EXHIBIT 10.22
CONVERTIBLE NOTE
San Mateo, California
April 30, 1997 $399,201.60
FOR VALUE RECEIVED, EMCON, a California corporation (hereinafter called
the "Borrower"), hereby promises to pay to ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, or his
respective registered assigns (the "Holder") or order, the sum of Three Hundred
Ninety-Nine Thousand Two Hundred One Dollars and Sixty Cents ($399,201.60) (the
"Principal"), on May 1, 2002, and to pay interest on the unpaid principal
balance hereof at the rate of eight percent (8%) per annum from the date hereof
until the same becomes due and payable. Interest shall commence accruing on the
date hereof and shall be payable quarterly on each July 31, October 31, January
31 and April 30 beginning on July 31, 1997, with all interest remaining unpaid
at maturity due at such time. All payments of principal and interest shall be
made in lawful money of the United States of America. All payments shall be made
at the address of the Holder, as set forth in Section 6.4 hereof or as the
Holder shall hereafter give to the Borrower by written notice made in accordance
with the provisions of this Note.
The following terms shall apply to this Note:
ARTICLE I
PROHIBITION AGAINST PREPAYMENT
1.1 Borrower shall have no right to prepay this Note at any time.
ARTICLE II
CONVERSION INTO BORROWER'S STOCK
Holder shall have the right to convert the Principal into shares of EMCON
Common Stock pursuant to the terms of this Article II. In such event, any
accrued but unpaid interest shall be immediately due and payable.
2.1 Conversion Price. The number of shares of EMCON Common Stock into which
the Principal shall be converted shall be the amount of the Principal, divided
by the EMCON Conversion Price. The EMCON Conversion Price shall initially be Six
Dollars and Fifty Cents ($6.50), and shall be adjusted as set forth in Section
2.2. hereof.
2.2 Adjustment to EMCON Conversion Price. The EMCON Conversion Price shall
be adjusted as set forth in this Section 2.2.
(a) Subdivisions. In case Borrower shall at any time subdivide
the outstanding shares of EMCON Common Stock, the EMCON Conversion Price in
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effect immediately prior to such subdivision shall be proportionately decreased,
and in case the Company shall at any time combine the outstanding shares of
EMCON Common Stock, the EMCON Conversion Price in effect immediately prior to
such combination shall be proportionately increased, effective at the close of
business on the date of such subdivision or combination, as the case may be.
(b) Stock Dividends. In case Borrower shall at any time pay a
dividend with respect to EMCON Common Stock payable in EMCON Common Stock, then
the EMCON Conversion Price in effect immediately prior to the record date for
distribution of such dividend shall be adjusted to that price determined by
multiplying the EMCON Conversion Price in effect immediately prior to such
record date by a fraction (i) the numerator of which shall be the total number
of shares of EMCON Common Stock outstanding immediately prior to such dividend
and (ii) the denominator of which shall be the total number of shares of EMCON
Common Stock outstanding immediately after such dividend.
(c) Reclassification or Merger. In case of any
reclassification, change or conversion of the EMCON Common Stock (other than as
a result of a subdivision or combination described above and other than upon any
Acceleration Event, as defined below), Borrower shall have the right to receive,
upon exchange of this Note (which may occur at the option of the Holder only)
the kind and amount of shares of stock, other securities, money and property
receivable upon such reclassification, change or conversion by a holder of the
number of shares of EMCON Common Stock into which this Note could then be
exchanged. The provisions of this subparagraph (c) shall similarly apply to
successive reclassifications, changes, and conversions.
2.3 Authorized Shares. EMCON convenants that during the period the
conversion right set forth in this Article exists, EMCON will reserve from the
authorized and unissued EMCON Common Stock a sufficient number of shares to
provide for the issuance of EMCON Common Stock upon the full conversion of the
Principal. EMCON represents that upon issuance, such shares will be duly and
validly issued, fully paid and non-assessable.
