EXHIBIT 10.5
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT ("AGREEMENT"), dated as of September 24,
2002, by and between U.S. Plastic Lumber Corp. (the "COMPANY") and Halifax Fund,
L.P. ("HALIFAX").
W I T N E S S E T H:
The Company has issued and sold to Halifax (i) a warrant, issued on
June 15, 2001, exercisable into 250,000 shares of common stock, par value
$0.0001, of the Company ("COMMON STOCK") and (ii) a warrant, issued on August
16, 2001, exercisable into 250,000 shares of Common Stock (collectively, the
"WARRANTS"). The shares of Common Stock issuable upon exercise of the Warrants
are referred to herein as the "WARRANT SHARES".
The Company and Halifax have entered into an Exchange and Repurchase
Agreement, dated as of September 24, 2002 (the "EXCHANGE AGREEMENT"), whereby
the Company has agreed to exchange certain securities held by Halifax for, among
other things, a 10% Subordinated Convertible Debenture (the "CONVERTIBLE
DEBENTURE"). In consideration of the mutual promises, representations,
warranties, covenants and conditions set forth in the Exchange Agreement and
this Agreement, the Company and Halifax agree as follows:
1. CERTAIN DEFINITIONS. Capitalized terms used herein and not otherwise
defined shall have the respective meaning ascribed thereto in the Exchange
Agreement, the Warrants or the Convertible Debenture. As used in this Agreement,
the following terms shall have the following meanings:
"BUSINESS DAY" means any day other than a Saturday, Sunday or
any other day on which the New York Stock Exchange or commercial banks in the
city of New York are authorized or required to close.
"CLOSING" and "CLOSING DATE" shall have the meanings ascribed
to such terms in the Exchange Agreement.
"COMMISSION" or "SEC" shall mean the Securities and Exchange
Commission or any other federal agency at the time administering the Securities
Act.
"DEFAULT PAYMENT RATE" shall have the meaning set forth in
Section 2(b)(i).
"HOLDER" and "HOLDERS" shall mean Halifax and any transferee
of the Convertible Debenture, Warrants, Warrant Shares or Registrable
Securities, other than any such securities that have been sold to the public
pursuant to an effective registration statement or pursuant to Rule 144 under
the Securities Act, or that have been sold in a private transaction and the
transferor's rights have not been duly assigned in accordance with paragraph 11
of this Agreement.
"HOLDERS' COUNSEL" shall mean a single law firm, designated as
counsel for the Holders by the Holders of a majority of the aggregate number of
Registrable Securities then issued or issuable (without regard to any
limitations on such issuance).
"REGISTRABLE SECURITIES" shall mean: (i) the Warrant Shares
issued or issuable to a Holder upon exercise of the Warrants; (ii) any shares of
Common Stock issued or issuable to a Holder upon the conversion or exercise of
the Convertible Debenture or any warrant or other security that is convertible
or exercisable into shares of Common Stock (the Convertible Debenture and any
such warrant or other security being collectively referred to herein as
"CONVERTIBLE SECURITIES"), but only to the extent that such shares of Common
Stock are not freely saleable to the public by such Holder pursuant to Rule
144(k) under the Securities Act (or any successor provision) assuming that no
cash is paid by such Holder to the Company in connection with such exercise or
conversion; and (iii) any shares of capital stock issued or issuable from time
to time (with any adjustments) in replacement of, in exchange for or otherwise
in respect of (whether as a result of a stock split, stock dividend, or
otherwise) the shares of Common Stock described in (i) or (ii) above, the
Warrants or any Convertible Securities.
The terms "REGISTER", "REGISTERED" and "REGISTRATION" shall
refer to a registration effected by preparing and filing a registration
statement in compliance with the Securities Act and applicable rules and
regulations thereunder (including without limitation Rule 415 thereunder), and
the declaration or ordering of the effectiveness of such registration statement.
"REGISTRATION EXPENSES" shall mean all expenses incurred by
the Company in connection with fulfilling its obligations under this Agreement,
including, without limitation, all registration and filing fees, printing
expenses, fees and disbursements of counsel for the Company, "Blue Sky" fees and
expenses, reasonable fees and disbursements of Holders' Counsel for a "due
diligence" examination of the Company and review of the Registration Statement
and related documents, and the expense of any special audits incident to or
required by any such registration (but excluding the compensation of regular
employees of the Company, which shall be paid in any event by the Company);
PROVIDED that the Company shall not be obligated to pay fees and expenses of
Holders' Counsel in excess of $2,500 in connection with the due diligence
examination of the Company and review of the Registration Statement described
above.
