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EXHIBIT 10.1
DEBENTURE PURCHASE AGREEMENT
DEBENTURE PURCHASE AGREEMENT ("AGREEMENT") dated as of June 15, 2001
between U.S. Plastic Lumber Corp., a Nevada corporation (the "COMPANY"), and the
entity listed as a Purchaser on SCHEDULE I attached to this Agreement (the
"PURCHASER").
WITNESSETH:
WHEREAS, the Company desires to sell and issue to the Purchaser, and
the Purchaser wishes to purchase from the Company, 18% Debentures due May 31,
2002 (the "DEBENTURES"), in the aggregate principal amount of $4,000,000 at an
aggregate price of $4,000,000, containing the terms and provisions set forth in
the Debentures in the form of EXHIBIT 1.1A attached hereto (the "ISSUANCE"), on
the terms and conditions set forth herein; and
WHEREAS, upon certain occurrences the Debentures will become
convertible into shares ("COMMON SHARES") of common stock, par value $.0001 of
the Company ("COMMON STOCK"), pursuant to the terms of the Debentures, and the
Purchaser will have registration rights with respect to such Common Shares and
the Warrant Shares (as defined herein), pursuant to the terms of that certain
Registration Rights Agreement to be entered into between the Company and the
Purchaser substantially in the form of EXHIBIT 4.2(F) hereto ("REGISTRATION
RIGHTS AGREEMENT");
WHEREAS, to induce the Purchaser to purchase the Debentures, the
Company has agreed to issue to the Purchaser warrants exercisable for 250,000
shares of Common Stock in the form attached as EXHIBIT 1.1B (the "WARRANTS";
and, together with the Debentures, the "SECURITIES"); and
WHEREAS, to secure the obligations of the Company under: (i) the
Debentures; (ii) the Company's 5% Convertible Debentures due February 2, 2005
(the "2000 DEBENTURES") and (iii) the Company's 15% Series D Preferred Stock
(the "SERIES D PREFERRED STOCK"), the Company is granting to the Purchaser a
second lien on all assets of the Company pursuant to the terms of a Security
Agreement and the Purchaser, substantially in the form of EXHIBIT 4.2(G) hereto
(the "SECURITY AGREEMENT").
ARTICLE 1
PURCHASE AND SALE OF DEBENTURES AND WARRANTS
Section 1.1 Issuance of Debentures and Warrants.
(a) Issuance. Upon the following terms and conditions, the
Company shall issue and sell to the Purchaser, and the Purchaser shall purchase
from the Company, the outstanding principal amount of Debentures and the number
of Warrants indicated next to such Purchaser's name on SCHEDULE I attached
hereto.
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(b) Purchase Price. The purchase price for the Debentures to
be acquired by the Purchaser (the "PURCHASE PRICE") shall be the Purchase Price
set forth next to such Purchaser's name on SCHEDULE I.
(c) The Closing.
(i) The closing of the purchase and sale of the Debentures
and the Warrants (the "CLOSING") in the Issuance, shall take
place at the offices of Kleinberg, Kaplan, Xxxxx & Xxxxx, P.C.
("PURCHASER'S COUNSEL") or at such other place as is mutually
agreeable, at 10:00 am., local time on the later of the
following: (x) the date on which the last to be fulfilled or
waived of the conditions set forth in Article IV hereof and
applicable to the Closing shall be fulfilled or waived in
accordance herewith, or (y) such other time and place and/or
on such other date as the Purchaser 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 the
Purchaser (x) certificates (with the number of and outstanding
principal amount of such certificates requested by such
Purchaser) representing the Debentures purchased hereunder by
such Purchaser at the Closing registered in the name of such
Purchaser or its nominee and (y) the Warrants registered in
the name of Purchaser or its nominee in such denominations as
reasonably requested by such Purchaser, and such Purchaser
shall deliver to the Company the Purchase Price for the
Debentures purchased by such Purchaser hereunder by wire
transfer in immediately available funds to an account
designated in writing by the Company. The delivery of payment
by the Purchaser 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 Purchaser'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 2
REPRESENTATIONS AND WARRANTIES
Section 2.1 Representations and Warranties of the Company. The Company
hereby makes the following representations and warranties to the Purchaser as of
the date hereof and on the 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
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Nevada and has the requisite corporate power to own its properties and to carry
on its business as now being conducted. The Company does not have any direct or
indirect subsidiaries other than the subsidiaries listed on SCHEDULE 2.1(A)
attached hereto. Except where specifically indicated to the contrary, all
references in this Agreement to subsidiaries shall be deemed to refer to all
direct and indirect subsidiaries of the Company. Each of the Company and its
subsidiaries is duly qualified as a foreign corporation to do business and is in
good standing in every jurisdiction in which the nature of the business
conducted or property owned by it makes such qualification necessary other than
those in which the failure so to qualify would not have a Material Adverse
Effect. "MATERIAL ADVERSE EFFECT" means any adverse effect on the business,
operations, properties, prospects, or financial condition of the entity with
respect to which such term is used and which is (either alone or together with
all other adverse effects) material to such entity and other entities
controlling or controlled by such entity taken as a whole, and any material
adverse effect on the transactions contemplated under this Agreement, the
Registration Rights Agreement, the Security Agreement or any other agreement or
document contemplated hereby or thereby.
(b) Authorization; Enforcement. (i) The Company has all
requisite corporate power and authority to enter into and perform this
Agreement, the Warrants, the Security Agreement and the Registration Rights
Agreement and to issue the Debentures and Warrants in accordance with the terms
hereof and thereof, (ii) the execution and delivery of this Agreement, the
Warrants, the Security Agreement and the Registration Rights Agreement by the
Company and the consummation by it of the transactions contemplated hereby and
thereby, including the issuance of the Debentures, the Common Shares and the
Warrant Shares, have been duly authorized by all necessary corporate action, and
no further consent or authorization of the Company or its Board of Directors (or
any committee or subcommittee thereof) or stockholders is required, (iii) this
Agreement, the Warrants, the Debentures, the Security Agreement and the
Registration Rights Agreement have been duly executed and delivered by the
Company, and (iv) this Agreement, the Warrants, the Debentures, the Security
Agreement and the Registration Rights Agreement constitute valid and binding
obligations of the Company enforceable against the Company in accordance with
their terms, except as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws
relating to, or affecting generally the enforcement of creditors' rights and
remedies or by other equitable principles of general application.
(c) Capitalization. The authorized capital stock of the
Company consists of 100,000,000 shares of Common Stock and 5,000,000 shares of
preferred stock; as of March 31, 2001 there were 35,041,772 shares of Common
Stock and, except as set forth on Schedule 2.1(c), no shares of preferred stock
issued and outstanding. All of the outstanding shares of the Company's Common
Stock and preferred stock have been validly issued and are fully paid and
nonassessable. Except as set forth in SCHEDULE 2.1(C), no shares of capital
stock are entitled to preemptive rights; and there are as of March 31, 2001
outstanding options for 5,389,000 shares of Common Stock and outstanding
warrants for shares of Common Stock (excluding the Warrants). The Company's
issued and outstanding preferred stock is, and will be, in all respects junior
to the Debentures. Except as set forth in SCHEDULE 2.1(C), there are no other
scrip, rights to subscribe to, calls or commitments of any character whatsoever
relating to, or securities or rights exchangeable for or convertible into, any
shares of capital stock of the Company, or contracts, commitments,
understandings, or arrangements by which the Company is or may
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become bound to issue additional shares of capital stock of the Company or
options, warrants, scrip, rights to subscribe to, or commitments to purchase or
acquire, any shares, or securities or rights convertible or exchangeable into
shares, of capital stock of the Company. Except where such information has been
clearly set forth in the SEC Documents (as defined below), the Company agrees to
update the information contained in the preceding sentences of this Section
2.1(c) and in SCHEDULE 2.1(C) in a certificate delivered to the Purchaser on a
quarterly basis, in the event that the Purchaser is deemed an "underwriter" by
the SEC (as defined below). Attached hereto as EXHIBIT 2.1(C)(I) is a true and
correct copy of the Company's Certificate of Incorporation (the "CHARTER"), as
in effect on the date hereof, and attached hereto as EXHIBIT 2.1(C)(II) is a
true and correct copy of the Company's By-Laws, as in effect on the date hereof
(the "BY-LAWS").
(d) Issuance of Common Shares. The Common Shares and the
shares of Common Stock issuable upon the exercise of the Warrants (the "WARRANT
SHARES") are duly authorized and reserved for issuance and, upon such conversion
in accordance with the Debentures and/or exercise in accordance with the
Warrants such Common Shares and Warrant Shares will be validly issued, fully
paid and non-assessable, free and clear of any and all liens, claims and
encumbrances, and entitled to be traded on the Nasdaq National Market ("NASDAQ
NM") (or the American Stock Exchange or the New York Stock Exchange,
collectively with the Nasdaq NM, the "APPROVED MARKETS"), and the holders of
such Common Shares and Warrant Shares shall be entitled to all rights and
preferences accorded to a holder of Common Stock. The outstanding shares of
Common Stock are currently listed on the Nasdaq NM.
