in accordance with management's general or
specific authorization and (iv) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and appropriate action
is taken with respect to any differences.
(x) Environmental Matters. Except as otherwise disclosed in
the Pre- Agreement SEC Documents, the Company and each of its subsidiaries is in
compliance in all material respects with all applicable state and federal
environmental laws and no event or condition has occurred that may interfere
with the compliance by the Company or any of its subsidiaries with any
environmental law or that may give rise to any liability under any environmental
law that, individually or in the aggregate, would have a Material Adverse
Effect.
(y) Solvency.
(i) Based on the financial condition of the Company
as of the Closing Date, the Company's fair saleable value of
its assets exceeds the amount that will be required to be paid
on or in respect of the Company's existing debts and other
liabilities (including contingent liabilities) as they mature.
(ii) Based on the financial condition of the Company
as of the Closing Date, the Company's assets do not constitute
unreasonably small capital to carry out its business as now
conducted and as proposed to be conducted including the
Company's capital needs taking into account the particular
capital requirements of the business conducted by the Company,
and projected capital requirements and capital availability
thereof.
(iii) The Company does not intend to incur debts
beyond its ability to pay such debts as they mature (taking
into account the timing and amounts of cash to be payable on
or in respect of its debt). Based on the financial condition
of the Company as of the Closing Date, the current cash flow
of the Company, together with the proceeds the Company would
receive, were it to liquidate all of its assets, after taking
into account all anticipated uses of the cash, would be
sufficient to pay all amounts on or in respect of its debt
when such amounts are required to be paid.
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(iv) The Company does not intend, and does not
believe, that final judgments against the Company in actions
for money damages will be rendered at a time when, or in an
amount such that, the Company will be unable to satisfy any
such judgments promptly in accordance with their terms (taking
into account the maximum reasonable amount of such judgments
in any such actions and the earliest reasonable time at which
such judgments might be rendered). The Company's cash flow,
after taking into account all other anticipated uses of the
cash (including the payments on or in respect of debt referred
to in paragraph (iii) above), will at all times be sufficient
to pay all such judgments promptly in accordance with their
terms.
(v) Neither the Company nor any of its subsidiaries
is subject to any bankruptcy, insolvency or similar
proceeding.
(z) Taxes. All federal, state, city and other tax returns,
reports and declarations required to be filed by or on behalf of the Company and
each of its subsidiaries have been filed and such returns are complete and
accurate and disclose all taxes (whether based upon income, operations,
purchases, sales, payroll, licenses, compensation, business, capital, properties
or assets or otherwise) required to be paid in the periods covered thereby.
Copies of all such returns have been provided to the Investors. All taxes shown
on such returns and any deficiency assessments, penalties and interest have been
paid. All taxes required to be withheld by or on behalf of the Company or any
such subsidiary in connection with amounts paid or owing to any employees,
independent contractor, creditor or other party have been withheld, and such
withheld taxes have either been duly and timely paid to the proper governmental
authorities or set aside in accounts for such purposes.
(aa) Title to Properties; Encumbrances. Schedule 2.1(aa)
contains a complete and accurate list of all real property, leaseholds, or other
interests therein owned by the Company and its subsidiaries. Each of the Company
and its subsidiaries owns (with good and marketable title in the case of real
property) all the properties and assets (whether real, personal, or mixed and
whether tangible or intangible) that it purports to own. All material properties
and assets listed on Schedule 2.1(aa) are free and clear of all encumbrances and
are not, in the case of real property, subject to any rights of way, building
use restrictions, exceptions, variances, reservations or limitations of any
nature, except, with respect to all such properties and assets, (a) mortgages or
security interests shown on Schedule 2.1(aa) as securing specified liabilities
or obligations, with respect to which no default (or event that, with notice or
lapse of time or both, would constitute a default) exists, (b) liens for current
taxes not yet due, and (c) with respect to real property, (i) minor
imperfections of title, if any, none of which is substantial in amount,
materially detracts from the value or impairs the use of the property subject
thereto, or impairs the operations the Company or any of its subsidiaries, and
(ii) zoning laws and other land use restrictions (including, but not limited to,
easements of records) that do not impair the present or anticipated use of the
property subject thereto. All buildings, plans, and structures owned by the
Company or any of its subsidiaries lie wholly within the boundaries of the real
property owned by the Company or such subsidiaries, and do not encroach upon the
property of, or otherwise conflict with the property rights of, any other
person.
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Section 2.2 Representations and Warranties of the Investors. Each of
the Investors, severally (as to itself) and not jointly, hereby makes the
following representations and warranties to the Company as of the date hereof
and on the Closing Date:
(a) Authorization; Enforcement. (i) Such Investor has the
requisite power and authority to enter into and perform this Agreement and the
Registration Rights Agreement and to purchase the Debentures and to acquire the
Warrants being sold to it hereunder, (ii) the execution and delivery of this
Agreement and the Registration Rights Agreement by such Investor and the
consummation by it of the transactions contemplated hereby and thereby have been
duly authorized by all necessary corporate or partnership action, and (iii) this
Agreement and the Registration Rights Agreement constitute valid and binding
obligations of such Investor enforceable against such Investor in accordance
with their terms, except as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws
relating to, or affecting generally the enforcement of creditors' rights and
remedies or by other equitable principles of general application.
