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EXHIBIT 99.1
CONVERTIBLE DEBENTURE PURCHASE AGREEMENT
CONVERTIBLE DEBENTURE PURCHASE AGREEMENT ("AGREEMENT") dated as of
February 2, 2000 between U.S. Plastic Lumber Corporation, a Nevada corporation
(the "COMPANY"), and the entity listed as an investor on SCHEDULE I attached to
this Agreement (the "INVESTOR").
W I T N E S S E T H:
WHEREAS, the Company desires to sell and issue to the Investor, and the
Investor wishes to purchase from the Company, 5% Convertible Debentures due
February 2, 2005 (the "DEBENTURES"), in the aggregate principal amount of
$7,500,000 at an aggregate price of $7,500,000, having the rights and privileges
set forth in the Debentures in the form of EXHIBIT 1.1A attached hereto (the
"ISSUANCE"), on the terms and conditions set forth herein; and
WHEREAS, the Debentures will be convertible into shares ("COMMON
SHARES") of common stock, par value $.0001 of the Company ("COMMON STOCK"),
pursuant to the terms of the Debentures, and the Investor 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 Investor substantially in the form
of EXHIBIT 4.2(F) hereto ("REGISTRATION RIGHTS AGREEMENT"); and
WHEREAS, to induce the Investor to purchase the Debentures, the Company
has agreed to issue to the Investor warrants exercisable for 200,000 shares of
Common Stock in the form attached as EXHIBIT 1.1B (the "WARRANTS"; and, together
with the Debentures, the "SECURITIES");
NOW, THEREFORE, in consideration of the foregoing premises and the
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
ARTICLE 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 Investor, and the Investor shall purchase
from the Company, the outstanding principal amount of Debentures and the number
of Warrants indicated next to such Investor's name on SCHEDULE I attached
hereto.
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(b) PURCHASE PRICE. The purchase price for the Debentures to
be acquired by the Investor (the "PURCHASE PRICE") shall be the Purchase Price
set forth next to such Investor's name on SCHEDULE I.
(c) THE CLOSING.
(i) The closing of the purchase and sale of the
Debentures and the Warrants (the "CLOSING") in the
Issuance, shall take place at the offices of Kleinberg,
Kaplan, Xxxxx & Xxxxx, P.C. ("INVESTOR'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 Investor 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 Investor (x) certificates (with the number of and
outstanding principal amount of such certificates
requested by such Investor) representing the Debentures
purchased hereunder by such Investor at the Closing
registered in the name of such Investor or its nominee
and (y) the Warrants registered in the name of Investor
or its nominee in such denominations as reasonably
requested by such Investor, and such Investor shall
deliver to the Company the Purchase Price for the
Debentures purchased by such Investor hereunder by wire
transfer in immediately available funds to an account
designated in writing by the Company. The delivery of
payment by the Investor of the Purchase Price applicable
to it as set forth in this paragraph shall constitute a
payment delivered to the Company in satisfaction of such
Investor's obligation to pay the Purchase Price
hereunder. In addition, each party shall deliver all
documents, instruments and writings required to be
delivered by such party pursuant to this Agreement at or
prior to the applicable Closing.
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ARTICLE 2
REPRESENTATIONS AND WARRANTIES
Section 2.1 REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The
Company hereby makes the following representations and warranties to the
Investor as of the date hereof and on each Closing Date:
(a) ORGANIZATION AND QUALIFICATION; MATERIAL ADVERSE EFFECT.
The Company is a corporation duly incorporated and existing in good standing
under the laws of the State of Nevada and has the requisite corporate power to
own its properties and to carry on its business as now being conducted. The
Company does not have any direct or indirect subsidiaries other than the
subsidiaries listed on SCHEDULE 2.1(a) attached hereto. Except where
specifically indicated to the contrary, all references in this Agreement to
subsidiaries shall be deemed to refer to all direct and indirect subsidiaries of
the Company. Each of the Company and its subsidiaries is duly qualified as a
foreign corporation to do business and is in good standing in every jurisdiction
in which the nature of the business conducted or property owned by it makes such
qualification necessary other than those in which the failure so to qualify
would not have a Material Adverse Effect. "MATERIAL ADVERSE EFFECT" means any
adverse effect on the business, operations, properties, prospects, or financial
condition of the entity with respect to which such term is used and which is
(either alone or together with all other adverse effects) material to such
entity and other entities controlling or controlled by such entity taken as a
whole, and any material adverse effect on the transactions contemplated under
this Agreement, the Registration Rights Agreement or any other agreement or
document contemplated hereby or thereby.
(b) AUTHORIZATION; ENFORCEMENT. (i) The Company has all
requisite corporate power and authority to enter into and perform this
Agreement, the Warrants and the Registration Rights Agreement and to issue the
Debentures and Warrants in accordance with the terms hereof and thereof, (ii)
the execution and delivery of this Agreement, the Warrants and the Registration
Rights Agreement by the Company and the consummation by it of the transactions
contemplated hereby and thereby, including the issuance of the Debentures, the
Common Shares and the Warrant Shares, have been duly authorized by all necessary
corporate action, and no further consent or authorization of the Company or its
Board of Directors (or any committee or subcommittee thereof) or stockholders is
required, (iii) this Agreement, the Warrants, the Debentures and the
Registration Rights Agreement have been duly executed and delivered by the
Company, and (iv) this Agreement, the Warrants, the Debentures and the
Registration Rights Agreement constitute valid and binding obligations of the
Company enforceable against the Company in accordance with their terms, except
as such enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar laws relating to, or
affecting generally the enforcement of creditors' rights and remedies or by
other equitable principles of general application.
