PURCHASE AGREEMENT
THIS PURCHASE AGREEMENT is made as of the 31st day of December, 1997,
by and among the purchasers whose names and addresses are shown on the
signature page to this Purchase Agreement (each a "Purchaser" and together
the "Purchasers") and METALCLAD CORPORATION, a Delaware corporation, with
its principal offices at 0 Xxxxxxxxx Xxxxx, Xxxxx 000, Xxxxxxx Xxxxx,
Xxxxxxxxxx 00000, Xxxxxx Xxxxxx of America (the "Company").
WITNESSETH:
WHEREAS, the Company is offering to sell up to U.S. $2,200,000.00
Principal Amount of its Zero Coupon Secured Notes, each Note to be dated
and issued as of the date hereof and to be due December 31, 2002 (each a
"Note" and together the "Notes"), the Purchasers or any other holders of
the Notes being hereinafter sometimes referred to as the "Noteholders" and
individually as a "Noteholder", and the Principal Amount of any Note being
hereinafter sometimes referred to as the "Principal Amount"), each Note to
be substantially in the form of Exhibit A annexed hereto and made a part
hereof;
WHEREAS, under certain circumstances described below and in the
Notes, the Notes may become convertible into the Company s Common Stock,
par value U.S. $.10 per share (the "Common Stock"), and may thereafter be
so converted at the option of the holder of such Note, the Company being
obligated to issue to the holder of each Note 1,000 "Warrants"
(hereinafter defined) to purchase the Common Stock of the Company for each
U.S. $1,000.00 of the "Purchase Price" (hereinafter defined) of the Notes
then outstanding (whether or not the Notes are then converted by the
holder thereof), and under certain further circumstances described below,
the Company may acquire the right, but not the obligation, to require the
holders of the Notes to convert the Notes into Common Stock (the Company
previously having issued the Warrants referred to above), neither of which
circumstances are certain to occur;
WHEREAS, under certain circumstances described below, on or after
April 15, 1999: (A) the Noteholders may acquire the right to require the
Company to redeem the Notes prior to maturity and concurrently therewith
to issue to the Noteholders 1,000 Warrants to purchase Common Stock for
each U.S. $1,000.00 of the Purchase Price of the Notes then outstanding
(provided such Warrants have not previously been issued to the
Noteholders); and (B) the Company may acquire the right to prepay the
Notes prior to maturity provided concurrently with the exercise of such
right, the Company shall issue to the Noteholders 1000 Warrants for each
such U.S. $1,000.00 of the Purchase Price of the Notes then outstanding
(provided such Warrants have not previously been issued to the
Noteholders);
WHEREAS, the obligations of the Company under the Purchase Agreement
and the Notes are entitled to the benefits of the Pledge Agreement
mentioned below;
WHEREAS, the placement of the Notes has been arranged directly by and
between the Company and the Purchasers; and
WHEREAS, the Company has furnished to the Purchasers, in accordance
with Section 4.2 (c) hereof, the latest annual and quarterly reports and
other public information referred to below filed with the United States
Securities and Exchange Commission ("SEC") constituting all of the filings
of any nature which the Company has filed and was required to file with
the SEC from and including January 1, 1997 through and including December
31, 1997;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained in this Purchase Agreement, the undersigned agree as
follows:
Section 1. Agreement to Sell and Purchase the Notes.
1.1 On the basis of the representations, warranties and agreements
contained in this Purchase Agreement but subject to the terms and
conditions set forth in this Purchase Agreement, the Company agrees to
issue and sell to each Purchaser, and each Purchaser agrees to purchase
from the Company on December 31, 1997, or on such other date as shall be
mutually agreed upon by the Company and the Purchasers (the "Closing
Date"), the aggregate Principal Amount of Notes set forth opposite such
Purchaser s name on Schedule 1 annexed to this Purchase Agreement and made
a part hereof. The Purchase Price for each Note shall be equal to the
Principal Amount of such Note multiplied by .68181819 (herein with
reference to each Note, the "Purchase Price") The total Purchase Price of
all Notes shall equal U.S. $1,500.000.00 (U.S. $2,200,000.00 Principal
Amount times .68181819).
1.2 Payment of the Purchase Price for each Note shall be made
by each Purchaser to the Company by wire transfer net of all wire transfer
charges of immediately available funds for value on December 31, 1997 or
such earlier date as the Company and the Purchasers shall agree in United
States dollars to:
Account: Metalclad Corporation
Account No.: 040116487
ABA No.: 000000000
Bank: Sanwa Bank, Santa Xxx Main Branch
0000 Xxxxx Xxxx Xxxxxx
Xxxxx Xxx, Xxxxxxxxxx 00000
Xxxxxx Xxxxxx of America
PURCHASER MUST INSTRUCT ITS PAYING BANK PRIOR TO THE CLOSING DATE TO WIRE
FUNDS FOR SAME DAY VALUE ON OR BEFORE THE CLOSING DATE, IN ORDER TO HAVE
SUCH FUNDS TRANSFERRED TO THE ABOVE ACCOUNT PRIOR TO THE CLOSING.
Alternatively, at the option of any Purchaser, payment may be made in
escrow in advance of the Closing Date by wire transfer of the Purchase
Price to be paid by such Purchaser in immediately available funds to:
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Account: Xxxxxxxxx, Poster & Xxxxxx Trust
Account No.: 00000000
ABA No.: 0210000089
Bank: Citibank, N.A.