(e) No Conflicts. The execution, delivery and performance of
this Agreement, the Registration Rights Agreement, the Security Agreement and
the Warrants by the Company and the consummation by the Company of the
transactions contemplated hereby and thereby and the issuance of the Debentures
and the Warrants do not and will not (i) result in a violation of the Company's
Charter or By-Laws or (ii) conflict with, or constitute a default (or an event
which with notice or lapse of time or both would become a default) under, or
give to others any rights of termination, amendment, acceleration or
cancellation of, any agreement, indenture, patent, patent license or instrument
to which the Company or any of its subsidiaries is a party (collectively,
"COMPANY AGREEMENTS"), or (iii) result in a violation of any federal, state,
local or foreign law, rule, regulation, order, judgment or decree (including
Federal and state securities laws and regulations) applicable to the Company or
any of its subsidiaries or by which any property or asset of the Company or any
of its subsidiaries is bound or affected. The business of the Company and its
direct and indirect subsidiaries is being conducted in material compliance with
(i) its charter and bylaws, (ii) all Company Agreements and (iii) all applicable
laws, ordinances or regulations of any governmental entity. The Company is not
required under Federal, state, local or foreign law, rule or regulation to
obtain any consent, authorization or order of, or make any filing or
registration with, any court or governmental agency in order for it to execute,
deliver or perform any of its obligations under this Agreement, the Registration
Rights Agreement, the Security Agreement, the Debentures and the Warrants or
issue and sell the Debentures in accordance with the terms hereof and issue the
Common Shares upon conversion thereof and issue the Warrant Shares on exercise
of the Warrants and for the registration provisions provided in the Registration
Rights Agreement.
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(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 Purchaser true and complete copies of all SEC
Documents (including, without limitation, proxy information and solicitation
materials and registration statements) filed with the SEC since March 31, 2001.
The Company has not directly or indirectly provided to the Purchaser 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. Except as may
otherwise be disclosed in any of the Schedules attached hereto, 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 NM.
(h) No Material Adverse Change. Since December 31, 2000, other
than as disclosed in the SEC Documents, 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) or in any Schedule attached
hereto, other than those liabilities incurred in the ordinary course of
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the Company's or its subsidiaries' respective businesses since December 31,
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, other than as set forth in the Schedules attached
hereto.
(k) No General Solicitation. Neither the Company, nor any of
its affiliates, or, to its knowledge, any person acting on its or their behalf
has engaged in any form of general solicitation or general advertising (within
the meaning of Regulation D under the Securities Act of 1933, as amended (the
"ACT")) in connection with the offer or sale of the Debentures or Common Shares.
(l) No Integrated Offering. Neither the Company, nor any of
its affiliates, nor to its knowledge any person acting on its or their behalf
has, directly or indirectly, made any offers or sales of any security or
solicited any offers to buy any security, under circumstances that would require
registration of the Debentures, the Warrants or the Common Shares or Warrant
Shares under the Act.
The issuance of the Debentures, Warrants, Common Shares, or
Warrant Shares to the Purchaser 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 NM.
(m) Form S-3. The Company is eligible to file the Registration
Statement (as defined in the Registration Rights Agreement) on Form S-3 under
the Act and rules promulgated thereunder, and Form S-3 is permitted to be used
for the transactions contemplated hereby under the Act and rules promulgated
thereunder.
(n) Intellectual Property. The Company (and/or its
wholly-owned subsidiaries) owns or has licenses to use certain patents,
copyrights and trademarks ("INTELLECTUAL PROPERTY") associated with its
business. The Company and its subsidiaries have all intellectual property rights
which are needed to conduct the business of the Company and its subsidiaries as
it is now being conducted or as proposed to be conducted as disclosed in the SEC
Documents. The Company and its subsidiaries have no reason to believe that the
intellectual property rights which it owns are invalid or unenforceable or that
the use of such intellectual property by the Company or its subsidiaries
infringes upon or conflicts with any right of any third party, and neither the
Company nor any of its subsidiaries has received notice of any such infringement
or conflict. The Company and its subsidiaries have no knowledge of any
infringement of its intellectual property by any third party.
(o) Shareholder Rights Plan. None of the acquisition of
Debentures, Warrants, Common Shares or Warrant Shares nor the deemed beneficial
ownership of shares of Common Stock prior to, or the acquisition of such shares
pursuant to, the conversion of
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Debentures or the exercise of the Warrants will in any event under any
circumstance trigger the poison pill provisions of any stockholders' rights or
similar agreements, or a substantially similar occurrence under any successor or
similar plan.
(p) No Litigation. Except as set forth in Schedule 2.1(p) or
in the Pre-Agreement SEC Documents (as defined in Section 2.2(c) (i) below), no
litigation or claim (including those for unpaid taxes) against the Company or
any of its subsidiaries is pending or, to the Company's knowledge, threatened,
and no other event has occurred, which if determined adversely could reasonably
be expected to have a Material Adverse Effect on the Company or could reasonably
be expected to materially and adversely effect the transactions contemplated
hereby. The legal proceedings described in the Pre-Agreement SEC Documents will
not have an effect on the transactions contemplated hereby, and will not have a
Material Adverse Effect on the Company.
(q) Brokers. The Company has taken no action which would give
rise to any claim by any person for brokerage commissions, finder's fees or
similar payments by the Company or any Purchaser relating to this Agreement or
the transactions contemplated hereby.
(r) Acknowledgement of Dilution. The number of shares of
Common Stock constituting Common Shares or Warrant Shares may increase
substantially in certain circumstances, including the circumstance where the
trading price of the Common Stock declines. The Company acknowledges that its
obligation to issue Common Shares upon conversion of Debentures and Warrant
Shares upon exercise of the Warrants is absolute and unconditional, regardless
of the dilution that such issuance may have on other shareholders of the
Company.
(s) Other Purchasers. Except as set forth on SCHEDULE 2.1(S),
there are no outstanding securities issued by the Company that are entitled to
registration rights under the Act. Except as set forth in SCHEDULE 2.1(S), there
are no outstanding securities issued by the Company that are directly or
indirectly convertible into, exercisable into, or exchangeable for, shares of
Common Stock of the Company, or that have anti-dilution or similar rights that
would be affected by the issuance of the Debentures, the Common Shares, the
Warrants or the Warrant Shares.
(t) Certain Transactions. Except as disclosed in the
Pre-Agreement SEC Documents, none of the officers, directors, or employees of
the Company is presently a party to any transaction with the Company or any of
its subsidiaries (other than for services as employees, officers and directors),
including any contract, agreement or other arrangement providing for the
furnishing of services to or by, providing for rental of real or personal
property to or from, or otherwise requiring payments to or from any officer,
director or such employee or, to the knowledge of the Company, any corporation,
partnership, trust or other entity in which any officer, director, or any such
employee has a substantial interest or is an officer, director, trustee or
partner.
(u) Permits; Compliance. The Company and each of its
subsidiaries is in possession of all franchises, grants, authorizations,
licenses, permits, easements, variances, exemptions, consents, certificates,
approvals and orders necessary to own, lease and operate its
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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. Since December 31, 1999, neither the Company nor any of its
subsidiaries has received any notification with respect to possible material
conflicts, material defaults or material violations of applicable laws.
(v) Insurance. The Company and each of its subsidiaries are
insured by insurers of recognized financial responsibility against such losses
and risks and in such amounts as management of the Company believes to be
prudent and customary in the businesses in which the Company and its direct and
indirect subsidiaries are engaged. Neither the Company nor any such subsidiary
has any reason to believe that it will not be able to renew its existing
insurance coverage as and when such coverage expires or to obtain similar
coverage from similar insurers as may be necessary to continue its business
without a significant increase in cost.
(w) Internal Accounting Controls. The Company and each of its
subsidiaries maintain a system of internal accounting controls sufficient, in
the judgment of the Company's board of directors, to provide reasonable
assurance that (i) transactions are executed in accordance with management's
general or specific authorizations, (ii) transactions are recorded as necessary
to permit preparation of financial statements in conformity with generally
accepted accounting principles and to maintain asset accountability, (iii)
access to assets is permitted only in accordance with management's general or
specific authorization and (iv) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and appropriate action
is taken with respect to any differences.
(x) Environmental Matters. Except as otherwise disclosed in
the Pre-Agreement SEC Documents, the Company and each of its subsidiaries is in
compliance in all material respects with all applicable state and federal
environmental laws and no event or condition has occurred that may interfere
with the compliance by the Company or any of its subsidiaries with any
environmental law or that may give rise to any liability under any environmental
law that, individually or in the aggregate, would have a Material Adverse
Effect.
(y) Solvency.
(i) Based on the financial condition of the Company as of
the Closing Date, the Company's fair saleable value of its
assets exceeds the amount that will be required to be paid on
or in respect of the Company's existing debts and other
liabilities (including contingent liabilities) as they mature.
(ii) Based on the financial condition of the Company as of
the Closing Date, the Company's assets do not constitute
unreasonably small capital to carry out its business as now
conducted and as proposed to be conducted including the
Company's capital needs
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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 from this
transaction, were it to liquidate all of its assets, after
taking into account all anticipated uses of the cash, would be
sufficient to pay all amounts on or in respect of its debt
when such amounts are required to be paid.
(iv) The Company does not intend, and does not believe,
that final judgments against the Company in actions for money
damages will be rendered at a time when, or in an amount such
that, the Company will be unable to satisfy any such judgments
promptly in accordance with their terms (taking into account
the maximum reasonable amount of such judgments in any such
actions and the earliest reasonable time at which such
judgments might be rendered). The Company's cash flow, after
taking into account all other anticipated uses of the cash
(including the payments on or in respect of debt referred to
in paragraph (iii) above), will at all times be sufficient to
pay all such judgments promptly in accordance with their
terms.
(v) Neither the Company nor any of its subsidiaries is
subject to any bankruptcy, insolvency or similar proceeding.
(z) Taxes. All federal, state, city and other tax returns,
reports and declarations required to be filed by or on behalf of the Company and
each of its subsidiaries have been filed and such returns are complete and
accurate and disclose all taxes (whether based upon income, operations,
purchases, sales, payroll, licenses, compensation, business, capital, properties
or assets or otherwise) required to be paid in the periods covered thereby.