(c) CAPITALIZATION. The authorized capital stock of the
Company consists of 50,000,000 shares of Common Stock and 895,000 shares of
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preferred stock; as of December 31, 1999 there were 32,689,901 shares of Common
Stock and no shares of preferred stock issued and outstanding; and 6,341,453
shares of Common Stock and no shares of preferred stock were reserved for
issuance to persons other than the Investor. 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 December
31, 1999 outstanding options for 4,009,918 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
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 Investor on a
quarterly basis. Attached hereto as EXHIBIT 2.1(C)(I) is a true and correct copy
of the Company's Certificate of Incorporation (the "CHARTER"), as in effect on
the date hereof, and attached hereto as EXHIBIT 2.1(C)(II) is a true and correct
copy of the Company's By-Laws, as in effect on the date hereof (the "BY-LAWS").
(d) ISSUANCE OF COMMON SHARES. The Common Shares and the
shares of Common Stock issuable upon the exercise of the Warrants (the "WARRANT
SHARES") are duly authorized and reserved for issuance and, upon such conversion
in accordance with the Debentures and/or exercise in accordance with the
Warrants such Common Shares and Warrant Shares will be validly issued, fully
paid and non-assessable, free and clear of any and all liens, claims and
encumbrances, and entitled to be traded on the Nasdaq 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 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
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or affected. The business of the Company and its direct and indirect
subsidiaries is being conducted in material compliance with (i) its charter and
bylaws, (ii) all Company Agreements and (iii) all applicable laws, ordinances or
regulations of any governmental entity. The Company is not required under
Federal, state, local or foreign law, rule or regulation to obtain any consent,
authorization or order of, or make any filing or registration with, any court or
governmental agency in order for it to execute, deliver or perform any of its
obligations under this Agreement, the Registration Rights Agreement, the
Debentures and the Warrants or issue and sell the Debentures in accordance with
the terms hereof and issue the Common Shares upon conversion thereof and issue
the Warrant Shares on exercise of the Warrants and for the registration
provisions provided in the Registration Rights Agreement.
(f) SEC DOCUMENTS; NO NON-PUBLIC INFORMATION; FINANCIAL
STATEMENTS. The Common Stock of the Company is registered pursuant to Section
12(g) of the Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT")
and the Company has filed all reports, schedules, forms, statements and other
documents required to be filed by it with the Securities and Exchange Commission
("SEC") pursuant to the reporting requirements of the Exchange Act, including
material filed pursuant to Section 13(a) or 15(d), in addition to one or more
registration statements and amendments thereto heretofore filed by the Company
with the SEC (all of the foregoing including filings incorporated by reference
therein being referred to herein as the "SEC DOCUMENTS"). The Company has
delivered or made available to the Investor true and complete copies of all SEC
Documents (including, without limitation, proxy information and solicitation
materials and registration statements) filed with the SEC since December 31,
1998. The Company has not directly or indirectly provided to the Investor any
material non-public information or any information which, according to
applicable law, rule or regulation, should have been disclosed publicly by the
Company but which has not been so disclosed. As of their respective dates, the
SEC Documents complied in all material respects with the requirements of the
Exchange Act and the rules and regulations of the SEC promulgated thereunder and
other federal, state and local laws, rules and regulations applicable to such
SEC Documents, and none of the SEC Documents contained any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. 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
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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, 1998, 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 the
Company's or its subsidiaries' respective businesses since December 31, 1998,
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 Investor 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.
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(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 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)
and in the Pre-Agreement SEC Documents (as defined in Section 2.2(c) (i) below),
no litigation or claim (including those for unpaid taxes) against the Company or
any of its subsidiaries is pending or, to the Company's knowledge, threatened,
and no other event has occurred, which if determined adversely could reasonably
be expected to have a Material Adverse Effect on the Company or could reasonably
be expected to materially and adversely effect the transactions contemplated
hereby. The legal proceedings described in the Pre-Agreement SEC Documents will
not have an effect on the transactions contemplated hereby, and will not have a
Material Adverse Effect on the Company.
(q) BROKERS. The Company has taken no action which would
give rise to any claim by any person for brokerage commissions, finder's fees or
similar payments by the Company or any Investor relating to this Agreement or
the transactions contemplated hereby.
(r) ACKNOWLEDGEMENT OF DILUTION. The number of shares of
Common Stock constituting Common Shares or Warrant Shares may increase
substantially in certain circumstances, including the circumstance where the
trading price of the Common Stock declines. The Company acknowledges that its
obligation to issue Common Shares upon conversion of Debentures and Warrant
Shares upon exercise of the Warrants is absolute and unconditional, regardless
of the dilution that such issuance may have on other shareholders of the
Company.
