Document:

Unassociated Document

Exhibit 4.1

 

NOTE PURCHASE AGREEMENT

THIS NOTE PURCHASE AGREEMENT (the “Agreement”) is entered into as of August 9, 2008, by and between GLOBAL RECYCLING TECHNOLOGIES, LTD., a Delaware corporation (the “Company”), and IRA FBO LEONID FRENKEL, Pershing LLC, as Custodian (the “Purchaser”).  For purposes of this Agreement, the Company and the Purchaser are each sometimes individually referred to as a “Party” and, collectively, as the “Parties.”

RECITALS

 

A. The Company wishes to issue and sell to the Purchaser a Secured Convertible Promissory Note in the principal amount of $1,000,000, in the form attached hereto as Exhibit A (the “Note”).

 

B. The Purchaser wishes to purchase from the Company the Note on the terms and subject to the conditions set forth in this Agreement.

 

AGREEMENT

 

NOW, THEREFORE, in consideration of the premises and the mutual covenants contained in this Agreement, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and intending to be legally bound, the Parties hereby agree as follows:

 

1. Issuance, Sale, and Delivery of the Note.  Subject to the terms and conditions hereof, the Company hereby agrees to issue and sell the Note to Purchaser, and Purchaser hereby agrees to purchase the Note from the Company.  The Note will be convertible into shares of Common Stock of the Company, $0.001 par value per share (the “Conversion Shares”), as more particularly described in the Note.  The Note will be issued to Purchaser on the date of funding of the Note (the “Funding Date”).

 

2. Representations and Warranties of the Company.  In connection with the transactions provided for in this Agreement and in the Note, the Company hereby represents and warrants to the Purchaser the following, which are true and correct as of the date of this Agreement and will be true and correct on the Funding Date:

 

a. Organization, Good Standing, and Qualification.  The Company is a corporation duly organized, validly existing, and in good standing under the laws of the State of Delaware and has all requisite corporate power and authority to carry on its business as now conducted.  The Company has full power and authority to issue the Note.

 

b. Valid Issuance of Common Stock.  The Conversion Shares, when issued, sold (as a result of conversion of the Note), and delivered in accordance with the terms and conditions of this Agreement and the Note for the consideration expressed in the Note, will be duly and validly issued, fully paid, and nonassessable.

 

3. Representations and Warranties of the Purchaser.  In connection with the transactions provided for in this Agreement and in the Note, the Purchaser hereby represents and warrants to the Company the following, which are true and correct as of the date of this Agreement and will be true and correct on the Funding Date:

 

  

  

  

 

a. Authorization.  The Purchaser has full power and authority to enter into this Agreement and the Note.  This Agreement and the Note constitute the Purchaser’s valid and legally binding obligation, enforceable in accordance with their respective terms, except as may be limited by (i) applicable bankruptcy, insolvency, reorganization, or similar laws relating to or affecting the enforcement of creditors’ rights, and (ii) laws relating to the availability of specific performance, injunctive relief, or other equitable remedies.

 

b. Purchase Entirely for Own Account.  This Agreement and the Note are being entered into in reliance upon the Purchaser’s representation to the Company that the Note and the Conversion Shares (collectively, the “Securities”) will be acquired for investment for the Purchaser’s own account, not as a nominee or agent, and not with a view to the resale or distribution of any part thereof, and that the Purchaser has no present intention of selling, granting any participation in, or otherwise distributing the same.  Further, the Purchaser does not have any contract, undertaking, agreement, or arrangement with any person to sell, transfer, or grant participations to such person or to any third person with respect to the Securities.

 

c. Disclosure of Information.  The Purchaser has received all information that it considers necessary or appropriate for deciding whether to acquire the Securities and has reviewed the Company’s Confidential Summary of the Private Offering, dated July 18, 2008, and the Risk Factors set forth threrein.  The Purchaser further has had an opportunity to ask questions of and receive answers from the Company regarding the terms and conditions of the offering of the Securities.

 

d. Investment Experience.  The Purchaser is an investor in securities of companies in the development stage and is able to fend for itself, can bear the economic risk of an investment in the Securities, and has such knowledge and experience in financial or business matters that the Purchaser and its principals are capable of evaluating the merits and risks of the investment in the Securities.

 

e. Accredited Investor.  The Purchaser is an “accredited investor” within the meaning of Rule 501 of Regulation D, as presently in effect, as promulgated by the Securities and Exchange Commission (the “SEC”) under the Securities Act of 1933, as amended (the “Act”).

 

f. Restricted Securities.  The Purchaser understands that the Securities are characterized as “restricted securities” under the federal securities laws inasmuch as they are being acquired from the Company in a transaction not involving a public offering and that under such laws and applicable regulations such securities may be resold without registration under the Act, only in certain limited circumstances. In this connection, the Purchaser represents that it is familiar with Rule 144, as presently in effect, as promulgated by the SEC under the Act (“Rule 144”), and understands the resale limitations imposed thereby and by the Act.

 

g. Legends.  The Purchaser agrees and acknowledges that the Securities may bear the following legend or similar or other applicable legends:

 

THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED OR QUALIFIED UNDER FEDERAL OR STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, PLEDGED, OR OTHERWISE DISPOSED OF UNLESS SO REGISTERED OR QUALIFIED, UNLESS AN EXEMPTION EXISTS OR UNLESS SUCH DISPOSITION IS NOT SUBJECT TO THE FEDERAL OR STATE SECURITIES LAWS, AND THE AVAILABILITY OF ANY EXEMPTION OR THE INAPPLICABILITY OF SUCH SECURITIES LAWS MUST BE ESTABLISHED BY AN OPINION OF COUNSEL, WHICH OPINION OF COUNSEL WILL BE REASONABLY SATISFACTORY TO THE COMPANY.

 

  

  

  

THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A LOCK-UP PERIOD OF UP TO 12 MONTHS AFTER COMMENCEMENT OF AN INITIAL PUBLIC OFFERING UNDER THE SECURITIES ACT, OR OTHER APPLICABLE FEDERAL, STATE, OR FOREIGN LAWS AND REGULATIONS, AS SET FORTH IN AN AGREEMENT BETWEEN THE COMPANY AND THE ORIGINAL HOLDER OF THESE SECURITIES, A COPY OF WHICH MAY BE OBTAINED AT THE COMPANY’S PRINCIPAL OFFICE.  SUCH LOCK-UP PERIOD IS BINDING ON TRANSFEREES OF THESE SHARES.

4. Conversion of Notes.  The Company will at all times reserve and keep available out of its authorized but unissued shares of Common Stock, for the purpose of effecting the conversion of the Note and otherwise complying with the terms of this Agreement, such number of its duly authorized shares of Common Stock as will be sufficient to effect the conversion of the Note into shares of the Company’s Common Stock.  If at any time the number of authorized but unissued shares of the Company’s Common Stock will not be sufficient to effect the conversion of the Note or otherwise to comply with the terms of this Agreement, the Company will take such corporate action as may be necessary to increase its authorized but unissued shares of Common Stock to such number of shares as will be sufficient for such purposes.

5. Expenses.  Each Party will be responsible for its own fees, costs, and other expenses incurred in negotiating and preparing this Agreement and in closing and carrying out the transactions contemplated hereby.