(b) No Conflicts. The execution, delivery and performance of
this Agreement and the Registration Rights Agreement and the performance under
the Debentures and Warrants and the consummation by such Investor of the
transactions contemplated hereby and thereby do not and will not (i) result in a
violation of such Investor's organizational documents, or (ii) conflict with any
agreement, indenture or instrument to which such Investor is a party, or (iii)
result in a material violation of any law, rule, or regulation, or any order,
judgment or decree of any court or governmental agency applicable to such
Investor. Such Investor is not required to obtain any consent or authorization
of any governmental agency in order for it to perform its obligations under this
Agreement, the Registration Rights Agreement, the Warrants or the Debentures.
(c) Investment Representations.
(i) Information. The Company has furnished such
Investor with its annual report on Form 10-K for its fiscal year ended December
31, 1997 (the "Fiscal Year End"), its quarterly reports on Form 10-Q for the
fiscal quarters ended March 31, 1998, June 30, 1998 and September 30, 1998, and
all other reports or documents filed by the Company pursuant to Section 13(a) or
15(d) of the Exchange Act prior to the Closing Date (the "Pre-Agreement SEC
Documents").
(ii) Access to Other Information. Such Investor
acknowledges that the Company has made available to such Investor the
opportunity to examine such additional documents from the Company and to ask
questions of, and receive full answers from, the Company concerning, among other
things, the Company, its financial condition, its management, its prior
activities and any other information which such Investor considers relevant or
appropriate in connection with entering into this Agreement.
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(iii) Risks of Investment. Such Investor acknowledges
that the Debentures have not been registered under the Act. Such Investor is
familiar with the provisions of Rule 144 and understands that in the event all
of the applicable requirements of Rule 144 are not satisfied, registration under
the Act or some other exemption from the registration requirements of the Act
will be required in order to dispose of the Debentures, and that such Investor
may be required to hold its Debentures received under this Agreement for a
significant period of time prior to reselling them, subject to the Company
successfully registering the Common Shares pursuant to the Registration Rights
Agreement. Such Investor is capable of assessing the risks of an investment in
the Debentures and is fully aware of the economic risks thereof. Such Investor
acknowledges that the Company's operating results have in the past and may in
the current period and in future periods not meet the expectations of securities
analysts and that failure to meet such expectations would be likely to have a
material adverse effect on the trading price and salability of the Common
Shares.
(iv) Investment Representation. Such Investor is
purchasing the Debentures and the Warrants for its own account and not with a
view to distribution in violation of any securities laws. Such Investor has no
present intention to sell the Debentures, Warrants, Common Shares, or Warrant
Shares in violation of federal or state securities laws and such Investor has no
present arrangement (whether or not legally binding) to sell the Debentures,
Warrants, Common Shares or Warrant Shares to or through any person or entity;
provided, however, that by making the representations herein, such Investor does
not agree to hold the Debentures, Warrants, Common Shares or Warrant Shares for
any minimum or other specific term and reserves the right to dispose of the
Debentures, Warrants, Common Shares or Warrant Shares at any time in accordance
with federal and state securities laws applicable to such disposition.
(v) Restricted Securities. It acknowledges and
understands that the terms of Issuance have not been reviewed by the SEC or by
any state securities authorities and that the Debentures have been issued in
reliance on the certain exemptions for non-public offerings under the Act, which
exemptions depend upon, among other things, the representations made and
information furnished by such Investor, including the bona fide nature of such
Investor's investment intent as expressed above.
(vi) Accuracy of Information. All information that
such Investor provides to the Company hereunder is correct and complete as of
the date set forth above.
(vii) Ability to Bear Economic Risk. It is an
"accredited" investor, and that it (i) is able to bear the economic risk of its
investment in the Debentures, (ii) is able to hold the Debentures for an
indefinite period of time, (iii) can afford a complete loss of its investment in
the Debentures and (iv) has adequate means of providing for its current needs.
(viii) No Public Solicitation. At no time was such
Investor presented with or solicited by any general mailing, leaflet, public
promotional meeting, newspaper or magazine article, radio or television
advertisement, or any other form of general advertising or general solicitation
in connection with the Issuance.
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(ix) Reliance by the Company. Such Investor
understands that the Debentures and Warrant are being offered and sold in
reliance on a transactional exemptions from the registration requirements of
federal and state securities laws and that the Company is relying upon the truth
and accuracy of the representations, warranties, agreements, acknowledgments and
understandings of such Investor set forth herein in order to determine the
applicability of such exemptions and the suitability of such Investor to acquire
the Debentures and Warrants.
(d) Brokers. Such Investor has taken no action which would
give rise to any claim by any person for brokerage commissions, finder's fees or
similar payments by the Company relating to this Agreement or the transactions
contemplated hereby.