2.4 Method of Exchange. Except as otherwise agreed by EMCON and the
Holder, the Principal balance of the Note may be converted in whole or in part
(provided at least $250,000 in Principal is converted) in up to two installments
by (i) submitting to EMCON a conversion notice setting forth the amount of
Principal to be converted and (ii) surrendering the Note held by the Holder at
the principle office of EMCON. In the event of a partial conversion EMCON will
thereafter reissue a new Note for the remaining unpaid Principal balance or
terms otherwise identical to those set forth herein.
2.5 Restrictions Concerning the Shares. The shares of EMCON Common
Stock to be held by the Holder pursuant to the exercise of the conversion rights
set forth herein may not be sold or transferred unless either (i) such shares
first shall have been registered under the Securities Act of 1933 (the "Act")
and applicable state securities laws or (ii) EMCON shall have been furnished
with an opinion of legal counsel to the effect that such sale or transfer is
exempt from the registration requirements of the Act and all applicable state
securities laws. Each certificate for shares of EMCON Common Stock to be held by
the Holder that have not been so registered and that have not been sold pursuant
to an exemption that permits removal of the legend, shall bear a legend
substantially in the following form, as appropriate:
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THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THE SECURITIES HAVE BEEN
ACQUIRED FOR INVESTMENT AND MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED IN
THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR AN OPINION OF COUNSEL
THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT.
Upon the request of the Holder, EMCON shall remove the foregoing legend from the
certificate representing the EMCON Common Stock held by the Holder upon exercise
of the conversion rights or issue to Holder a new certificate therefor free of
any transfer legend, if, with such request, EMCON shall have received either (i)
an opinion of counsel to the effect that any such legend may be removed from
such certificate, or (ii) if the present paragraph (k) of Rule 144 or a
substantially similar successor rule remains in force and effect, satisfactory
representations from the Holder that ▇▇▇▇▇▇ is not then, and has not been during
the proceeding three (3) months, an affiliate of EMCON, and that a period of at
least two (2) years has elapsed since the later of the date the securities were
acquired (as determined under Rule 144) from EMCON or an affiliate of EMCON.
2.6 EMCON Registration.
(a) If, EMCON shall determine to register any of its
securities either for its own account or the account of a security holder or
holders, other than a registration relating to employee benefit plans, or a
registration relating solely to a Rule 145 transaction, or a registration on any
registration form that does not permit secondary sales, EMCON will:
(i) promptly give the Holder written notice thereof;
(ii) use its best efforts to include in such registration
(and any related qualification under blue sky laws or other compliance), except
as set forth in Section 2.6 (b) below, and in any underwriting involved therein,
all the shares of EMCON Common Stock issued upon conversion of this Note (the
"Holder's Shares") specified in a written request or requests made by the Holder
and received by EMCON within twenty (20) days after the written notice from
EMCON described in clause (i) above is mailed or delivered by EMCON. Such
written request may specify all or a part of the Holder's Shares;
(iii) furnish such number of prospectuses and other
documents incident thereto, including any amendment of or supplement to the
prospectus, as the Holder from time to time may reasonably request;
(iv) cause all such EMCON Common Stock registered pursuant
hereunder to be listed on each securities exchange on which similar securities
issued by EMCON are then listed.
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(b) If the registration of which EMCON gives notice is for a
registered public offering involving an underwriting, EMCON shall so advise the
Holder as a part of the written notice given pursuant to Section 2.6(a)(i). In
such event, the right of Holder to registration pursuant to this Section 2.6
shall be conditioned upon ▇▇▇▇▇▇'s participation in such underwriting and the
inclusion of the Holder's Shares in the underwriting to the extent provided
herein. The Holder shall (together with EMCON and the other holders of
securities of EMCON with registration rights to participate therein distributing
their securities through such underwriting) enter into an underwriting agreement
in customary form with the representative of the underwriter or underwriters
selected by EMCON.
(c) Notwithstanding any other provision of this Section 2.6,
if the representative of the underwriters advises EMCON in writing that
marketing factors require a limitation on the number of shares to be
underwritten, the representative may (subject tot he limitations set forth
below) exclude all Holder's Shares from, or limit the number of the Holder's
Shares to be included in, the registration and underwriting. EMCON shall so
advise the Holder and all other holders of EMCON securities (the "Other Shares")
requesting registration and the number of Holder's Shares and Other Shares that
may be included shall be allocated amount the Holder and other selling
stockholders requesting inclusion of shares pro rata on the basis of the number
of Holder's Shares and Other Shares that are requested to be registered.