Xxx Xxxxxxxx, Xxx Xxxx, Xxx Xxxx 00000
Xxxxxx Xxxxxx of America
Attention: Xx. Xxxx Xxxxxxxx
Should the funds be transferred in such alternative manner and should
the Closing take place at a time of day when it is no longer practicable
or possible to wire transfer said funds to the above mentioned account of
the Company, Purchaser will cause Messrs. Xxxxxxxxx, Poster & Xxxxxx
("Agent"), concurrently with the Closing, to: (i) issue and deliver to the
Company the Agent s irrevocable and unconditional confirmation that
concurrently with the Closing the Agent holds such Purchase Price solely
and exclusively for the benefit of the Company, and (ii) issue and deliver
to Citibank, N.A. no later than the opening of business on the following
Business Day its irrevocable and unconditional instructions to Citibank,
N.A. forthwith to wire transfer net of all wire transfer charges the total
Purchase Price of all the Notes to the Company s account with said Sanwa
Bank above mentioned.
1.3 The completion of the sale and purchase of the Notes (the
"Closing") shall take place at the offices of the Agent, 0xx Xxxxx, Xxx
Xxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, at 10:00 a.m. local time on the
Closing Date. At the Closing, the Company shall deliver to the Agent for
the account of Purchasers, one Note for each Purchaser in the aggregate
Principal Amount of the Note being purchased by such Purchaser, such Note
being registered in the name of such Purchaser or its nominees,
representing the Notes being purchased by each Purchaser, against payment
of the Purchase Price therefor in immediately available funds to the
account of the Company designated in or otherwise as provided in Section
1.2 of this Purchase Agreement. Upon mutual Agreement of the Company and
the Purchasers, the Closing may take place earlier than December 31,1997,
but such earlier Closing shall have no effect on the dating of any
documents, including the Notes. In the event of such earlier closing the
Company shall pay interest to the Purchasers at the rate of 9 1/3% per
annum from the date of receipt of the Purchase Price by the Company to and
including December 30, 1997, such interest to be paid by the Company to
the Agent for distribution to the Purchasers no later than January 10,
1998.
1.4 The obligation of each Purchaser to purchase the Notes at the
Closing shall be conditional upon the delivery by the Company to the
Agent, on behalf of all the Purchasers, of:
1.4.1 The Pledge Agreement by and between the Company and
the Agent dated as of the Closing Date substantially in the form of
Schedule 2 annexed hereto and made a part hereof pursuant to which the
Company pledges to the Agent for the benefit of the Noteholders and as
security for, among other things, the obligations of the Company under the
Notes and this Purchase Agreement, all of the issued and outstanding
capital stock ("MIC Shares") of the Company s wholly owned subsidiary,
Metalclad Insulation Corporation ("MK"), a California corporation.
1.4.2 Evidence satisfactory to the Agent of the authority of
the persons executing the Notes, the Pledge Agreement and all other
transaction documents on behalf of the Company.
1.4.3 The Notes.
1.4.4 The MIC Share Certificates and the MIC Stock Powers.
1.4.5 UCC Financing Statements relating to the Collateral to
be filed in such jurisdictions as are determined appropriate by the Agent.
Section 2. Contingent Rights of the Noteholders and the Company to
Require Conversion of the Notes; Obligation of the Company to Issue
Warrants Under Certain Circumstances; Right of the Noteholders to Require
Redemption of the Notes After April 15. 1999; Right of the Company to
Prepay the Notes Prior to Conversion After April 15. 1999; Certain Rights
of Noteholders Upon the Occurrence of an Event of Default; Registration
Rights.
2.1 When used in this Purchase Agreement, the following terms
shall have the following meanings:
2.1.1 "Agent" shall have the meaning set forth in Section
1.2 of this Purchase Agreement.
2.1.2 "Business Day" shall mean a day on which banks are
open for business in each of Los Angeles, California, New York City, New
York, London, England and the Channel Islands.
2.1.3 "Closing Date" shall have the meaning set forth in
Section 1.1 of this Purchase Agreement.
2.1.4 "Common Stock" shall have the meaning set forth in the
second recital of this Purchase Agreement.
2.1.5 "Company" shall have the meaning set forth in the
first paragraph of this Purchase Agreement.
2.1.6 "Conversion Rate" shall mean 667 shares of Common
Stock for each U.S. $1,000.00 of the Purchase Price of any Note, which
number of shares shall be subject to adjustment pursuant to the OFW
Ratchet Clause.
2.1.7 "Conversion Shares" shall mean the shares of Common
Stock of the Company issuable upon conversion of the Notes.
2.1.8 "Default Rate" shall be a per annum rate of interest
equal to (i) the greater of (w) 15% or (x) the sum of 6% plus the rate
announced from time to time by Citibank, N.A. as its prime or stated rate
for unsecured short term U.S. dollar commercial loans in the United
States.
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2.1.9 "Discounted Present Value" with respect to any Note
shall be based on a simple interest rate of 9 1/3% per annum without
compounding and shall mean with respect to any Note an amount calculated
in accordance with the following formula:
n
----
PP + (46 2/3% PP x 1826)
wherein PP equals the Purchase Price of a Note, n equals the number of
days elapsed from and including the date of issuance of any Note to and
including (A) the date of payment pursuant to the exercise by any
Noteholder of its contingent right of redemption or (B) the date of
payment pursuant to the exercise by the Company of its contingent right of
prepayment or (C) the date of occurrence of an Event of Default, as the
case may be, and 1826 equals the total number of days from and including
the date of issuance to and including the date of maturity of the Note
(December 31, 1997 through and including December 31, 2002).
2.1.10 "Event of Default" shall mean any of the events
referred to in Section 7 of this Purchase Agreement; and "Events of
Default" shall mean more than one such event.