ARTICLE III
Covenants
Section 3.1 Registration and Listing; Effective Registration. Until the
second anniversary of the issuance of the Debentures and the Warrants, the
Company will cause the Common Stock issuable upon the exercise of the Securities
to continue at all times to be registered under Section 12(g) of the Exchange
Act, will comply in all respects with its reporting and filing obligations under
the Exchange Act, and will not take any action or file any document (whether or
not permitted by the Exchange Act or the rules thereunder) to terminate or
suspend such reporting and filing obligations. Until such time as no Debentures
or Warrants are outstanding, the Company shall continue the listing or trading
of the Common Stock on the Nasdaq SCM or one of the other Approved Markets and
comply in all respects with the Company's reporting, filing and other
obligations under the bylaws or rules of the Approved Market on which the Common
Stock is listed. The Company shall cause the Common Stock to be listed on the
Nasdaq SCM no later than the registration of the Common Stock under the Act, and
at all times shall continue such listing(s) on one of the Approved Markets. As
used herein and in the Registration Rights Agreement, the Debenture and the
Warrants, the term "Effective Registration" shall mean that all registration
obligations of the Company pursuant to the Registration Rights Agreement and
this Agreement have been satisfied, such registration is not subject to any
suspension or stop order, the prospectus for the Common Stock issuable upon
conversion and/or exercise of the Securities is current and such shares of
Common Stock are listed for trading on one of the Approved Markets and such
trading has not been suspended for any reason, none of the Company or any direct
or indirect subsidiary of the Company is subject to any bankruptcy, insolvency
or similar proceeding, and no Interfering Event (as defined in Section 2(b) of
the Registration Rights Agreement) exists.
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Section 3.2 Debentures on Conversion and Warrants on Exercise.
(a) Upon any conversion by an Investor (or then holder of
Debentures) of the Debentures pursuant to the terms thereof, the Company shall
issue and deliver to such Investor (or holder) within three (3) Trading Days (as
such term is defined in the Debenture) of the Conversion Date (as defined in the
Debenture), a new certificate or certificates for the principal amount of
Debentures which such Investor (or holder) has not yet elected to convert but
which is evidenced in part by the certificate(s) submitted to the Company in
connection with such conversion (with the number of and denomination of such new
certificate(s) designated by such Investor or holder).
(b) Upon any partial exercise by an Investor (or then holder
of the Warrants) of the Warrants, the Company shall issue and deliver to such
Investor (or holder) within three (3) days of the date on which such Warrants
are exercised, a new Warrant or Warrants representing the number of adjusted
Warrant Shares, in accordance with the terms of Section 2 of the Warrants.
Section 3.3 Replacement Debentures and Warrants.
(a) The certificate(s) representing the Debentures held by any
Investor (or then holder) may be exchanged by such Investor (or such holder) at
any time and from time to time for certificates with different denominations
representing an equal aggregate number of Debentures, as requested by such
Investor (or such holder) upon surrendering the same. No service charge will be
made for such registration or transfer or exchange.
(b) The Warrants will be exchangeable at the option of the
Investor (or then holder of the Warrants) at the office of the Company for other
Warrants of different denominations entitling the holder thereof to purchase in
the aggregate the same number of Warrant Shares as are purchasable under such
Warrants. No service charge will be made for such transfer or exchange.
Section 3.4 Expenses. The Company shall pay in immediately available
funds, at the Closing and promptly upon receipt of any further invoices relating
to same, all reasonable due diligence fees and expenses and attorneys' fees and
expenses of the Investors' Counsel, incurred by the Investors in connection with
the preparation, negotiation, execution and delivery of this Agreement, the
Registration Rights Agreement, the Debentures, the Warrants and the related
agreements and documents and the transactions contemplated hereunder and
thereunder. At Closing, the Company shall pay the amount due for such fees and
expenses (which may include fees and expenses estimated to be incurred for
completion of the transaction including post-closing matters). In the event such
amount is ultimately less than the actual fees and expenses, the Company shall
promptly pay such deficiency upon receipt of an invoice regarding same.
Section 3.5 Securities Compliance. The Company shall notify the SEC and
the Nasdaq SCM, in accordance with their requirements, of the transactions
contemplated by this Agreement, the Debenture, the Registration Rights Agreement
and the Warrants, and
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shall take all other necessary action and proceedings as may be required and
permitted by applicable law, rule and regulation, for the legal and valid
issuance of the Debentures hereunder, the Common Shares issuable upon conversion
thereof, the Warrants and the Warrant Shares issuable upon exercise of the
Warrants.
Section 3.6 Dividends or Distributions; Purchases of Equity Securities.
So long as any Debentures or Warrants remain outstanding, the Company agrees
that it shall not (a) declare or pay any dividends or make any distributions to
any holder or holders of Common Stock, or (b) purchase or otherwise acquire for
value, directly or indirectly, any shares of Common Stock or other equity
security of the Company; provided that the Company may purchase or acquire
shares of Common Stock so long as the Company (i) purchases or acquires such
shares on the open market or pursuant to a tender offer directed to all of the
Company's shareholders and (ii) does not utilize the proceeds of the issuances
of the Debentures for such purpose.