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(s) OTHER INVESTORS. Except as set forth on SCHEDULE 2.1(S),
there are no outstanding securities issued by the Company that are entitled to
registration rights under the Act. Except as set forth in SCHEDULE 2.1(S), there
are no outstanding securities issued by the Company that are directly or
indirectly convertible into, exercisable into, or exchangeable for, shares of
Common Stock of the Company, or that have anti-dilution or similar rights that
would be affected by the issuance of the Debentures, the Common Shares, the
Warrants or the Warrant Shares.
(t) CERTAIN TRANSACTIONS. Except as disclosed in the
Pre-Agreement SEC Documents, none of the officers, directors, or employees of
the Company is presently a party to any transaction with the Company or any of
its subsidiaries (other than for services as employees, officers and directors),
including any contract, agreement or other arrangement providing for the
furnishing of services to or by, providing for rental of real or personal
property to or from, or otherwise requiring payments to or from any officer,
director or such employee or, to the knowledge of the Company, any corporation,
partnership, trust or other entity in which any officer, director, or any such
employee has a substantial interest or is an officer, director, trustee or
partner.
(u) PERMITS; COMPLIANCE. The Company and each of its
subsidiaries is in possession of all franchises, grants, authorizations,
licenses, permits, easements, variances, exemptions, consents, certificates,
approvals and orders necessary to own, lease and operate its properties and to
carry on its business as it is now being conducted (collectively, the "COMPANY
PERMITS"), and there is no action pending or, to the knowledge of the Company,
threatened regarding suspension or cancellation of any of the Company Permits
except for such Company Permits the failure of which to possess, or the
cancellation or suspension of which, would not, individually or in the
aggregate, have a material effect on the Company. To the best of its knowledge,
neither the Company nor any of its subsidiaries is in material conflict with, or
in material default or material violation of, any of the Company Permits. Since
December 31, 1998, 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)
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access to assets is permitted only in accordance with management's general or
specific authorization and (iv) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and appropriate action
is taken with respect to any differences.
(x) ENVIRONMENTAL MATTERS. Except as otherwise disclosed in
the Pre-Agreement SEC Documents, the Company and each of its subsidiaries is in
compliance in all material respects with all applicable state and federal
environmental laws and no event or condition has occurred that may interfere
with the compliance by the Company or any of its subsidiaries with any
environmental law or that may give rise to any liability under any environmental
law that, individually or in the aggregate, would have a Material Adverse
Effect.
(y) SOLVENCY.
(i) Based on the financial condition of the Company as
of the Closing Date, the Company's fair saleable value
of its assets exceeds the amount that will be required
to be paid on or in respect of the Company's existing
debts and other liabilities (including contingent
liabilities) as they mature.
(ii) Based on the financial condition of the Company as
of the Closing Date, the Company's assets do not
constitute unreasonably small capital to carry out its
business as now conducted and as proposed to be
conducted including the Company's capital needs taking
into account the particular capital requirements of the
business conducted by the Company, and projected capital
requirements and capital availability thereof.
(iii) The Company does not intend to incur debts beyond
its ability to pay such debts as they mature (taking
into account the timing and amounts of cash to be
payable on or in respect of its debt). Based on the
financial condition of the Company as of the Closing
Date, the current cash flow of the Company, together
with the proceeds the Company would receive, were it to
liquidate all of its assets, after taking into account
all anticipated uses of the cash, would be sufficient to
pay all amounts on or in respect of its debt when such
amounts are required to be paid.
(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
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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 Investor. All taxes shown
on such returns and any deficiency assessments, penalties and interest have been
paid. All taxes required to be withheld by or on behalf of the Company or any
such subsidiary in connection with amounts paid or owing to any employees,
independent contractor, creditor or other party have been withheld, and such
withheld taxes have either been duly and timely paid to the proper governmental
authorities or set aside in accounts for such purposes.
(aa) TITLE TO PROPERTIES; ENCUMBRANCES. SCHEDULE 2.1(AA)
contains a complete and accurate list of all real property, leaseholds, or other
interests therein owned by the Company and its subsidiaries. Each of the Company
and its subsidiaries owns (with good and marketable title in the case of real
property) all the properties and assets (whether real, personal, or mixed and
whether tangible or intangible) that it purports to own. All material properties
and assets listed on SCHEDULE 2.1(AA) are free and clear of all encumbrances and
are not, in the case of real property, subject to any rights of way, building
use restrictions, exceptions, variances, reservations or limitations of any
nature, except, with respect to all such properties and assets, (a) mortgages or
security interests shown on SCHEDULE 2.1(AA) as securing specified liabilities
or obligations, with respect to which no default (or event that, with notice or
lapse of time or both, would constitute a default) exists, (b) liens for current
taxes not yet due, and (c) with respect to real property, (i) minor
imperfections of title, if any, none of which is substantial in amount,
materially detracts from the value or impairs the use of the property subject
thereto, or impairs the operations the Company or any of its subsidiaries, and
(ii) zoning laws and other land use restrictions (including, but not limited to,
easements of records) that do not impair the present or anticipated use of the
property subject thereto. All buildings, plans, and structures owned by the
Company or any of its subsidiaries lie wholly within the boundaries of the real
property owned by the Company or such subsidiaries, and do not encroach upon the
property of, or otherwise conflict with the property rights of, any other
person.