"REGISTRATION STATEMENT" shall have the meaning set forth in
Section 2(a).
"REGULATION D" shall mean Regulation D as promulgated pursuant
to the Securities Act, and as subsequently amended.
"SECURITIES ACT" or "ACT" shall mean the Securities Act of
1933, as amended.
"SELLING EXPENSES" shall mean all underwriting discounts and
selling commissions applicable to the sale of Registrable Securities and all
fees and disbursements of counsel for the Holders not included within
"Registration Expenses".
"SUSPENSION NOTICE" shall have the meaning set forth in
Section 2(a)(v).
-2-
2. REGISTRATION REQUIREMENTS. Subject to the terms and conditions
hereof, the Company shall use its reasonable best efforts to effect the
registration of the Registrable Securities (including without limitation the
execution of an undertaking to file post-effective amendments, appropriate
qualification under applicable "Blue Sky" or other state securities laws and
appropriate compliance with applicable regulations issued under the Securities
Act) as would permit or facilitate the sale or distribution of all the
Registrable Securities in the manner (including manner of sale) and in all
states reasonably requested by a Holder. Such reasonable best efforts by the
Company shall include the following:
(a) The Company shall:
(i) on or before the earlier to occur of (i) the
fifteenth (15th) day following the date on which the
Company becomes eligible to file a registration
statement on Form S-3; (ii) the thirtieth (30th) day
following a determination or acknowledgement by the
Company that Halifax (or any Affiliate of Halifax) is
an Affiliate of the Company; and (iii) April 15, 2003
(the "Filing Deadline"), prepare and file a
registration statement with the Commission pursuant
to Rule 415 under the Securities Act on, if the
Company is then eligible to use such form, Form S-3
under the Securities Act, or in the event that the
Company is ineligible to use such form, such other
form as the Company is eligible to use under the
Securities Act, covering the Registrable Securities
(such registration statement, including all of the
documents incorporated or deemed to be incorporated
by reference therein, is referred to herein as the
"REGISTRATION STATEMENT"), which Registration
Statement, to the extent allowable under the
Securities Act and the rules promulgated thereunder
(including Rule 416), shall state that such
Registration Statement also covers such indeterminate
number of additional shares of Common Stock as may
become issuable upon exercise of the Warrants or
conversion or exercise of any Convertible Securities;
PROVIDED, HOWEVER, that no Holder shall be identified
as an "underwriter" in the Registration Statement
with respect to the sale of Registrable Securities.
The number of shares of Common Stock initially
included in such Registration Statement shall be no
less than one and one-half times the number of
Warrant Shares issuable upon exercise of the Warrants
without regard to any limitation on a Holder's
ability to exercise the Warrants. Thereafter, the
Company shall use its reasonable best efforts to
cause such Registration Statement to be declared
effective as soon as possible, and in any event prior
to 90 days following the Filing Deadline (or, if the
staff of the SEC has informed the Company that the
Registration Statement will be the subject of a full
review, and the Company has used and continues to use
its reasonable best efforts in obtaining
effectiveness of the Registration Statement, one
hundred and twenty (120) days). The Company shall
-3-
provide each Holder and Holders' Counsel reasonable
opportunity to review any such Registration Statement
or amendment or supplement thereto, or any response
to comments of the staff of the SEC, prior to filing
or submission. Without limiting the foregoing, the
Company will promptly respond to all SEC comments,
inquiries and requests, and shall request
acceleration of effectiveness at the earliest
possible date. If the Company is not initially
eligible to use Form S-3 on the Filing Deadline, it
will amend its Form S-1 or Form S-2 to a Form S-3 (or
file a new Registration Statement on Form S-3, as
appropriate) at such time that it becomes eligible to
do so. The Company shall notify the Holders in
writing (A) within one day following each of the
SEC's clearance to request acceleration of
effectiveness of the Registration Statement and the
Company's request for such acceleration of
effectiveness and (B) immediately upon the SEC's
declaration of such effectiveness.
(ii) Prepare and file with the SEC such amendments and
supplements to such Registration Statement and the
prospectus used in connection with such Registration
Statement as may be necessary to comply with the
provisions of the Act with respect to the disposition
of all securities covered by such Registration
Statement and notify each Holder of the filing and
effectiveness of such amendments or supplements.
(iii) After the Registration Statement is declared
effective, furnish to each Holder such numbers of
copies of a current prospectus conforming with the
requirements of the Act, copies of the Registration
Statement, any amendment or supplement thereto and
any documents incorporated by reference therein and
such other documents as such Holder may reasonably
require in order to facilitate the disposition of
Registrable Securities owned by such Holder.