Copies of all such returns have been provided to the Purchaser. All taxes shown
on such returns and any deficiency assessments, penalties and interest have been
paid, or will be paid when due or are being contested in good faith. All taxes
required to be withheld by or on behalf of the Company or any such subsidiary in
connection with amounts paid or owing to any employees, independent contractor,
creditor or other party have been withheld, and such withheld taxes have either
been duly and timely paid to the proper governmental authorities or set aside in
accounts for such purposes.
(aa) Title to Properties; Encumbrances. SCHEDULE 2.1(AA)
contains a complete and accurate list of all real property, leaseholds, or other
interests therein owned by the Company and its subsidiaries. Each of the Company
and its subsidiaries owns (with good and marketable
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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 related assets listed on SCHEDULE 2.1(AA) are free
and clear of all encumbrances and are not 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.
(bb) No Reliance on Purchasers. The Company acknowledges and
agrees that the Purchaser is acting solely in the capacity of an arm's length
purchaser with respect to this Agreement, the Security Agreement and the
Registration Rights Agreement and the performance under the Debentures and the
Warrants and the transactions contemplated hereby and thereby. The Company
further acknowledges that no Purchaser is acting as a financial advisor or
fiduciary of the Company (or in any similar capacity) with respect to this
Agreement, the Security Agreement and the Registration Rights Agreement and the
performance under the Debentures and the Warrants and the transactions
contemplated hereby and thereby. The Company further represents to the Purchaser
that the Company's decision to enter into this Agreement, the Security Agreement
and the Registration Rights Agreement and the performance under the Debentures
and the Warrants has been based solely on the independent evaluation by the
Company and its representatives.
(cc) Foreign Corrupt Practices Act. Neither the Company, nor
any director, officer, agent, employee or other person acting on behalf of the
Company or any subsidiary of the Company has, in the course of acting for, or on
behalf of, the Company, directly or indirectly used any corporate funds for any
unlawful contribution, gift, entertainment or other unlawful expenses relating
to political activity; directly or indirectly made any direct or indirect
unlawful payment to any foreign or domestic government or party official or
employee from corporate funds; violated or is in violation of any provision of
the U.S. Foreign Corrupt Practices Act of 1977, as amended, or any similar
treaties of the United States; or directly or indirectly made any bribe, rebate,
payoff, influence payment, kickback or other unlawful payment to any foreign or
domestic government or party official or employee.
(dd) MFN and Variable Rate Transactions. Except for the
Amended and Restated Common Stock Purchase Agreement, dated as of May 16, 2001,
by and between the Company and Fusion Capital Fund II, LLC, the Company has not
entered into any MFN Transaction or Variable Rate Transaction (other than
transactions entered into with the Purchasers), pursuant to which: (1)
securities or potential obligations to issue securities are still
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outstanding or (2) the issuance conversion, or exercise, as the case may be, of
the Debentures or the Warrants trigger, or may in the future trigger, an
adjustment.
The term "MFN TRANSACTION" shall mean a transaction in which
the Company issues or sells any securities in a capital raising transaction or
series of related transactions (the "MFN Offering") which grants to a purchaser
(the "MFN Purchaser") the right to receive additional shares (including without
limitation as a result of a lower conversion, exchange or exercise price but
excluding customary antidilution protections) based upon subsequent transactions
of the Company on terms more favorable than those granted to such MFN Purchaser
in such MFN Offering. As used herein, term "VARIABLE RATE TRANSACTION" shall
mean a transaction in which the Company issues or sells (i) any debt or equity
securities that are convertible into, exchangeable or exercisable for, or
include the right to receive additional shares of, Common Stock either (x) at a
conversion, exercise or exchange rate or other price that is based upon and/or
varies with the trading prices of or quotations for the Common Stock at any time
after the initial issuance of such debt or equity securities, or (y) with a
fixed conversion, exercise or exchange price that is subject to being reset at
some future date after the initial issuance of such debt or equity security or
upon the occurrence of specified or contingent events directly or indirectly
related to the business of the Company or the market for the Common Stock (but
excluding standard stock split anti-dilution provisions), or (ii) any securities
of the Company pursuant to an "equity line" structure which provides for the
sale, from time to time, of securities of the Company which are registered for
resale under the Act.
(EE) [INTENTIONALLY OMITTED].
(ff) Compliance with 2000 Debentures. The Company is in full
compliance with the terms of the 2000 Debentures, the Purchase Agreement dated
as of February 2, 2000 by and between the Company and the Purchaser, and the
documents contemplated thereby.
(gg) Schedule of Payments. Attached as Schedule 2.1(gg) is the
schedule of remaining principal payments under the Company's Credit Agreement,
dated as of June 30, 2000, by and among the Company, Bank of America, NA as
Agent and the Lenders set forth therein, as subsequently amended (the "LOAN
AGREEMENT").
(hh) Chicago Real Estate. Based upon discussions with Wexford
Banc Group, all independent appraisals of the Chicago Real Estate (as defined
below) reflect a valuation of at least $14.5 million. Based upon discussions
with Wexford Banc Group, the Phase I environmental audit and the engineering
report performed on the Chicago Real Estate have not indicated any developments
or situations which could have a Material Adverse Effect.
Section 2.2 Representations and Warranties of the Purchaser. The
Purchaser 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 Purchaser has the
requisite power and authority to enter into and perform this Agreement, the
Security Agreement and the
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Registration Rights Agreement and to purchase the Debentures and to acquire the
Warrants being sold to it hereunder, (ii) the execution and delivery of this
Agreement, the Security Agreement and the Registration Rights Agreement by such
Purchaser 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, the Security Agreement and the Registration
Rights Agreement constitute valid and binding obligations of such Purchaser
enforceable against such Purchaser 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, the Security Agreement and the Registration Rights Agreement and
the performance under the Debentures and Warrants and the consummation by such
Purchaser of the transactions contemplated hereby and thereby do not and will
not (i) result in a violation of such Purchaser's organizational documents, or
(ii) conflict with any agreement, indenture or instrument to which such
Purchaser 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 Purchaser. Such Purchaser is not required to obtain
any consent or authorization of any governmental agency in order for it to
perform its obligations under this Agreement, the Security Agreement, the
Registration Rights Agreement, the Warrants or the Debentures.
(c) Purchase Representations.
(i) Information. The Company has furnished such Purchaser
with its annual report on Form 10-K for its fiscal year ended
December 31, 2000 (the "FISCAL YEAR END"), its quarterly
report on Form 10-Q for the fiscal quarter ended March 31,
2001, and all other reports or documents filed by the Company
pursuant to Section 13(a) or 15(d) of the Exchange Act prior
to the Closing Date (the "PRE-AGREEMENT SEC DOCUMENTS").
(ii) Access to Other Information. Such Purchaser
acknowledges that the Company has made available to such
Purchaser 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 Purchaser
considers relevant or appropriate in connection with entering
into this Agreement.
(iii) Risks of Purchase. Such Purchaser acknowledges that the
Debentures have not been registered under the Act. Such
Purchaser 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
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exemption from the registration requirements of the Act will
be required in order to dispose of the Debentures, and that
such Purchaser may be required to hold its Debentures received
under this Agreement for a significant period of time prior to
reselling them, subject to the Company successfully
registering the Common Shares pursuant to the Registration
Rights Agreement. Such Purchaser is capable of assessing the
risks of an investment in the Debentures and is fully aware of
the economic risks thereof. Such Purchaser 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) Purchase Representation. Such Purchaser is purchasing
the Debentures and the Warrants for its own account and not
with a view to distribution in violation of any securities
laws. Such Purchaser has no present intention to sell the
Debentures, Warrants, Common Shares, or Warrant Shares in
violation of federal or state securities laws and such
Purchaser has no present arrangement (whether or not legally
binding) to sell the Debentures, Warrants, Common Shares or
Warrant Shares to or through any person or entity; provided,
however, that by making the representations herein, such
Purchaser does not agree to hold the Debentures, Warrants,
Common Shares or Warrant Shares for any minimum or other
specific term and reserves the right to dispose of the
Debentures, Warrants, Common Shares or Warrant Shares at any
time in accordance with federal and state securities laws
applicable to such disposition.
(v) Restricted Securities. It acknowledges and understands
that the terms of Issuance have not been reviewed by the SEC
or by any state securities authorities and that the Debentures
have been issued in reliance on the certain exemptions for
non-public offerings under the Act, which exemptions depend
upon, among other things, the representations made and
information furnished by such Purchaser, including the bona
fide nature of such Purchaser's investment intent as expressed
above.
(vi) Accuracy of Information. All information that such
Purchaser 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 within the meaning of Regulation D under the
Securities Act, and that it (i) is able to bear the economic
risk of its
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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 Purchaser
presented with or solicited by any general mailing, leaflet,
public promotional meeting, newspaper or magazine article,
radio or television advertisement, or any other form of
general advertising or general solicitation in connection with
the Issuance.
(ix) Reliance by the Company. Such Purchaser understands
that the Debentures and Warrant are being offered and sold in
reliance on a transactional exemptions from the registration
requirements of federal and state securities laws and that the
Company is relying upon the truth and accuracy of the
representations, warranties, agreements, acknowledgments and
understandings of such Purchaser set forth herein in order to
determine the applicability of such exemptions and the
suitability of such Purchaser to acquire the Debentures and
Warrants.