6. Counterparts.  This Agreement may be executed in two or more counterparts, each of which will be deemed an original, but all of which together will constitute one and the same instrument.

 

7. Exhibits and Recitals.  The Exhibits attached to this Agreement and the Recitals set forth above are hereby incorporated into and made a part of this Agreement.

8. Headings.  Headings contained in this Agreement are inserted only as a matter of convenience and in no way define, limit, extend, or describe the scope of this Agreement or of any term or provision hereof.

9. Entire Agreement; Modification.  This Agreement and the Note constitute the entire agreement between the Parties and supersedes all prior and contemporaneous agreements and undertakings of the Parties with respect to the subject matter hereof and thereof.  No supplement, modification, or amendment of this Agreement will be binding and enforceable unless executed in writing by the Parties.

10. Waiver.  No waiver of any of the provisions of this Agreement will be deemed, or will constitute, a waiver of any other provision hereof (whether or not similar) nor will such waiver constitute a continuing waiver, and no waiver will be binding unless executed in writing by the Party making the waiver.

11. Governing Law; Jurisdiction.  Except as expressly provided herein, this Agreement and all questions relating to its validity, interpretation, performance, and enforcement will be governed by and construed in accordance with the laws of the State of Arizona, notwithstanding any Arizona or other conflict-of-interest provisions to the contrary.  Jurisdiction of and venue for any legal action between the Parties will be in the state and federal courts serving Maricopa County, Arizona, and the Parties hereby consent to such jurisdiction and venue.

 

  

  

  

12. Severability.  If any provision of this Agreement will be declared void or unenforceable by any judicial or administrative authority, the validity of any other provision and of the entire Agreement will not be affected thereby.

13. Interpretation.  The Parties agree that each Party and its counsel have reviewed this Agreement and that any rule of construction to the effect that ambiguities are to be resolved against the drafting Party will not apply to the interpretation of this Agreement.

IN WITNESS WHEREOF, the Company and the Purchaser have executed this Note Purchase Agreement as of the date first above written.

 

 

COMPANY:

 

GLOBAL RECYCLING TECHNOLOGIES, LTD., a Delaware corporation

By: /s/ John d’Arc Lorenz                   

John d’Arc Lorenz II, Chief Executive Officer and Chairman

Address:                Global Recycling Technologies, Ltd.

Attn:  John d’Arc Lorenz II

Post Office Box 3064

Tempe, Arizona  85280-3064

Email: john@grtus.com

Fax: (____) ____-______

PURCHASER:

IRA FBO LEONID FRENKEL, Pershing LLC, as Custodian

By: /s/ Leonid Frenkel                  

Name: Leonid Frenkel                   

Title:                                                                          

Address:                401 City Line Avenue

Suite 800

Bala Cynwyd, PA  19004

Email: jfrankel@triagefunds.com

Fax: (610) 668-1919

 

  

  

  

 

EXHIBIT A

 

THIS SECURED CONVERTIBLE PROMISSORY NOTE (THE “NOTE”) AND THE SECURITIES ISSUABLE UPON THE CONVERSION HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), NOR UNDER ANY STATE SECURITIES LAW AND MAY NOT BE PLEDGED, SOLD, ASSIGNED, OR TRANSFERRED UNLESS (I) A REGISTRATION STATEMENT WITH RESPECT THERETO IS EFFECTIVE UNDER THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAW REQUIREMENTS HAVE BEEN MET, OR (II) EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS UNDER THE SECURITIES ACT AND THE REGISTRATION OR QUALIFICATION REQUIREMENTS OF APPLICABLE STATE SECURITIES LAWS ARE AVAILABLE.

 

	$1,000,000	August 9, 2008

 

GLOBAL RECYCLING TECHNOLOGIES, LTD.

 

SECURED CONVERTIBLE PROMISSORY NOTE

 

GLOBAL RECYCLING TECHNOLOGIES, LTD., a Delaware corporation (the “Company”), hereby promises to pay to IRA FBO LEONID FRENKEL, Pershing LLC, as Custodian (the “Holder”), in lawful dollars of the United States of America, the sum of $1,000,000 or such lesser amount as will then be outstanding hereunder, together with simple interest on the principal balance outstanding hereunder, commencing on the date of funding of this Note (the “Funding Date”).  The principal amount hereof will be due and payable on a date that is two years from the Funding Date (the “Maturity Date”).  Payment of all amounts due hereunder will be made by mail to the address of the Holder as set forth on the signature page of this Note.

 

1. Definitions.  As used in this Note, the following terms, unless the context otherwise requires, have the following meanings:

 

a. “Company” includes any legal entity which will succeed to or assume the obligations of the Company under this Note; and

 

b. “Holder,” when the context refers to a holder of this Note, will mean any person who will at the time be the registered holder of this Note.

 

2. Interest.  Interest will accrue on the principal amount outstanding under this Note at the rate of 10.0% per annum, beginning on the Funding Date, and based on the number of days elapsed in a 360-day year.  Payments of interest accrued under this Note will be made on a semi-annual basis and may be paid, at the option of the Holder, in lawful dollars of the Untied States of America or in shares of the Company’s Common Stock, $0.001 par value per share (“Common Stock”), which shares will be valued at the Exercise Price (as defined below) applicable on the date of payment.  On the Maturity Date, the Company will pay to the Holder all principal outstanding under this Note plus all accrued but unpaid interest hereunder.

 

3. Prepayment.  This Note, or any portion hereof, may be prepaid by the Company at any time or from time to time without consent of the Holder and without penalty, upon 30 days prior written notice (the “Prepayment Notice”) to the Holder.  If the Company has delivered to the Holder a Prepayment Notice, the Holder may, prior to the Company prepaying the Note, convert all (but not less than all) of the principal balance outstanding under this Note and unpaid but accrued interest on this Note into Conversion Shares (as defined below) at the Exercise Price (as defined below) by following the conversion procedures set forth in Section 5.

 

  

  

  

 

4. Purchase Agreement.  This Note has been issued pursuant to a Note Purchase Agreement (the “Purchase Agreement”), dated of even date herewith, by and between the Company and the Holder.  Each of the Company and the Holder incorporate by reference into this Note all of the representations and warranties of such party as set forth in the Purchase Agreement, which representations and warranties are true and correct as of the date of this Note and will be true and correct on the date of conversion of this Note, if applicable.

 

5. Conversion.

 

a. Conversion; Exercise.  From time to time on or prior to the Maturity Date, the Holder will have the right, at the Holder’s option, to convert the outstanding principal and accrued but unpaid interest due under this Note, in whole or in part, into shares of Common Stock.  The exercise price for the shares of Common Stock issuable pursuant to this Section 5 (collectively, the “Conversion Shares”) will be $1.00 per share (as it may be adjusted pursuant to Section 5.d., the “Exercise Price”).

 

b. Conversion Procedure.  Before the Holder will be entitled to convert this Note into the Conversion Shares, it will surrender this Note and a properly executed Notice of Conversion, in the form attached hereto as Attachment A (the “Conversion Notice”), to the Company and will give written notice to the Company of the election to convert the same pursuant to this Section 5.  Such conversion will be deemed to have been made immediately prior to the close of business on the date of such surrender of this Note and the Conversion Notice, and the person or persons entitled to receive the Conversion Shares issuable upon such conversion will be treated for all purposes as the record holder or holders of such Conversion Shares as of such date.