2.1.11 "Mandatory Redemption" shall mean the exercise by
any Noteholder, at any time after April 15, 1999 and prior to the timely
receipt by such Noteholder of notice from the Company of the occurrence of
a Trigger Event, of the right to require the Company to redeem such Note
at a price equal to the Discounted Present Value from the date of payment
of the redemption price and the concurrent delivery by the Company to such
Noteholder of 1,000 Warrants for each $1,000.00 of the Purchase Price of
such Note.
2.1.12 "Market Price" shall have the meaning set forth in
the form of Warrant annexed to this Purchase Agreement as Exhibit B and
made a part hereof.
2.1.13 "MIC Shares" shall mean all of the issued and
outstanding capital stock of Metalclad - Insulation Corporation, a
California corporation.
2.1.14 "MIC Stock Powers" shall mean stock powers executed
in blank, with signature guaranteed, in form sufficient to enable the
Agent to transfer the registered and beneficial ownership of the whole or
any portion of the MIC Shares pursuant to the terms of the Pledge
Agreement.
2.1.15 "MTLC Optional Conversion Event" shall mean the
occurrence of both of (i) the receipt of timely notice by the Noteholder
of the occurrence of a Trigger Event, (ii) the receipt by the Noteholders
of notice from the Company that the Market Price of the Common Stock has
equaled or exceeded U.S. $3.00 per share for not less than 60 consecutive
trading days, which such notice must be given by the Company not later
than 15 calendar days after the occurrence of such MTLC Optional
Conversion Event.
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2.1.16 "Noteholder" and "Noteholders" shall have the
meanings set forth in the first recital of this Purchase Agreement.
2.1.17 "Obligations" shall have the meaning set forth in
Pledge Agreement.
2.1.18 "OFW Ratchet Clause" shall have the meaning set
forth in the form of Warrant annexed hereto as Exhibit B and made a part
hereof.
2.1.19 "Pledge Agreement" shall mean that certain Pledge
Agreement by and between the Company and the Agent dated as of December
31, 1997, substantially in the form of Exhibit C annexed hereto and made a
part hereof, pursuant to which, among other things, the Company pledges to
the Agent for the benefit of the Noteholders and as security for all of
the Obligations, the MIC Shares.
2.1.20 "Principal Amount" shall mean with respect to all of
the Notes, U.S. $2,200,000, and with respect to any Note, shall mean the
Purchase Price thereof multiplied by 1.466666667.
2.1.21 "Purchaser" and "Purchasers" shall have the meanings
set forth in the first paragraph of this Purchase Agreement.
2.1.22 "Purchase Price" of any Note shall mean the
Principal Amount thereof multiplied times .68181819.
2.1.23 "SEC" shall have the meaning set forth in the last
recital of this Purchase Agreement.
2.1.24 "Total Interest" in respect of any Note shall mean
the total interest thereon from the date of issuance to the date of
maturity and shall be equal to the Principal Amount of such Note
multiplied times .318181.
2.1.25 "Trigger Event" shall mean the timely receipt by the
Noteholder of Notice from the Company that the Market Price of the Common,
Stock shall have equaled or exceeded U.S. $1.50 per share for a period of
10 consecutive trading days (which Notice the Company shall be obligated
to give upon the first occurrence thereof).
2.1.26 "Warrant" shall mean the non-redeemable right to
purchase one share of the Common Stock at the Warrant Exercise Price; and
"Warrants" shall mean the plural thereof, each Warrant to be substantially
in the form of Exhibit B annexed hereto and made a part hereof.
2.1.27 "Warrant Exercise Price" shall mean U.S. $1.50 per
share of Common Stock as the same may be adjusted pursuant to the OFW
Ratchet Clause.
2.1.28 "Warrant Shares" shall mean the shares of Common
Stock of the Company issuable upon exercise of the Warrant.
2.2 Upon the occurrence of a Trigger Event following the issuance
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of the Notes: (i) the Notes shall become convertible at the option of the
holder thereof at the Conversion Rate; (ii) the Company shall issue to
such holder 1,000 Warrants for each $1,000.00 of the Purchase Price of
such Note; and (iii) the right of the Noteholder to receive Total Interest
in respect of his Note, whether accrued or to be accrued, shall be
canceled if, and only if, such Note is actually converted by such
Noteholder following the owner of a Trigger Event or (B) following the
occurrence of an MTLC Optional Conversion Event as hereinafter provided.
2.3 Upon the occurrence of an MTLC Optional Conversion Event,
provided the Noteholders shall have received notice thereof not later than
15 calendar days following the occurrence thereof, the Company shall have
the right (but not the obligation) to require the Noteholders to convert
the Notes into Common Stock at the Conversion Rate at any time prior to
maturity of the Notes. In the event such notice is not received by such
Noteholder within such 15 calendar days, the right of the Company to
require such conversion shall lapse without prejudice to the right of the
Company to require such conversion upon the occurrence of an MTLC Optional
Conversion Event provided notice thereof is given to the Noteholders
within such 15 day period. Upon the exercise by the Company of such right
to require conversion following the occurrence of an MTLC Optional
Conversion Event, (A) the Notes shall be converted into Common Stock at
the Conversion Rate and (B) the Company shall, concurrently with such
conversion, issue to such Noteholder 1000 Warrants for each $1000.00 of
Purchase Price of such Note (unless such Warrants have previously been
issued to such Noteholder).
2.4 In the event a Trigger Event shall not have occurred on or
before April 14, 1999, the holder of any Note shall thereafter have the
right (but not the obligation) to require the Company to redeem such Note
and upon the exercise of such right, the Company will (i) pay to such
Noteholder the Discounted Present Value of such Note calculated to the
date of payment thereof, which payment shall be effected by the Company
within 30 calendar days following the date of such demand for redemption,
and (ii) issue to such holder 1,000 Warrants for each $1,000.00 of the
Purchase Price of such Note.