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Section 2.2 REPRESENTATIONS AND WARRANTIES OF THE INVESTOR. The
Investor hereby makes the following representations and warranties to the
Company as of the date hereof and on the Closing Date:
(a) AUTHORIZATION; ENFORCEMENT. (i) Such Investor has the
requisite power and authority to enter into and perform this Agreement and the
Registration Rights Agreement and to purchase the Debentures and to acquire the
Warrants being sold to it hereunder, (ii) the execution and delivery of this
Agreement and the Registration Rights Agreement by such Investor and the
consummation by it of the transactions contemplated hereby and thereby have been
duly authorized by all necessary corporate or partnership action, and (iii) this
Agreement and the Registration Rights Agreement constitute valid and binding
obligations of such Investor enforceable against such Investor in accordance
with their terms, except as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws
relating to, or affecting generally the enforcement of creditors' rights and
remedies or by other equitable principles of general application.
(b) NO CONFLICTS. The execution, delivery and performance of
this Agreement and the Registration Rights Agreement and the performance under
the Debentures and Warrants and the consummation by such Investor of the
transactions contemplated hereby and thereby do not and will not (i) result in a
violation of such Investor's organizational documents, or (ii) conflict with any
agreement, indenture or instrument to which such Investor is a party, or (iii)
result in a material violation of any law, rule, or regulation, or any order,
judgment or decree of any court or governmental agency applicable to such
Investor. Such Investor is not required to obtain any consent or authorization
of any governmental agency in order for it to perform its obligations under this
Agreement, the Registration Rights Agreement, the Warrants or the Debentures.
(c) INVESTMENT REPRESENTATIONS.
(i) INFORMATION. The Company has furnished such
Investor with its annual report on Form 10-K for its
fiscal year ended December 31, 1998 (the "FISCAL YEAR
END"), its quarterly reports on Form 10-Q for the fiscal
quarters ended March 31, 1999, June 30, 1999 and
September 30, 1999, and all other reports or documents
filed by the Company pursuant to Section 13(a) or 15(d)
of the Exchange Act prior to the Closing Date (the
"PRE-AGREEMENT SEC DOCUMENTS").
(ii) ACCESS TO OTHER INFORMATION. Such Investor
acknowledges that the Company has made available to such
Investor the opportunity to examine such additional
documents from the Company and to ask questions of, and
receive full answers from, the Company concerning, among
other things, the Company, its financial condition, its
management, its prior activities and any other
information which such Investor considers relevant or
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appropriate in connection with entering into this
Agreement.
(iii) RISKS OF INVESTMENT. Such Investor acknowledges
that the Debentures have not been registered under the
Act. Such Investor is familiar with the provisions of
Rule 144 and understands that in the event all of the
applicable requirements of Rule 144 are not satisfied,
registration under the Act or some other exemption from
the registration requirements of the Act will be
required in order to dispose of the Debentures, and that
such Investor may be required to hold its Debentures
received under this Agreement for a significant period
of time prior to reselling them, subject to the Company
successfully registering the Common Shares pursuant to
the Registration Rights Agreement. Such Investor is
capable of assessing the risks of an investment in the
Debentures and is fully aware of the economic risks
thereof. Such Investor acknowledges that the Company's
operating results have in the past and may in the
current period and in future periods not meet the
expectations of securities analysts and that failure to
meet such expectations would be likely to have a
material adverse effect on the trading price and
salability of the Common Shares.
(iv) INVESTMENT REPRESENTATION. Such Investor is
purchasing the Debentures and the Warrants for its own
account and not with a view to distribution in violation
of any securities laws. Such Investor has no present
intention to sell the Debentures, Warrants, Common
Shares, or Warrant Shares in violation of federal or
state securities laws and such Investor has no present
arrangement (whether or not legally binding) to sell the
Debentures, Warrants, Common Shares or Warrant Shares to
or through any person or entity; PROVIDED, however, that
by making the representations herein, such
Investor does not agree to hold the Debentures,
Warrants, Common Shares or Warrant Shares for any
minimum or other specific term and reserves the right to
dispose of the Debentures, Warrants, Common Shares or
Warrant Shares at any time in accordance with federal
and state securities laws applicable to such
disposition.
(v) RESTRICTED SECURITIES. It acknowledges and
understands that the terms of 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
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offerings under the Act, which exemptions depend upon,
among other things, the representations made and
information furnished by such Investor, including the
bona fide nature of such Investor's investment intent as
expressed above.
(vi) ACCURACY OF INFORMATION. All information that such
Investor provides to the Company hereunder is correct
and complete as of the date set forth above.
(vii) ABILITY TO BEAR ECONOMIC RISK. It is an
"accredited" investor, and that it (i) is able to bear
the economic risk of its investment in the Debentures,
(ii) is able to hold the Debentures for an indefinite
period of time, (iii) can afford a complete loss of its
investment in the Debentures and (iv) has adequate means
of providing for its current needs.
(viii) NO PUBLIC SOLICITATION. At no time was such
Investor presented with or solicited by any general
mailing, leaflet, public promotional meeting, newspaper
or magazine article, radio or television advertisement,
or any other form of general advertising or general
solicitation in connection with the Issuance.
