EXHIBIT 10.50
CONVERTIBLE DEBENTURE PURCHASE AGREEMENT
CONVERTIBLE DEBENTURE PURCHASE AGREEMENT ("AGREEMENT") dated as of 1st
December, 2000 between U.S. Plastic Lumber Corp., a Nevada corporation (the
"COMPANY"), and the Xxxxx Partnership, a New Jersey partnership (each partner,
individually an "INVESTOR" and collectively the "INVESTORS")
WITNESSETH:
WHEREAS, the Company desires to sell and issue to the Investors, and
the Investors wish to purchase from the Company, 11.5% Convertible Debentures
due December 1, 2001 (the "DEBENTURES"), in the aggregate principal amount of
$5,000,000 at an aggregate price of $5,000,000, 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;
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
Section 1.1 Issuance of Debentures. 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 equal to $5,000,000.
(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 principal amount
of Debentures as set forth in Section 1.1.
(b) Purchase Price. The purchase price for the Debentures to
be acquired by each Investor (the "PURCHASE PRICE") shall be $2.00 per share
for purposes of the Closing, but later subsequent to adjustment based upon the
Conversion Price as set forth in Section 5(c) of the Debenture.
(c) The Closing.
(i) The closing of the purchase and sale of the
Debentures (the "CLOSING") in the Initial Issuance, shall
take place at the offices of the Company or at such other
place as is mutually agreeable, at 10:00 am., local time on
December 1, 2000 or 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 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 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.
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, 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, and to issue the Debentures in accordance with the terms hereof and
thereof, (ii) the execution and delivery of this Agreement by the Company and
the consummation by it of the transactions contemplated hereby and thereby,
including the issuance of the Debentures and the Common 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 and the
Debentures have been duly executed and delivered by the Company, and (iv) this
Agreement and the Debentures 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 100,000,000 shares of Common Stock and 5,000,000 shares of
preferred stock. All of the outstanding shares of the Company's Common Stock
and preferred stock have been validly issued and are fully paid and
nonassessable. The Company's issued and outstanding preferred stock is, and
will be, in all respects junior to the Debentures. 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 are duly
authorized and reserved for issuance and, upon such conversion in accordance
with the Debentures such Common 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 Market ("NASDAQ") (or the American
Stock Exchange, the New York Stock Exchange or the Nasdaq National Market
System, collectively with the Nasdaq, the "APPROVED MARKETS"), and the holders
of such Common 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.
(e) No Conflicts. The execution, delivery and performance of
this Agreement, by the Company and the consummation by the Company of the
transactions contemplated hereby and thereby and the issuance of the Debentures
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, 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 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 and the Debentures or issue and sell the
Debentures in accordance with the terms hereof and issue the Common Shares upon
conversion thereof.
(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
September 30, 2000. The Company has not directly or indirectly provided to the
Investor 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 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.
(h) No Material Adverse Change. Since September 30, 2000, 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 September 30, 2000, 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 under the Act.
The issuance of the Debentures and Common 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.
(m) 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.
(n) Shareholder Rights Plan. None of the acquisition of
Debentures and Common 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 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.
(o) 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.
(p) 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.
(q) Acknowledgement of Dilution. The number of shares of
Common Stock constituting Common 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 is absolute and unconditional, regardless
of the dilution that such issuance may have on other shareholders of the
Company.
(r) Other Investors. Except as set forth in SCHEDULE 2.1(R),
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, that have anti-dilution or similar rights that
would be affected by the issuance of the Debentures and the Common Shares.
(s) 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.
(t) 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 has not received notification with respect to possible material
conflicts, material defaults or material violations of applicable laws.
(u) 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.
(v) 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.
(w) 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.
(x) 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.
(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.
(y) 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.
(z) 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.
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 to
purchase the Debentures being sold hereunder, (ii) the execution and delivery
of this 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 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 performance under the Debentures 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 or the Debentures.
(c) Investment Representations.
(i) Information. The Company has furnished it
with its annual report on Form 10-K for its fiscal year ended December 31, 1999
(the "Fiscal Year End"), its quarterly reports on Form 10-Q for the fiscal
quarters ended March 31, 2000, June 30, 2000 and September 30, 2000, 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. It
acknowledges that 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. It 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. 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 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 or Common 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, or Common 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 or Common Shares for any
minimum or other specific term and reserves the right to dispose of the
Debentures or Common 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 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 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.
(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 Debentures on Conversion.
(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).
Section 3.2 Replacement Debentures.
(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.
Section 3.3 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 and the Debentures and the related agreements and documents and the
transactions contemplated hereunder and thereunder; provided that the Company
shall not be obligated to pay fees and expenses of Investors' Counsel in excess
of $5,000. 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 3.4 Dividends or Distributions; Purchases of Equity
Securities. So long as any Debentures 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 Common Stock or other equity security of the
Company without the prior express written consent of the Investors (which shall
not be unreasonably withheld).
Section 3.5 Notices. The Company agrees to provide all holders of
Debentures 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 3.6 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 3.7 Reservation of Stock Issuable Upon Conversion. 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, 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 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, 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 such number of authorized but unissued
shares of Common Stock that is at least equal to the aggregate shares issuable
upon conversion of Debentures, which number may be reduced by the Debentures
converted, and shall be appropriately adjusted for any stock split, reverse
split, stock dividend or reclassification of the Common Stock.
Section 3.8 Best Efforts. The parties shall use their best efforts to
satisfy timely each of the conditions described in Article IV of this
Agreement.
Section 3.9 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 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 issuable upon the
conversion of any Debentures, including by calling a special meeting of such
shareholders and having the Company's Board of Directors recommend such
approval in a proxy statement.
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 Debentures .
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. 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 (or other Approved Market), and trading in securities generally as
reported by the Nasdaq (or other Approved Market) shall not have been suspended
or limited, and the Common Stock shall not have been delisted from the Nasdaq
(or any other Approved Market where they are currently listed).
(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 Debenture.
(e) Adverse Changes. Except as otherwise disclosed in the
Pre-Agreement SEC Documents, since September 30, 2000, 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.
(f) 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.
(g) Debentures. The Investors shall have received
certificates representing the Debentures 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 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 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 without the legend set forth
above at such time as (i) the holder thereof is permitted to dispose of such
Debentures and Common Stock issuable upon conversion or exercise thereof
pursuant to Rule 144(k) under the Act, or (ii) such Debentures 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.
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
pursuant hereto, the Common Shares issued upon conversion thereof.
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 JERSEY STATE COURTS AND OTHER COURTS OF THE UNITED STATES
SITTING IN NEW JERSEY OR 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 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
0000 Xxxxxx Xxxx
Xxxxx 000 Xxxx
Xxxx Xxxxx, Xxxxxxx 00000
Attention: Xxxxx Xxxxxxx
Facsimile: (000) 000-0000
to the Investors:
Xxxxx Partnership
000 Xxxxxx Xx.
Xxxxxxxxx, XX 00000
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 and the Debentures 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. 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 JERSEY
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
otherwise, to any holder of Debentures, 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, unless such
consideration is required to be paid to all holders of Debentures 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 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]
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 CORP.
By:
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Name: Xxxxx X. Xxxxxxx
Title: Vice President and
General Counsel
INVESTORS:
XXXXX PARTNERSHIP
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AUGUST X. XXXXXXXX, XX
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XXXXX X. XXXXXXXX, XX.
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