2.5 At any time after April 15, 1999 prior to the exercise (i) by
any Noteholder or the Company of their rights of conversion pursuant to
Sections 2.2 or 2.3, or (ii) by any Noteholder of its right of redemption
under Section 2.4, the Company may, but shall not be required to, prepay
the Notes in whole but not in part by (A) paying to each Noteholder the
Discounted Present Value of his Note calculated to the date of such
prepayment, and (B) issuing to each Noteholder 1,000 Warrants for each
$1,000.00 of the Purchase Price of his Note (unless such Noteholders shall
have previously received such amount of Warrants).
2.6 Upon the occurrence of an Event of Default and so long as the
same shall be continuing, any Noteholder shall have the right to declare
his Note to be in default. In the event of any such declaration the
Discounted Present Value of such Note shall be calculated to the date of
the occurrence of such Event of Default and, (i) thereafter, such
Discounted Present Value of the Note shall bear interest at the Default
Rate until all amounts due such Noteholder are paid in full, and (ii)
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unless previously issued to such Noteholder, the Company will forthwith
issue to the Noteholder 1,000 Warrants for each $1,000.00 of the Purchase
Price of such Note. Upon the occurrence of an Event of Default any
Noteholder may instruct the Agent to exercise any one or more or all of
the Agent s rights under the Pledge Agreement, all without prejudice to
the Noteholders rights in law or equity.
2.7 If the SEC or any other agency of the government of the
United States abolishes, modifies or otherwise changes the terms of
Regulation S or Rule 144 promulgated under the Securities Act of 1933, as
amended, so as to (i) extend the holding period under Regulation S to a
period greater than 40 days, or (ii) extend the holding period under Rule
144 to greater than one year, the Purchasers adversely affected thereby
shall have the registration rights set forth in the Registration Rights
Agreement attached hereto as Exhibit D and incorporated herein by this
reference.
Section 3. Representations and Warranties of the Company.
The Company hereby represents and Warrants to each Purchaser as
follows:
3.1 Organization and Qualification. The Company is a corporation
duly organized, validly existing and in good standing under the laws of
the State of Delaware and has all requisite corporate power and authority
to own and lease its properties and to conduct its business as presently
conducted and as described in the Offering Memorandum. The Company and its
subsidiaries are duly qualified to do business as foreign corporations and
are in good standing in every jurisdiction where such qualification is
required by controlling law and where the failure to so qualify would have
a material adverse effect on the Company and its subsidiaries, taken as a
whole.
3.2 MIC Shares. The MIC Shares consist of 1,000 shares of Common
Stock, no par value, represent all of the issued shares of capital stock
of the Company, have been duly and validly authorized and issued, and are
fully paid and nonassessable. The MIC Shares are owned directly by the
Company and are free and clear of any claim, lien, security interest,
mortgage, pledge, charge or other encumbrance of any nature whatsoever.
3.3 Due Execution. Delivery and Performance of the Purchase
Agreement. The execution, delivery and performance of this Purchase
Agreement, the Notes, the Pledge Agreement, the Warrant, and all other
documents delivered by the Company in connection with this Purchase
Agreement (a) have been duly authorized by all requisite corporate action
of the Company, and (b) will not violate (i) the Certificate of
Incorporation or Bylaws of the Company or (ii) any law applicable to the
Company, any of its subsidiaries or any rule, regulation or order of any
court or governmental agency or body having jurisdiction over the Company
or any of its subsidiaries or (iii) any provision of any indenture,
mortgage, agreement, contract or other instrument to which the Company is
bound.
3.4 Issuance and Delivery of the Conversion Shares and the
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Warrant Shares. The offer, issuance, sale and delivery of the Conversion
Shares and the Warrant Shares, as in accordance with the Purchase
Agreements, have been duly authorized by all requisite corporate action of
the Company. The Conversion Shares and the Warrant Shares, when issued,
will conform to the terms of the Common Stock set forth in the Company s
Certificate of Incorporation. The Conversion Shares when issued pursuant
to the conversion of the Note and this Purchase Agreement, and the Warrant
Shares, when exercised in accordance with the Warrant and this Purchase
Agreement, will be duly and validly issued and outstanding, fully paid and
non-assessable, will not be subject to any pre-emptive or similar right,
and Purchaser will receive good and valid record title to the Conversion
Shares and the Warrant Shares, respectively, free and clear of any claim,
lien, security interest, mortgage, pledge, charge or other encumbrance of
any nature whatsoever, except such as may have been created by the
Purchaser. No consent or approval by the stockholders of the Company or of
any other person is required to be obtained by the Company for the
consummation of the issuance, sale and delivery of the Conversion Shares
and the Warrant Shares pursuant to the terms of this Purchase Agreement.
The Conversion Shares and the Warrant Shares have been duly and validly
authorized and reserved for issuance.
3.5 Notes and Warrants Authorized. At the Closing, the Notes and
the Warrants will be duly and validly executed and delivered by the
Company and will constitute the valid and legally binding obligations of
the Company, enforceable against the Company in accordance with their
respective terms, except as the enforceability thereof may be limited by
any applicable bankruptcy, insolvency, reorganization or other similar
laws relating to or affecting the enforcement of creditors rights
generally and by general equitable principles, regardless of whether such
enforceability is considered in a proceeding in equity or at law.