(d) Brokers. Such Purchaser 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 3
COVENANTS
Section 3.1 Registration and Listing; Effective Registration. Until the
second anniversary of the issuance of the Debentures and the Warrants, the
Company will cause the Common Stock issuable upon the exercise of the Securities
to continue at all times to be registered under Section 12(g) of the Exchange
Act, will comply in all respects with its reporting and filing obligations under
the Exchange Act, and will not take any action or file any document (whether or
not permitted by the Exchange Act or the rules thereunder) to terminate or
suspend such reporting and filing obligations. Until such time as no Debentures
or Warrants are outstanding, the Company shall continue the listing or trading
of the Common Stock on the Nasdaq NM or one of the other Approved Markets and
comply in all respects with the Company's reporting, filing and other
obligations under the bylaws or rules of the Approved Market on which the Common
Stock is listed. The Company shall cause the Common Stock to be listed on the
Nasdaq NM no later than the registration of the Common Stock under the Act, and
at all times shall continue such listing(s) on one of the Approved Markets. As
used herein and in the Registration Rights Agreement, the Debenture and the
Warrants, the term "Effective Registration" shall mean that all registration
obligations of the Company pursuant to the Registration Rights Agreement and
this Agreement have been satisfied, such registration is not subject to any
suspension or stop order, the prospectus for the Common Stock issuable upon
conversion and/or exercise of the Securities is current and deliverable, the
Purchaser is not
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identified as an "underwriter" in the registration statement effected pursuant
to the Registration Rights Agreement, and such shares of Common Stock are listed
for trading on one of the Approved Markets and such trading has not been
suspended for any reason, none of the Company or any direct or indirect
subsidiary of the Company is subject to any bankruptcy, insolvency or similar
proceeding, and no Interfering Event (as defined in Section 2(b) of the
Registration Rights Agreement) exists.
Section 3.2 Debentures on Conversion and Warrants on Exercise.
(a) Upon any conversion by the Purchaser (or then holder of
Debentures) of the Debentures pursuant to the terms thereof, the Company shall
issue and deliver to such Purchaser (or holder) within three (3) Trading Days
(as such term is defined in the Debenture) of the Conversion Date (as defined in
the Debenture), a new certificate or certificates for the principal amount of
Debentures which such Purchaser (or holder) has not yet elected to convert but
which is evidenced in part by the certificate(s) submitted to the Company in
connection with such conversion (with the number of and denomination of such new
certificate(s) designated by such Purchaser or holder).
(b) Upon any partial exercise by the Purchaser (or then holder
of the Warrants) of the Warrants, the Company shall issue and deliver to such
Purchaser (or holder) within three (3) days of the date on which such Warrants
are exercised, a new Warrant or Warrants representing the number of adjusted
Warrant Shares, in accordance with the terms of Section 2 of the Warrants.
Section 3.3 Replacement Debentures and Warrants.
(a) The certificate(s) representing the Debentures held by the
Purchaser (or then holder) may be exchanged by such Purchaser (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
Purchaser (or such holder) upon surrendering the same. No service charge will be
made for such registration or transfer or exchange.
(b) The Warrants will be exchangeable at the option of the
Purchaser (or then holder of the Warrants) at the office of the Company for
other Warrants of different denominations entitling the holder thereof to
purchase in the aggregate the same number of Warrant Shares as are purchasable
under such Warrants. No service charge will be made for such transfer or
exchange.
Section 3.4 Expenses. The Company shall pay in immediately available
funds, at the Closing and promptly upon receipt of any further invoices relating
to same, all reasonable due diligence fees and expenses and attorneys' fees and
expenses of the Purchaser's Counsel, incurred by the Purchaser in connection
with the preparation, negotiation, execution and delivery of this Agreement, the
Registration Rights Agreement, the Debentures, the Warrants and the related
agreements and documents and the transactions contemplated hereunder and
thereunder. At Closing, the Company shall pay the amount due for such fees and
expenses (which may include fees and expenses estimated to be incurred for
completion of the transaction including post-closing matters). In the event such
amount is ultimately less than the actual fees and
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expenses, the Company shall promptly pay such deficiency upon receipt of an
invoice regarding same.
Section 3.5 Securities Compliance. The Company shall notify the SEC and
the Nasdaq NM, in accordance with their requirements, of the transactions
contemplated by this Agreement, the Debenture, the Registration Rights Agreement
and the Warrants, and shall take all other necessary action and proceedings as
may be required and permitted by applicable law, rule and regulation, for the
legal and valid issuance of the Debentures hereunder, the Common Shares issuable
upon conversion thereof, the Warrants and the Warrant Shares issuable upon
exercise of the Warrants.
Section 3.6 Dividends or Distributions; Purchases of Equity Securities.
So long as any Debentures or Warrants remain outstanding, the Company agrees
that it shall not (a) declare or pay any dividends or make any distributions to
any holder or holders of Common Stock, or (b) purchase or otherwise acquire for
value, directly or indirectly, any shares of Common Stock or other equity
security of the Company; provided that the Company may purchase or acquire
shares of Common Stock so long as the Company (i) purchases or acquires such
shares on the open market or pursuant to a tender offer directed to all of the
Company's shareholders and (ii) does not utilize the proceeds of the issuances
of the Debentures for such purpose.
Section 3.7 Notices. The Company agrees to provide all holders of
Debentures and Warrants with copies of all notices and information, including
without limitation notices and proxy statements in connection with any meetings,
that are provided to the holders of shares of Common Stock, contemporaneously
with the delivery of such notices or information to such Common Stock holders.
Section 3.8 Use of Proceeds. The Company agrees that the proceeds
received by the Company from the sale of the Debentures hereunder shall be used
for working capital purposes.
Section 3.9 MFN. If at any time within twelve (12) months from the
Closing Date ("MFN PERIOD") the Company issues Common Stock (or securities or
rights exercisable or exchangeable for, or convertible into, Common Stock
("Derivative Securities") in a private placement at a discount or in the
Purchaser's judgment on terms more favorable to the purchaser thereof than the
terms specified in Section 5(c) of the Debentures or at a ceiling price less
than the Conversion Price (as defined in the Debentures and as adjusted pursuant
to the terms thereof), then the Debentures will automatically (at the
Purchaser's request) be adjusted to provide for such discount or lower or more
favorable Conversion Price, as applicable. If at any time within the MFN Period
(i) the Company has issued and outstanding any Floating Rate Derivative
Securities (as defined below) and (ii) under the terms of such Floating Rate
Derivative Securities a holder thereof could have exercised, exchanged or
converted them for Common Stock at a price per share less than the Conversion
Price (as defined in Section 5(c) of the Debentures) then the Conversion Price
shall be reduced to equal the lowest of such exercise, exchange or conversion
prices from time to time. For purposes hereof, a Floating Rate Derivative
Security is a Derivative Security that is exercisable, exchangeable or
convertible into or for Common Stock at a price that varies or is subject to
adjustment or reset based upon market prices after the initial issuance of the
security.
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Section 3.10 Reservation of Stock Issuable Upon Conversion and Upon
Exercise of the Warrants. The Company shall at all times reserve and keep
available out of its authorized but unissued shares of Common Stock, solely for
the purpose of effecting the conversion of the Debentures and the exercise of
the Warrants, such number of its shares of Common Stock as shall from time to
time be sufficient to effect the conversion of all outstanding Debentures and
the full exercise of the Warrants and if at any time the number of authorized
but unissued shares of Common Stock shall not be sufficient to effect the
conversion of all the then outstanding Debentures and the full exercise of the
Warrants, the Company will take such corporate action as may, in the opinion of
its counsel, be necessary to increase its authorized but unissued shares of
Common Stock to such number of shares as shall be sufficient for such purpose,
including without limitation engaging in best efforts to obtain the requisite
shareholder approval. Without in any way limiting the foregoing, the Company
agrees to reserve and at all times keep available solely for purposes of
conversion of Debentures and the exercise of the Warrants such number of
authorized but unissued shares of Common Stock that is at least equal to 200% of
the aggregate shares issuable upon conversion of Debentures, and 200% of the
aggregate shares issuable on exercise of Warrants, which number may be reduced
by the number of Common Shares or Warrant Shares actually delivered pursuant to
conversion of Debentures or exercise of the Warrants and shall be appropriately
adjusted for any stock split, reverse split, stock dividend or reclassification
of the Common Stock. If the Company falls below the reserves specified in the
immediately preceding sentence and does not cure such non-compliance within 30
days of its start, then the Purchaser will be entitled to the discount
adjustments specified in Section 2(b)(i) of the Registration Rights Agreement.
If at any time the number of authorized but unissued shares of Common Stock is
not sufficient to effect the conversion of all the then outstanding Debentures
or the full exercise of the Warrants, the Purchaser shall be entitled to, inter
alia, the premium price redemption rights provided in the Registration Rights
Agreement.
Section 3.11 Best Efforts. The parties shall use their best efforts to
satisfy timely each of the conditions described in Article IV of this Agreement.
Section 3.12 Form D; Blue Sky Laws. The Company agrees to file a Form D
with respect to the Debentures, Warrants, Common Shares and Warrant Shares, as
required under Regulation D and to provide a copy thereof to the Purchaser
promptly after such filing. The Company shall, on or before each Closing Date,
take such action as the Company shall have reasonably determined is necessary to
qualify the Debentures, Warrants, Common Shares and Warrant Shares for sale to
the Purchaser at the Closing pursuant to this Agreement under applicable
securities or "blue sky" laws of the states of the United States (or to obtain
an exemption from such qualification), and shall provide evidence of any such
action so taken to the Purchaser on or prior to the Closing Date.
Section 3.13 Limitation on Indebtedness.
(a) Until such time as no Debentures or 2000 Debentures shall
remain outstanding, the Company agrees that neither the Company nor any direct
or indirect subsidiary of the Company shall create, incur, assume, guarantee,
secure or in any manner become liable in respect of any indebtedness, or suffer
to exist any indebtedness, such that aggregate indebtedness shall be in excess
of 70% of the book value of the Company's assets, on a consolidated basis.
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(b) Intentionally omitted.