 

c. Mechanics and Effect of Conversion.  The Company will, promptly after the Holder presents this Note and a properly executed Conversion Notice to the Company for conversion under Section 5.b., issue and deliver to the Holder a certificate or certificates for the number of Conversion Shares to which the Holder will be entitled upon conversion (bearing such legends as are required by the Purchase Agreement and applicable United States federal and state securities laws and the applicable securities laws of any other country or jurisdiction in the opinion of counsel to the Company), together with a check payable to the Holder for any cash amounts payable as described in Section 5.e., if applicable.  Upon conversion of this Note and issuance of such stock certificate(s), the Company will be forever released from all its obligations and liabilities under this Note.

 

d. Exercise Price Adjustments.  If the Company effectuates a split or subdivision of the outstanding shares of its Common Stock, then the Exercise Price will be appropriately decreased so that the number of Conversion Shares will be increased in proportion to such increase of outstanding shares.  If the number of shares of the Company’s Common Stock outstanding at any time after the Funding Date is decreased by a combination of the outstanding shares of Common Stock, then the Exercise Price will be appropriately increased so that the number of Conversion Shares will be decreased in proportion to such decrease in outstanding shares.

 

e. Fractional Shares; Interest; Effect of Conversion.  No fractional shares will be issued upon conversion of this Note.  In lieu of the Company issuing any fractional shares to the Holder upon the conversion of this Note, the Company will pay to the Holder an amount equal to the product obtained by multiplying the applicable Exercise Price by the fraction of a share not issued pursuant to the previous sentence.

 

  

  

  

 

6. Events of Default; Acceleration.  The occurrence of any one or more of the following events will constitute an “Event of Default” under this Note:

 

a. Nonpayment of principal, interest, or other amounts when the same will become due and payable under this Note, and the Company does not cure such failure to pay within 10 days after the date such payment is due;

 

b. The failure of the Company to comply with any other term or condition of this Note;

 

c. The entry of an order for relief under the Federal Bankruptcy Code as to the Company, or the entry of an order or appointing a receiver or trustee for the Company, or the entry of an order approving a petition in reorganization or other similar relief relating to the Company under bankruptcy or similar laws in the United States of America or any other competent jurisdiction; or

 

d. The dissolution, winding-up, or termination of the existence of the Company.

 

Upon the occurrence of any Event of Default, the entire principal balance outstanding hereunder, together with all accrued but unpaid interest and other amounts payable hereunder, at the election of the Holder, will automatically become immediately due and payable upon written notice provided to the Company by the Holder.

 

7. Usury.  In the event that any interest paid on this Note is deemed to be in excess of the then legal maximum rate, then that portion of the interest payment representing an amount in excess of the then legal maximum rate will be deemed a payment of principal and applied against the principal of this Note.

 

8. Security Interest.

 

a. Grant of Security Interest.  The Company hereby grants to the Holder a lien on and security interest in the Collateral (as defined below) to secure the Company’s full and timely payment of principal, interest, and other amounts due and payable under this Note.  For purposes of this Section 8, “Collateral” means all of the Company’s rights to and interest in the provisional patent application filed with the United States Patent and Trademark Office on June 27, 2008, Number 61076588.

 

b. Representations Relating to Collateral.  In connection with the foregoing security interest, the Company hereby represents and warrants to the Holder that on the date of this Note and at all times prior to the Maturity Date or the earlier prepayment or conversion of this Note: (i) the Company is and will be the owner of the Collateral; (ii) the Company will not transfer the Collateral to any other person or entity without the prior written consent of the Holder; (iii) the Collateral is and will be free from all liens, security interests, encumbrances, or other rights, title, or interest of any other person or entity, except for the security interest granted in this Section 8.

 

c. Rights of the Holder Upon Default.  If any Event of Default occurs and is continuing, in addition to all the rights and remedies afforded to the Holder at law or in equity, the Holder may, upon 30 days prior written notice to the Company: (i) take such action as may be necessary to transfer title in the Collateral from the Company to the Holder; (ii) take such action as may be necessary to sell or otherwise dispose of the Collateral in whole or in part; (ii) collect any and all money due or to become due and enforce in the Company’s rights with respect to the Collateral; or (iii) settle, adjust, or compromise any dispute with respect to the Collateral.

 

  

  

  

 

9. State Commissioners of Corporations.  The sale of the Conversion Shares which are the subject of this Note has not been qualified with any state commission or regulatory body and the issuance of such Conversion Shares or the payment or receipt of any part of the consideration for such Conversion Shares prior to such qualification is unlawful, unless the sale of the Conversion Shares is exempt from qualification by applicable law.  The rights of the Company and the Holder under this Note are expressly conditioned upon such qualification being obtained, unless the sale is so exempt.

 

10. “Market Stand-Off” Agreement.  The Holder agrees that, if requested by an underwriter, Nomad, or broking institution engaged by the Company in connection with (a) the Company’s first underwritten public offering pursuant to an effective registration statement under the Securities Act, or (b) the Company having its shares of its capital stock admitted to trading on any internationally recognized securities exchange (e.g., New York, AMEX, NASDAQ, London, or Toronto Stock Exchanges), the Holder will not sell or otherwise transfer, make any short sale of, grant any option for the purchase of, or enter into any hedging or similar transaction with the same economic effect as a sale, of any Conversion Shares during the period commencing on the earlier to occur of (i) the date of the final prospectus relating to the Company’s first firm commitment underwritten public offering of its common stock under the Securities Act, or (ii) the date that the Company’s shares of capital stock are admitted for trading on any internationally recognized securities exchange, and ending on the date specified by the Company and the applicable underwriter, Nomad, or broking firm for a period of up to 12 months.  Holder will execute a market standoff agreement with said underwriters, Nomads, and broking institutions in customary form consistent with the provisions of this Section 9.  The requirements set forth above apply to Holder solely on the condition that all other holders of shares of Common Stock are also subject to such requirements, and only in the proportion that all shares of Common Stock subject to the requirement bears to the total number of Common Stock outstanding.

 

11. Beneficial Ownership Restrictions.

 

a. Notwithstanding anything to the contrary set forth in this Note or the Purchase Agreement, at no time may the Holder convert this Note if the number of Conversion Shares to be issued pursuant to such conversion, when aggregated with all other shares of Common Stock owned by the Holder or its affiliates at such time, would result in the Holder beneficially owning (as determined in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and the rules thereunder) in excess of 4.99% of the then issued and outstanding shares of Common Stock of the Company; provided, however, that upon the Holder providing the Company with 61 days notice (the “Waiver Notice”) that the Holder would like to waive this Section 11.a. with regard to any or all Conversion Shares issuable upon conversion of this Note, this Section 11.a. will be of no force or effect with regard to the Conversion Shares referenced in the Waiver Notice.