3.6 Compliance with Regulation S. The Company is a "reporting
issuer" (as defined in Regulation S promulgated by the SEC). The Company,
its affiliates and any person acting on behalf of, or as agent of, any of
the foregoing, whether as principal or agent, (a) has offered and sold the
securities which are the subject of this Purchase Agreement, including the
Notes, the Conversion Shares and the Warrant Shares (the "Securities") to
the Purchasers only in an "offshore transaction" (as defined in Regulation
5), (b) has not engaged with respect to the Securities in any "directed
selling efforts" (as defined in Regulation 5) in or directed toward the
United States, and (c) has complied with all "offering restrictions" (as
defined in Regulation 5) in respect of the Securities.
Section 4. Representations. Warranties and Covenants of Purchaser.
Each Purchaser hereby represents, warrants and covenants to the
Company as follows:
4.1 Compliance with United States Securities Laws. Each Purchaser
understands and acknowledges that (a) the Securities have not been and
will not be registered under the Securities Act, and may not be offered or
sold in the United States or to, or for the account or benefit of, any
"U.S. person" (as defined in Regulation 5, which definition is set out in
Schedule 4 hereto), unless such securities are registered under the
9
Securities Act and any applicable state securities or blue sky laws or
such offer or sale is made pursuant to exemptions from the registration
requirements of such laws, (b) the Notes may not be converted and the
Warrants may not be exercised in the United States or by or on behalf of a
"U.S. person" (as defined in Regulation 5) unless the Conversion Shares,
the Warrants and the Warrant Shares are registered under the Securities
Act and any applicable state securities or blue sky laws or exemptions
from the registration requirements of such laws are available, and (c) the
Securities are being offered and sold pursuant to the terms of Regulation
S under the Securities Act, which permits securities to be sold to non-
"U.S. persons" in "offshore transactions" (as defined in Regulation 5),
subject to certain terms and conditions.
4.2 Status of Purchaser.
(a) Purchaser is purchasing the Securities for its own
account or for persons or accounts as to which it exercises investment
discretion. Neither Purchaser nor such person or account is a "U.S.
person" (as defined in Regulation 5). Purchaser has executed this
Purchase Agreement outside the United States. The offer to Purchaser and
sale of the Securities has occurred outside the United States.
(b) Purchaser (and any person or account on whose behalf
Purchaser is purchasing) is knowledgeable, sophisticated and experienced
in making, and is qualified to make, decisions with respect to investments
in restricted securities such as this Purchase Agreement and the
Securities) and has requested, received, reviewed and considered all
information it deems relevant in making a decision to execute this
Purchase Agreement and to purchase the Securities. Purchaser acknowledges
that it is capable of evaluating the merits and risks of an investment in
the Securities.
(c) Purchaser acknowledges that the Company has made
available to Purchaser (i) the latest annual and quarterly reports and
other public information referred to below filed with the SEC. including
all of the filings of any nature which the Company has filed and was
required to file with the SEC from and including January 1, 1997 through
and including December 31, 1997, (ii) the opportunity to ask questions and
receive answers concerning the terms and conditions of the offering of the
Securities, and (iii) the opportunity to obtain any additional information
that the Company possesses or can acquire without unreasonable effort or
expense that is necessary to verify the accuracy of the information
furnished in accordance herewith.
(d) Purchaser has agreed to purchase the Securities for
investment purposes and not with a view to a distribution. To the extent
that the Shares and the Warrants comprising the Securities are registered
in the name of Purchaser s nominee, Purchaser confirms that such nominee
is acting as custodian for Purchaser of such securities.
4.3 Restrictions on Transfer or Re-Sale.
(a) For a period of 40 days following the Closing Date, or
if the Securities come to be issued on more than one day, the latest
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Closing Date (the "Restricted Period"), Purchaser shall not engage in any
activity for the purpose of, or which may reasonably be expected to have
the effect of, conditioning the market in the United States for the
Securities, or offer, sell, transfer, pledge or otherwise dispose of the
Securities, or any interest therein in the United States to, or for the
account or benefit of, a "U.S. person" (as defined in Regulation 5).
(b) Purchaser understands that the Conversion Shares or
Warrant Shares or any interest therein are only transferable on the books
and records of the Transfer Agent and Registrar of the Common Stock of the
Company and, with respect to the Notes and the Warrants, on the books and
records of the Company. Purchaser further understands that the Transfer
Agent and Registrar and the Company will not register any transfer of the
Securities or any interest therein which the Company in good faith
believes violates the restrictions set forth herein.
(c) Unless registered under the Securities Act, any proposed
offer, sale, transfer, pledge or other disposition during the Restricted
Period of any of the Securities or any interest therein shall be subject
to the condition that Purchaser must deliver to the Company (i) a written
certification that neither record nor beneficial ownership of the
Securities has been offered or sold in the United States or to, or for the
account or benefit of, any "U.S. person" (as defined in Regulation 5),
(ii) a written certification of the proposed transferee that such
transferee (or any account for which such transferee is acquiring such
Securities is not a "U.S. person (as defined in Regulation 5), that such
transferee is acquiring such Securities or such interest therein, as the
case may be, for such transferee s own account (or an account over which
it has investment discretion) and for investment and not with a view to a
distribution, and that such transferee is knowledgeable of and agrees to
be bound by the restrictions on re-sale set forth in this section and
Regulation S during the Restricted Period, and (iii) a written opinion of
United States counsel, in form and substance satisfactory to the Company,
to the effect that the offer, sale, transfer, pledge or other disposition
of such Securities, or any interest therein, as the case may be, are
exempt from registration under the Securities Act and any applicable state
securities or blue sky laws.