Section 3.14 20% Cap. The Purchaser shall, be entitled to convert
Debentures into a total of ______ Common Shares (19.99% of the Common Stock
issued and outstanding on the date hereof, which number shall be subject to
readjustment for any stock split, stock dividend or reclassification of the
Common Stock) (the "20% CAP"). Once the Purchaser has received the 20% Cap upon
conversion of its Debentures, it may request that the Company redeem its
remaining Debentures at a price equal to 120% of the Outstanding Principal
Amount (as defined in the Debentures) that remain outstanding. The restrictions
and redemption obligations set forth in this Section 3.14 shall cease to apply
if (a) the Company obtains written shareholder approval to issue Common Shares
in excess of the 20% Cap pursuant to Nasdaq Rule 4460 or (b) the Company
provides the Purchaser with irrevocable written notice, based upon the advice of
its counsel, that any such issuance of Common Shares upon conversion of the
Debentures is not subject to the 20% Cap pursuant to Rule 4460 of the NASD
Manual applicable to the Company, which is a company listed on the NMS. The
Company will use its best efforts promptly to obtain either the shareholder
approval or the irrevocable notice described in the preceding sentence and to
provide the Purchasers with a copy of same without limiting the foregoing, the
Company shall solicit the aforementioned shareholder approval at the next
shareholders meeting (for whatever purpose it may be called) which, in any
event, shall not be later than November 30, 2001 in which the Company will
solicit the aforementioned shareholder approval, will solicit proxies in favor
of issuing Common Shares in excess of the 20% Cap and will use its best efforts
to have all affiliates of the Company which own or control shares of Common
Stock to vote their shares in favor of such resolution.
SECTION 3.15 [OMITTED].
Section 3.16 Conversion of Existing Debentures; Standstill on
Conversion.
(a) The Purchaser agrees to deliver, within twenty (20)
Trading Days after the Closing, conversion notices for up to $2 million (but not
less than $1 million) principal amount of 2000 Debentures previously acquired
from the Company pursuant to that certain Convertible Debenture Purchase
Agreement, dated as of February 2, 2000. However, the foregoing obligation is
conditioned upon the shares of Common Stock into which such 2000 Debentures are
convertible being subject to Effective Registration at all times commencing with
the date hereof through the conversion date.
(b) The Purchaser hereby covenants that, in the event the
Closing occurs, it shall not, until the six month anniversary of the Closing,
effect any conversions of the 2000 Debentures, other than those referred to in
Section 3.16(a) above; provided that this limitation shall not apply: (i) if the
Company is in default with respect to any of its obligations under this
Agreement, the Debentures, the 2000 Debentures, the Debenture Purchase Agreement
and Registration Rights Agreement relating to the 2000 Debentures, the Security
Agreement, the Registration Rights Agreement or the Warrant; (ii) if the
transaction referred to in Section 3.17 below has not been consummated by August
15, 2001; (iii) on days where the shares of Common Stock trade at a price above
$3.00 per share (as such price may be subsequently adjusted to reflect stock
splits, stock dividends, reverse splits and consolidations); or (iv) the Company
has delivered a Redemption Notice pursuant to Section 3A.1 below.
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Section 3.17 Sale/Leaseback of Chicago Real Estate. The Company shall
use its best efforts to effect a sale/leaseback, yielding net proceeds to the
Company of at least $7.5 million, of its real estate located at 0000 Xxxx
Xxxxxxxxx Xxxx, 110 South Washtenaw in Chicago, Illinois (the "Chicago Real
Estate") by no later than August 15, 2001. In the event that such transaction is
not closed by such date, then:
(i) The coupon on the Debenture shall be increased,
effective such date, to 25% per annum;
(ii) The Debentures shall become convertible into Common
Shares, pursuant to Section 5 therein; and
(iii) The Company shall thereupon issue to the Purchaser a
Warrant (the "ADDITIONAL WARRANT"), expiring August 15, 2006,
to purchase an additional 250,000 shares of Common Stock at a
purchase price equal to 120% of the closing market price of
the Common Stock on August 15, 2001, but otherwise containing
the same terms and provisions as the Warrant.
Section 3.18 Mortgages. As soon as practicable following the Closing
Date, the Company shall prepare and duly record mortgages or deeds of trust, as
the case may be, on all of its real property owned by it or any subsidiaries, to
secure the obligations under the Debentures, 2000 Debentures and Series D
Preferred Stock, which mortgages or deeds of trust, shall be in form and
substance reasonably satisfactory to Purchaser; provided, however, that the
Company shall not be required to prepare and file such mortgages or deeds of
trust with respect to the Chicago Real Estate and the Ocala Real Estate (as
defined below) unless, in each case, the sale/leaseback of such property shall
not have been consummated by August 15, 2001; provided, however, that in each
such case, if the sale/leaseback has not been consummated by August 15, 2001,
such mortgages shall be duly filed and recorded by August 31, 2001.
Section 3.19 June 30 Payment. The Company shall notify the Purchaser,
on or before June 30, 2001, whether the payment due on such date pursuant to the
Loan Agreement, has been paid or has been waived by the lenders thereunder.
ARTICLE 3A
REPURCHASES
Section 3A.1 Optional Repurchases.
(a) The Company shall have the option, at any time upon 5
business days written notice to the Purchaser to repurchase: (i) all or any
portion of the Debentures; (ii) all or any portion of the shares of the Series D
Preferred Stock held by the Purchaser and; (iii) up to $2,000,000 in principal
amount of the 2000 Debentures (provided that if the conditions set forth in
paragraph 3A.1(b)(ii)(B) shall apply, then the price shall be the greater of
125% of the Outstanding Principal Amount or the product of the number of Common
Shares issuable upon conversion of the Debentures (without regard to any
limitations set forth therein) multiplied by
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the greater of the Market Price of the Common Stock (as defined in the
Debenture) on the date of redemption or on the date of the redemption request
("Conversion Value")); provided, however, that no portion of the 2000 Debentures
shall be redeemed until such time as the Debentures and Series D Preferred Stock
shall have been redeemed in full and no portion of the Series D Preferred Stock
shall be redeemed until the Debentures shall have been redeemed in full.
(b) (i) The Company shall have the option, on 20 Trading
Days (as defined in the Debentures) written notice, to
repurchase that portion of the 2000 Debentures not included in
Section 3A(a)(iii) above, at a price of 110% of the
Outstanding Principal Amount (as defined in the 2000
Debentures), plus accrued and unpaid interest (the "REPURCHASE
PRICE") subject to the conditions set forth below. The closing
of such redemption shall be effected on the 20th Trading Day
following receipt of such written notice (the "REPURCHASE
NOTICE") at the offices of Purchaser's counsel.
(ii) the repurchase set forth above shall be subject to
the following conditions, which may be waived by the
Purchaser:
(A) the Company shall have effected previously or
concurrently the redemption of the 2000 Debentures referred to
in Section 3A(a)(iii) above, all of the Debentures and all of
the Series D Preferred Stock;
(B) if the Company is in default with respect to any
provision of this Agreement, the Debentures, the Registration
Rights Agreement, the Warrant, the 2000 Debentures and the
Debenture Purchase or Registration Rights Agreement relating
to the 2000 Debentures, then the Repurchase Price shall be the
greater of 125% of the Outstanding Principal Amount or the
Conversion Value; and
(C) on the date of the Redemption Notice and at all
times between such date and the redemption, there shall have
been Effective Registration (as defined in Section 3.1 of the
Debenture Purchase Agreement relating to the 2000 Debentures).
(iii) In the event that the Company delivers a Repurchase
Notice the limitations on conversion, if any, set forth in
Section 3.16(b) above shall thereafter cease to apply.
(c) In the event that the Company shall have exercised its
right to repurchase under paragraph (a) or (b), the Purchaser's ability to
convert the 2000 Debentures, Series D Preferred Stock or the Debentures until
the repurchase of such securities shall be unaffected, and the repurchases
effected pursuant to paragraphs (a) and (b) above shall apply only to such
securities which have not been converted.
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Section 3A.2 Mandatory Redemption. Upon the occurrence of any of the
following events, the Company shall redeem the Debentures, after first making
any required payments pursuant to the terms of any senior or secured debt
existing on the date hereof, from the proceeds of the following transactions:
(i) The sale of the Company's subsidiary Clean Earth, Inc.;
(ii) The sale/leaseback of the Chicago Real Estate or the
Company's real estate in Ocala, Florida (the "Ocala Real
Estate");
(iii) Any debt or equity financing received by the Company.
Notwithstanding the foregoing, the Company hereby represents
and covenants that so long as the Debentures are outstanding, no more than 50%
of the proceeds from the sale/leaseback of the Chicago Real Estate shall be
applied to the payment of such senior or secured lenders. Any proceeds from the
foregoing transactions which remain after the redemption of the Debentures shall
be applied by the Company toward the repurchase, to the extent of such remaining
proceeds, of the Series D Preferred Stock held by the Purchaser.
ARTICLE 4
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 Purchaser 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 Purchaser's Representations and
Warranties. The representations and warranties of the Purchaser 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 Purchaser. The Purchaser shall have
performed all agreements and satisfied all conditions required to be performed
or satisfied by such Purchaser at or prior to the Closing.
(c) No Injunction. No statute, rule, regulation, executive
order, decree, ruling or injunction shall have been enacted, entered,
promulgated or endorsed by any court or governmental authority of competent
jurisdiction which prohibits the consummation of any of the transactions
contemplated by this Agreement or the Registration Rights Agreement or the
Debentures or the Warrants.