(iv) Use its reasonable best efforts to register and
qualify the securities covered by such Registration
Statement under such other securities or "Blue Sky"
laws of such states and jurisdictions as shall be
reasonably requested by each Holder; provided that
the Company shall not be required in connection
therewith or as a condition thereto (a) to qualify to
do business or to file a general consent to service
of process in any such states or jurisdictions or (b)
to subject itself to taxation in any such state or
jurisdiction if it is not now so subject.
(v) Deliver to each Holder a written notice (a
"SUSPENSION NOTICE") immediately of the happening of
any event as a result of which the prospectus
(including any supplements thereto or thereof and any
information incorporated or deemed to be incorporated
by reference therein) included in such Registration
Statement, as then in effect, includes an untrue
statement of material fact or omits to state a
material fact required to be stated therein or
necessary to make the statements therein not
misleading in light of the circumstances then
existing, and use its reasonable best efforts to
promptly update and/or correct such prospectus, and
immediately notify each Holder in writing when it has
done so.
-4-
(vi) Notify each Holder immediately of the issuance by the
Commission or any state securities commission or
agency of any stop order suspending the effectiveness
of the Registration Statement or the initiation of
any proceedings for that purpose. The Company shall
use its reasonable best efforts to prevent the
issuance of any stop order and, if any stop order is
issued, to obtain the lifting thereof at the earliest
possible time.
(vii) Permit Holders' Counsel to review the Registration
Statement and all amendments and supplements thereto
within a reasonable period of time prior to each
filing, and shall not file any document in a form to
which such counsel reasonably objects.
(viii) Use its reasonable best efforts to list the
Registrable Securities covered by such Registration
Statement with all securities exchange(s) and/or
markets on which the Common Stock is then listed or
traded and prepare and file any required filings with
the National Association of Securities Dealers, Inc.
or any exchange or market where the Common Stock is
then listed or traded.
(ix) Take all steps necessary to enable Holders to avail
themselves of the prospectus delivery mechanism set
forth in Rule 153 (or successor thereto) under the
Act.
(b) Each of the following events shall be deemed to be an
"INTERFERING EVENT" hereunder:
(i) DELAY IN EFFECTIVENESS OF REGISTRATION STATEMENT. In
the event that such Registration Statement has not
been declared effective within ninety (90) days from
the Filing Deadline (or, if the staff of the SEC has
informed the Company that the Registration Statement
will be the subject of a full review, and the Company
has used and continues to use its reasonable best
efforts in obtaining effectiveness of the
Registration Statement, one hundred and twenty (120)
days), or an amendment thereto or new Registration
Statement filed pursuant to paragraph (g) below has
not been declared effective within ninety (90) days
from the date on which the notice specified in such
paragraph is received by the Company, then the
Company shall pay in cash to each Holder a default
payment at a rate (the "DEFAULT PAYMENT RATE") equal
to two and one half percent (2.5%) of an amount
determined by multiplying (x) the number of
Registrable Securities issuable or issued and then
held by such Holder (such number of issuable
securities to be calculated without regard to any
limitation on the exercise or conversion of the
Warrants or any Convertible Securities) by (y) the
Market Price for the Common Stock on the date such
Interfering Event first occurs (the product of (x)
-5-
and (y) being referred to herein as the "AGGREGATE
MARKET VALUE"), for each 30-day period (or portion
thereof) during the period from and after the last
day of either such 90-day period (or 120-day period,
as provided above) until such Registration Statement
or amendment thereto has been declared effective.
(ii) NO LISTING; PREMIUM PRICE REDEMPTION FOR DELISTING OF
CLASS OF SHARES. In the event that the Company fails,
refuses or is unable to continue the listing or
quotation of the Common Stock on or with an Approved
Market at any time during the period ("LISTING
PERIOD") commencing on the date hereof and continuing
thereafter for so long as any Registrable Securities
are outstanding, then the Company shall pay in cash
to each Holder a default payment at the Default
Payment Rate times the Aggregate Market Value of the
Registrable Securities issuable or issued and then
held by such Holder (such number of issuable
securities to be calculated without regard to any
limitation on the exercise or conversion of the
Warrants or any Convertible Securities) for each
30-day period (or portion thereof) during the Listing
Period from and after such failure, refusal or
inability to so list the Common Stock until the
Common Stock is so listed or quoted.