(d) EMCON's obligations pursuant to this Section 2.6 shall
expire at such time as Holder may sell all Holder's Shares during any successive
two quarter period pursuant to Rule 144 under the Act.
(e) All Registration Expenses (as hereinafter defined)
incurred in connection with any registration, qualification or compliance
pursuant to this Section 2.6 hereof shall be borne by EMCON. All Selling
Expenses (as hereinafter defined) relating to securities so registered shall be
borne by the Holder. For purposes hereof, Registration Expenses shall mean all
expenses incurred in effecting any registration pursuant to this Note,
including, without limitation, all registration, qualification, and filing fees,
printing expenses, escrow fees, fees and disbursements of counsel for EMCON,
blue sky fees and expenses, and expenses of any regular or special audits
incident to or required by any such registration, but shall not include Selling
Expenses and fees and disbursements of counsel for Holder. Selling Expenses
shall mean all underwriting discounts and selling commissions applicable to the
sale of the Holder's Shares and fees and disbursements of counsel for Holder
(other than the fees and disbursements of counsel included in Registration
Expenses).
ARTICLE III
OFFSET
3.1 Offset. The Holder acknowledges that this Note is being made by the
Borrower pursuant to that certain Stock Purchase Agreement, dated as of April
30, 1997, by and among the Borrower, Organic Waste Technologies, Inc., a
Delaware corporation and the holders of the outstanding capital stock of
National Earth Products, Inc. (the "Stock Purchase Agreement"). The Holder
further acknowledges that he or she is bound by the Stock Purchase Agreement and
that the Principal due hereunder may be reduced by any amounts due from the
Holder to Borrower pursuant thereto.
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ARTICLE IV
ACCELERATION
4.1 Notwithstanding anything to the contrary herein, in the event that
any of the events set forth in Section 4.1 (each, an "Acceleration Event") shall
occur at any time after the date hereof, then, subject to the qualification set
forth below, the Principal and all interest thereon shall, at the option of the
Holder, be immediately due and payable.
(a) upon a consolidation or merger of EMCON with or into any
other corporation or corporations (other than a wholly-owned subsidiary of EMCON
and other than a merger in which EMCON is the surviving corporation), or the
sale, transfer or other disposition of all or substantially all of the assets of
EMCON;
(b) upon a change in ownership of Fifty Percent (50%) or more
of the stock of Borrower to a single buyer or an affiliated group of buyers,
resulting in a change in the majority of the Board of Directors of Borrower from
the Board of Directors as it existed immediately prior to such change in
ownership;
(c) upon the liquidation, dissolution or winding up of the
Borrower or the consolidation or merger of the Borrower with and into another
corporation (other than a merger in which the Borrower is the surviving
corporation);
provided, however, that upon any Acceleration Event, no amount shall be
due and payable hereunder in the event that the Holder has exchanged this Note
for Common Stock of EMCON, pursuant to the Note Agreement.
ARTICLE V
EVENTS OF DEFAULT
If any of the following events of default (each, an "Event of Default")
shall occur:
5.1. Failure to Pay Principal or Interest. The Borrower fails to pay
the Principal or interest when due;
5.2 Receiver or Trustee. The Borrower shall make an assignment for the
benefit of creditors, or apply for or consent to the appointment of a receiver
or trustee for it or for a substantial part of its property or business, or such
a receiver or trustee shall otherwise be appointed;
86
5.3 Bankruptcy. Bankruptcy, insolvency, reorganization or liquidation
proceedings or other proceedings for relief under any bankruptcy law or any law
for relief of debtors shall be instituted by or against the Borrower,
then upon the occurrence and during the continuation of any Event of
Default, then, at the option of the Holder, the Principal and all interest due
thereon shall be immediately due and payable, and the Borrower shall have all
other remedies available at law or equity.