Section 4.2 Conditions Precedent to the Obligation of the Purchaser to
Purchase the Debentures. The obligation hereunder of the Purchaser to acquire
and pay for the Debentures at the Closing (unless otherwise specified) is
subject to the satisfaction, at or before the Closing, of
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each of the applicable conditions set forth below. These conditions are for the
Purchaser's benefit and may be waived by the Purchaser 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) [INTENTIONALLY OMITTED]
(d) No Injunction. No statute, rule, regulation, executive,
judicial or administrative order, decree, ruling or injunction shall have been
enacted, entered, promulgated or endorsed by any court or governmental authority
of competent jurisdiction which prohibits the consummation of any of the
transactions contemplated by this Agreement or the Registration Rights Agreement
or the Debenture or the Warrants.
(e) Opinion of Counsel. At the Closing, the Purchaser shall
have received: (i) an opinion of the outside counsel of the Company, Blank,
Rome, in the form attached hereto as EXHIBIT 4.2(E)(I); (ii) an opinion of
Rosetto & Associates, in the form attached hereto as Exhibit 4.2(e)(ii); (iii)
an opinion of Illinois counsel to the Company, covering the lien created by the
Security Agreement, in form and substance reasonably satisfactory to Purchaser,
and such other opinions, certificates and documents as the Purchaser or their
counsel shall reasonably require incident to the Closing.
(f) Registration Rights Agreement. The Company and the
Purchaser shall have executed and delivered the Registration Rights Agreement in
the form and substance of EXHIBIT 4.2(F) attached hereto.
(g) Security Agreement. The Company and the Purchaser shall
have executed and delivered the Security Agreement in the form and substance of
EXHIBIT 4.2(G) hereto.
(h) Adverse Changes. Except as otherwise disclosed in the
Pre-Agreement SEC Documents, since December 31, 1999, no event which had or is
likely to have, in the reasonable judgment of the Purchaser, a Material Adverse
Effect on the Company or any of its direct or indirect subsidiaries shall have
occurred.
(i) Officer's Certificate. The Company shall have delivered to
the Purchaser a certificate in form and substance satisfactory to the Purchaser
and the Purchaser's 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.
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(j) Debentures and Warrants. The Purchaser shall have received
certificates representing the Debentures and Warrants in the form and substance
of EXHIBIT 1.1A and EXHIBIT 1.1B hereto.
(k) Due Diligence. The Purchaser shall have completed its
financial, accounting, operational and legal due diligence in a manner
satisfactory to such Purchaser in its sole discretion.
(l) Consent of Senior Lender. The Company shall have received,
and shall deliver to the Purchaser a copy of, the written consent of Bank of
America, the Company's senior lender (the "Senior Lender") to the transactions
contemplated by this Agreement.
(m) Intercreditor Agreement. The Senior Lender and the
Purchaser shall have entered into an intercreditor agreement.
ARTICLE 5
LEGEND AND STOCK
The Company will issue one or more certificates representing the
Debentures and the Warrants in the name of the Purchaser and in such
denominations to be specified by the Purchaser prior to (or from time to time
subsequent to) Closing. Each certificate representing the Debentures and the
Warrants and any shares of Common Stock issued upon conversion or exercise
thereof initially shall be stamped or otherwise imprinted with a legend
substantially in the following form:
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933 OR ANY STATE SECURITIES LAWS. THEY MAY NOT BE TRANSFERRED, PLEDGED
OR OTHERWISE SOLD OR ASSIGNED EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER SAID ACT AND ANY APPLICABLE STATE
SECURITIES LAW OR AN APPLICABLE EXEMPTION FROM SUCH REGISTRATION
REQUIREMENTS.
The Company agrees to reissue Debentures and Warrants without the
legend set forth above at such time as (i) the holder thereof is permitted to
dispose of such Debentures and/or Warrants and Common Stock issuable upon
conversion or exercise thereof pursuant to Rule 144(k) under the Act, or (ii)
such Debentures and/or Warrants are sold to a purchaser or purchasers who (in
the opinion of counsel to the seller or such purchaser(s), in form and substance
reasonably satisfactory to the Company and its counsel) are able to dispose of
such shares publicly without registration under the Act.
Prior to the Registration Statement (as defined in the Registration
Rights Agreement) being declared effective, any Common Shares issued pursuant to
conversion of Debentures or Warrant Shares issued upon exercise of the Warrants
shall bear a legend in the same form as the legend indicated above. Upon such
Registration Statement becoming effective, the Company agrees to promptly, but
no later than three (3) business days thereafter, issue new certificates
representing such Common Shares and Warrant Shares without such legend. Any
Common Shares issued pursuant to conversion of Debentures or Warrant Shares
issued upon exercise of
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the Warrants after the Registration Statement has become effective shall be free
and clear of any legends, transfer restrictions and stop orders. Notwithstanding
the removal of such legend, the Purchaser agrees to sell the Common Shares and
Warrant Shares represented by the new certificates in accordance with the
applicable prospectus delivery requirements (if copies of a current prospectus
are provided to such Purchaser by the Company) or in accordance with an
exception from the registration requirements of the Act.
Upon the registration under the Act thereof (or upon the applicability
of Rule 144(K) under the Act), the Common Shares and the Warrant Shares may be
pledged pursuant to a bona fide margin account or lending arrangement.
ARTICLE 6
MISCELLANEOUS
Section 6.1 Stamp Taxes. The Company shall pay all stamp and other
taxes and duties levied in connection with the issuance of the Debentures and
Warrants pursuant hereto, the Common Shares issued upon conversion thereof, and
the Warrant Shares issued upon exercise of the Warrants.
Section 6.2 Specific Performance; Consent to Jurisdiction; Jury Trial.
(a) The Company and the Purchaser 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 THE PURCHASER (I) HEREBY IRREVOCABLY
SUBMITS TO THE EXCLUSIVE JURISDICTION OF THE UNITED STATES DISTRICT COURT, THE
NEW YORK STATE COURTS AND OTHER COURTS OF THE UNITED STATES SITTING IN NEW YORK
COUNTY, NEW YORK FOR THE PURPOSES OF ANY SUIT, ACTION OR PROCEEDING ARISING OUT
OF OR RELATING TO THIS AGREEMENT AND (II) HEREBY WAIVES, AND AGREES NOT TO
ASSERT IN ANY SUCH SUIT ACTION OR PROCEEDING, ANY CLAIM THAT IT IS NOT
PERSONALLY SUBJECT TO THE JURISDICTION OF SUCH COURT, THAT THE SUIT, ACTION OR
PROCEEDING IS BROUGHT IN AN INCONVENIENT FORUM OR THAT THE VENUE OF THE SUIT,
ACTION OR PROCEEDING IS IMPROPER. THE COMPANY AND THE PURCHASER 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.
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(c) THE COMPANY AND THE PURCHASER HEREBY WAIVES ALL RIGHTS TO
A TRIAL BY JURY.
Section 6.3 Entire Agreement; Amendment. This Agreement, together with
the Registration Rights Agreement, the Security Agreement, the Warrants, the
Debentures and the agreements and documents executed in connection herewith and
therewith, contains the entire understanding of the parties with respect to the
matters covered hereby and thereby and, except as specifically set forth herein
or therein, neither the Company nor any Purchaser 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 Corp.
0000 Xxxxxx Xxxx
Xxxxx 000 Xxxx
Xxxx Xxxxx, Xxxxxxx 00000
Attention: Xxxxx Xxxxxxx
Facsimile: (000) 000-0000
with copy to:
Blank Rome Comisky & XxXxxxxx LLP
Xxx Xxxxx Xxxxxx
Xxxxxxxxxxxx, Xxxxxxxxxxxx 00000
Attention: Xxxx X. Xxxxxx, Esq.
Facsimile: (000) 000-0000
to the Purchaser:
To the Purchaser at the address and/or fax number set
forth on SCHEDULE I of this Agreement.
with copy to:
Kleinberg, Kaplan, Xxxxx & Xxxxx, P.C.
000 Xxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxxx X. Xxx, Esq.
Facsimile: (000) 000-0000
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.
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26
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 Purchasers (which consent may be withheld for any
reason in their sole discretion), except that the Company may assign this
Agreement in connection with the sale of all or substantially all of its assets
provided that the Company is not released from any of its obligations hereunder,
such assignee assumes all obligations of the Company hereunder, and appropriate
adjustment of the provisions contained in this Agreement, the Registration
Rights Agreement, the Security Agreement, the Debentures and the Warrants is
made, in form and substance satisfactory to the Purchasers, to place the
Purchasers in the same position as they would have been but for such assignment,
in accordance with the terms of the Debentures and the Warrants. No Purchaser
may assign this Agreement (in whole or in part) or any rights or obligations
hereunder without the consent of the Company (which shall not be unreasonably
withheld).
Section 6.9 No Third Party Beneficiaries. This Agreement is intended
for the benefit of the parties hereto and their respective permitted successors
and assigns and is not for the benefit of, nor may any provision hereof be
enforced by, any other person.
Section 6.10 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK
APPLICABLE TO AGREEMENTS EXECUTED AND TO BE PERFORMED ENTIRELY WITHIN SUCH
STATE.
Section 6.11 Survival. The representations and warranties and the
agreements and covenants of the Company and the Purchaser 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 Purchaser
without the express written
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27
agreement of such Purchaser, 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 the Purchaser and any public announcement including the name of the
Purchaser to such Purchaser, reasonably in advance of the release of such
announcements.
Section 6.14 Severability. Intentionally omitted.
Section 6.15 Like Treatment of Holders; Redemption. Neither the Company
nor any of its affiliates shall, directly or indirectly, pay or cause to be paid
any consideration (immediate or contingent), whether by way of interest, fee,
payment for the redemption or conversion of Debentures or exercise of the
Warrants, or otherwise, to any holder of Debentures or Warrants, for or as an
inducement to, or in connection with the solicitation of, any consent, waiver or
amendment of any terms or provisions of the Debenture or this Agreement or the
Registration Rights Agreement or the Security Agreement or the Warrants, unless
such consideration is required to be paid to all holders of Debentures and
Warrants bound by such consent, waiver or amendment whether or not such holders
so consent, waive or agree to amend and whether or not such holders tender their
Debentures or Warrants for redemption, conversion or exercise. 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. Any
amendments to the terms of this Agreement may be effected if consented to by a
majority in principal amount of the Debentures.
