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Exhibit 10.1
SECURITIES PURCHASE
AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT (the
"AGREEMENT"), dated as of September 29, 2006, is by and between
LaPolla Industries Inc., a Delaware corporation, with its principal
place of business at 15402 Vantage Parkway East, Suite 322,
Houston, Texas 77032 (the "COMPANY"), and Richard J. Kurtz, with a
residence at Nine Duck Pond Road, Alpine, New Jersey 07620 (the
"BUYER").
WHEREAS, the Company and the Buyer are executing
and delivering this Agreement in reliance upon the exemption from
securities registration afforded by Section 4(2) of the Securities
Act of 1933, as amended (the "ACT");
WHEREAS, the Company has authorized the following
new series of its preferred stock, $1.00 par value per share: the
Series D Preferred Stock (the "SERIES D PREFERRED STOCK"), with a
stated value per share of Series D Preferred Stock of $1,000, which
includes a $1.00 par value per share (The Series D Preferred Stock
is referred to in this Agreement as the "SECURITIES");
and
WHEREAS, the Buyer wishes to purchase and the
Company desires to sell an aggregate of 6,900 shares of Series D
Preferred Stock for a total of $6,900,000, upon the terms and
conditions stated in this Agreement.
NOW, THEREFORE, in consideration of the premises
and covenants herein contained, the Company and the Buyer hereby
agree as follows:
1. PURCHASE AND SALE OF SERIES D
PREFERRED STOCK.
a. PURCHASE OF SERIES D PREFERRED
STOCK. Subject to the satisfaction (or waiver) of the conditions
set forth in Sections 6 and 7(a) below, the Company shall issue and
sell to the Buyer and the Buyer shall purchase from the Company,
for an aggregate of $6,900,000 an aggregate of 6,900 shares of
Series D Preferred Stock (the "CLOSING"). On the Closing Date,
subject to receipt of the agreed upon consideration, the Company
shall cause to be delivered to Buyer a stock certificate
representing the number of shares of Series D Preferred Stock that
Buyer is then purchasing, duly executed on behalf of the Company
and registered in the name of the Buyer or his designee (the "STOCK
CERTIFICATE").
b. CLOSING DATE. The date and time of
the Closing (the "CLOSING DATE") shall be 10:00 a.m. Eastern
Daylight Time on September 29, 2006, subject to satisfaction (or
waiver) of the conditions to the Closing set forth in Sections 6
and 7(a) below (or such later date as is mutually agreed to by the
Company and the Buyer).
c. FORM OF PAYMENT. On the Closing
Date, Buyer shall cancel indebtedness in the form of loans bearing
interest owed by Company to Buyer as payment of the applicable
purchase price for the Series D Preferred Stock to be issued and
sold to Buyer at the Closing.
2. BUYER'S REPRESENTATIONS AND
WARRANTIES. Buyer represents and warrants with respect to only
himself that:
a. INVESTMENT PURPOSE. Such Buyer is
acquiring the Series D Preferred Stock for his own account for
investment only and not with a view towards, or for resale in
connection with, the unlawful public sale or distribution thereof,
except pursuant to sales of such shares which are the subject of an
effective registration statement duly filed under the Act or
otherwise exempted under the Act and all applicable state blue sky
laws; provided, however, that by making the representations herein,
such Buyer does not agree to hold any Securities for any minimum
period or other specific term and reserves the right to dispose of
the Securities at any time in accordance with or pursuant to a
registration statement or an exemption under the Act and all
applicable state blue sky laws.
b. ACCREDITED INVESTOR STATUS. Buyer
is an "accredited investor" as that term is defined in Rule 501(a)
of Regulation D promulgated by the United States Securities and
Exchange Commission (the "SEC") under the Act ("REGULATION
D").
c. RELIANCE ON EXEMPTIONS. Buyer
understands that the Series D Preferred Stock is being offered and
sold to him in reliance on specific exemptions from the
registration requirements of United States federal and state
securities laws and that the Company is relying in part upon the
truth and accuracy of, and Buyer's compliance with, the
representations, warranties, agreements, acknowledgments and
understandings of Buyer set forth herein in order to determine the
availability of such exemptions and the eligibility of Buyer to
acquire the Series D Preferred Stock.
d. INFORMATION. Buyer acknowledges
that he is the Chairman of the Board of Directors of the Company
and as such has been furnished with all materials relating to the
business, finances and operations of the Company and materials
relating to the offer and sale of the Series D Preferred Stock that
have been requested by Buyer. No independent due diligence
investigations conducted by Buyer shall modify, amend or affect
Buyer's right to rely on the Company's representations and
warranties contained in Section 3 below.