 

b. Notwithstanding anything to the contrary set forth in this Note or the Purchase Agreement, at no time may the Holder convert this Note if the number of Conversion Shares to be issued pursuant to such conversion, when aggregated with all other shares of Common Stock owned by the Holder or its affiliates at such time, would result in the Holder beneficially owning (as determined in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and the rules thereunder) in excess of 9.99% of the then issued and outstanding shares of Common Stock of the Company; provided, however, that upon the Holder providing the Company with a Waiver Notice that the Holder would like to waive this Section 11.b. with regard to any or all Conversion Shares issuable upon conversion of this Note, this Section 11.b. will be of no force or effect with regard to the Conversion Shares referenced in the Waiver Notice.

 

  

  

  

 

12. Status Under Securities Laws.  This Note and the Conversion Shares: (i) constitute “restricted securities” within the meaning of Rule 144 under the Securities Act; and (ii) have not been registered under the Securities Act or the securities laws of any other state, country, or province.  The Company is under no obligation to register this Note or the Conversion Shares under the Securities Act or the securities laws of any other state, country, or province, or to take any action that would make available any exemption from such registration.

 

13. Assignment; Successors and Assigns.  This Note may not be assigned or otherwise transferred by the Holder without the prior written consent of the Company.  The rights and obligations of the Company and the Holder will be binding upon and benefit the successors, assigns, heirs, administrators, and transferees of the Company and the Holder.

 

14. Entire Agreement; Modification.  This Note and the Purchase Agreement constitute the entire agreement between the Company and the Holder and supersedes all prior and contemporaneous agreements and undertakings of the Company and the Holder with respect to the subject matter hereof and thereof.  No supplement, modification, or amendment of this Note will be binding and enforceable unless executed in writing by the Company and the Holder.

 

15. Waiver.  No waiver of any of the provisions of this Note will be deemed, or will constitute, a waiver of any other provision hereof (whether or not similar) nor will such waiver constitute a continuing waiver, and no waiver will be binding unless executed in writing by the party making the waiver.

 

16. Expenses.  If any action at law or in equity is necessary to enforce or interpret the terms of this Note, the prevailing party will be entitled to reasonable attorneys’ fees, costs, and necessary disbursements in addition to any other relief to which such party may be entitled.

 

17. Severability.  If any provision of this Note will be declared void or unenforceable by any judicial or administrative authority, the validity of any other provision and of the entire Note will not be affected thereby.

 

18. No Stockholder Rights.  Nothing contained in this Note will be construed as conferring upon the Holder or any other person any rights or privileges as a stockholder of the Company and no dividends or interest will be payable or accrued in respect of the Conversion Shares obtainable under this Note until, and only to the extent that, this Note will have been converted pursuant to the terms and conditions hereof.

 

19. Treatment of Note.  To the extent permitted by generally accepted accounting principles, the Company will treat, account, and report the Note as debt and not equity for accounting purposes and with respect to any returns filed with federal, state, or local tax authorities.

 

20. Notices.  All notices and other communications given or made pursuant to this Note will be in writing and will be deemed effectively given: (i) upon personal delivery to the party to be notified; (ii) when sent by confirmed electronic mail or facsimile, if sent during normal business hours of the recipient, and if not so confirmed, then on the next business day; (iii) five days after having been sent by registered or certified mail, return receipt requested, postage prepaid; or (iv) one day after deposit with a nationally recognized overnight courier, specifying next day delivery, with written verification of receipt. All communications will be sent to the Company or to the Holder at the addresses of the parties set forth on the signature page of this Note (or at such other addresses as will be specified by notice given in accordance with this Section 20).

 

  

  

  

 

21. Governing Law; Jurisdiction.  Except as expressly provided herein, this Note and all questions relating to its validity, interpretation, performance, and enforcement will be governed by and construed in accordance with the laws of the State of Arizona, notwithstanding any Arizona or other conflict-of-interest provisions to the contrary.  Jurisdiction of and venue for any legal action between the Company and the Holder will be in the state and federal courts serving Maricopa County, Arizona, and the Company and the Holder hereby consent to such jurisdiction and venue.

 

22. Interpretation.  The Company and the Holder agree that each party and its counsel have reviewed this Agreement and that any rule of construction to the effect that ambiguities are to be resolved against the drafting party will not apply to the interpretation of this Note.

 

23. Headings.  Headings contained in this Note are inserted only as a matter of convenience and in no way define, limit, extend, or describe the scope of this Note or of any term or provision hereof.

 

[SIGNATURES ON FOLLOWING PAGE]

 

 

 

 

 

 

  

  

  

 

IN WITNESS WHEREOF, the Company, by and through its authorized officer, has caused this Secured Convertible Promissory Note to be issued as of the date first set forth above.

 

 

 

COMPANY:

 

GLOBAL RECYCLING TECHNOLOGIES, LTD., a Delaware corporation

By: /s/ John d’Arc Lorenz                             

John d’Arc Lorenz II, Chief Executive Officer and Chairman

Address:                Global Recycling Technologies, Ltd.

Attn:  John d’Arc Lorenz II

Post Office Box 3064

Tempe, Arizona  85280-3064

Email: john@grtus.com

Fax: (____) ____-______

 

ACKNOWLEDGED AND AGREED:

HOLDER:

IRA FBO LEONID FRENKEL, Pershing LLC, as Custodian

By: /s/ Leonid Frenkel                          

Name: Leonid Frenkel                                                                                 

Title:                                                                          

Address:                        401 City Line Avenue

Suite 800

Bala Cynwyd, PA  19004

Email: jfrankel@triagefunds.com

Fax: (610) 668-1919

 

  

  

  

ATTACHMENT A

 

NOTICE OF CONVERSION

 

The undersigned, the holder of the foregoing Secured Convertible Promissory Note, hereby surrenders such Note for conversion into ______________ shares of Common Stock of Global Recycling Technologies, Ltd., to the extent of $__________ unpaid principal amount and accrued and unpaid interest amount of such Note, and requests that the certificates for such shares be issued in the name of, and delivered to, the undersigned pursuant to the terms and conditions of the Note.  The undersigned agrees and acknowledges that the representations and warranties of the undersigned in the Purchase Agreement and the Note are true, accurate, and correct on the date of this Notice of Conversion.  Capitalized terms used but not otherwise defined in this Notice of Conversion will have the meanings given to such terms in the Note.

 

 

Dated: ___________ ___, 20__.

 

                                                                                                                                                                                                                                                                             

(Signature must conform in all respects to name of 

holder as specified on the face of the Note)

 

                                                                                                                                                                                                                                                                                       

(Address)Unassociated Document

Exhibit 4.2

 

FORBEARANCE AGREEMENT

This Forbearance Agreement (the “Agreement”) is entered into this 11th day of August, 2010 by GLOBAL RECYCLING TECHNOLOGIES, LTD., a Delaware corporation (the “Company”) and IRA FBO LEONID FRENKEL, PERSHING LLC AS CUSTODIAN (the “Payee”).

RECITALS

	
A.  

	
On August 9, 2008, the Company executed and purchased a Secured Convertible Promissory Note (the “Note”) in the amount of $1,000,000.00 to Payee.

 

	
B.  