Section 6.16 No Strict Construction. The language used in this
Agreement will be deemed to be the language chosen by the parties to express
their mutual intent, and no rules of strict construction will be applied against
any party.
[Signature Page Follows]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first above written.
COMPANY:
U.S. PLASTIC LUMBER CORP.
By: /s/ Xxxxx X. Xxxxxxx
--------------------------------------
Name: Xxxxx X. Xxxxxxx
Title: Vice President and General Counsel
PURCHASER:
HALIFAX FUND, L.P.
By: THE PALLADIN GROUP, L.P.
Attorney-in-Fact
By: /s/ Xxxxxx Xxxxxxx
--------------------------------------
Name: Xxxxxx Xxxxxxx
Title: Managing Director
[SIGNATURE PAGE TO U.S. PLASTIC LUMBER CORP. DEBENTURE PURCHASE AGREEMENT]
28
29
EXHIBITS AND SCHEDULES
Schedule I List of Purchasers
Exhibit 1.1A Form of Debenture
Exhibit 1.1B Form of Warrant
Schedule 2.1(a) List of Subsidiaries
Schedule 2.1(c) Capitalization; Preemptive Rights
Exhibit 2.1(c)(i) Certificate of Incorporation of the Company
Exhibit 2.1(c)(ii) By-Laws of the Company
Schedule 2.1(p) Litigation Disclosure
Schedule 2.1(s) Outstanding Securities Subject to Registration Rights, etc.
Schedule 2.1(aa) Real Property
Schedule 2.1(gg) Schedule of Principal Payments to Senior Credit Facility
Exhibit 4.2(e) Opinion of Company Counsel
Exhibit 4.2(f) Registration Rights Agreement
30
SCHEDULE I
OUTSTANDING PRINCIPAL NUMBER
AMOUNT OF
PURCHASER OF DEBENTURES WARRANTS PURCHASE PRICE
--------- --------------------- -------- --------------
HALIFAX FUND, LP $ 4,000,000 250,000 $ 4,000,000
c/o The Palladin Group, L.P.
Investment Manager
000 Xxxxxxxxx Xxxxxx
Xxxxxxxxx, Xxx Xxxxxx 00000
Attn: Xxxxxx Xxxxxxx
Facsimile: (000) 000-0000
31
SCHEDULE 1 TO SECURITY AGREEMENT
CHIEF EXECUTIVE OFFICE LOCATIONS:
GRANTOR: LOCATION: STATE OF INCORPORATION
--------------------------------------------------------------------------------------------------------------------------
U.S. PLASTIC LUMBER CORP. 0000 X. Xxxxxx Xxxx, Xxx. 000X Xxxxxx
Xxxx Xxxxx, XX 00000
--------------------------------------------------------------------------------------------------------------------------
U.S. PLASTIC LUMBER LTD. 0000 Xxxx Xxxxxxxxx Xxxx Xxxxxxxx
Xxxxxxx, XX 00000
--------------------------------------------------------------------------------------------------------------------------
INTEGRATED TECHNICAL SERVICES, INC. 0000 Xxxxxxxx Xxxxx Xxxxxxxx
Xx. Xxxxxx, XX 00000
--------------------------------------------------------------------------------------------------------------------------
XXXXXXXX ENVIRONMENTAL TECHNOLOGY, INC. 0000 Xxxxxxxx Xxxxx Xxx Xxxxxx
Xx. Xxxxxx, XX 00000
--------------------------------------------------------------------------------------------------------------------------
CLEAN EARTH OF MARYLAND, INC. 0000 Xxxxxxxx Xxxxx Xxxxxxxx
Xx. Xxxxxx, XX 00000
--------------------------------------------------------------------------------------------------------------------------
CLEAN EARTH OF NEW CASTLE, INC. 0000 Xxxxxxxx Xxxxx Xxxxxxxx
Xx. Xxxxxx, XX 00000
--------------------------------------------------------------------------------------------------------------------------
CLEAN EARTH OF PHILADELPHIA, INC. 0000 Xxxxxxxx Xxxxx Xxxxxxxx
Xx. Xxxxxx, XX 00000
--------------------------------------------------------------------------------------------------------------------------
CLEAN EARTH OF NORTH JERSEY, INC. 0000 Xxxxxxxx Xxxxx Xxx Xxxxxx
Xx. Xxxxxx, XX 00000
--------------------------------------------------------------------------------------------------------------------------
CLEAN EARTH OF CARTERET, INC. 0000 Xxxxxxxx Xxxxx Xxxxxxxx
Xx. Xxxxxx, XX 00000
--------------------------------------------------------------------------------------------------------------------------
CLEAN ROCK PROPERTIES, LTD. 0000 Xxxxxxxx Xxxxx Xxxxxxxx
Xx. Xxxxxx, XX 00000
--------------------------------------------------------------------------------------------------------------------------
CONSOLIDATED TECHNOLOGIES, INC. 0000 Xxxxxxxx Xxxxx Xxxxxxxxxxxx
Xx. Xxxxxx, XX 00000
--------------------------------------------------------------------------------------------------------------------------
ALLIED WASTE SERVICES, INC. 0000 Xxxxxxxx Xxxxx Xxxxxxxx
Xx. Xxxxxx, XX 00000
--------------------------------------------------------------------------------------------------------------------------
CLEAN EARTH, INC. 0000 Xxxxxxxx Xxxxx Xxxxxxxx
Xx. Xxxxxx, XX 00000
--------------------------------------------------------------------------------------------------------------------------
CARTERET ASPHALT CORPORATION 0000 Xxxxxxxx Xxxxx Xxxxxxxx
Xx. Xxxxxx, XX 00000
--------------------------------------------------------------------------------------------------------------------------
THE EAGLEBROOK GROUP, INC. 0000 Xxxx Xxxxxxxxx Xxxx Xxxxxxxx
Xxxxxxx, XX 00000
--------------------------------------------------------------------------------------------------------------------------
U.S. PLASTIC LUMBER FINANCE CORPORATION 0000 X. Xxxxxx Xxxx, Xxx. 000X Xxxxxxxx
Xxxx Xxxxx, XX 00000
--------------------------------------------------------------------------------------------------------------------------
U.S. PLASTIC LUMBER IP CORPORATION 0000 X. Xxxxxx Xxxx, Xxx. 000X Xxxxxxxx
Xxxx Xxxxx, XX 00000
--------------------------------------------------------------------------------------------------------------------------
ADVANCED REMEDIATION & DISPOSAL TECHNOLOGIES OF 1000 Xxxxxxxx Place Delaware
DELAWARE Xx. Xxxxxx, XX 00000
--------------------------------------------------------------------------------------------------------------------------
32
INVENTORY AND EQUIPMENT LOCATIONS:
See above and see attached
33
SCHEDULE 2.1(a)
SUBSIDIARIES
The Company has no subsidiaries, except as set forth in the organizational chart
shown below. All subsidiaries are 100% owned with the exception of Carteret
Materials Corp., which is only owned 80% by the Company.
[ORGANIZATIONAL CHART]
34
SCHEDULE 2.1(c)
CAPITALIZATION
CAPITALIZATION TABLE
AS OF MARCH 31, 2001
Common Shares Authorized 100,000,000 Par Value $.0001
Preferred Shares Authorized 5,000,000 Par Value $.001
Common Stock Outstanding 35,041,772
Options/Warrants Outstanding(1) 5,389,000
Series D Preferred(2) 1,187,285
Series E Preferred(2) 1,714,285
Convertible Debentures
Halifax Fund(3) 762,485 contains floating conversion price
Xxxxx Partnership(3) 2,500,000 contains floating conversion price
Equity Line
Fusion Capital(4) 0
(1) Vast majority of the options are out of the money at the current time.
The underlying stock is registered.
(2) The Company has a right to force redemption of face amount. If
conversion does occur, the ratio of common shares to preferred shares
is 1:1. If the Company does not redeem and the preferred are converted,
the Company must register the common shares.
(3) The underlying stock for the Halifax Fund is registered. Due to
substantial decrease in trading price, in the event of conversion the
number of shares issued may be significantly higher than that presented
above.
(4) The Company executed a Purchase Agreement with Fusion Capital Fund II
for the purpose of establishing an equity line. No shares have been
issued under this equity line as of the date hereof, but the Company is
in the process of filing an S-2 registration statement with the
Securities and Exchange Commission to register shares of common stock
to support the equity line.
35
SCHEDULE 2.1(c)(i)
CERTIFICATE OF INCORPORATION
36
SCHEDULE 2.1(c)(ii)
BYLAWS
37
SCHEDULE 2.1(p)
LITIGATION
A. Pending Matters:
With the exception of litigation in the ordinary course of business, the Company
has no other litigation pending, or to its knowledge, threatened other than as
specifically set forth below.
1. Clean Earth, Inc. v. Xxxxxxx Xxxxxxx and New England Wholesale Truck. This
matter was filed by the Company against Xx. Xxxxxxx on June 9, 2000 alleging
usurpation of corporate opportunity, damages from unauthorized taking of
corporate assets, and seeking a declaratory ruling against Xx. Xxxxxxx with
respect to his non-competition provisions of his Employment Agreement. Xx.
Xxxxxxx was terminated from employment with the Company for cause in April 2000.