(iii) BLACKOUT PERIODS. In the event any Holder is unable
to sell all of its Registrable Securities under the
Registration Statement, other than during (A) a
Permitted Suspension Period (as defined in paragraph
2(f) below) or (B) in addition to any Permitted
Suspension Period, any Post-Effective Amendment
Period (as defined below), including without
limitation by reason of any suspension or stop order
with respect to the Registration Statement or the
fact that an event has occurred as a result of which
the prospectus (including any supplements thereto)
included in such Registration Statement then in
effect includes an untrue statement of material fact
or omits to state a material fact required to be
stated therein or necessary to make the statements
therein not misleading in light of the circumstances
then existing, or the number of shares of Common
Stock covered by the Registration Statement is
insufficient at such time to make such sales, but
excluding any general suspension of trading of all
securities on the market where the Common Stock is
traded, then the Company shall pay in cash to each
Holder a default payment at the Default Payment Rate
times the Aggregate Market Value of the Registrable
Securities issuable or issued and then held by such
Holder (such number of issuable securities to be
calculated without regard to any limitation on the
exercise or conversion of the Warrants or any
Convertible Securities) for each 30-day period (or
portion thereof) from and after the date on which
such Holder is unable to sell its Registrable
Securities under the Registration Statement (after
-6-
giving effect to any Permitted Suspension Period)
until such Holder is able to sell all of the
Registrable Securities under the Registration
Statement. For purposes hereof, "POST-EFFECTIVE
AMENDMENT PERIOD" shall mean a period, not to exceed
thirty (30) consecutive Business Days or ninety (90)
calendar days in any twelve month period, that occurs
while the Company is ineligible to use Form S-3 and
during which the Company is required, on the
reasonable advice of its outside counsel, to file a
post-effective amendment to the Registration
Statement in order to correct or supplement an untrue
statement of material fact or an omission to state a
material fact required to be stated therein or in the
related prospectus or necessary to make the
statements therein or in the related prospectus not
misleading in light of the circumstances then
existing or otherwise to comply with applicable
securities laws and regulations.
(iv) CONVERSION DEFICIENCY; PREMIUM PRICE REDEMPTION FOR
CONVERSION DEFICIENCY. In the event that the Company
does not have a sufficient number of shares of Common
Stock available to satisfy the Company's obligations
to a Holder upon receipt of a Conversion Notice (as
defined in the Debenture) or is otherwise unable or
unwilling to issue such shares (including without
limitation by reason of the limit described in
Section 10 below) in accordance with the terms of the
Warrants or any Convertible Security upon the
exercise or conversion thereof, then the Company
shall pay in cash to such Holder a default payment at
the Default Payment Rate times the Aggregate Market
Value of the Registrable Securities issuable or
issued and then held by such Holder (such number of
issuable securities to be calculated without regard
to any limitation on the exercise or conversion of
the Warrants or any Convertible Securities), for each
30-day period (or portion thereof) that the Company
fails or refuses to issue such shares in accordance
with the terms of such exercise or conversion; and
(v) DEFAULT PAYMENT TERMS; STATUS OF UNPAID DEFAULT
PAYMENTS. All default payments (which payments shall
be pro rata on a per diem basis for any period of
less than 30 days) required to be made in connection
with the above provisions shall be paid in cash at
any time upon demand, and whether or not a demand is
made, by the tenth (10th) day of each calendar month
for each partial or full 30-day period occurring
prior to that date. Until paid as required in this
Agreement, default payments shall be deemed added to,
and a part of, the Obligations (as defined in the
Security Agreement).
(vi) CUMULATIVE REMEDIES. Each default payment triggered
by an Interfering Event shall be in addition to each
other default payment triggered by another
Interfering Event; PROVIDED, however, that in no
event shall the Company be obligated to pay to any
Holder default payments in an aggregate amount
greater than the Default Payment Rate times the
Aggregate Market Value of the Registrable Securities
issuable or issued and then held by such Holder (such
number of issuable securities to be calculated
without regard to any limitation on the exercise or
conversion of the Warrants or any Convertible
Securities) for any 30-day period (or portion
thereof). The default payments provided for above are
in addition to and not in lieu or limitation of any
other rights the Holders may have at law, in equity
or under the terms of the Exchange Agreement, the
-7-
Warrants, this Agreement or any other Transaction
Document, including without limitation the right to
specific performance. Each Holder shall be entitled
to specific performance of any and all obligations of
the Company in connection with the registration
rights of the Holders hereunder.