Section 3.7 Notices. The Company agrees to provide all holders of
Debentures and Warrants with copies of all notices and information, including
without limitation notices and proxy statements in connection with any meetings,
that are provided to the holders of shares of Common Stock, contemporaneously
with the delivery of such notices or information to such Common Stock holders.
Section 3.8 Use of Proceeds. The Company agrees that the proceeds
received by the Company from the sale of the Debentures hereunder shall be used
for the acquisition by the Company of 100% of the common stock of Brass
Investment Company, Inc.
Section 3.9 Notification of Additional Financings; Adjustments.
(a) Until the expiration of twelve (12) months from the
Closing Date, the Company shall provide reasonable advance notice to the
Investors of its intentions to pursue any transaction, the purpose of which is
to provide capital to the Company, in consideration of which the Company will
sell or otherwise issue or deliver or dispose of any shares of Common Stock or
other equity securities or any securities which are convertible into or
exchangeable for shares of its Common Stock or other equity securities or any
convertible or exchangeable security, or any warrants or other rights to
subscribe for or to purchase or any options for the purchase of shares of Common
Stock or other equity securities (such transactions are referred to as
"Applicable Financing Transactions"). The Company agrees to use reasonable
efforts to provide the Investors with the opportunity to provide the financing
in such Applicable Financing Transactions.
(b) If at any time within twelve (12) months from the Closing
Date the Company issues Common Stock (or securities or rights exercisable or
exchangeable for, or convertible into, Common Stock) in a private placement at a
discount greater (or in the Investor's judgment more favorable to the purchaser
thereof) than the discount specified in Section 5(c) of the Debentures or at a
ceiling price less than the Conversion Price (as defined in the Debentures and
as adjusted pursuant to the terms thereof), then the
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Debentures will automatically (at the Investor's request) be adjusted to provide
for such greater discount or lower or more favorable Conversion Price, as
applicable.
Section 3.10 Reservation of Stock Issuable Upon Conversion and Upon
Exercise of the Warrants. The Company 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 Debentures and the exercise of
the Warrants, such number of its shares of Common Stock as shall from time to
time be sufficient to effect the conversion of all outstanding Debentures and
the full exercise of the Warrants and if at any time the number of authorized
but unissued shares of Common Stock shall not be sufficient to effect the
conversion of all the then outstanding Debentures and the full exercise of the
Warrants, the Company 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,
including without limitation engaging in best efforts to obtain the requisite
shareholder approval. Without in any way limiting the foregoing, the Company
agrees to reserve and at all times keep available solely for purposes of
conversion of Debentures and the exercise of the Warrants such number of
authorized but unissued shares of Common Stock that is at least equal to 200% of
the aggregate shares issuable upon conversion of Debentures, and 200% of the
aggregate shares issuable on exercise of Warrants, which number may be reduced
by the number of Common Shares or Warrant Shares actually delivered pursuant to
conversion of Debentures or exercise of the Warrants and shall be appropriately
adjusted for any stock split, reverse split, stock dividend or reclassification
of the Common Stock. If the Company falls below the reserves specified in the
immediately preceding sentence and does not cure such non-compliance within 30
days of its start, then the Investors will be entitled to the discount
adjustments specified in Section 2(b)(i) of the Registration Rights Agreement.
If at any time the number of authorized but unissued shares of Common Stock is
not sufficient to effect the conversion of all the then outstanding Debentures
or the full exercise of the Warrants, the Investors shall be entitled to, inter
alia, the premium price redemption rights provided in the Registration Rights
Agreement.
Section 3.11 Best Efforts. The parties shall use their best efforts to
satisfy timely each of the conditions described in Article IV of this Agreement.
Section 3.12 Form D; Blue Sky Laws. The Company agrees to file a Form D
with respect to the Debentures, Warrants, Common Shares and Warrant Shares, as
required under Regulation D and to provide a copy thereof to each Investor
promptly after such filing. The Company shall, on or before each Closing Date,
take such action as the Company shall have reasonably determined is necessary to
qualify the Debentures, Warrants, Common Shares and Warrant Shares for sale to
the Investors at the Closing pursuant to this Agreement under applicable
securities or "blue sky" laws of the states of the United States (or to obtain
an exemption from such qualification), and shall provide evidence of any such
action so taken to each Investor on or prior to the Closing Date.
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Section 3.13 No Senior Indebtedness; Limitation on Issuance of Equity.
(a) Until the six month anniversary of the Closing Date, the
Company agrees that neither the Company nor any direct or indirect subsidiary of
the Company shall create, incur, assume, guarantee, secure or in any manner
become liable in respect of any indebtedness, or permit any liens, claims or
encumbrances to exist against the Company or any direct or indirect subsidiary
of the Company or any of their assets, unless junior to the Debentures in all
respects, except for (i) trade payables incurred in the ordinary course of
business consistent with past practices, (ii) indebtedness incurred in
connection with the acquisition by the Company of another entity (or any assets
of such entity), and (iii) except for a working capital facility which shall not
exceed $40.0 million. The Company agrees that it shall at all times between the
Closing Date and April 1, 2000 maintain at least $2.5 million of available
credit under the facility described in clause (iii) of the preceding sentence.