(d) Purchaser will not, directly or indirectly, voluntarily
offer, sell, pledge, transfer or otherwise dispose of (or solicit any
offers to buy, purchase or otherwise acquire or take a pledge oh its
rights under this Purchase Agreement otherwise than in compliance with the
Securities Act, any applicable state securities or blue sky laws and any
applicable securities laws of jurisdictions outside the United States, and
the rules and regulations promulgated thereunder.
(e) The parties acknowledge the contemplated transfer of a
portion of the principal amount of the Note and agree that a portion of
the Note may be transferred to a "U.S. person" (as defined in Regulation
5) on the condition that the transferee agrees to accept the imposition of
the following legend restricting further transfer of re-sale:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS AND
11
CANNOT BE SOLD OR TRANSFERRED UNLESS (i) A REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, IS THEN IN EFFECT WITH RESPECT TO
THE SECURITIES REPRESENTED HEREBY; OR (ii) A WRITTEN OPINION FROM LEGAL
COUNSEL TO THE ISSUER IS OBTAINED TO THE EFFECT THAT AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND ANY
APPLICABLE STATE SECURITIES LAWS IS AVAILABLE WITH RESPECT TO THE PROPOSED
SALE OR TRANSFER AND THAT NO SUCH REGISTRATION IS REQUIRED; OR (iii) A NO
ACTION LETTER OR ITS THEN EQUIVALENT WITH RESPECT TO SUCH SALE OR TRANSFER
HAS BEEN ISSUED BY THE STAFF OF THE SECURITIES AND EXCHANGE COMMISSION.
4.5 Exercise of the Warrants. Purchaser understands that the
Warrants may not be exercised by or on behalf of any "U.S. person" (as
defined in Regulation 5) unless the Warrants and the Warrant Shares
issuable upon exercise thereof are registered under the Securities Act or
an exemption from such registration is available. Accordingly, Purchaser
understands that it is a condition to the exercise of the Warrants that
(a) any shares of Common Stock issuable upon such exercise will not be
delivered within the United States except in circumstances constituting an
"offshore transaction" (as defined in Regulation 5) or unless such shares
of Common Stock have been registered under the Securities Act or an
exemption from such registration is available, and (b) the holder
exercising the Warrants must deliver to the Company (i) a written
certification that such holder is not a "U.S. person" (as defined in
Regulation 5) and that the Warrants are not being exercised on behalf of,
or for the account or benefit of, a "U.S. person" (as defined in
Regulation 5) or (ii) a written opinion of United States counsel, in form
and substance satisfactory to the Company, to the effect that the Warrants
and the shares of Common Stock issuable upon exercise of the Warrants have
been registered under the Securities Act or are exempt from registration
under the Securities Act.
4.6 Due Execution. Delivery and Performance of the Purchase
Agreement and Other Obligations. Purchaser has full right, power,
authority and capacity to enter into this Purchase Agreement and to
consummate the transactions contemplated hereby; if Purchaser is a company
or corporation, the execution, delivery and performance of this Purchase
Agreement by Purchaser have been duly authorized by all requisite
corporate action of Purchaser. Upon the execution and delivery of this
Purchase Agreement by Purchaser, this Purchase Agreement shall constitute
the legal, valid and binding obligations of Purchaser, except as the
enforceability thereof may be limited by any applicable bankruptcy,
insolvency, reorganization or other similar laws relating to or affecting
the enforcement of creditors rights generally and by general equitable
principles, regardless of whether such enforceability is considered in a
proceeding in equity or at law.
Section 5. Representations and Warranties at the Closing; Survival of
Representations. Warranties and Agreements.
5.1 Each of the parties hereto acknowledges that each of its
respective representations and warranties contained in this Purchase
Agreement is true and correct as of the date of this Purchase Agreement.
5.2 Notwithstanding any investigation made by either party to
12
this Purchase Agreement, all covenants, agreements, representations and
warranties made by the Company and Purchaser herein and in the Securities
delivered pursuant hereto shall survive the execution of this Purchase
Agreement, the delivery to Purchaser of the Securities, and the receipt by
the Company of payment for the Securities.
Section 6. Certain Agreements of the Company.
The Company hereby covenants and agrees with Purchaser as follows:
6.1 The Company shall cause MIC to preserve and maintain its
corporate existence and all of its right, privileges and franchises in
every jurisdiction in which the character of the property owned or the
nature of the business transacted makes licensing of qualification
necessary relative to the conduct of MIC s business.
6.2 The Company shall not permit MIC to encumber, mortgage,
pledge, assign or grant any security in MIC s assets to anyone other than
Purchaser. The shall cause MIC to place notations on MIC s books of
account and financial statements to disclose Purchaser s interest in MIC
assets.
6.3 The Company shall cause MIC to keep and maintain MIC s assets
in good operating condition, reasonable wear and tear excepted.
6.4 The Company shall not permit MIC to make any capital
expenditures in any fiscal year in excess of $100,000 without the consent
of Purchaser.
6.5 The Company shall promptly notify Purchaser of the imposition
at any time of any lien or encumbrance upon any of the Collateral and the
Company shall defend MIC s assets against all claims and demands of all
persons at any time claiming the same or any interest therein adverse to
Purchaser.
6.6 Without the prior written consent of Purchaser, the Company
shall not sell, assign, transfer, mortgage, pledge, or otherwise dispose
of MIC s assets, other than in the ordinary course of business.
6.7 The Company shall promptly give to Purchaser notice in
writing of any proceeding before any governmental agency or court against
MIC which might, if determined adversely to MIC, materially and adversely
affect MIC s financial condition, affairs or operations.