ARTICLE VI
MISCELLANEOUS
6.1 Late Charge. The Borrower shall pay to the Holder a late charge
equal to 1.5% per month, but not to exceed the maximum rate allowable by law, on
any amount due hereunder that is not received by the Holder within 10 days after
the date on which such amount is due. ▇▇▇▇▇▇▇▇ agrees that it would be extremely
difficult or impractical to determine the Holder's actual damages in the event
of such late payment, that the amount specified above is a reasonable estimate
of such damages and that such amount shall constitute liquidated damages for
such late payment. The foregoing provision shall not be construed to extend the
due date for any amount required to be paid hereunder. The Holder shall have no
obligation to accept any late payment not accompanied by such late charge.
6.2 Collection Costs and Expenses. The Borrower shall pay all costs,
fees and expenses (including court costs and reasonable attorneys fees) incurred
by the Holder in collecting or attempting to collect any amount that becomes due
hereunder or in seeking legal advice with respect to such collection or an Event
of Default.
6.3 Failure or Indulgence Note Waiver. No failure or delay on the part
of the Holder in the exercise of any power, right or privilege hereunder shall
operate as a waiver thereof, nor shall any single or partial exercise of any
such power, right or privilege preclude other or further exercise thereof or of
any other right, power or privileges.
6.4 Notices. All notices, consents, waivers, and other communications
under this Agreement must be in writing and will be deemed to have been duly
given when (a) delivered by hand (with written confirmation of receipt), (b)
sent by telecopier (with written confirmation of receipt), provided that a copy
is mailed within three (3) business days by registered mail, return receipt
requested, (c) when received by the addressee, if sent by a nationally
recognized overnight delivery service (receipt requested), or (d) three (3)
business days after being sent by registered or certified mail, return receipt
requested, in each case to the appropriate addresses and telecopier numbers set
forth below (or to such other addresses and telecopier numbers as a party may
designate by notice to the other parties):
Holder: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Borrower: EMCON
▇▇▇ ▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: Chief Financial Officer
Facsimile: 415/375-0763
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6.5 Amendment Provision. The term "Note" and all reference thereto, as
used throughout this instrument, shall mean this instrument as originally
executed, or if later amended or supplemented, then as so amended or
supplemented.
6.6 Governing Law. This Note shall be governed by the internal laws of
the State of California, without regard to the principles of conflict of laws.
6.7 Confession of Judgment. THE FOLLOWING PARAGRAPH SETS FORTH A
WARRANT OF ATTORNEY TO CONFESS JUDGMENT AGAINST THE BORROWER. IN GRANTING THIS
WARRANT OF ATTORNEY TO CONFESS JUDGMENT AGAINST THE BORROWER, THE BORROWER
HEREBY KNOWINGLY, INTENTIONALLY AND VOLUNTARILY, AND, ON THE ADVICE OF SEPARATE
COUNSEL OR THE BORROWER, UNCONDITIONALLY WAIVES ANY AND ALL RIGHTS THE BORROWER
HAS OR MAY HAVE TO PRIOR NOTICE AND AN OPPORTUNITY FOR HEARING UNDER THE
RESPECTIVE CONSTITUTIONS AND LAWS OF THE UNITED STATES AND THE COMMONWEALTH OF
PENNSYLVANIA.
As further security for payment hereunder and upon an event of
default, Borrower authorizes and empowers any attorney of any court of record of
Pennsylvania or elsewhere to appear for and CONFESS JUDGMENT against it and
immediately execute on such judgment, without notice of such immediate
execution, for the then unpaid principal amount and interest of this Note,
together with late charges, costs of suit and reasonable attorneys' fees, with
or without declaration or stay of execution, and with release of errors, for
which this Note or a copy hereof shall serve as a sufficient warrant. This power
to CONFESS JUDGMENT against ▇▇▇▇▇▇▇▇ shall not be exhausted by any exercise of
the power and shall continue from time to time and at all times until full
payment of all amounts due under this Note.
IN WITNESS WHEREOF, ▇▇▇▇▇▇▇▇ has caused this Note to be signed in its
name by its duly authorized officer as of the 30th day of April, 1997.