(b) Until the later of (i) December 31, 1999 or (ii) 210 days
after the date that the Registration Statement (as defined in the Registration
Rights Agreement) has been declared effective by the SEC and the Common Shares
and the Warrant Shares are subject to Effective Registration, neither the
Company nor any of its subsidiaries will issue any equity securities or
instruments or rights convertible into or exchangeable or exercisable for any
equity securities; provided that the Company shall be permitted on one occasion
to issue not less than $10.0 million of publicly trading shares of Common Stock
in a firm commitment underwriting during this period.
Section 3.14 Delisting; Best Efforts. If a conversion of a Debenture
for Common Shares by an Investor could result in the Company being delisted from
the Nasdaq SCM for issuing in excess of 20% of its outstanding Common Stock to
the Investors without the approval of the Company's shareholders, then the
Company must redeem any and all Debentures covered by the applicable Conversion
Notice (as defined in the Debentures) and any and all Debentures that would, if
a Conversion Notice for all Debentures were then delivered, result in the
Company being subject to such delisting, at a price equal to 130% of the
Outstanding Principal Amount (as defined in the Debentures) plus accrued but
unpaid interest and default payments in effect at that time. The Company will
use its best efforts to obtain promptly shareholder approval pursuant to NASD
Rule 4460(i) authorizing the issuance of all Common Shares and Warrant Shares
issuable upon the conversion of any Debentures or the exercise of any Warrants,
including by calling a special meeting of such shareholders and having the
Company's Board of Directors recommend such approval in a proxy statement.
Section 3.15 Investor's Option to Compel Repurchase of Its Debentures.
Between January 1, 2000 and March 31, 2000 (the "Investor Put Expiration Date"),
each of the Investors shall have the right in its sole discretion to sell to the
Company all of its Debentures at a price in immediately available funds (the
"Premium Redemption Price") equal to 1.1 times (i.e., 110% of) the outstanding
principal amount of such Debentures, plus any accrued but unpaid or unrecognized
interest or default payments thereon; provided that the Investor Put Expiration
Date shall be extended by 1.5 Business Days for each Business
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Day that the Common Shares and/or Warrants Shares are not subject to Effective
Registration after the date such shares are initially required to be subject to
Effective Registration under the Registration Rights Agreement. Payment of such
amount shall be due and payable within five days of demand therefor, which
demand shall be revocable by the relevant Investor at any time prior to its
actual receipt of the Premium Redemption Price. Notwithstanding anything to the
contrary herein, in the event an Investor converts any of its Debentures
pursuant to this Agreement, such Investor shall lose its option to compel
repurchase of its Debentures pursuant to this Section 3.15.
ARTICLE IV
Conditions to Closings
Section 4.1 Conditions Precedent to the Obligation of the Company to
Sell the Debentures. The obligation hereunder of the Company to issue and/or
sell the Debentures to the Investors at the Closing (unless otherwise specified)
is subject to the satisfaction, at or before the Closing, of each of the
applicable conditions set forth below. These conditions are for the Company's
sole benefit and may be waived by the Company at any time in its sole
discretion.
(a) Accuracy of the Investors' Representations and Warranties.
The representations and warranties of each Investor will be true and correct in
all material respects as of the date when made and as of the Closing Date as
though made at that time (except for representations and warranties as of an
earlier date, which will be true and correct in all material respects as of such
date).
(b) Performance by the Investors. Each Investor shall have
performed all agreements and satisfied all conditions required to be performed
or satisfied by such Investor at or prior to the Closing.
(c) No Injunction. No statute, rule, regulation, executive
order, decree, ruling or injunction shall have been enacted, entered,
promulgated or endorsed by any court or governmental authority of competent
jurisdiction which prohibits the consummation of any of the transactions
contemplated by this Agreement or the Registration Rights Agreement or the
Debentures or the Warrants.
Section 4.2 Conditions Precedent to the Obligation of the Investors to
Purchase the Debentures. The obligation hereunder of each Investor to acquire
and pay for the Debentures at the Closing (unless otherwise specified) is
subject to the satisfaction, at or before the Closing, of each of the applicable
conditions set forth below. These conditions are for each Investor's benefit and
may be waived by each Investor at any time in its sole discretion.
(a) Accuracy of the Company's Representations and Warranties.
The representations and warranties of the Company shall be true and correct in
all material
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respects as of the date when made and as of the Closing Date as though made at
that time (except for representations and warranties as of an earlier date,
which shall be true and correct in all material respects as of such date).
(b) Performance by the Company. The Company shall have
performed all agreements and satisfied all conditions required to be performed
or satisfied by the Company at or prior to the Closing.