(vii) CERTAIN ACKNOWLEDGMENTS. The Company acknowledges
that the occurrence of an Interfering Event will
cause the Holders to suffer damages in an amount that
will be difficult to ascertain, including without
limitation damages resulting from the loss of
liquidity in the Registrable Securities and the
additional investment risk in holding the Registrable
Securities. Accordingly, the parties agree that it is
appropriate to include in this Agreement the
foregoing provisions for default payments in order to
compensate the Holders for such damages. The parties
acknowledge and agree that the default payments set
forth above represent the parties' good faith effort
to quantify such damages and, as such, agree that the
form and amount of such default payments are
reasonable and will not constitute a penalty.
(c) If the Holder(s) intend to distribute the Registrable
Securities by means of an underwriting, the Holder(s) shall so advise the
Company. Any such underwriting may only be administered by investment bankers
reasonably satisfactory to the Company. The Company shall only be obligated to
permit one underwritten offering, which offering shall be determined by the
Holders of a majority of the Registrable Securities then issued or issuable.
(d) If the Registrable Securities are to be sold in an
underwritten offering, the Company shall:
(i) make such representations and warranties to the
Holders and the underwriter or underwriters in form,
substance and scope as are customarily made by
issuers to underwriters in secondary offerings;
(ii) cause to be delivered to the sellers of Registrable
Securities and the underwriter or underwriters
opinions of independent counsel to the Company, dated
the date of delivery of any Registrable Securities
sold pursuant thereto, which counsel and opinions (in
form, scope and substance) shall be reasonably
satisfactory to the Holders and the underwriter(s)
and their counsel and covering, without limitation,
such matters as the due authorization and issuance of
the securities being registered and compliance as to
form with federal securities laws by the Company in
connection with the authorization, issuance and
registration thereof and other matters that are
customarily given to underwriters in underwritten
offerings, addressed to the Holders and each
underwriter;
(iii) cause to be delivered, at the time of delivery of any
Registrable Securities sold pursuant thereto, a
"comfort" letter from the Company's independent
certified public accountants addressed to the Holders
and each underwriter stating that such accountants
-8-
are independent public accountants within the meaning
of the Securities Act and the applicable published
rules and regulations thereunder, and otherwise in
customary form and covering such financial and
accounting matters as are customarily covered by
letters of the independent certified public
accountants delivered in connection with secondary
offerings;
(iv) enter into an underwriting agreement which shall
include customary indemnification and contribution
provisions to and from the underwriters and
procedures for secondary underwritten offerings; and
(v) deliver such documents and certificates as may be
reasonably requested by the Holders of the
Registrable Securities being sold or the managing
underwriter or underwriters to evidence compliance
with clause (i) above and with any customary
conditions contained in the underwriting agreement,
if any.
(e) The Company shall make available for inspection by each
Holder, representative(s) of all the Holders together, any underwriter
participating in any disposition pursuant to a Registration Statement, and any
attorney or accountant retained by any Holder or underwriter, all financial and
other records customary for purposes of the Holders' due diligence examination
of the Company and review of any Registration Statement, all SEC Documents (as
defined in the Exchange Agreement) filed subsequent to the Closing, pertinent
corporate documents and properties of the Company, and cause the Company's
officers, directors and employees to supply all information reasonably requested
by any such representative, underwriter, attorney or accountant in connection
with such Registration Statement, provided that such parties agree in writing to
keep such information confidential.
(f) Subject to Section 2(b) above, in connection with a
proposed or pending merger, acquisition, financing or similar transaction, the
Company may, for a period of not more than ten (10) consecutive Business Days or
a total of not more than thirty (30) calendar days in any twelve (12) month
period (a "PERMITTED SUSPENSION PERIOD"), delay the disclosure of material
non-public information concerning such transaction the public disclosure of
which at the time would not be, in the good faith opinion of the Board of
Directors of the Company, in the best interests of the Company and which may,
based on the written advice of outside counsel, be delayed under applicable law
or regulation (a "DISCLOSURE DELAY"). The Company will use its reasonable best
efforts to cause each Disclosure Delay to terminate at the earliest possible
date.
(g) In the event that, subsequent to the date on which the
initial Registration Statement filed hereunder is declared effective, a Holder
wishes to include for resale under such Registration Statement Registrable
Securities held by such Holder that were not included on such initial
Registration Statement, the Company shall either amend such Registration
Statement to include such securities, or file a new Registration Statement, or
both, upon receipt of written notice to such effect from such Holder. The
-9-
Company shall promptly file such amendment or new Registration Statement, as the
case may be, within ten (10) Business Days of receiving such notice, and shall
use its reasonable best efforts to (i) cause any such amendment or additional
Registration Statement, when filed, to become effective under the Securities Act
as soon as practicable thereafter, and (ii) keep any such additional
Registration Statement effective during the period described in Section 5 below.