EMCON
By: /S/
--------------------------------
Name: ▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
--------------------------------
Title: CFO & VP Legal
------------------------------
88
CONVERTIBLE NOTE
San Mateo, California
April 30, 1997 $400,798.40
FOR VALUE RECEIVED, EMCON, a California corporation (hereinafter called
the "Borrower"), hereby promises to pay to ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, or his respective
registered assigns (the "Holder") or order, the sum of Four Hundred Thousand
Seven Hundred Ninety Eight Dollars and Forty Cents ($400,798.40) (the
"Principal"), on May 1, 2000, and to pay interest on the unpaid principal
balance hereof at the rate of eight percent (8%) per annum from the date hereof
until the same becomes due and payable. Interest shall commence accruing on the
date hereof and shall be payable quarterly on each July 31, October 31, January
31 and April 30 beginning on July 31, 1997, with all interest remaining unpaid
at maturity due at such time. All payments of principal and interest shall be
made in lawful money of the United States of America. All payments shall be made
at the address of the Holder, as set forth in Section 6.4 hereof or as the
Holder shall hereafter give to the Borrower by written notice made in accordance
with the provisions of this Note.
The following terms shall apply to this Note:
ARTICLE I
PROHIBITION AGAINST PREPAYMENT
1.1 Borrower shall have no right to prepay this Note at any time.
ARTICLE II
CONVERSION INTO BORROWER'S STOCK
Holder shall have the right to convert the Principal into shares of
EMCON Common Stock pursuant to the terms of this Article II. In such event, any
accrued but unpaid interest shall be immediately due and payable.
2.1 Conversion Price. The number of shares of EMCON Common Stock into
which the Principal shall be converted shall be the amount of the Principal,
divided by the EMCON Conversion Price. The EMCON Conversion Price shall
initially be Six Dollars and Fifty Cents ($6.50), and shall be adjusted as set
forth in Section 2.2.
hereof.
2.2 Adjustment to EMCON Conversion Price. The EMCON Conversion Price
shall be adjusted as set forth in this Section 2.2.
(a) Subdivisions. In case Borrower shall at any time subdivide
the outstanding shares of EMCON Common Stock, the EMCON Conversion Price in
effect immediately prior to such subdivision shall be proportionately decreased,
and in case the Company shall at any time combine the outstanding shares of
EMCON Common Stock, the EMCON Conversion Price in effect immediately prior to
such combination shall be proportionately increased, effective at the close of
business on the date of such subdivision or combination, as the case may be.
89
(b) Stock Dividends. In case Borrower shall at any time pay a
dividend with respect to EMCON Common Stock payable in EMCON Common Stock, then
the EMCON Conversion Price in effect immediately prior to the record date for
distribution of such dividend shall be adjusted to that price determined by
multiplying the EMCON Conversion Price in effect immediately prior to such
record date by a fraction (i) the numerator of which shall be the total number
of shares of EMCON Common Stock outstanding immediately prior to such dividend
and (ii) the denominator of which shall be the total number of shares of EMCON
Common Stock outstanding immediately after such dividend.
(c) Reclassification or Merger. In case of any
reclassification, change or conversion of the EMCON Common Stock (other than as
a result of a subdivision or combination described above and other than upon any
Acceleration Event, as defined below), Borrower shall have the right to receive,
upon exchange of this Note (which may occur at the option of the Holder only)
the kind and amount of shares of stock, other securities, money and property
receivable upon such reclassification, change or conversion by a holder of the
number of shares of EMCON Common Stock into which this Note could then be
exchanged. The provisions of this subparagraph (c) shall similarly apply to
successive reclassifications, changes, and conversions.
2.3 Authorized Shares. EMCON convenants that during the period the
conversion right set forth in this Article exists, EMCON will reserve from the
authorized and unissued EMCON Common Stock a sufficient number of shares to
provide for the issuance of EMCON Common Stock upon the full conversion of the
Principal. EMCON represents that upon issuance, such shares will be duly and
validly issued, fully paid and non-assessable.