(ix) RELIANCE BY THE COMPANY. Such Investor understands
that the Debentures and Warrant are being offered and
sold in reliance on a transactional exemptions from the
registration requirements of federal and state
securities laws and that the Company is relying upon the
truth and accuracy of the representations, warranties,
agreements, acknowledgments and understandings of such
Investor set forth herein in order to determine the
applicability of such exemptions and the suitability of
such Investor to acquire the Debentures and Warrants.
(d) BROKERS. Such Investor has taken no action which would
give rise to any claim by any person for brokerage commissions, finder's fees or
similar payments by the Company relating to this Agreement or the transactions
contemplated hereby.
(e) ADDITIONAL ISSUANCES. Upon the Closing, the parties
agree that the Investor shall no longer have the Investor Call Option (as
defined in Section 3.15(a) of the Convertible Debenture Purchase Agreement dated
December 22, 1998) and that the Company shall no longer have the Company Put
Option (as defined in Section 3.15(a) of the Convertible Debenture Purchase
Agreement dated December 22, 1998) with respect to sales to the Investor under
the aforesaid agreement.
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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 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 Investor (or then holder of
Debentures) of the Debentures pursuant to the terms thereof, the Company shall
issue and deliver to such Investor (or holder) within three (3) Trading Days (as
such term is defined in the Debenture) of the Conversion Date (as defined in the
Debenture), a new certificate or certificates for the principal amount of
Debentures which such Investor (or holder) has not yet elected to convert but
which is evidenced in part by the certificate(s) submitted to the Company in
connection with such conversion (with the number of and denomination of such new
certificate(s) designated by such Investor or holder).
(b) Upon any partial exercise by the Investor (or then
holder of the Warrants) of the Warrants, the Company shall issue and deliver to
such Investor (or holder) within three (3) days of the date on which such
Warrants are exercised, a new Warrant or Warrants representing the number of
adjusted Warrant Shares, in accordance with the terms of Section 2 of the
Warrants.
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SECTION 3.3 REPLACEMENT DEBENTURES AND WARRANTS.
(a) The certificate(s) representing the Debentures held by
the Investor (or then holder) may be exchanged by such Investor (or such holder)
at any time and from time to time for certificates with different denominations
representing an equal aggregate number of Debentures, as requested by such
Investor (or such holder) upon surrendering the same. No service charge will be
made for such registration or transfer or exchange.
(b) The Warrants will be exchangeable at the option of the
Investor (or then holder of the Warrants) at the office of the Company for other
Warrants of different denominations entitling the holder thereof to purchase in
the aggregate the same number of Warrant Shares as are purchasable under such
Warrants. No service charge will be made for such transfer or exchange.
Section 3.4 EXPENSES. The Company shall pay in immediately
available funds, at the Closing and promptly upon receipt of any further
invoices relating to same, all reasonable due diligence fees and expenses and
attorneys' fees and expenses of the Investor's Counsel, incurred by the Investor
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, up to a maximum of $25,000. At Closing, the Company shall pay
the amount due for such fees and expenses (which may include fees and expenses
estimated to be incurred for completion of the transaction including
post-closing matters). In the event such amount is ultimately less than the
actual fees and expenses, the Company shall promptly pay such deficiency upon
receipt of an invoice regarding same.
SECTION 3.5 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.
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SECTION 3.7 NOTICES. The Company agrees to provide all holders of
Debentures and Warrants with copies of all notices and information, including
without limitation notices and proxy statements in connection with any meetings,
that are provided to the holders of shares of Common Stock, contemporaneously
with the delivery of such notices or information to such Common Stock holders.
SECTION 3.8 USE OF PROCEEDS. The Company agrees that the proceeds
received by the Company from the sale of the Debentures hereunder shall be used
for working capital purposes.
SECTION 3.9 NOTIFICATION OF ADDITIONAL FINANCINGS; ADJUSTMENTS.
(a) Intentionally omitted.
(b) 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
Investor'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 Investor'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 Minimum Floating Conversion
Price (as defined in Section 5(c) of the Debentures) then the Minimum Floating
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.
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
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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 Investor 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 Investor 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
Investor promptly after such filing. The Company shall, on or before each
Closing Date, take such action as the Company shall have reasonably determined
is necessary to qualify the Debentures, Warrants, Common Shares and Warrant
Shares for sale to the Investor 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 Investor on or prior to the Closing Date.
SECTION 3.13 NO SENIOR INDEBTEDNESS; LIMITATION ON ISSUANCE OF
EQUITY.
(a) Until the six month anniversary of the Closing Date,
the Company agrees that neither the Company nor any direct or indirect
subsidiary of the Company shall create, incur, assume, guarantee, secure or in
any manner become liable in respect of any indebtedness, or permit any liens,
claims or encumbrances to exist against the Company or any direct or indirect
subsidiary of the Company or any of their assets, unless junior to the
Debentures in all respects, except for (i) trade payables incurred in the
ordinary course of business consistent with past practices, (ii) indebtedness
incurred in connection with the acquisition by the Company of another entity (or
any assets of such entity), and (iii) except for a senior credit facility and/or
equipment and real estate financing which, in the aggregate, shall not exceed
$75.0 million. The Company agrees that it shall at all times between the Closing
Date and April 1, 2001 maintain at least $4.0 million of available credit under
the facility described in clause (iii) of the preceding sentence.