(c) Nasdaq SCM. From the date hereof to the Closing Date,
trading in the Company's Common Stock shall not have been suspended by the SEC
or the Nasdaq SCM (or other Approved Market), and trading in securities
generally as reported by the Nasdaq SCM (or other Approved Market) shall not
have been suspended or limited, and the Common Stock shall not have been
delisted from the Nasdaq SCM (or any other Approved Market where they are
currently listed), and the market value of the outstanding Common Stock shall
not have decreased below $4.00 per share.
(d) No Injunction. No statute, rule, regulation, executive,
judicial or administrative order, decree, ruling or injunction shall have been
enacted, entered, promulgated or endorsed by any court or governmental authority
of competent jurisdiction which prohibits the consummation of any of the
transactions contemplated by this Agreement or the Registration Rights Agreement
or the Debenture or the Warrants.
(e) Opinion of Counsel. At the Closing, the Investors shall
have received an opinion of the general counsel of the Company, ▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇, in the form attached hereto as Exhibit 4.2(e) and such other opinions,
certificates and documents as the Investors or their counsel shall reasonably
require incident to the Closing.
(f) Registration Rights Agreement. The Company and the
Investors shall have executed and delivered the Registration Rights Agreement in
the form and substance of Exhibit 4.2(f) attached hereto.
(g) Adverse Changes. Except as otherwise disclosed in the
Pre-Agreement SEC Documents, since December 31, 1997, no event which had or is
likely to have, in the reasonable judgment of the Investors, a Material Adverse
Effect on the Company or any of its direct or indirect subsidiaries shall have
occurred.
(h) Officer's Certificate. The Company shall have delivered to
the Investors a certificate in form and substance satisfactory to the Investors
and the Investors' Counsel, executed by an officer of the Company, certifying as
to satisfaction of closing conditions, incumbency of signing officers, and the
true, correct and complete nature of the Charter, By-Laws, good standing and
authorizing resolutions of the Company.
(i) Debentures and Warrants. The Investors shall have received
certificates representing the Debentures and Warrants in the form and substance
of Exhibit 1.1A and Exhibit 1.1B hereto.
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(j) Due Diligence. Each Investor shall have completed its
financial, accounting, operational and legal due diligence in a manner
satisfactory to such Investor in its sole discretion.
ARTICLE V
Legend and Stock
The Company will issue one or more certificates representing the
Debentures and the Warrants in the name of the Investor and in such
denominations to be specified by the Investor prior to (or from time to time
subsequent to) Closing. Each certificate representing the Debentures and the
Warrants and any shares of Common Stock issued upon conversion or exercise
thereof initially shall be stamped or otherwise imprinted with a legend
substantially in the following form:
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933 OR ANY STATE SECURITIES LAWS. THEY MAY NOT BE SOLD OR OFFERED FOR
SALE EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SAID
ACT AND ANY APPLICABLE STATE SECURITIES LAW OR AN APPLICABLE EXEMPTION
FROM SUCH REGISTRATION REQUIREMENTS.
The Company agrees to reissue Debentures and Warrants without the
legend set forth above at such time as (i) the holder thereof is permitted to
dispose of such Debentures and/or Warrants and Common Stock issuable upon
conversion or exercise thereof pursuant to Rule 144(k) under the Act, or (ii)
such Debentures and/or Warrants are sold to a purchaser or purchasers who (in
the opinion of counsel to the seller or such purchaser(s), in form and substance
reasonably satisfactory to the Company and its counsel) are able to dispose of
such shares publicly without registration under the Act.
Prior to the Registration Statement (as defined in the Registration
Rights Agreement) being declared effective, any Common Shares issued pursuant to
conversion of Debentures or Warrant Shares issued upon exercise of the Warrants
shall bear a legend in the same form as the legend indicated above. Upon such
Registration Statement becoming effective, the Company agrees to promptly, but
no later than three (3) business days thereafter, issue new certificates
representing such Common Shares and Warrant Shares without such legend. Any
Common Shares issued pursuant to conversion of Debentures or Warrant Shares
issued upon exercise of the Warrants after the Registration Statement has become
effective shall be free and clear of any legends, transfer restrictions and stop
orders. Notwithstanding the removal of such legend, each Investor agrees to sell
the Common Shares and Warrant Shares represented by the new certificates in
accordance with the applicable prospectus delivery requirements (if copies of a
current prospectus are provided to such Investor by the Company) or in
accordance with an exception from the registration requirements of the Act.
Nothing herein shall limit the right of any holder to pledge these
securities pursuant to a bona fide margin account or lending arrangement.
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ARTICLE VI
Miscellaneous
Section 6.1 Stamp Taxes. The Company shall pay all stamp and other
taxes and duties levied in connection with the issuance of the Debentures and
Warrants pursuant hereto, the Common Shares issued upon conversion thereof, and
the Warrant Shares issued upon exercise of the Warrants.
Section 6.2 Specific Performance; Consent to Jurisdiction; Jury Trial.