All of the registration rights and remedies under this Agreement shall apply to
the registration of such newly reserved shares and such new Registrable
Securities, including without limitation the provisions providing for default
payments contained herein.
3. EXPENSES OF REGISTRATION. All Registration Expenses incurred in
connection with any registration, qualification or compliance with registration
pursuant to this Agreement shall be borne by the Company, and all Selling
Expenses of a Holder shall be borne by such Holder.
4. REGISTRATION ON FORM S-3; OTHER FORMS. The Company shall use its
reasonable best efforts to qualify for registration on Form S-3 or any
comparable or successor form or forms, or in the event that the Company is
ineligible to use such form, such form as the Company is eligible to use under
the Securities Act. Halifax acknowledges that, as of the Closing Date, the
Company is ineligible to use Form S-3.
5. REGISTRATION PERIOD. In the case of the registration effected by the
Company pursuant to this Agreement, the Company will use its reasonable best
efforts to keep such registration effective until the earliest to occur of the
date on which (i) all the Holders have completed the public sales or
distribution described in the Registration Statement relating thereto, (ii) such
Registrable Securities may be sold under Rule 144(k) (provided that the
Company's transfer agent has accepted an instruction from the Company to such
effect) or (iii) there are no Registrable Securities outstanding.
6. INDEMNIFICATION.
(a) COMPANY INDEMNITY. The Company will indemnify each Holder,
each of its officers, directors and partners, and each person controlling such
Holder, within the meaning of Section 15 of the Securities Act and the rules and
regulations thereunder with respect to which registration, qualification or
compliance has been effected pursuant to this Agreement, and each underwriter,
if any, and each person who controls such underwriter, within the meaning of
Section 15 of the Securities Act and the rules and regulations thereunder,
against all claims, losses, damages and liabilities (or actions in respect
thereof) arising out of or based on any untrue statement (or alleged untrue
statement) of a material fact contained in any prospectus, offering circular or
other document prepared by or on behalf of the Company (including any related
registration statement, notification or the like) incident to any such
registration, qualification or compliance, or based on any omission (or alleged
omission) to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, and will reimburse each
Holder, each of its officers, directors and partners, and each person
controlling such Holder, each such underwriter and each person who controls any
such underwriter, for any legal and any other expenses reasonably incurred in
connection with investigating and defending any such claim, loss, damage,
liability or action, provided that the Company will not be liable in any such
-10-
case to a Holder to the extent that any such claim, loss, damage, liability or
expense arises out of or is based on any untrue statement or omission based upon
written information furnished to the Company by such Holder or the underwriter
(if any) therefor and stated to be specifically for use therein, and provided,
further, that the Company shall not be liable for any claim, loss, damage,
liability, or expense (i) arising from an offer or sale made under the
Registration Statement occurring after such Holder has received a Suspension
Notice, or (ii) if the Holder fails to deliver at or prior to delivery of the
securities being sold, a prospectus that is amended or supplemented, and such
prospectus, as amended or supplemented, would have corrected the untrue
statement or omission or alleged untrue statement or omission of a material fact
contained in the prospectus delivered by the Holder, so long as the prospectus,
as so amended or supplemented, has been delivered to such Holder at least one
(1) Business Day prior to the date on which it delivers such securities to the
purchaser thereof. The indemnity agreement contained in this Section 6(a) shall
not apply to amounts paid in settlement of any such loss, claim, damage,
liability or action if such settlement is effected without the consent of the
Company (which consent will not be unreasonably withheld).
(b) HOLDER INDEMNITY. Each Holder will, severally and not
jointly, if Registrable Securities held by it are included in the securities as
to which such registration, qualification or compliance is being effected,
indemnify the Company, each of its directors, officers, partners, and each
underwriter, if any, of the Company's securities covered by such a registration
statement, each person who controls the Company or such underwriter within the
meaning of Section 15 of the Securities Act and the rules and regulations
thereunder, each other Holder (if any), and each of their officers, directors
and partners, and each person controlling such other Holder(s), against all
claims, losses, damages and liabilities (or actions in respect thereof) arising
out of or based on any untrue statement (or alleged untrue statement) of a
material fact contained in any such registration statement, prospectus, offering
circular or other document prepared by or on behalf of the Company, or any
omission (or alleged omission) to state therein a material fact required to be
stated therein or necessary to make the statement therein not misleading, and
will reimburse the Company and such other Holder(s) and their directors,
officers and partners, underwriters or control persons for any legal or any
other expenses reasonably incurred in connection with investigating and
defending any such claim, loss, damage, liability or action, in each case to the
extent, but only to the extent, that such untrue statement (or alleged untrue
statement) or omission (or alleged omission) is made in such registration
statement, prospectus, offering circular or other document in reliance upon and
in conformity with written information furnished to the Company by such Holder
and stated to be specifically for use therein, and provided that the maximum
amount for which such Holder shall be liable under this indemnity shall not
exceed the net proceeds received by such Holder from the sale of the Registrable
Securities. The indemnity agreement contained in this Section 6(b) shall not
apply to amounts paid in settlement of any such claims, losses, damages or
liabilities if such settlement is effected without the consent of such Holder
(which consent shall not be unreasonably withheld).