(b) Intentionally omitted.
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SECTION 3.14 DELISTING; BEST EFFORTS. If a conversion of a
Debenture for Common Shares by the Investor could result in the Company being
delisted from the Nasdaq NM for issuing in excess of 20% of its outstanding
Common Stock to the Investor without the approval of the Company's shareholders,
then the Company must redeem any and all Debentures covered by the applicable
Conversion Notice (as defined in the Debentures) and any and all Debentures that
would, if a Conversion Notice for all Debentures were then delivered, result in
the Company being subject to such delisting, at a price equal to 130% of the
Outstanding Principal Amount (as defined in the Debentures) plus accrued but
unpaid interest and default payments in effect at that time. The Company will
use its best efforts to obtain promptly shareholder approval pursuant to NASD
Rule 4460(i) authorizing the issuance of all Common Shares and Warrant Shares
issuable upon the conversion of any Debentures or the exercise of any Warrants,
including by calling a special meeting of such shareholders and having the
Company's Board of Directors recommend such approval in a proxy statement.
Section 3.15 Intentionally omitted.
SECTION 3.16 CONVERSION OF EXISTING DEBENTURES. The Investor
agrees to deliver, within twenty (20) Trading Days after the Closing, conversion
notices for debentures previously acquired from the Company pursuant to
Convertible Debenture Purchase Agreements, dated as of December 22, 1998 and
January 26, 1999, respectively. However, the foregoing obligation is conditioned
upon the shares of Common Stock into which such debentures are convertible being
subject to Effective Registration at all times commencing with the date hereof
through the conversion date.
SECTION 3.17 ACKNOWLEDGEMENT AND RELEASE. Investor releases all
claims against the Company arising out of the Company's failure to provide
proper notice to the Investor pursuant to Section 3.9(a) of the Convertible
Debenture Purchase Agreements dated December 22, 1998 and January 26, 1999 with
respect to Common Stock private financing in the amount of $17.3 million
consummated on or about September 1, 1999.
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 Investor 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 INVESTOR'S REPRESENTATIONS AND
WARRANTIES. The representations and warranties of the Investor will be true and
correct in all material respects as of the date when made and as of the Closing
Date as though made at that time (except for representations and warranties as
of an earlier date, which will be true and correct in all material respects as
of such date).
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(b) PERFORMANCE BY THE INVESTOR. The Investor shall have
performed all agreements and satisfied all conditions required to be performed
or satisfied by such Investor at or prior to the Closing.
(c) NO INJUNCTION. No statute, rule, regulation,
executive order, decree, ruling or injunction shall have been enacted, entered,
promulgated or endorsed by any court or governmental authority of competent
jurisdiction which prohibits the consummation of any of the transactions
contemplated by this Agreement or the Registration Rights Agreement or the
Debentures or the Warrants.
Section 4.2 CONDITIONS PRECEDENT TO THE OBLIGATION OF THE
INVESTOR TO PURCHASE THE DEBENTURES. The obligation hereunder of the Investor to
acquire and pay for the Debentures at the Closing (unless otherwise specified)
is subject to the satisfaction, at or before the Closing, of each of the
applicable conditions set forth below. These conditions are for the Investor's
benefit and may be waived by the Investor at any time in its sole discretion.
(a) ACCURACY OF THE COMPANY'S REPRESENTATIONS AND
WARRANTIES. The representations and warranties of the Company shall be true and
correct in all material respects as of the date when made and as of the Closing
Date as though made at that time (except for representations and warranties as
of an earlier date, which shall be true and correct in all material respects as
of such date).
(b) PERFORMANCE BY THE COMPANY. The Company shall have
performed all agreements and satisfied all conditions required to be performed
or satisfied by the Company at or prior to the Closing.
(c) 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 Investor
shall have received an opinion of the general counsel of the Company, Xxxxx X.
Xxxxxxx, in the form attached hereto as EXHIBIT 4.2(E) and such other opinions,
certificates and documents as the Investor or their counsel shall reasonably
require incident to the Closing.
(f) REGISTRATION RIGHTS AGREEMENT. The Company and the
Investor shall have executed and delivered the Registration Rights Agreement in
the form and substance of EXHIBIT 4.2(F) attached hereto.
(g) ADVERSE CHANGES. Except as otherwise disclosed in the
Pre-Agreement SEC Documents, since December 31, 1998, no event which had or is
likely to have, in the reasonable judgment of the Investor, a Material Adverse
Effect on the Company or any of its direct or indirect subsidiaries shall have
occurred.
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(h) OFFICER'S CERTIFICATE. The Company shall have
delivered to the Investor a certificate in form and substance satisfactory to
the Investor and the Investor'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.
(i) DEBENTURES AND WARRANTS. The Investor shall have
received certificates representing the Debentures and Warrants in the form and
substance of EXHIBIT 1.1A and EXHIBIT 1.1B hereto.
(j) DUE DILIGENCE. The Investor shall have completed its
financial, accounting, operational and legal due diligence in a manner
satisfactory to such Investor in its sole discretion.