2.4 Method of Exchange. Except as otherwise agreed by EMCON and the
Holder, the Principal balance of the Note may be converted in whole or in part
(provided at least $250,000 in Principal is converted) in up to two installments
by (i) submitting to EMCON a conversion notice setting forth the amount of
Principal to be converted and (ii) surrendering the Note held by the Holder at
the principle office of EMCON. In the event of a partial conversion EMCON will
thereafter reissue a new Note for the remaining unpaid Principal balance or
terms otherwise identical to those set forth herein.
2.5 Restrictions Concerning the Shares. The shares of EMCON Common
Stock to be held by the Holder pursuant to the exercise of the conversion rights
set forth herein may not be sold or transferred unless either (i) such shares
first shall have been registered under the Securities Act of 1933 (the "Act")
and applicable state securities laws or (ii) EMCON shall have been furnished
with an opinion of legal counsel to the effect that such sale or transfer is
exempt from the registration requirements of the Act and all applicable state
securities laws. Each certificate for shares of EMCON Common Stock to be held by
the Holder that have not been so registered and that have not been sold pursuant
to an exemption that permits removal of the legend, shall bear a legend
substantially in the following form, as appropriate:
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THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THE SECURITIES HAVE BEEN
ACQUIRED FOR INVESTMENT AND MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED IN
THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR AN OPINION OF COUNSEL
THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT.
Upon the request of the Holder, EMCON shall remove the foregoing legend from the
certificate representing the EMCON Common Stock held by the Holder upon exercise
of the conversion rights or issue to Holder a new certificate therefor free of
any transfer legend, if, with such request, EMCON shall have received either (i)
an opinion of counsel to the effect that any such legend may be removed from
such certificate, or (ii) if the present paragraph (k) of Rule 144 or a
substantially similar successor rule remains in force and effect, satisfactory
representations from the Holder that ▇▇▇▇▇▇ is not then, and has not been during
the proceeding three (3) months, an affiliate of EMCON, and that a period of at
least two (2) years has elapsed since the later of the date the securities were
acquired (as determined under Rule 144) from EMCON or an affiliate of EMCON.
2.6 EMCON Registration.
(a) If, EMCON shall determine to register any of its
securities either for its own account or the account of a security holder or
holders, other than a registration relating to employee benefit plans, or a
registration relating solely to a Rule 145 transaction, or a registration on any
registration form that does not permit secondary sales, EMCON will:
(i) promptly give the Holder written notice thereof;
(ii) use its best efforts to include in such registration
(and any related qualification under blue sky laws or other compliance), except
as set forth in Section 2.6 (b) below, and in any underwriting involved therein,
all the shares of EMCON Common Stock issued upon conversion of this Note (the
"Holder's Shares") specified in a written request or requests made by the Holder
and received by EMCON within twenty (20) days after the written notice from
EMCON described in clause (i) above is mailed or delivered by EMCON. Such
written request may specify all or a part of the Holder's Shares;
(iii) furnish such number of prospectuses and other
documents incident thereto, including any amendment of or supplement to the
prospectus, as the Holder from time to time may reasonably request;
(iv) cause all such EMCON Common Stock registered pursuant
hereunder to be listed on each securities exchange on which similar securities
issued by EMCON are then listed.
91
(b) If the registration of which EMCON gives notice is for a registered
public offering involving an underwriting, EMCON shall so advise the Holder as a
part of the written notice given pursuant to Section 2.6(a)(i). In such event,
the right of Holder to registration pursuant to this Section 2.6 shall be
conditioned upon ▇▇▇▇▇▇'s participation in such underwriting and the inclusion
of the Holder's Shares in the underwriting to the extent provided herein. The
Holder shall (together with EMCON and the other holders of securities of EMCON
with registration rights to participate therein distributing their securities
through such underwriting) enter into an underwriting agreement in customary
form with the representative of the underwriter or underwriters selected by
EMCON.
(c) Notwithstanding any other provision of this Section 2.6, if the
representative of the underwriters advises EMCON in writing that marketing
factors require a limitation on the number of shares to be underwritten, the
representative may (subject tot he limitations set forth below) exclude all
Holder's Shares from, or limit the number of the Holder's Shares to be included
in, the registration and underwriting. EMCON shall so advise the Holder and all
other holders of EMCON securities (the "Other Shares") requesting registration
and the number of Holder's Shares and Other Shares that may be included shall be
allocated amount the Holder and other selling stockholders requesting inclusion
of shares pro rata on the basis of the number of Holder's Shares and Other
Shares that are requested to be registered.