	
On August 9, 2008, Company and Payee executed a Note Purchase Agreement in connection with the Note (the “Note Purchase Agreement”) (the Note Purchase Agreement, the Note and all renewals and modifications thereof are sometimes hereinafter referred to as the “Obligations”).  The Obligations are secured by certain collateral more particularly described in the Note (the “Collateral”);

 

	
C.  

	
As of the date hereof, no payment of interest or principal have been made by the Company to the Payee under the Note and Payee has alleged that an Event of Default has occurred according to the terms therein and Company has asserted certain defenses;

 

	
D.  

	
Without either party waiving its respective legal positions concerning the alleged defaults, to resolve current disputes concerning the Note, subject to the terms and conditions below, Payee is willing to forbear from commencing any action to collect the Obligations or to realize against the Collateral or otherwise in law or in equity during the Forbearance Period (as defined below).

 

AGREEMENT

 

NOW, THEREFORE, in consideration of the premises and the mutual covenants contained in this Agreement, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and intending to be legally bound, the Company and Payee hereby agree as follows:

 

1.             Subject to the further terms and conditions of this Agreement, Payee agrees to waive any and all claims or demands arising from or related to a default of the Company under the Note, Note Purchase Agreement, the Collateral or otherwise under the Obligations arising prior to or concurrent with the date of this Agreement.  Further, subject to the further terms and conditions of this Agreement and provided that no Event of Default under the Obligations hereinafter occurs and is continuing, Payee further agrees that it shall hereafter forbear from enforcing any and all rights and remedies available to Payee under the Obligations or as to the Collateral under law or in equity arising in connection with the Obligations until November 30, 2010 (the “Forbearance Period”).  If the Company has complied with all the terms and conditions of this Agreement during the Forbearance Period, the Obligations shall be deemed to be current and in good standing as of November 30, 2010 subject only to those modifications made pursuant to this Agreement.

 

2.             The Company shall, on or before the expiration of the Forbearance Period:

 

a. Pay in lawful dollars of the United States of America all accrued, outstanding and unpaid interest under the terms of the Note.  Such amount of accrued and unpaid interest shall be calculated from the beginning Funding Date of September 9, 2008 for each semi-annual as follows:

 

  

  

  

 

(i) Interest of $50,000 that was due on March 9, 2009 (“First Interest Payment Date”) will be paid in cash, including interest on this unpaid interest at the rate of 10% to the date of repayment from the First Interest Payment Date;

 

(ii) Interest of $50,000 that was due on September 9, 2009 (“Second Interest Payment Date”) will be paid in cash, including interest on this unpaid interest at the rate of 10% to the date of repayment from the Second Interest Payment Date;

 

(iii) Interest of $50,000 that was due on  March 9, 2010 (“Third Interest Payment Date”) will be paid in cash, including interest on this unpaid interest at the rate of 10% to the date of repayment from the Third Interest Payment Date; and

 

(iv) all other interest that has accrued under the terms of the Note and this Agreement from the Third Interest Payment Date to the date of repayment on or before the expiration of the Forbearance Period at the rate of 12.5%.

 

b. The Company shall issue and deliver to LEONID FRENKEL within ten (10) days of Payee’s execution of this Agreement a warrant (the “Warrant”) to purchase 1,000,000 shares of Voting Common Stock of the Company, $0.0001 par value per share (“Par Value”), exercisable until December 31, 2011 at a strike price equal to the Par Value pursuant to the terms of the Company’s standard warrant agreement, in the form of warrant attached hereto and made a part hereof as Exhibit “A’. The Company represents and confirms that, as of the time of issuance and delivery of the Warrant to Payee, no Liquidation Event (as defined therein) has occurred or will occur for a period of no less than thirty (30) days from the time of delivery of the Warrant to Payee, such that will render the Warrant no longer exercisable.

 

3.             Subject to the terms and conditions of this Agreement, Payee and the Company agree that the Maturity Date of the Note shall be extended to March 31, 2012.

 

4.             The Interest rate under the Note shall be amended to accrue on the principal amount outstanding under the Note at the rate of 12.5% starting from March 9, 2010, and semi-annual interest payments will be made every six (6) months thereafter.  In the event that the Company does not repay the principal and unpaid interest on or before the  Maturity Date of the Note or any Event of Default occurs under the terms of the Note whereby the entire principal and interest becomes immediately due and payable, or if the  Company does not fulfill its covenants and agreements hereunder on or before the expiration of the Forbearance Period, then in such case the Company shall pay interest calculated at the rate of eighteen percent (18%) per annum (the “Default Rate”) from such date as the entire principal and interest becomes immediately due and payable.

 

5.             The Company shall hereafter provide to Payee a monthly report of business operations containing a description of business revenues, income, operations, cash flows, current activities, fund raising efforts and  any material developments.   This report shall be provided to Payee in written form by email to jfrankel@triagefunds.com, and shall be delivered within the first seven (7) days of each month.

 

6.             Payee acknowledges and agrees that any notices it has given prior to the date hereof regarding default or demand for assets are withdrawn and shall be considered null and void and the Note shall not be deemed to be in default.  Further, it is expressly agreed and understood by and between the parties that the execution of this Agreement is not to be construed as an admission of liability, default or inability to pay debts in due course in any way on the part of the Company.

 

  

  

  

 

7.             The Company agrees that Payee's obligation to forbear under this Agreement will immediately terminate if the Company fails to make any payment under this Agreement when due. At such time, all outstanding principal and interest shall become immediately due and payable.

 

8.             This Agreement sets forth the entire agreement and understanding of the parties hereto with respect to the subject matter hereof and supersedes all prior agreements, if any, written or oral.  There is no written or oral understanding directly or indirectly connected with this Agreement that is not incorporated herein.

 

9.             This Agreement shall be binding upon and inure to the benefit of the successors, assigns, heirs, executors and personal representatives of all parties hereto, including any parties signing this Agreement.  This Agreement may be executed in one or more counterparts, which, when executed, shall be effective against the party executing the same once all the parties to this Agreement have signed an original or counterpart signature page.  If any provision of this Agreement violates law or is finally found unenforceable by a court of competent jurisdiction, the rest of this letter agreement shall remain valid and in full force and effect.  Any modification or waiver of any term of this Agreement must be in a writing signed by all parties.

 

10.           The terms of the Note and Note Purchase Agreement shall remain in full force and effect, except as otherwise modified by the terms of this Forbearance Agreement.

In witness whereof, the parties have executed this Forbearance Agreement as of the date first above written.

 

GLOBAL RECYCLING TECHNOLOGIES, LTD.

	
By:      /s/ John d’Arc Lorenz                       

	 

	
  

	
John d’Arc Lorenz II, CEO

IRA FBO LEONID FRENKEL, PERSHING LLC AS CUSTODIAN  (“PAYEE”)

	
By:     /s/ Leonid Frenkel                               

	 

	
  

	
Leonid  Frenkel

 

  

  

  

 

EXHIBIT A

FORM OF WARRANT

 

THIS COMMON STOCK PURCHASE WARRANT AND THE SECURITIES ISSUABLE UPON THE EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED, HYPOTHECATED, OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT REGISTRATION IS NOT REQUIRED UNDER SUCH ACT OR UNLESS SOLD PURSUANT TO RULE 144 UNDER SUCH ACT.