ARTICLE 5
LEGEND AND STOCK
The Company will issue one or more certificates representing the
Debentures and the Warrants in the name of the Investor and in such
denominations to be specified by the Investor prior to (or from time to time
subsequent to) Closing. Each certificate representing the Debentures and the
Warrants and any shares of Common Stock issued upon conversion or exercise
thereof initially shall be stamped or otherwise imprinted with a legend
substantially in the following form:
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933 OR ANY STATE SECURITIES LAWS. THEY MAY NOT BE SOLD OR OFFERED FOR
SALE EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SAID
ACT AND ANY APPLICABLE STATE SECURITIES LAW OR AN APPLICABLE EXEMPTION
FROM SUCH REGISTRATION REQUIREMENTS.
The Company agrees to reissue Debentures and Warrants without the
legend set forth above at such time as (i) the holder thereof is permitted to
dispose of such Debentures and/or Warrants and Common Stock issuable upon
conversion or exercise thereof pursuant to Rule 144(k) under the Act, or (ii)
such Debentures and/or Warrants are sold to a purchaser or purchasers who (in
the opinion of counsel to the seller or such purchaser(s), in form and substance
reasonably satisfactory to the Company and its counsel) are able to dispose of
such shares publicly without registration under the Act.
Prior to the Registration Statement (as defined in the Registration
Rights Agreement) being declared effective, any Common Shares issued pursuant to
conversion of Debentures or Warrant Shares issued upon exercise of the Warrants
shall bear a legend in the same form as the legend indicated above. Upon such
Registration Statement becoming effective, the Company agrees to promptly, but
no later than three (3) business days thereafter, issue new certificates
representing such Common Shares and Warrant Shares without such legend. Any
Common Shares issued pursuant to conversion of Debentures or Warrant Shares
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issued upon exercise of the Warrants after the Registration Statement has become
effective shall be free and clear of any legends, transfer restrictions and stop
orders. Notwithstanding the removal of such legend, the Investor agrees to sell
the Common Shares and Warrant Shares represented by the new certificates in
accordance with the applicable prospectus delivery requirements (if copies of a
current prospectus are provided to such Investor by the Company) or in
accordance with an exception from the registration requirements of the Act.
Nothing herein shall limit the right of any holder to pledge these
securities pursuant to a bona fide margin account or lending arrangement.
ARTICLE 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 Investor 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 INVESTOR (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 INVESTOR CONSENTS TO
PROCESS BEING SERVED IN ANY SUCH SUIT, ACTION OR PROCEEDING BY MAILING A COPY
THEREOF TO SUCH PARTY AT THE ADDRESS IN EFFECT FOR NOTICES TO IT UNDER THIS
AGREEMENT AND AGREES THAT SUCH SERVICE SHALL CONSTITUTE GOOD AND SUFFICIENT
SERVICE OF PROCESS AND NOTICE THEREOF. NOTHING IN THIS PARAGRAPH SHALL AFFECT OR
LIMIT ANY RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY APPLICABLE
LAW.
(c) THE COMPANY AND THE INVESTOR HEREBY WAIVES ALL RIGHTS
TO A TRIAL BY JURY.
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SECTION 6.3 ENTIRE AGREEMENT; AMENDMENT. This Agreement, together
with the Registration Rights Agreement, the Warrants, the Debentures and the
agreements and documents executed in connection herewith and therewith, contains
the entire understanding of the parties with respect to the matters covered
hereby and thereby and, except as specifically set forth herein or therein,
neither the Company nor any Investor makes any representation, warranty,
covenant or undertaking with respect to such matters. No provision of this
Agreement may be waived or amended other than by a written instrument signed by
the party against whom enforcement of any such amendment or waiver is sought.
SECTION 6.4 NOTICES. Any notice or other communication required
or permitted to be given hereunder shall be in writing by mail, facsimile or
personal delivery and shall be effective upon actual receipt of such notice.
The addresses for such communications shall be:
to the Company:
U.S. Plastic Lumber Corporation
0000 Xxxxxx Xxxx
Xxxxx 000 Xxxx
Xxxx Xxxxx, Xxxxxxx 00000
Attention: Xxxxx Xxxxxxx
Facsimile: (000) 000-0000
to the Investor:
To the Investor 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: Xxxxxxx X. Xxxxxxx, 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.
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
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any party to exercise any right hereunder in any manner impair the exercise of
any such right accruing to it thereafter.
SECTION 6.7 HEADINGS. The headings herein are for convenience
only, do not constitute a part of this Agreement and shall not be deemed to
limit or affect any of the provisions hereof.
SECTION 6.8 SUCCESSORS AND ASSIGNS. Except as otherwise provided
herein, this Agreement shall be binding upon and inure to the benefit of the
parties and their successors and permitted assigns. The parties hereto may amend
this Agreement without notice to or the consent of any third party. The Company
may not assign this Agreement or any rights or obligations hereunder without the
prior written consent of all Investors (which consent may be withheld for any
reason in their sole discretion), except that the Company may assign this
Agreement in connection with the sale of all or substantially all of its assets
provided that the Company is not released from any of its obligations hereunder,
such assignee assumes all obligations of the Company hereunder, and appropriate
adjustment of the provisions contained in this Agreement, the Registration
Rights Agreement, the Debentures and the Warrants is made, in form and substance
satisfactory to the Investors, to place the Investors in the same position as
they would have been but for such assignment, in accordance with the terms of
the Debentures and the Warrants. No Investor may assign this Agreement (in whole
or in part) or any rights or obligations hereunder without the consent of the
Company (which shall not be unreasonably withheld).