6.8 The Company shall cause MIC to pay all taxes, assessments,
governmental charges or levies imposed upon it or upon its income or
profits, or upon any property belonging to it, prior to the date penalties
attach thereto; provided, however, that MIC shall not be required to pay
any such all taxes, assessments, governmental charges or levies being
contested in good faith and by appropriate proceedings, but only so long
as such proceedings do not involve any material danger or material adverse
impact on the business of MIC.
6.9 The Company shall not permit MIC to merge or consolidate with
13
or into any other corporation or entity (except to the extent that MIC is
the successor, survivor or parent and, in such event, only if (i) the
tangible net worth of MIC is in the Company s reasonable judgment equal to
or greater than the tangible net worth of MIC prior to such merger or
consolidation, and (ii) MIC remains a wholly-owned subsidiary of the
Company.
6.10 The Company shall cause MIC to defend MIC s assets against
the claims and demands of all parties.
6.11 The Company shall not permit MIC to make a loan, pay a
dividend, or otherwise transfer any of MIC s assets to the Company.
6.12 The Company shall not permit MIC to make any loans to any
officers, directors, employees, or affiliates of the Company or MIC.
6.13 The Company shall cause MIC to provide Purchaser with
unaudited financial statements of MIC, including a balance sheet, profit
and loss statement, statement of equity, and cash flow statement, within
45 days of the end of each fiscal quarter and 90 days after the end of the
fiscal year. All financial statements required hereunder shall be prepared
in accordance with GAAP, subject to year-end adjustments in the case of
quarterly statements. In addition, the Company shall cause MIC to furnish
Purchaser with a month-by-month operating budget and cash flow for each
fiscal year, including a balance sheet and income statement) no later than
30 days prior to the end of the previous fiscal year.
6.14 The Company shall cause MIC to maintain insurance as on its
assets in a commercially reasonable manner.
6.15 The Company shall cause MIC to remain in material compliance
with all applicable provisions of the Occupational Safety and Health Act
("OSHA") and the Environmental Protection Act.
6.16 The Company shall not permit MIC to materially change the
nature of its business.
6.17 The Company shall not permit MIC to purchase or acquire
obligations or stock of, or any interest in, or make any investment in any
entity other than (i) obligations issued or guaranteed by the United
States of America or any agency thereof, (ii) commercial paper with
maturities of not more than 180 days and a published rating of not less
than A-1 or P-1 or equivalent rating, or (iii) certificates of deposit
having maturities of not more than 180 days issued by FDIC-insured
commercial banks with combined capital and surplus of at least $500
million, (iv) U.S. money market funds that invest solely in obligations
issued by the United States of America or any agency thereof, and (v)
Eurodollar time deposits with financial institutions with a published
rating of not less than A-I or P-I or equivalent rating.
Section 7. Events of Default
7.1 The Company shall be deemed to be in default of this Purchase
Agreement and the Note if any of the following events ("Events of
14
Default") shall occur and be continuing:
(a) The Company shall fail to pay any principal of any Note
when due in accordance with the terms thereof or hereof; or the Company
shall fail to pay any interest on any Note or any other amount payable
hereunder, within five Business Days after any such interest or other
amount becomes due in accordance with the terms thereof or hereof; or
(b) Any representation or warranty made or deemed made by
the Company or MIC or in any other transaction document or which is
contained in any certificate, document or financial or other statement
furnished by it at any time under or in connection with this Purchase
Agreement or any such other transaction document shall prove to have been
incorrect in any material respect on or as of the date made or deemed
made; or
(c) The Company shall default in the observance or
performance of any agreement contained in Section o or any covenant
contained in any other transaction document; or
(d) The Company or MIC shall default in the observance or
performance of any agreement contained in this Purchase Agreement or any
other transaction document and such default shall continue unremedied for
a period of 30 days after the earlier of (i) the date upon which an
executive officer of the Company has actual knowledge thereof and (ii) the
date upon which the Agent or any Noteholder gives notice to the Company
thereof; or
(e) (i) the Company or MIC shall commence any case,
proceeding or other action (A) under any existing or future law of any
jurisdiction, domestic or foreign, relating to bankruptcy, insolvency,
reorganization or relief of debtors, seeking to have any order for relief
entered with respect to it, or seeking to adjudicate it a bankrupt or
insolvent, or seeking reorganization, arrangement, adjustment, winding-up,
liquidation, dissolution, composition or other relief with respect to it
or its debts, or (B) seeking appointment of a receiver, trustee,
custodian, conservator or other similar official for it or for all or any
substantial part of its assets, or the Company or MIC shall make a general
assignment for the benefit of its creditors; or (ii) there shall be
commenced against the Company or MIC any case, proceeding or other action
of a nature referred to in clause (i) above which (A) results in the entry
of an order for relief or any such adjudication or appointment or (B)
remains undismissed, undischarged or unbonded for a period of 60 days; or
(iii) there shall, be commenced against the Company or MIC any case,
proceeding or other action seeking issuance of a warrant of attachment,
execution, distraint or similar process against all or any substantial
part of its assets which results in the entry of an order for any such
relief which shall not have been vacated, discharged, or stayed or bonded
pending appeal within 60 days from the entry thereof; or (iv) the Company
or MIC shall take any action in furtherance of, or indicating its consent
to, approval of, or acquiescence in, any of the acts set forth in clause
(i), (ii), or (iii) above; or (v) the Company or MIC shall generally not,
or shall be unable to, or shall admit in writing its inability to, pay its
debts as they become due.