 

	Date of Issuance	Void after
	 	 
	August 11, 2010	December 31, 2011

 

 Global Recycling Technologies, Ltd.

 

Common Stock Purchase Warrant

 

WHEREAS, GLOBAL RECYCLING TECHNOLOGIES, LTD., a Delaware corporation (the “Company”), is issuing this Common Stock Purchase Warrant (the “Warrant”) to LEONID FRENKEL (the “Holder”), pursuant to the terms and conditions of that certain Forbearance Agreement dated August 11, 2010, between the Holder and the Company.  The Holder is entitled, subject to the terms and conditions contained in this Warrant, to purchase shares of the Common Stock of the Company.

 

NOW, THEREFORE:

 

1.  Purchase of Shares.

 

(a) Number of Shares.  Subject to the terms and conditions set forth in this Warrant, the Holder is entitled, upon surrender of this Warrant at the principal office of the Company (or at such other place as the Company will notify the Holder in writing), to purchase from the Company up to 1,000,000 fully paid and nonassessable shares of the Company’s Common Stock, par value $0.0001 per share (the “Common Stock”).

 

(b) Exercise Price. The exercise price for the shares of Common Stock issuable pursuant to this Section 1 (collectively, the “Shares”) will be $0.0001 per Share (the “Exercise Price”).  The Shares and the Exercise Price will be subject to adjustment pursuant to Section 7 hereof.

 

2.  Exercise Period.  This Warrant will be exercisable, in whole or in part, during the term commencing on August 11, 2010 and ending at 5:00 p.m. local Phoenix time on December 31, 2011 (the “Exercise Period”); provided, however, that this Warrant will no longer be exercisable and will become null and void upon the consummation of any “Liquidation Event,” which is defined herein as follows: (i) the sale or transfer of substantially the entire business of the Company, whether by sale of assets, merger, or a sale of a majority of the voting equity securities of the Company; (ii) a registration statement filed by the Company is declared effective by the United States Securities Exchange Commission or any other securities regulatory body for the sale of equity securities of the Company to the public; or (iii) the listing by the Company of any class of the Company’s equity securities on any internationally recognized securities exchange (e.g., New York, AMEX, NASDAQ, London, or Toronto Stock Exchanges).  The Company will notify Purchaser in writing 30 days in advance of a Liquidation Event; provided, however, that the Company will have no liability for failure to provide such notice; and provided further, that, notwithstanding the foregoing sentence, Purchaser will have 30 days from the date the Company does provide such notice to purchase the Shares, regardless of whether notice has been provided or a Liquidation Event has occurred prior to the end of such 30-day period.

 

  

  

  

 

3.  Method of Exercise.

 

(a) While this Warrant remains outstanding and exercisable in accordance with Section 2 above, the Holder may exercise, in whole or in part, the purchase rights evidenced hereby. Such exercise will be effected by:

 

(i)           the surrender of the Warrant, together with a duly executed copy of the Notice of Exercise attached hereto, to the Secretary of the Company at its principal office (or at such other place as the Company will notify the Holder in writing); and

 

(ii)           (A)           the cash payment to the Company of an amount equal to the aggregate Exercise Price for the number of Shares being purchased, or

 

(B)           in lieu of any cash payment by the Holder of any Exercise Price or any cash or other consideration, the delivery of the Notice of Exercise attached hereto, to the Secretary of the Company indicating that the Holder seeks to effectuate a cashless exercise of this Warrant.  In the event of a cashless exercise of this Warrant, the Holder will be entitled to that number of shares of Common  Stock equal to the quotient obtained by dividing: (X) the value of this Warrant (or the specified portion hereof) on the date of the cashless exercise, which value shall be determined by subtracting (1) the aggregate Exercise Price of the Shares being purchased from (2) the Fair Market Value of the Shares being purchased on the date of the cashless exercise; by (Y) the Fair Market Value of one share of Common Stock on the date of the cashless exercise.

For purposes of this Warrant, the “Fair Market Value” of a share of Common Stock on any relevant date will be determined in accordance with the following provisions: (i) if the Common Stock at the time is not listed or admitted to trading on any stock exchange or traded in the over-the-counter market, then the Fair Market Value will be determined by the Company’s Board of Directors in good faith; (ii) if the Common Stock is at the time listed or admitted to trading on any stock exchange, then the Fair Market Value will be the most recent closing selling price per share of Common Stock on the date in question as reported on the stock exchange or trading market (and or if no such sale is made on such day, the average of the closing bid and asked prices for such day on such exchange or trading market); and (iii) if the Common Stock is not at the time listed or admitted to trading on any stock exchange but is traded in over-the-counter market, the Fair Market Value will be the closing selling price (or, if such information is not available, the average of the highest bid and lowest asked prices) per share of Common Stock on the date in question in the over-the-counter market (and if there is no reported closing selling price (or bid and asked prices) for the Common Stock on the date in question, the Fair Market Value will be the closing selling price (or the average of the highest bid price and lowest asked price) on the last preceding date for which such quotations exist).  Notwithstanding the foregoing, in the event this Warrant is exercised in connection with the Company’s initial public offering of Common Stock, the Fair Market Value a share of Common Stock will be the per share offering price to the public of the Company’s initial public offering.

(b) Each exercise of this Warrant will be deemed to have been effected immediately prior to the close of business on the day on which this Warrant is surrendered to the Company as provided in Section 3(a) above.  At such time, the person or persons in whose name or names any certificate for the Shares will be issuable upon such exercise as provided in Section 3(c) below will be deemed to have become the holder or holders of record of the Shares represented by such certificate.

 

  

  

  

 

(c) As soon as practicable after the exercise of this Warrant, in whole or in part, the Company at its expense will cause to be issued in the name of, and delivered to, the Holder, or as such Holder (upon payment by such Holder of any applicable transfer taxes) may direct:

 

(i)           a certificate or certificates for the number of Shares to which such Holder will be entitled; and

 

(ii)           in case such exercise is in part only, a new warrant or warrants (dated the date hereof) of like tenor, calling in the aggregate on the face or faces thereof for the number of Shares equal to the number of such Shares described in this Warrant minus the number of such Shares purchased by the Holder upon all exercises made in accordance with Section 3(a) above.

 

4.  Representations and Warranties of the Company.  In connection with the transactions provided for herein, the Company hereby represents and warrants to the Holder that:

 

(a) Organization, Good Standing, and Qualification.  The Company is a corporation duly organized, validly existing, and in good standing under the laws of the State of Delaware and has all requisite corporate power and authority to carry on its business as now conducted. The Company is duly qualified to transact business and is in good standing in each jurisdiction in which the failure to so qualify would have a material adverse effect on its business or properties.  The Company has full power and authority to issue this Warrant.

 

(b) Valid Issuance of Common Stock.  The Shares, when issued, sold (as a result of an exercise of this Warrant), and delivered in accordance with the terms and conditions of this Warrant for the consideration expressed herein, will be duly and validly issued, fully paid and nonassessable.

 

5.  Representations and Warranties of the Holder.  In connection with the transactions provided for herein, the Holder hereby represents and warrants to the Company that:

 

(a) Authorization.  The Holder represents and warrants that the Holder has full power and authority to enter into this Warrant.  This Warrant constitutes the Holder’s valid and legally binding obligation, enforceable in accordance with its terms, except as may be limited by (i) applicable bankruptcy, insolvency, reorganization, or similar laws relating to or affecting the enforcement of creditors’ rights, and (ii) laws relating to the availability of specific performance, injunctive relief, or other equitable remedies.