(a) The Company and the Investors acknowledge and agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement were not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that the parties shall be entitled
to an injunction or injunctions to prevent or cure breaches of the provisions of
this Agreement and to enforce specifically the terms and provisions hereof, this
being in addition to any other remedy to which any of them may be entitled by
law or equity.
(b) THE COMPANY AND EACH OF THE INVESTORS (I) HEREBY
IRREVOCABLY SUBMITS TO THE EXCLUSIVE JURISDICTION OF THE UNITED STATES DISTRICT
COURT, THE NEW YORK STATE COURTS AND OTHER COURTS OF THE UNITED STATES SITTING
IN NEW YORK COUNTY, NEW YORK FOR THE PURPOSES OF ANY SUIT, ACTION OR PROCEEDING
ARISING OUT OF OR RELATING TO THIS AGREEMENT AND (II) HEREBY WAIVES, AND AGREES
NOT TO ASSERT IN ANY SUCH SUIT ACTION OR PROCEEDING, ANY CLAIM THAT IT IS NOT
PERSONALLY SUBJECT TO THE JURISDICTION OF SUCH COURT, THAT THE SUIT, ACTION OR
PROCEEDING IS BROUGHT IN AN INCONVENIENT FORUM OR THAT THE VENUE OF THE SUIT,
ACTION OR PROCEEDING IS IMPROPER. THE COMPANY AND EACH OF THE INVESTORS CONSENTS
TO PROCESS BEING SERVED IN ANY SUCH SUIT, ACTION OR PROCEEDING BY MAILING A COPY
THEREOF TO SUCH PARTY AT THE ADDRESS IN EFFECT FOR NOTICES TO IT UNDER THIS
AGREEMENT AND AGREES THAT SUCH SERVICE SHALL CONSTITUTE GOOD AND SUFFICIENT
SERVICE OF PROCESS AND NOTICE THEREOF. NOTHING IN THIS PARAGRAPH SHALL AFFECT OR
LIMIT ANY RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY APPLICABLE
LAW.
(c) THE COMPANY AND EACH INVESTOR HEREBY WAIVES ALL RIGHTS TO
A TRIAL BY JURY.
Section 6.3 Entire Agreement; Amendment. This Agreement, together with
the Registration Rights Agreement, the Warrants, the Debentures and the
agreements and documents executed in connection herewith and therewith, contains
the entire understanding of the parties with respect to the matters covered
hereby and thereby and, except as specifically set forth herein or therein,
neither the Company nor any Investor makes any representation, warranty,
covenant or undertaking with respect to such matters. No provision of this
Agreement may be waived or amended other than by a written instrument signed by
the party against whom enforcement of any such amendment or waiver is sought.
Section 6.4 Notices. Any notice or other communication required or
permitted to be given hereunder shall be in writing by mail, facsimile or
personal delivery and shall be effective upon actual receipt of such notice. The
addresses for such communications shall be:
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to the Company:
U.S. Plastic Lumber Corporation
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
to the Investors:
To each Investor at the address and/or fax number set forth on
Schedule I of this Agreement.
with copies to:
Kleinberg, Kaplan, ▇▇▇▇▇ & ▇▇▇▇▇, P.C.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
▇▇▇▇▇, Day, ▇▇▇▇▇▇ & ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: J. ▇▇▇▇ ▇▇▇▇, Esq.
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Any party hereto may from time to time change its address for notices by giving
at least 10 days' written notice of such changed address to the other parties
hereto.
Section 6.5 Indemnity. Each party shall indemnify each other party
against any loss, cost or damages (including reasonable attorney's fees but
excluding consequential damages) incurred as a result of such parties' breach of
any representation, warranty, covenant or agreement in this Agreement.
Section 6.6 Waivers. No waiver by any party of any default with respect
to any provision, condition or requirement of this Agreement shall be deemed to
be a continuing waiver in the future or a waiver of any other provision,
condition or requirement hereof, nor shall any delay or omission of any party to
exercise any right hereunder in any manner impair the exercise of any such right
accruing to it thereafter.
Section 6.7 Headings. The headings herein are for convenience only, do
not constitute a part of this Agreement and shall not be deemed to limit or
affect any of the provisions hereof.
Section 6.8 Successors and Assigns. Except as otherwise provided
herein, this Agreement shall be binding upon and inure to the benefit of the
parties and their successors and permitted assigns. The parties hereto may amend
this Agreement without notice to or the consent of any third party. The Company
may not assign this Agreement or any rights
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or obligations hereunder without the prior written consent of all Investors
(which consent may be withheld for any reason in their sole discretion), except
that the Company may assign this Agreement in connection with the sale of all or
substantially all of its assets provided that the Company is not released from
any of its obligations hereunder, such assignee assumes all obligations of the
Company hereunder, and appropriate adjustment of the provisions contained in
this Agreement, the Registration Rights Agreement, the Debentures and the
Warrants is made, in form and substance satisfactory to the Investors, to place
the Investors in the same position as they would have been but for such
assignment, in accordance with the terms of the Debentures and the Warrants. No
Investor may assign this Agreement (in whole or in part) or any rights or
obligations hereunder without the consent of the Company (which shall not be
unreasonably withheld).