15
7.2 In any such Event of Default, as defined in Section 7.1, (A)
if such Event of Default specified in clause (i) or (iv) of paragraph (e)
of Section 7.1 with respect to the Company, automatically the Notes
hereunder (with accrued interest on) and all other amounts owing under
this Purchase Agreement (including, without limitation, all Obligations
shall immediately become due and payable, and (B) if such event is any
other Event of Default, any Noteholder may declare the Notes (and accrued
interest thereon) and all other amounts owing under this Purchase
Agreement without limitation, all Obligations, to be due and payable
forthwith, whereupon the same shall immediately become due and payable.
7.3 Except as expressly provided above in this Section 7, demand,
protest and all other notices of any kind are hereby expressly waived.
Section 8. Notices.
Notices and other communications provided for herein shall be in
writing and shall be delivered by hand or shall be sent by telecopy (and
if sent by telecopy, shall be confirmed by registered mail, return receipt
requested, or by overnight mail or courier, postage and delivery charges
prepaid), to the following addresses:
if to the Company: Metalclad Corporation
Attention: Xxxxx Xxxxxx, President
0 Xxxxxxxxx Xxxxx, Xxxxx 000
Xxxxxxx Xxxxx, Xxxxxxxxxx 00000
Phone: (000) 000-0000
Fax: (000) 000-0000
with a copy to: Xxxxxx, Xxxxxxx & Xxxxxxx
Attention: Xxxxx X. Xxxxxxx, Esq.
Xxxx Center Irvine
0000 Xxxx Xxxxxx, Xxxxx 000
Xxxxxx, Xxxxxxxxxx 00000
Phone: (000) 000-0000
Fax: (000) 000-0000 or (000) 000-0000
if to the Purchaser: Sundial International Fund Limited
Attention: Mr. J.C.M. Xxxxxxxxx, Director
Les Bruyeres, Les Grande Mielle
Fauvic, Xxxxxxxxx
Xxxxxx, Xxxxxxx Xxxxxxx XX0 0XX
Phone: 000-00-0000-000-000
Fax: 000-00-0000-000-000
Ultra Pacific Holdings S.A.
Attention: Xxxx Xxxx Xxxxxxx
c/o Xx. Xxxxxxx Xxxxxxxx
Post Xxx 00
X.X. 0000
Xxxxx, Xxxxxxxxxxxxx
Phone: 000-00-00-000-0000
Fax: 000-00-00-000-0000
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with copies to: Xxxxxxxxx, Poster & Xxxxxx
Attention: Xxxxxx X. Xxxxxx, Esq.
Xxx Xxxxxxx Xxxxxx, 0xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Phone: (000) 000-0000
Fax: (000) 000-0000 or (000) 000-0000
Xxxxx & Co. Ltd.
Attention: Xxxx Xxxxxx
00 Xx. Xxxxx x Xxxxxx
Xxxxxx XX0X 0XX Xxxxxx Xxxxxxx
Phone: 000-00-000-000-0000
Fax: 000-00-000-000-0000
Whenever any notice is required to be given hereunder, such notice shall
be deemed given and such requirement satisfied only when such notice is
delivered or, if sent by telecopy, when received. Addresses may be changed
upon notice of such change given as provided in this Section 8.
Section 9. Amendments.
No amendment, interpretation or waiver of any of the provisions of this
Purchase Agreement shall be effective unless made in writing and signed by
the parties to this Purchase Agreement.
Section 10. Headings.
The headings of the sections and sub-sections of this Purchase
Agreement are used for convenience only and shall not affect the meaning
or interpretation of the contents of this Purchase Agreement.
Section 11. Enforcement.
The failure to enforce or to require the performance at any time of
any of the provisions of this Purchase Agreement shall in no way be
construed to be a waiver of such provisions, and shall not affect either
the validity of this Purchase Agreement or any part hereof or the right of
any party thereafter to enforce each and every provision in accordance
with the terms of this Purchase Agreement.
Section 12. Governing Law.
This Agreement and the relationships of the parties in connection
with the subject matter of this Purchase Agreement shall be governed by
and determined in accordance with the substantive laws of the State of New
York, in the United States of America, applicable to agreements made and
to be performed entirely therein.
Section 13. Severability.
In case any one or more of the provisions contained in this Pledge
Agreement should be invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions
contained herein shall not in any way be affected or impaired thereby. To
17
the extent permitted by applicable law, the parties hereby waive any
provision of law which may render any provision hereof invalid, illegal or
unenforceable in any respect.
Section 14. Counterparts.
This Purchase Agreement may be executed by the parties hereto in separate
counterparts, each of which when so executed and delivered shall be an
original, but all such counterparts shall together constitute one and the
same instrument, and all signatures need not appear on any one
counterpart.
IN WITNESS WHEREOF, the parties hereto have caused this Purchase
Agreement to be executed by their duly authorized representatives as of
the day and year first above written.
The Company: METALCLAD CORPORATION
By: /s/Xxxxx X. Xxxxxx
--------------------------------
Xxxxx X. Xxxxxx, President
Purchasers: SUNDIAL INTERNATIONAL FUND LIMITED
By: /s/Xxxxxx X. Xxxxxx
--------------------------------
Name: Xxxxxx X. Xxxxxx
Title: Assistant Secretary
ULTRA PACIFIC HOLDINGS S.A.
By: /s/Xxxxxx X. Xxxxxx
--------------------------------
Name: Xxxxxx X. Xxxxxx
Title: President
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METALCLAD CORPORATION
SCHEDULE 1
PURCHASE AGREEMENT DATED DECEMBER 31, 1997
Name of Noteholder Principal Amount of Notes
------------------ -------------------------
Sundial International Fund Limited $1,466,666.67
Ultra Pacific Holdings, S.A. 733,333.33
------------
Total $2,200,000.00
19