(d) EMCON's obligations pursuant to this Section 2.6 shall expire at
such time as Holder may sell all Holder's Shares during any successive two
quarter period pursuant to Rule 144 under the Act.
(e) All Registration Expenses (as hereinafter defined) incurred in
connection with any registration, qualification or compliance pursuant to this
Section 2.6 hereof shall be borne by EMCON. All Selling Expenses (as hereinafter
defined) relating to securities so registered shall be borne by the Holder. For
purposes hereof, Registration Expenses shall mean all expenses incurred in
effecting any registration pursuant to this Note, including, without limitation,
all registration, qualification, and filing fees, printing expenses, escrow
fees, fees and disbursements of counsel for EMCON, blue sky fees and expenses,
and expenses of any regular or special audits incident to or required by any
such registration, but shall not include Selling Expenses and fees and
disbursements of counsel for Holder. Selling Expenses shall mean all
underwriting discounts and selling commissions applicable to the sale of the
Holder's Shares and fees and disbursements of counsel for Holder (other than the
fees and disbursements of counsel included in Registration Expenses).
ARTICLE III
OFFSET
3.1 Offset. The Holder acknowledges that this Note is being made by the
Borrower pursuant to that certain Stock Purchase Agreement, dated as of April
30, 1997, by and among the Borrower, Organic Waste Technologies, Inc., a
Delaware corporation and the holders of the outstanding capital stock of
National Earth Products, Inc. (the "Stock Purchase Agreement"). The Holder
further acknowledges that he or she is bound by the Stock Purchase Agreement and
that the Principal due hereunder may be reduced by any amounts due from the
Holder to Borrower pursuant thereto.
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ARTICLE IV
ACCELERATION
4.1 Notwithstanding anything to the contrary herein, in the event that
any of the events set forth in Section 4.1 (each, an "Acceleration Event") shall
occur at any time after the date hereof, then, subject to the qualification set
forth below, the Principal and all interest thereon shall, at the option of the
Holder, be immediately due and payable.
(a) upon a consolidation or merger of EMCON with or into any
other corporation or corporations (other than a wholly-owned subsidiary of EMCON
and other than a merger in which EMCON is the surviving corporation), or the
sale, transfer or other disposition of all or substantially all of the assets of
EMCON;
(b) upon a change in ownership of Fifty Percent (50%) or more
of the stock of Borrower to a single buyer or an affiliated group of buyers,
resulting in a change in the majority of the Board of Directors of Borrower from
the Board of Directors as it existed immediately prior to such change in
ownership;
(c) upon the liquidation, dissolution or winding up of the
Borrower or the consolidation or merger of the Borrower with and into another
corporation (other than a merger in which the Borrower is the surviving
corporation);
provided, however, that upon any Acceleration Event, no amount shall be
due and payable hereunder in the event that the Holder has exchanged this Note
for Common Stock of EMCON, pursuant to the Note Agreement.
ARTICLE V
EVENTS OF DEFAULT
If any of the following events of default (each, an "Event of Default")
shall occur:
5.1. Failure to Pay Principal or Interest. The Borrower fails to pay
the Principal or interest when due;
5.2 Receiver or Trustee. The Borrower shall make an assignment for the
benefit of creditors, or apply for or consent to the appointment of a receiver
or trustee for it or for a substantial part of its property or business, or such
a receiver or trustee shall otherwise be appointed;
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5.3 Bankruptcy. Bankruptcy, insolvency, reorganization or liquidation
proceedings or other proceedings for relief under any bankruptcy law or any law
for relief of debtors shall be instituted by or against the Borrower, then upon
the occurrence and during the continuation of any Event of Default, then, at the
option of the Holder, the Principal and all interest due thereon shall be
immediately due and payable, and the Borrower shall have all other remedies
available at law or equity.