-11-
(c) PROCEDURE. Each party entitled to indemnification under
this Section 6 (the "Indemnified Party") shall give notice to the party required
to provide indemnification (the "Indemnifying Party") promptly after such
Indemnified Party has actual knowledge of any claim as to which indemnity may be
sought, and shall permit the Indemnifying Party to assume the defense of any
such claim in any litigation resulting therefrom, provided that counsel for the
Indemnifying Party, who shall conduct the defense of such claim or any
litigation resulting therefrom, is reasonably satisfactory to the Indemnified
Party , and the Indemnified Party may participate in such defense at such
party's expense, and provided further that the failure of any Indemnified Party
to give notice as provided herein shall not relieve the Indemnifying Party of
its obligations under this Article except to the extent that the Indemnifying
Party is materially and adversely affected by such failure to provide notice. No
Indemnifying Party, in the defense of any such claim or litigation, shall,
except with the consent of each Indemnified Party, consent to entry of any
judgment or enter into any settlement which does not include as an unconditional
term thereof the giving by the claimant or plaintiff to such Indemnified Party
of a release from all liability in respect to such claim or litigation. No
Indemnifying Party shall be liable for any settlement of any such action
effected without its written consent (which consent shall not be unreasonably
withheld). Each Indemnified Party shall furnish such information regarding
itself or the claim in question as an Indemnifying Party may reasonably request
in writing and as shall be reasonably required in connection with the defense of
such claim and litigation resulting therefrom.
7. CONTRIBUTION. If the indemnification provided for in Section 6
herein is unavailable to the Indemnified Parties in respect of any losses,
claims, damages or liabilities referred to herein (other than by reason of the
exceptions provided therein), then each such Indemnifying Party, in lieu of
indemnifying each of such Indemnified Parties, shall contribute to the amount
paid or payable by each such Indemnified Party as a result of such losses,
claims, damages or liabilities as between the Company on the one hand and any
Holder on the other, in such proportion as is appropriate to reflect the
relative fault of the Company and of such Holder in connection with the
statements or omissions which resulted in such losses, claims, damages or
liabilities, as well as any other relevant equitable considerations. The
relative fault of the Company on the one hand and of any Holder on the other
shall be determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or omission or alleged omission to
state a material fact relates to information supplied by the Company or by such
Holder.
In no event shall the obligation of any Indemnifying Party to
contribute under this Section 7 exceed the amount that such Indemnifying Party
would have been obligated to pay by way of indemnification if the
indemnification provided for under Section 6(a) or 6(b) hereof had been
available under the circumstances.
The Company and the Holders agree that it would not be just
and equitable if contribution pursuant to this Section 7 were determined by PRO
RATA allocation (even if the Holders or the underwriters were treated as one
entity for such purpose) or by any other method of allocation which does not
take account of the equitable considerations referred to in the immediately
-12-
preceding paragraphs. The amount paid or payable by an Indemnified Party as a
result of the losses, claims, damages and liabilities referred to in the
immediately preceding paragraphs shall be deemed to include, subject to the
limitations set forth above, any legal or other expenses reasonably incurred by
such Indemnified Party in connection with investigating or defending any such
action or claim. No person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation.
8. SURVIVAL. The indemnity and contribution agreements contained in
Sections 6 and 7 shall remain operative and in full force and effect regardless
of (i) any termination of this Agreement or the Exchange Agreement or any
underwriting agreement, (ii) any investigation made by or on behalf of any
Indemnified Party or by or on behalf of the Company, and (iii) the consummation
of the sale or successive resales of the Registrable Securities.
9. INFORMATION BY HOLDERS. Each Holder shall furnish to the Company in
writing such information regarding such Holder and the distribution and/or sale
proposed by such Holder as the Company may reasonably request in writing and as
shall be reasonably required in connection with any registration, qualification
or compliance referred to in this Agreement within ten (10) Business Days of any
such request. The intended method or methods of disposition and/or sale (Plan of
Distribution) of such securities as so provided by such Holder shall be included
without alteration in the Registration Statement covering the Registrable
Securities and shall not be changed unless specifically requested in writing by
such Holder.