 

(b) Purchase Entirely for Own Account.  The Holder agrees and acknowledges that this Warrant is entered into by the Holder in reliance upon such Holder’s representation to the Company that the Warrant and the Shares (collectively, the “Securities”) will be acquired for investment for the Holder’s own account, not as a nominee or agent, and not with a view to the resale or distribution of any part thereof, and that the Holder has no present intention of selling, granting any participation in, or otherwise distributing the same.  By acknowledging this Warrant, the Holder further represents that the Holder does not have any contract, undertaking, agreement, or arrangement with any person to sell, transfer, or grant participations to such person or to any third person with respect to the Securities.

 

  

  

  

 

(c) Disclosure of Information.  The Holder agrees and acknowledges that the Holder has received all information that the Holder considers necessary or appropriate for deciding whether to acquire the Securities.  The Holder further represents and warrants that the Holder has had an opportunity to ask questions and receive answers from the Company regarding the terms and conditions of the offering of the Securities in this Warrant.

 

(d) Investment Experience.  The Holder is an investor in securities of companies in the development stage and acknowledges that the Holder is able to fend for himself, can bear the economic risk of an investment in the Shares, and has such knowledge and experience in financial or business matters that the Holder and his advisors are capable of evaluating the merits and risks of the investment in the Securities.

 

(e) Accredited Investor.  The Holder is an “accredited investor” within the meaning of Rule 501 of Regulation D, as presently in effect, as promulgated by the Securities and Exchange Commission (the “SEC”) under the Securities Act of 1933, as amended (the “Act”).

 

(f) Restricted Securities.  The Holder understands that the Securities are characterized as “restricted securities” under the federal securities laws inasmuch as they are being acquired from the Company in a transaction not involving a public offering and that under such laws and applicable regulations such securities may be resold without registration under the Act, only in certain limited circumstances. In this connection, the Holder represents that he is familiar with Rule 144, as presently in effect, as promulgated by the SEC under the Act (“Rule 144”), and understands the resale limitations imposed thereby and by the Act.

 

(g) Correct Number.  Holder hereby confirms and acknowledges that, as of the date of this Warrant, this Warrant and the Shares issuable hereunder represent the only securities he is entitled to receive from the Company pursuant to the terms of this Warrant.

 

(h) Further Limitations on Disposition.  Without in any way limiting the representations set forth above, the Holder further agrees not to make any disposition of all or any portion of the Securities unless and until the transferee has agreed in writing for the benefit of the Company to be bound by the terms of this Warrant, including, without limitation, this Section 5, Section 18, and:

 

(i)           there is then in effect a registration statement under the Act covering such proposed disposition and such disposition is made in accordance with such registration statement; or

 

(ii)           the Holder will have notified the Company of the disposition and will have furnished the Company with an opinion of counsel, reasonably satisfactory to the Company, that such disposition will not require registration of such Shares under the Act.

 

(i) Legends.  The Holder agrees and acknolwedges that the Shares may bear the following legend or similar or other applicable legends:

 

THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED OR QUALIFIED UNDER FEDERAL OR STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, PLEDGED, OR OTHERWISE DISPOSED OF UNLESS SO REGISTERED OR QUALIFIED, UNLESS AN EXEMPTION EXISTS OR UNLESS SUCH DISPOSITION IS NOT SUBJECT TO THE FEDERAL OR STATE SECURITIES LAWS, AND THE AVAILABILITY OF ANY EXEMPTION OR THE INAPPLICABILITY OF SUCH SECURITIES LAWS MUST BE ESTABLISHED BY AN OPINION OF COUNSEL, WHICH OPINION OF COUNSEL WILL BE REASONABLY SATISFACTORY TO THE COMPANY.

 

  

  

  

THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A LOCK-UP PERIOD OF UP TO 12 MONTHS AFTER COMMENCEMENT OF AN INITIAL PUBLIC OFFERING UNDER THE SECURITIES ACT, OR OTHER APPLICABLE FEDERAL, STATE, OR FOREIGN LAWS AND REGULATIONS, AS SET FORTH IN AN AGREEMENT BETWEEN THE COMPANY AND THE ORIGINAL HOLDER OF THESE SECURITIES, A COPY OF WHICH MAY BE OBTAINED AT THE COMPANY’S PRINCIPAL OFFICE. SUCH LOCK-UP PERIOD IS BINDING ON TRANSFEREES OF THESE SHARES.

6.  State Commissioners of Corporations.  The sale of the Shares which are the subject of this Warrant has not been qualified with any state commission or regulatory body and the issuance of such Shares or the payment or receipt of any part of the consideration for such Shares prior to such qualification is unlawful, unless the sale of the Shares is exempt from qualification by applicable law. The rights of all parties to this Warrant are expressly conditioned upon such qualification being obtained, unless the sale is so exempt.

 

7.  Adjustment of Exercise Price and Number of Shares.  The number and kind of Shares purchasable upon exercise of this Warrant and the Exercise Price will be subject to adjustment from time to time as follows:

 

(a) Subdivisions, Combinations, and Other Issuances.  If the Company will at any time after the issuance but prior to the expiration of this Warrant subdivide its Common Stock, by split-up or otherwise, or combine its Common Stock, or issue additional shares of its Common Stock or Common Stock as a dividend with respect to any shares of its Common Stock, the number of Shares issuable on the exercise of this Warrant will forthwith be proportionately increased in the case of a subdivision or stock dividend, or proportionately decreased in the case of a combination.  Appropriate adjustments will also be made to the Exercise Price payable per share, but the aggregate Exercise Price payable for the total number of Shares purchasable under this Warrant (as adjusted) will remain the same.  Any adjustment under this Section 7(a) will become effective at the close of business on the date the subdivision or combination becomes effective, or as of the record date of such dividend, or in the event that no record date is fixed, upon the making of such dividend.

 

(b) Notice of Adjustment.  When any adjustment is required to be made in the number or kind of Shares purchasable upon exercise of the Warrant, or in the Exercise Price, the Company will promptly notify the Holder of such event and of the number of Shares or other securities or property thereafter purchasable upon exercise of this Warrant.

 

8.  No Fractional Shares or Scrip.  No fractional shares or scrip representing fractional shares will be issued upon the exercise of this Warrant, but in lieu of such fractional shares, the Company will make a cash payment therefor on the basis of the Exercise Price then in effect.

 

9.  No Stockholder Rights.  Prior to exercise of this Warrant, the Holder will not be entitled to any rights of a stockholder with respect to the Shares, and, except as otherwise provided in this Warrant, the Holder will not be entitled to any stockholder notice or other communication concerning the business or affairs of the Company.