Section 6.9 No Third Party Beneficiaries. This Agreement is intended
for the benefit of the parties hereto and their respective permitted successors
and assigns and is not for the benefit of, nor may any provision hereof be
enforced by, any other person.
Section 6.10 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK
APPLICABLE TO AGREEMENTS EXECUTED AND TO BE PERFORMED ENTIRELY WITHIN SUCH
STATE.
Section 6.11 Survival. The representations and warranties and the
agreements and covenants of the Company and each Investor contained herein shall
survive the Closing.
Section 6.12 Execution. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement, it
being understood that all parties need not sign the same counterpart.
Section 6.13 Publicity. The Company agrees that it will not disclose,
and will not include in any public announcement, the name of any Investor
without the express written agreement of such Investor, unless and until such
disclosure is required by law or applicable regulation, and then only to the
extent of such requirement. The Company agrees that it will deliver a copy of
any public announcement regarding the matters covered by this Agreement or any
agreement and document executed herewith to each Investor and any public
announcement including the name of an Investor to such Investor, reasonably in
advance of the release of such announcements.
Section 6.14 Severability. The parties acknowledge and agree that the
Investors are not agents, affiliates or partners of each other, that all
representations, warranties, covenants and agreements of the Investors hereunder
are several and not joint, that no Investor shall have any responsibility or
liability for the representations, warrants, agreements, acts or omissions of
any other Investor, and that any rights granted to "Investors" hereunder shall
be enforceable by each Investor hereunder.
Section 6.15 Like Treatment of Holders; Redemption. Neither the Company
nor any of its affiliates shall, directly or indirectly, pay or cause to be paid
any consideration (immediate or contingent), whether by way of interest, fee,
payment for the redemption or conversion of Debentures or exercise of the
Warrants, or otherwise, to any holder of Debentures or Warrants, for or as an
inducement to, or in connection with the solicitation of, any consent, waiver or
amendment of any terms or provisions of the Debenture or this Agreement or the
Registration Rights Agreement or the Warrants, unless such consideration is
required to be paid to all holders of Debentures and Warrants bound by such
consent, waiver or amendment whether or not such holders so consent,
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waive or agree to amend and whether or not such holders tender their Debentures
or Warrants for redemption, conversion or exercise. The Company shall not,
directly or indirectly, redeem any Debentures unless such offer of redemption is
made pro rata to all holders of Debentures on identical terms.
Section 6.16 No Strict Construction. The language used in this
Agreement will be deemed to be the language chosen by the parties to express
their mutual intent, and no rules of strict construction will be applied against
any party.
[Signature Page Follows]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first above written.
U.S. PLASTIC LUMBER CORPORATION
By:
-----------------------------------
Name:
Title:
INVESTORS:
HALIFAX FUND, L.P.
By: THE PALLADIN GROUP, L.P.
Attorney-in-Fact
By:
-----------------------------------
Name:
Title:
SOCIETE GENERALE
By:
-----------------------------------
Name:
Title:
[Signature page to U.S. Plastic Lumber Corporation Debenture Purchase Agreement]
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EXHIBITS AND SCHEDULES
Schedule I List of Investors
Exhibit 1.1A Form of Debenture
Exhibit 1.1B Form of Warrant
Schedule 2.1(a) List of Subsidiaries
Schedule 2.1(c) Capitalization; Preemptive Rights
Exhibit 2.1(c)(i) Certificate of Incorporation of the Company
Exhibit 2.1(c)(ii) By-Laws of the Company
Schedule 2.1(s) Outstanding Securities Subject to Registration
Rights, etc.
Schedule 2.1(aa) Real Property
Exhibit 4.2(e) Opinion of Company Counsel
Exhibit 4.2(f) Registration Rights Agreement
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SCHEDULE I
Outstanding Number Restricted
Principal Amount of Ownership
Investor of Debentures Warrants Purchase Price Percentage
-------- ---------------- -------- -------------- ----------
HALIFAX FUND, LP $1,500,000 37,500 $1,500,000 4.9%
c/o The Palladin Group, L.P.
Investment Manager
▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Tax I.D. No.:____________
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
SOCIETE GENERALE $1,000,000 25,000 $1,500,000 4.9%
Tour Societe Generale
▇▇, ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇ La Defense Cedex
France
c/o
Societe Generale
1221 Avenue of the Americas
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Tax I.D. No.:_____________
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
---------- ------ ----------
TOTAL $2,500,000 62,500 $2,500,000
========== ====== ==========
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SCHEDULE 2.1(a)
List of Subsidiaries
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SCHEDULE 2.1(c)
Capitalization; Preemptive Rights
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SCHEDULE 2.1(s)
Outstanding Securities Subject to Registration Rights, etc.
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SCHEDULE 2.1(aa)
Real Property, Leaseholds and Certain Other Interest, etc.
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SCHEDULE 2.1(bb)
Real Property