ARTICLE VI
MISCELLANEOUS
6.1 Late Charge. The Borrower shall pay to the Holder a late charge
equal to 1.5% per month, but not to exceed the maximum rate allowable by law, on
any amount due hereunder that is not received by the Holder within 10 days after
the date on which such amount is due. ▇▇▇▇▇▇▇▇ agrees that it would be extremely
difficult or impractical to determine the Holder's actual damages in the event
of such late payment, that the amount specified above is a reasonable estimate
of such damages and that such amount shall constitute liquidated damages for
such late payment. The foregoing provision shall not be construed to extend the
due date for any amount required to be paid hereunder. The Holder shall have no
obligation to accept any late payment not accompanied by such late charge.
6.2 Collection Costs and Expenses. The Borrower shall pay all costs,
fees and expenses (including court costs and reasonable attorneys fees) incurred
by the Holder in collecting or attempting to collect any amount that becomes due
hereunder or in seeking legal advice with respect to such collection or an Event
of Default.
6.3 Failure or Indulgence Note Waiver. No failure or delay on the part
of the Holder in the exercise of any power, right or privilege hereunder shall
operate as a waiver thereof, nor shall any single or partial exercise of any
such power, right or privilege preclude other or further exercise thereof or of
any other right, power or privileges.
6.4 Notices. All notices, consents, waivers, and other communications
under this Agreement must be in writing and will be deemed to have been duly
given when (a) delivered by hand (with written confirmation of receipt), (b)
sent by telecopier (with written confirmation of receipt), provided that a copy
is mailed within three (3) business days by registered mail, return receipt
requested, (c) when received by the addressee, if sent by a nationally
recognized overnight delivery service (receipt requested), or (d) three (3)
business days after being sent by registered or certified mail, return receipt
requested, in each case to the appropriate addresses and telecopier numbers set
forth below (or to such other addresses and telecopier numbers as a party may
designate by notice to the other parties):
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Holder: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Borrower: EMCON
▇▇▇ ▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: Chief Financial Officer
Facsimile: 415/375-0763
6.5 Amendment Provision. The term "Note" and all reference thereto, as
used throughout this instrument, shall mean this instrument as originally
executed, or if later amended or supplemented, then as so amended or
supplemented.
6.6 Governing Law. This Note shall be governed by the internal laws of
the State of California, without regard to the principles of conflict of laws.
6.7 Confession of Judgment. THE FOLLOWING PARAGRAPH SETS FORTH A
WARRANT OF ATTORNEY TO CONFESS JUDGMENT AGAINST THE BORROWER. IN GRANTING THIS
WARRANT OF ATTORNEY TO CONFESS JUDGMENT AGAINST THE BORROWER, THE BORROWER
HEREBY KNOWINGLY, INTENTIONALLY AND VOLUNTARILY, AND, ON THE ADVICE OF SEPARATE
COUNSEL OR THE BORROWER, UNCONDITIONALLY WAIVES ANY AND ALL RIGHTS THE BORROWER
HAS OR MAY HAVE TO PRIOR NOTICE AND AN OPPORTUNITY FOR HEARING UNDER THE
RESPECTIVE CONSTITUTIONS AND LAWS OF THE UNITED STATES AND THE COMMONWEALTH OF
PENNSYLVANIA.
As further security for payment hereunder and upon an event of
default, Borrower authorizes and empowers any attorney of any court of record of
Pennsylvania or elsewhere to appear for and CONFESS JUDGMENT against it and
immediately execute on such judgment, without notice of such immediate
execution, for the then unpaid principal amount and interest of this Note,
together with late charges, costs of suit and reasonable attorneys' fees, with
or without declaration or stay of execution, and with release of errors, for
which this Note or a copy hereof shall serve as a sufficient warrant. This power
to CONFESS JUDGMENT against ▇▇▇▇▇▇▇▇ shall not be exhausted by any exercise of
the power and shall continue from time to time and at all times until full
payment of all amounts due under this Note.
IN WITNESS WHEREOF, ▇▇▇▇▇▇▇▇ has caused this Note to be signed in its
name by its duly authorized officer as of the 30th day of April, 1997.
EMCON
By: /S/
--------------------------------
Name: ▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
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Title: CFO & VP Legal
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