 

  

  

  

 

10.  Transfer of Warrant.  Subject to compliance with the terms and conditions of this Section 10, this Warrant and all rights hereunder are transferable, in whole, without charge to the holder hereof (except for transfer taxes), upon surrender of this Warrant properly endorsed or accompanied by written instructions of transfer.  With respect to any offer, sale or other disposition of this Warrant or any Shares acquired pursuant to the exercise of this Warrant prior to registration of such Warrant or Shares, the holder hereof agrees to give written notice to the Company prior thereto, describing briefly the manner thereof, together with a written opinion of such holder’s counsel, or other evidence, if requested by the Company, to the effect that such offer, sale or other disposition may be effected without registration or qualification (under the Act as then in effect or any federal or state securities law then in effect) of this Warrant or the Shares and indicating whether or not under the Act certificates for this Warrant or the Shares to be sold or otherwise disposed of require any restrictive legend as to applicable restrictions on transferability in order to ensure compliance with such law.  Upon receiving such written notice and reasonably satisfactory opinion or other evidence, if so requested, the Company, as promptly as practicable, shall notify such holder that such holder may sell or otherwise dispose of this Warrant or such Shares, all in accordance with the terms of the notice delivered to the Company.  If a determination has been made pursuant to this Section 10 that the opinion of counsel for the holder or other evidence is not reasonably satisfactory to the Company, the Company shall so notify the holder promptly with details thereof after such determination has been made.  Each certificate representing this Warrant or the Shares transferred in accordance with this Section 10 shall bear a legend as to the applicable restrictions on transferability in order to ensure compliance with such laws, unless in the aforesaid opinion of counsel for the holder, such legend is not required in order to ensure compliance with such laws.  The Company may issue stop transfer instructions to its transfer agent in connection with such restrictions.

 

11.  Governing Law.  This Warrant will be governed by and construed under the laws of the State of Arizona as applied to agreements among Arizona residents, made and to be performed entirely within the State of Arizona.

 

12.  Successors and Assigns.  The terms and conditions of this Warrant will inure to the benefit of, and be binding upon, the Company and the Holder and its heirs, successors, and assigns.

 

13.  Titles and Subtitles.  The titles and subtitles used in this Warrant are used for convenience only and are not to be considered in construing or interpreting this Warrant.

 

14.  Notices.  All notices and other communications given or made pursuant hereto will be in writing and will be deemed effectively given: (a) upon personal delivery to the party to be notified; (b) when sent by confirmed electronic mail or facsimile, if sent during normal business hours of the recipient, and if not so confirmed, then on the next business day; (c) five days after having been sent by registered or certified mail, return receipt requested, postage prepaid; or (d) one day after deposit with a nationally recognized overnight courier, specifying next day delivery, with written verification of receipt. All communications will be sent to the respective parties at the following addresses (or at such other addresses as will be specified by notice given in accordance with this Section 14):

 

If to the Company:

Global Recycling Technologies, Ltd.

Attn:  John d’Arc Lorenz II

4802 E. Ray Road, Suite 23-#196

Phoenix, AZ  85044

Facsimile:                                           

Email: john@grtus.com

If to Holder:

LEONID FRENKEL

401 City Line Avenue

Suite 800

Bala Cynwyd, PA  19004

Facsimile: (610) 668-1919

Email: JFrankel@triagefunds.com

 

  

  

  

15.  Expenses.  If any action at law or in equity is necessary to enforce or interpret the terms of this Warrant, the prevailing party will be entitled to reasonable attorneys’ fees, costs, and necessary disbursements in addition to any other relief to which such party may be entitled.

 

16.  Entire Agreement; Amendments and Waivers.  This Warrant and any other documents delivered pursuant hereto constitute the full and entire understanding and agreement between the parties with regard to the subjects hereof and thereof. Nonetheless, any term of this Warrant may be amended and the observance of any term of this Warrant may be waived (either generally or in a particular instance and either retroactively or prospectively), with the written consent of the Company and the Holder; or if this Warrant has been assigned in part, by the holders or rights to purchase a majority of the Shares originally issuable pursuant to this Warrant.

 

17.  Severability.  If any provision of this Warrant is held to be unenforceable under applicable law, such provision will be excluded from this Warrant and the balance of the Warrant will be interpreted as if such provision were so excluded and will be enforceable in accordance with its terms.

 

18.  “Market Stand-Off” Agreement.  The Holder agrees that, if requested by an underwriter, Nomad, or broking institution engaged by the Company in connection with (a) the Company’s first underwritten public offering pursuant to an effective registration statement under the Act, or (b) the Company having its shares of its capital stock admitted to trading on any internationally recognized securities exchange (e.g., New York, AMEX, NASDAQ, London, or Toronto Stock Exchanges), the Holder will not sell or otherwise transfer, make any short sale of, grant any option for the purchase of, or enter into any hedging or similar transaction with the same economic effect as a sale, of any Shares during the period commencing on the earlier to occur of (i) the date of the final prospectus relating to the Company’s first firm commitment underwritten public offering of its common stock under the Act, or (ii) the date that the Company’s shares of capital stock are admitted for trading on any internationally recognized securities exchange, and ending on the date specified by the Company and the applicable underwriter, Nomad, or broking firm for a period of up to 12 months.  Holder will execute a market standoff agreement with said underwriters, Nomads, and broking institutions in customary form consistent with the provisions of this Section 18.  The requirements set forth above apply to Holder solely on the condition that all other holders of shares of Common Stock of the Company are also subject to such requirements, and only in the proportion that all shares of Common Stock subject to the requirement bears to the total number of Common Stock outstanding.

 

[SIGNATURES ON FOLLOWING PAGE]

 

 

 

  

  

  

IN WITNESS WHEREOF, the parties have executed this Warrant as of August 11, 2010.

COMPANY:

 

GLOBAL RECYCLING TECHNOLOGIES, LTD., a Delaware corporation

By: /s/ John d’Arc Lorenz                    

John d’Arc Lorenz II, Chief Executive Officer and Chairman

 

ACKNOWLEDGED AND AGREED:

HOLDER:

By: /s/ Leonid Frenkel                                                                                                              

       LEONID FRENKEL

Address:                401 City Line Avenue

Suite 800

Bala Cynwyd, PA  19004

Email: jfrankel@triagefunds.com

Fax: (610) 668-1919

 

  

  

  

 

Notice of Exercise

 

Global Recycling Technologies, Ltd.

Attention: John d’Arc Lorenz II

4802 E. Ray Road, Suite 23-#196

Phoenix, AZ  85044

The undersigned hereby elects to purchase, pursuant to the terms and conditions of that certain Common Stock Purchase Warrant, dated as of August 11, 2010 (the “Warrant”), as follows:

_____________ shares of Common Stock (the “Shares”) pursuant to the terms and conditions of the Warrant, and tenders herewith payment in cash of the Exercise Price of such Shares in full, together with all applicable transfer taxes, if any; or

_____________ shares of Common Stock (the “Shares”) pursuant to the cashless exercise terms and conditions of the Warrant.

The undersigned hereby represents and warrants that Representations and Warranties in Section 5 of the Warrant are true and correct in all respects as of the date hereof.

 

HOLDER:

By:                                                                

        LEONID FRENKEL

Address:                401 City Line Avenue

Suite 800

Bala Cynwyd, PA  19004

Email: jfrankel@triagefunds.com

Fax: (610) 668-1919

Date:                                           

Name in which Shares should be registered: LEONID FRENKEL.

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