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EXHIBIT 10.34
CONVERTIBLE DEBENTURE PURCHASE AGREEMENT
CONVERTIBLE DEBENTURE PURCHASE AGREEMENT ("AGREEMENT") dated as of
December 22, 1998 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
December 22, 2003 (the "DEBENTURES"), in the aggregate principal amount of
$4,000,000 at an aggregate price of $4,000,000, having the rights and
privileges set forth in the Debentures in the form of EXHIBIT 1.1A attached
hereto (the "INITIAL 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 100,000
shares of Common Stock in the form attached as EXHIBIT 1.1B (the "WARRANTS";
and, together with the Debentures, the "SECURITIES");
WHEREAS, the Investors may elect or be required (by the Company) to
purchase from the Company additional Debentures (the "OPTION DEBENTURES") in
the aggregate principal amount of up to $4,000,000, pro rata to their
investments in the Initial Issuance, as further described herein;
WHEREAS, upon the issuance of the Option Debentures, the Company has
agreed to issue additional warrants exercisable for shares of Common Stock (the
"OPTION WARRANTS"; and together with the Option Debentures, the "OPTION
SECURITIES"), as further described herein;
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:
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ARTICLE I
PURCHASE AND SALE OF DEBENTURES AND WARRANTS
Section 1.1 ISSUANCE OF DEBENTURES AND WARRANTS.
(a) INITIAL 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 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 Initial
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
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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.
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
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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 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
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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 (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
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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
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.
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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 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.
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(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.
(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.
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(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 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
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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.
(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
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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, easments 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.
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 being sold
hereunder and to acquire the Warrant, (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").
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(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.
(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 Initial 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
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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 Initial Issuance.
(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 (or,
if applicable, the second anniversary of the issuance of Option Securities),
the Company will cause the Common Stock issuable upon the exercise of the
Securities and the Option 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 (or, if applicable,
the Option Securities) 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 and the Option
Securities is current and such shares of Common Stock are listed for trading on
one of the Approved
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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.
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 number of
Debentures which such Investor (or holder) has not yet elected to convert but
which are 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
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upon receipt of an invoice regarding same. In the event the Company issues
Option Securities pursuant to the exercise of the Company Put Option or the
Investor Call Option, the Company shall pay in immediately available funds all
of the fees and expenses of Investors' Counsel related to such issuance in
accordance with all of the same terms and conditions in this paragraph relating
to the issuance of the Securities in the Initial Issuance.
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 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 and/or the Option 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 working capital purposes.
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
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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
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.
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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 applicable 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.
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.
(b) Until 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.
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.
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Section 3.15 ADDITIONAL ISSUANCE.
(a) In the event that (unless any of the following conditions
shall have been waived by the Investors):
(i) the closing bid price of a share of Common Stock on
the principal Approved Market has been 130% of the Initial
Price (as such term is defined in the Debentures; such
Initial Price being subject to the same adjustments as may
from time to time be made to the Conversion Price in the
Debentures) or more for the 10 consecutive Trading Days
preceding the date of the notice referred to below; and
(ii) there is, and has been for each of the preceding
60 Trading Days, Effective Registration; and
(iii) there are not, and have not been in any of the
preceding 60 Trading Days, any Interfering Events (as such
term is defined in the Registration Rights Agreement); and
(iv) no Event of Default (as defined in the Debentures)
shall have occurred, be likely to occur or be threatened; and
(v) the average of the aggregate market value of all
the shares of Common Stock trading on the principal Approved
Market for each of the 60 preceding Trading Days (exclusive
of "block trades", which shall mean trades in excess of
20,000 shares of Common Stock) shall be in excess of
$375,000; and
(vi) the Company shall have a net worth (as defined
under U.S. Generally Accepted Accounting Principles) of at
least $20.0 million, as certified in writing to the Investors
by the chief financial officer of the Company; and
(vii) there have been no breaches by the Company that
have not been fully cured under this Agreement, the
Registration Rights Agreement, the Debentures or the
Warrants; and
(viii) all the Company's representations and warranties
contained in this Agreement, the Registration Rights
Agreement, the Debentures and the Warrants shall continue to
be true (in all material respects), and all the Company's
covenants contained in this Agreement, the Registration
Rights Agreement, the Debentures and the Warrants shall have
been performed when and as required, all as certified in
writing by the chief financial officer of the Company; and
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(ix) the issuance of all Common Shares issuable upon
conversion of the Debentures (including the Debentures
issuable pursuant to this Section 3.15) and Warrant Shares
issuable upon exercise of the Warrants (including the Option
Warrants) have been approved by the shareholders of the
Company pursuant to NASD Rule 4460(i) (where such rule is
applicable);
THEN (x) the Investors shall have a right to purchase (the "INVESTOR CALL
OPTION") up to $4.0 million of Option Debentures, or (y) the Company may compel
the Investors to purchase (the "COMPANY PUT OPTION") up to $3.0 million of
Option Debentures, in each case, upon written notice, for immediately available
funds, in accordance with the procedures described below; PROVIDED that neither
the Company nor the Investors may exercise the options referred to in this
paragraph, if such exercise would result in the issuance of an aggregate
principal amount of Option Debentures in excess of $4.0 million. Upon the
issuance of Option Debentures pursuant to the exercise of the Investor Call
Option or the Company Put Option, the Company shall issue to the Investors (pro
rata in accordance with the percentages of total Option Debentures each
Investor shall have purchased) Option Warrants for the purchase of 25,000
shares of Common Stock (such number of shares to be subject to adjustment in a
manner consistent with the provisions adjusting the number of shares issuable
under the Warrant upon the occurrence of certain events) per $1.0 million
principal amount of Option Debentures issued to the Investors.