10. REPLACEMENT CERTIFICATES. The certificate(s) representing
Registrable Securities held by a Holder may be exchanged by such Holder at any
time and from time to time for certificates with different denominations
representing an equal aggregate number of such Registrable Securities, as
reasonably requested by such Holder upon surrendering the same. No service
charge will be made for such registration or transfer or exchange.
11. TRANSFER OR ASSIGNMENT. 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 rights granted to Halifax or any
other Holder by the Company under this Agreement may be transferred or assigned
(in whole or in part) to a transferee or assignee of Warrants or Convertible
Securities, as long as any such transfer or assignment is effected pursuant to
the applicable provisions of the Exchange Agreement; provided that the Company
must be given written notice by such transferring Holder at the time of or
within a reasonable time after said transfer or assignment, stating the name and
address of said transferee or assignee and identifying the securities with
respect to which such registration rights are being transferred or assigned; and
provided further that the transferee or assignee of such rights agrees in
writing to be bound by the provisions of this Agreement applicable to a Holder.
12. MISCELLANEOUS.
-13-
(a) REMEDIES. The Company and each Holder 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) JURISDICTION. The Company and each Holder (i) hereby
irrevocably submit to the non-exclusive jurisdiction of the federal and state
courts 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
waive, and agree not to assert in any such suit action or proceeding, any claim
that it is not personally subject to the jurisdiction of such court, that the
suit, action or proceeding is brought in an inconvenient forum or that the venue
of the suit, action or proceeding is improper. The Company and each Holder
consent 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 law.
(c) NOTICES. Any notice or other communication required or
permitted to be given hereunder shall be in writing by facsimile, mail 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 X. Xxxxxx Xxxx
Xxxxx 000 Xxxx
Xxxx Xxxxx, Xxxxxxx 00000
Facsimile: (000) 000-0000
Attention: Xxxxx Xxxxxxx
with a copy to:
Blank Rome Comisky & XxXxxxxx LLP
Xxx Xxxxx Xxxxxx
Xxxxxxxxxxxx, Xxxxxxxxxxxx 00000
Facsimile: (000) 000-0000
Attention: Xxxx X. Xxxxxx, Esq.
-14-
to Halifax:
Halifax Fund, L.P.
c/o The Palladin Group, L.P.
Investment Manager
000 Xxxxxxxxx Xxxxxx
Xxxxxxxxx, Xxx Xxxxxx 00000
Facsimile: (000) 000-0000
Attention: Xxxxxx Xxxxxxx/Xxxxxxx Xxxxxxx
with a copy to:
Xxxxx & Stachenfeld
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, XX 00000
Attn: Xxxxxx X. Xxxxxx, Esq.
Fax: 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.
(d) 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.
(e) 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.
(f) PUBLICITY. The Company agrees that it will not disclose,
and will not include in any public announcement, the name of any Holder without
its express written approval, unless and until such disclosure is required by
law or applicable regulation, and then only to the extent of such requirement.
The Company agrees to deliver a copy of any public announcement regarding the
matters covered by this Agreement or any agreement or document executed herewith
to each Holder and any public announcement including the name of a Holder to
such Holder, prior to the publication of such announcements.
(g) ENTIRE AGREEMENT. This Agreement, together with the
Exchange Agreement, the Warrants, any Convertible Securities and the other
Transaction Documents, contains the entire understanding and agreement of the
parties with respect to the registration of Registrable Securities, and may not
be modified or terminated except by a written agreement signed by both parties.
(h) GOVERNING LAW. This Agreement and the validity and
performance of the terms hereof shall be governed by and construed and enforced
in accordance with the internal laws of the State of New York applicable to
contracts executed and to be performed entirely in such State.
(i) JURY TRIAL. Each party hereto waives the right to a trial
by jury.
-15-
(j) TITLES. The titles used in this Agreement are used for
convenience only and are not to be considered in construing or interpreting this
Agreement.
[Signature page to follow]
-16-
In Witness Whereof, the parties hereto have caused this Agreement to
be duly executed as of the date first above written.
U.S. PLASTIC LUMBER CORP.
By: /s/ Xxxxx Xxxxxxx
--------------------------------
Name: Xxxxx Xxxxxxx
Title: Secretary
HALIFAX FUND, L.P.
By: THE PALLADIN GROUP, L.P.,
Attorney-in-Fact
By: Xxxxxxx Xxxxxxx
--------------------------------
Name: Xxxxxxx Xxxxxxx
Title: Counsel
-17-