Xx. Xxxxxxx was employed as the General Manager of Clean Rock Industries, Inc.,
a subsidiary of the Company. A Settlement Agreement was reached upholding the
non-compete provisions of the Employment Agreement and prohibiting Xx. Xxxxxxx
from defaming or harassing the Company. Xx. Xxxxxxx has violated the Settlement
Agreement and otherwise made material misrepresentations under the Stock
purchase Agreement. Accordingly, USPL has provided notice that the shares held
in escrow from the acquisition of CRI will not be released. This action has
resulted in an arbitration proceeding regarding the disposition of the escrow
shares. We have filed a counterclaim in the arbitration action for damages
relative to breach of the Settlement Agreement, breach of the representations in
the Stock Purchase Agreement and defamation.
2. Integrated Technical Services, Inc. v. Pugmill Systems, Inc. We filed our
Complaint in this matter in early March, 1999. It involves over $300,000 in
damages we allege were sustained by our subsidiary, Integrated Technical
Services, Inc. due to the failure of equipment manufactured by Pugmill Systems,
Inc. to perform to the specifications represented to the Company relative to the
Company's handling and processing of dredge material. We will aggressively seek
to recover our actual damages of $9,000 and consequential damages of $300,000.
Pugmill claims it does not owe consequential damages under contract. Discovery
is on-going. Settlement negotiations are likely but have not yet been set.
3. Xxxxxx vs. Clean Earth, et al. This matter was filed in the Common Pleas
Court of Philadelphia on April 17, 2001. It has named 7 defendants, several of
which are subsidiaries of Clean Earth, alleging negligence relative to
performance of work at the Xxxxxxx Xxxxx facility. Xx. Xxxxxx fell off a roof at
that facility and died. Xx. Xxxxxx was not an employee of the company but worked
for a subcontractor hired by the company. Xx. Xxxxxx was not wearing his safety
harness when he fell. The Company will file an Answer to the Complaint denying
the allegations being made. The Company has submitted this matter to its
insurance carrier for defense.
38
4. Eginiza vs. Integrated Technical Services, Inc. This matter was filed in the
Superior Court of New Jersey in July 2000 and is the result of an automobile
accident in which the plaintiff died. The driver of the automobile which caused
the accident was an employee of our subsidiary, Integrated Technical Services,
Inc. The automobile involved in the accident was not owned by the Company. This
matter has been submitted to our insurance carrier for defense.
5. There are numerous xxxxxx in which S & Waste Inc. was named as a PRP in
several cases dating back ten years or more. The vast majority of those case
have been settled. A few remain. See Case Status report of Xxxx Xxxxx dated June
2000.
6. Roa v. Magnetic Separators v. USPL: Brought in Chicago as a result of a
personal injury Roa sustained in 1995 while operating a conveyor manufactured by
defendant. USPL anticipates it will be covered by our insurance carrier, but
initial investigation appears to support conclusion that Roa was entirely
negligent as he put his hand, intentionally, into the debaling unit for no
apparent reason and the equipment had all appropriate safety mechanisms attached
and in full working order. We will be filing a Motion for Summary Judgment to
dismiss the case.
7. Frontier Recycling: USPL is seeking to bring an action against an Engineer
who designed our plant and production capacity expansion in a very poor manner
causing substantial delays and cost overruns. USPL is seeking credits for
equipment not needed nor functioning appropriately. USPL paid Frontier $2.7
million and balance claimed by Frontier is $300,000. USPL has refused to pay
balance as much of the equipment never worked to specifications designed and
many items of equipment were never delivered, although USPL was billed for them.
USPL records reveal approximately half million dollars of equipment was never
delivered so that rather than USPL owing any money to Frontier, it appears from
the discovery that Frontier owes USPL money. Litigation has been filed in this
matter by a third party vendor against Frontier, who then joined USPL as a third
party defendant. USPL will counterclaim that all money has been paid to Frontier
and that, in fact, Frontier has been overpaid by USPL. We will defend this
matter vigorously.
8. USPL vs. Xxxxxx: We filed a lawsuit against Xxxxxx claiming theft of goods
from USPL by former manager of USPL location in CA. Approximate value of
material: $250,000. Xxxxxx has filed a counterclaim for wrongful discharge of
employment, defamation, breach of contract, invasion of privacy, and emotional
distress. We will be vigorous in our defense of the counterclaim.
9. Xxxxxx vs. Eaglebrook Products, Inc. This action was filed in the common
please court of Xxxxxxxxxx County, Ohio on April 19, 2001 seeking $25,000 in
damages for defective SmartDeck product. We have inspected the deck and believe
the problem is poor installation by the contractor and not a problem with our
product. We will file an Answer defending our position.
39
10. Xxxxxx vs. USPL: Action filed in the Superior Court of New Jersey on January
29, 2001. Claim is for less than $50,000. Claim is based upon breach of
warranty. Plastic deck was purchased from RPI in 1996, a company subsequently
merged into USPL. Claim alleges the plastic deck has faded and plaintiff seeks
damages for breach of an express warranty by RPI and its distributor at the time
of sale that said product would not fade. Our experts have inspected the deck
and find no problems. We will vigorously defend.
11. Southern Wood Services v. USPL. We executed a contract with Southern Wood
Services in 2000 to provide woodflour whereby Southern Wood Services will claim
it was a "take or pay" contract. They currently provide sawdust as a feedstock
for our SmartDeck manufacturing process in Ocala, FL. Their woodflour operation
was delayed in construction and start-up. They will claim that Southern Wood
Services built this plant in reliance upon our contract. We still purchase
sawdust from Southern Wood Services despite the dispute on woodflour. They are
seeking to try to force us to purchase woodflour in lieu of the sawdust. We no
longer need the woodflour as we have purchased capital equipment in Ocala to
allow us to use the sawdust in lieu of the woodflour. Sawdust is a much less
expensive raw material. Our claim is that the contract was breached by Southern
Wood Services by their failure to become operational by October 2000 as required
in the contract, therefore we needed to mitigate our damages by transforming our
operation to handle sawdust. An arbitration action has been filed by Southern
Wood Services seeking $3.3 million in damages. We will vigorously defend this
action.
12. Diesel Enterprises v. USPL. This action was filed on April 26, 2001. It is a
claim for approximately $40,000 for trucking services to USPL. We will
vigorously defend this matter claiming we were overcharged and improperly
billed.
B. Accounts receivable Claims:
1. CTI from New York DOS - approximately $500,000. Met with account executive in
NYDOS and informed that claim is being processed.
2. Quakertown - claim has been submitted to PA DEP in the approximate amount of
$6 million. Settlement discussions are on-going.
3. Xxxxxxx Hook - Intent to file claim has been filed. Approximately $1.1
million. Claim will probably be filed within next few weeks.
4. Reaches B, C & D - Notice of claim has been filed. Approximately $300,000.
5. Xxxxx Brass Industrial: Claim has been made for approximately $97,000. Xxxxx
has refused to pay alleging that ITS owes an indemnity obligation back to Xxxxx
as a result of DEP issues that Xxxxx has incurred with PA DEP. The PA DEP has
issued an Order and Civil Penalty Assessment against Xxxxx. Our claim is that we
completed all work in
40
accordance with specifications and that issues between Xxxxx and DEP are not
related to any work performed by ITS. Lien has been placed on property.
6. Xxxxx & R: Approximately $500,000. We filed Complaint. Discovery is
undergoing. We are aggressively seeking to collect. However, one of the
defendants, American Appliance, recently filed Chapter 11 Reorganization.
American Appliance is not related to Xxxxx & R, except as a customer. As a
result of Bankruptcy action, and automatic stay is in place so we are now
requesting permission from the Bankruptcy court to proceed with our litigation
against the non-related defendants that are not a part of the Bankruptcy action.
7. 1113 Building Group: Claim for $113,000. We filed lien. Seeking to collect.
Property has been sold so we expect to collect at closing, perhaps within 30
days.
8. Xxxxxxx Sachs: USPL has a claim for approximately $1 million. Notice has been
provided. Claim report has not been submitted yet. Likely to negotiate a
settlement once claim is filed. Claim should be ready in next few weeks.
C. Potential Threatened Litigation
1. Specialty Sawdust vs. USPL: No action has been filed, but USPL has received
correspondence from a law office representing Specialty Sawdust claiming breach
of contract relative to "take or pay" provisions in a raw material supply
contract and the construction of a plant to produce raw material on behalf of
USPL in reliance up the contract. USPL has responded that it has no legal
obligations under the contract at this time. In the event litigation pursues,
USPL will defend vigorously.
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SCHEDULE 2.1 (s)
OTHER PURCHASERS
The Company executed a Purchase Agreement with Fusion Capital Fund II for the
purpose of establishing an equity line. No shares have been issued under this
equity line as of the date hereof, but the Company is in the process of filing
an S-2 registration statement with the Securities and Exchange Commission to
register shares of common stock to support the equity line.
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SCHEDULE 2.1 (aa)
LIST OF PROPERTIES
See attached spreadsheet
43
SCHEDULE 2.1 (gg)
SCHEDULE OF PRINCIPAL PAYMENTS TO SENIOR CREDIT FACILITY
AMORTIZATION OF TERM LOANS
DATE PRINCIPAL PAYMENT
---- -----------------
September 30, 2000 $ 1,250,000
December 31, 2000 $ 1,250,000
March 31, 2001 $ 1,250,000
June 30, 2001 $ 1,250,000
September 30, 2001 $ 2,500,000
December 31, 2001 $ 2,500,000
March 31, 2002 $ 2,500,000
June 30, 2002 $ 2,500,000
September 30, 2002 $ 3,750,000
December 31, 2002 $ 3,750,000
March 31, 2003 $ 3,750,000
Maturity $ 3,750,000
TOTAL $30,000,000