(b) The Investors may exercise the Investor Call Option under
Paragraph (a) of this Section 3.15 on only one occasion and only during the
period beginning on the Closing Date and expiring on the day after the second
anniversary of the Closing Date. In connection with the exercise of the
Investor Call Option, the Investors may waive any or all of the conditions set
forth in paragraph (a). Upon receipt by the Company of written notice from an
Investor exercising its right to purchase additional Debentures, the Company
shall issue to such Investor within five (5) days such additional Debentures.
Each Investor shall only be entitled to purchase a percentage of the total
Option Debentures subject to the Investor Call Option (which is equal to $4.0
million) equal to the percentage it purchased of the total principal amount of
the Debentures purchased in the Initial Issuance; PROVIDED that each Investor
may assign its right to purchase Option Debentures to any other Investor
without the consent of the Company or any other Investor.
(c) The Company may exercise the Company Put Option on only
one occasion and only during the period (i) beginning on the later of (x) the
six month anniversary of the Closing Date and (y) 60 Trading Days after the
Registration Statement (as defined in the Registration Rights Agreement) shall
have first become effective and (ii) expiring on the day after the first
anniversary of the Closing Date. Upon receipt by the Investors of written
notice of the Company exercising its right to compel Investors to purchase
additional Debentures, the Investors shall use best efforts to purchase the
additional Debentures within 10 Business Days; PROVIDED that the Investors
shall not be obligated to purchase additional Debentures if the closing bid
price of a share of Common Stock for any Trading Day during the period between
the Investors' receipt of such notice and the scheduled closing of such
purchase fails to reach 130% of the Initial Price. If the
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Company shall exercise the Company Put Option for $3.0 million of Option
Debentures, the Investors may elect to purchase an additional $1.0 million of
Option Debentures at the time of the issuance of such Option Debentures. Option
Debentures shall be purchased by the Investors in proportion to their purchases
of the Debentures at the Closing. The obligations of the Investors to purchase
Debentures under Paragraphs (a) and (c) of this Section 3.15 shall be in all
respects several and not joint.
(d) The Option Securities issued pursuant to the exercise of
the rights set forth in this Section 3.15 shall be issued pursuant to
documentation (including, without limitation, a Purchase Agreement and a
Registration Rights Agreement) that is the same in all material respects as the
documentation pursuant to which the Debentures and Warrants are issued. In
addition, the Option Securities shall be subject to the same terms as the
Securities issued on the Closing Date; PROVIDED that (i) the conversion price
applicable to the Option Debentures shall be the lesser of (x) 110% of the
lowest sales price of a share of Common Stock during the five (5) Trading Days
prior to the date of the issuance of the Option Debentures and (y) 90% of the
lowest trading price of the Common Stock on the principal trading market for
such Common Stock during the four (4) Trading Days prior to but not including
the conversion date of such Debentures and (ii) the maturity date of the Option
Debentures shall be the fifth anniversary of the issuance of such Debentures.
Section 3.16 INVESTOR'S OPTION TO COMPEL REPURCHASE OF A PORTION OF
ITS DEBENTURES. Beginning on the six month anniversary of the Closing Date,
Halifax Fund, L.P. (or any assignee thereof in accordance with the terms of
this Agreement and the Debentures; each such entity is referred to herein as a
"PALLADIN INVESTOR") shall have the right in its sole discretion to sell to the
Company its Debentures or Option 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; PROVIDED that the Company shall not
be required to repurchase more than an aggregate of $1.0 million principal
amount of Debentures pursuant to this Section. Payment of such amount shall be
due and payable within five days of demand therefor, which demand shall be
revocable by the relevant Palladin Investor at any time prior to its actual
receipt of the Premium Redemption Price.
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.
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(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 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.
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(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.
(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.
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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.
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
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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:
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: (▇▇▇) ▇▇▇-▇▇▇▇
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▇▇▇▇▇, 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 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.
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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, waive or agree to amend and whether or not such
holders tender their Debentures or Warrants for redemption, conversion or
exercise. Except as set forth in Section 3.16, 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 $2,500,000 50,000 $2,500,000 4.9%
c/o The Palladin Group, L.P.
Investment Manager
▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Tax I.D. No.: ___________
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
SOCIETE GENERAL $1,500,000 50,000 $1,500,000 4.9%
▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Tax I.D. No.: ____________
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
---------- -------- ----------
TOTAL $4,000,000 100,000 $4,000,000
========== ======== ==========
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SCHEDULE 2.1(a)
List of Subsidiaries
--------------------
31
SCHEDULE 2.1(c)
Capitalization; Preemptive Rights
---------------------------------
32
SCHEDULE 2.1(s)
Outstanding Securities Subject to Registration Rights, Etc.
-----------------------------------------------------------
33
SCHEDULE 2.1 (aa)
Real Property, Leaseholds and Certain Other Interest, Etc.
----------------------------------------------------------
34
SCHEDULE 2.1(bb)
Real Property
-------------