SECTION 6.9 NO THIRD PARTY BENEFICIARIES. This Agreement is
intended for the benefit of the parties hereto and their respective permitted
successors and assigns and is not for the benefit of, nor may any provision
hereof be enforced by, any other person.
SECTION 6.10 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY
AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK
APPLICABLE TO AGREEMENTS EXECUTED AND TO BE PERFORMED ENTIRELY WITHIN SUCH
STATE.
SECTION 6.11 SURVIVAL. The representations and warranties and the
agreements and covenants of the Company and the Investor contained herein shall
survive the Closing.
SECTION 6.12 EXECUTION. This Agreement may be executed in two or
more counterparts, all of which shall be considered one and the same agreement,
it being understood that all parties need not sign the same counterpart.
SECTION 6.13 PUBLICITY. The Company agrees that it will not
disclose, and will not include in any public announcement, the name of any
Investor without the express written agreement of such Investor, unless and
until such disclosure is required by law or applicable regulation, and then only
to the extent of such requirement. The Company agrees that it will deliver a
copy of any public announcement regarding the matters covered by this Agreement
23
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or any agreement and document executed herewith to the Investor and any public
announcement including the name of the Investor to such Investor, 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 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.
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 CORPORATION
By: /s/ Xxxxx X. Xxxxxxx
---------------------------------------
Name: Xxxxx X. Xxxxxxx
Title: Vice President and General Counsel
INVESTOR:
HALIFAX FUND, L.P.
By: THE PALLADIN GROUP, L.P.
Attorney-in-Fact
By:
---------------------------------------
Name:
Title:
[SIGNATURE PAGE TO U.S. PLASTIC LUMBER CORPORATION
DEBENTURE PURCHASE AGREEMENT]
25
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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 CORPORATION
By:
---------------------------------------
Name:
Title:
INVESTOR:
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 CORPORATION
DEBENTURE PURCHASE AGREEMENT]
25
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EXHIBITS AND SCHEDULES
Schedule I List of Investors
Exhibit 1.1A Form of Debenture
Exhibit 1.1B Form of Warrant
Schedule 2.1(a) List of Subsidiaries
Schedule 2.1(c) Capitalization; Preemptive Rights
Exhibit 2.1(c)(i) Certificate of Incorporation of the Company
Exhibit 2.1(c)(ii) By-Laws of the Company
Schedule 2.1(f) SEC Disclosures
Schedule 2.1(p) Litigation Disclosure
Schedule 2.1(s) Outstanding Securities Subject to Registration Rights, ETC.
Schedule 2.1(aa) Real Property
Exhibit 4.2(e) Opinion of Company Counsel
Exhibit 4.2(f) Registration Rights Agreement
28
SCHEDULE I
OUTSTANDING PRINCIPAL NUMBER
AMOUNT OF
INVESTOR OF DEBENTURES WARRANTS PURCHASE PRICE
-------- ---------------------- -------- --------------
HALIFAX FUND, LP $7,500,000 200,000 $7,500,000
c/o The Palladin Group, L.P.
Investment Manager
000 Xxxxxxxxx Xxxxxx
Xxxxxxxxx, Xxx Xxxxxx 00000
Attn: Xxxxxx Xxxxxxx
Tax I.D. No.:
Facsimile: (000) 000-0000
29
SCHEDULE 2.1(s)
LIST OF SUBSIDIARIES
SEE ATTACHED CORPORATE ORGANIZATIONAL CHART.
30
SCHEDULE 2.1(a)
COMPANY ORGANIZATION CHART
U.S. PLASTIC LUMBER CORP.
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SCHEDULE 2.1(c)
CAPITALIZATION; PREEMPTIVE RIGHTS
NONE.
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SCHEDULE 2.1 (f)
SEE LITIGATION DISCLOSURE REPORTS ATTACHED TO SCHEDULE 2.1 (p).
33
SCHEDULE 2.1 (p)
SEE ATTACHED LITIGATION DISCLOSURE REPORTS FROM XXXXX X. XXXXXXX, DATED JANUARY
17, 2000, AND BLANK ROME XXXXXXX AND XXXXXXXX, DATE JANUARY 19, 2000 TO KPMG,
LLP.
34
SCHEDULE 2.1(s)
OUTSTANDING SECURITIES SUBJECT TO REGISTRATION RIGHTS, ETC.
WARRANTS OF XXXXX X. XXXXXXX, XX., XXXXX X. XXXXXXX, XX., XXXXXXX XXXXXXX, AND
XXXXXX XXXXXXX TOTALING 500,000 SHARES IN THE AGGREGATE, EXERCISABLE AT $6.00
PER SHARE.
OPTIONS TO CERTAIN EMPLOYEES NOT PART OF THE 1999 STOCK OPTION PLAN, TOTALING
825,000 SHARES IN AGGREGATE, EXERCISABLE AT $6.00 PER SHARE.
35
SCHEDULE 2.1 (aa)
REAL PROPERTY, LEASEHOLDS AND CERTAIN OTHER INTEREST, ETC.
SEE ATTACHED LIST.