e. NO GOVERNMENTAL REVIEW. Buyer
understands that no United States federal or state agency or any
other government or governmental agency has passed on or made any
recommendation or endorsement of the Series D Preferred Stock and
the Warrants or the fairness or suitability of the investment in
the Securities nor have such authorities passed upon or endorsed
the merits of the offering of the Series D Preferred
Stock.
f. TRANSFER OR RESALE. Buyer
understands that the: (i) Securities have not been and are not
being registered under the Act or any state securities laws, and
may not be offered for sale, sold, assigned or transferred unless
(A) (i) they have been subsequently registered thereunder and (ii)
they are offered for sale, sold, assigned and transferred in
compliance with the prospectus delivery requirements of the Act; or
(B) Buyer shall have delivered to the Company an opinion of
counsel, in a generally acceptable form, to the effect that such
securities to be sold, assigned or transferred may be sold,
assigned or transferred pursuant to an exemption from such
registration.
g. LEGENDS.
(i) Buyer understands that the
certificates or other instruments representing the Series D
Preferred Stock shall bear a restrictive legend in substantially
the following form (and a stop-transfer order may be placed against
transfer of such stock certificates):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED OR
APPLICABLE STATE SECURITIES LAWS. THE SECURITIES HAVE BEEN ACQUIRED
FOR INVESTMENT AND MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED
OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
APPLICABLE STATE SECURITIES LAWS, OR AN OPINION OF COUNSEL, IN A
GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER
SAID ACT OR APPLICABLE STATE SECURITIES LAWS.
(ii) Each certificate for Series D
Preferred Stock shall also bear the following legend:
ANY TRANSFEREE OF THIS CERTIFICATE SHOULD CAREFULLY REVIEW
THE TERMS OF THE COMPANY'S CERTIFICATE OF DESIGNATIONS RELATING TO
THE SERIES D PREFERRED SHARES REPRESENTED BY THIS CERTIFICATE. THE
NUMBER OF SERIES D PREFERRED SHARES REPRESENTED BY THIS CERTIFICATE
MAY BE LESS THAN THE NUMBER OF SUCH SHARES STATED ON THE FACE
HEREOF.
3. REPRESENTATIONS AND WARRANTIES OF
THE COMPANY. The Company represents and warrants to Buyer as set
forth in this Section 3.
a. ORGANIZATION AND QUALIFICATION. The
Company is duly organized and validly existing in good standing
under the laws of the jurisdiction in which it is organized, and
has the requisite corporate power to own its properties and to
carry on its business as now being conducted. The Company is duly
qualified to do business and is in good standing in every
jurisdiction in which the nature of the business conducted by it
makes such qualification necessary, except to the extent that the
failure to be so qualified or be in good standing would not have a
Material Adverse Effect. "MATERIAL ADVERSE EFFECT" means any
material adverse effect on (i) the business, properties,
operations, condition (financial or otherwise), results of
operations or objective prospects of the Company taken as a whole,
(ii) on the ability of the Company to perform its obligations
hereunder, under the Certificate of Designation or under the
agreements or instruments to be entered into or filed in connection
herewith or therewith, or (iii) the Securities.
b. AUTHORIZATION; ENFORCEMENT;
COMPLIANCE WITH OTHER INSTRUMENTS. (i) The Company has the
requisite corporate power and authority to enter into and perform
its obligations under this Agreement, to issue, sell and perform
its obligations with respect to the Series D Preferred Stock in
accordance with the terms hereof and the Certificate of
Designation, (ii) the execution and delivery of this Agreement by
the Company and the consummation by it of the transactions
contemplated hereby and thereby, including without limitation the
issuance of the Series D Preferred Stock, have been duly authorized
by the Company's Board of Directors and no further consent or
authorization is required by the Company, its Board of Directors or
its shareholders, (iii) this Agreement and the certificates for the
Series D Preferred Stock have been duly executed and delivered by
the Company, (iv) this Agreement and the certificates for the
Series D Preferred Stock constitute the valid and binding
obligations of the Company enforceable against the Company in
accordance with their terms, except as such enforceability may be
limited by general principles of equity or applicable bankruptcy,
insolvency, reorganization, moratorium, liquidation or similar laws
relating to, or affecting generally, the enforcement of creditors'
rights and remedies, and (v) the Certificate of Designation will
have been filed with the Secretary of State of the State of
Delaware within sixty (60) days after the Closing date hereof and
will be in full force and effect, enforceable against the Company
in accordance with its terms.
c. CAPITALIZATION. As of September 29,
2006, the authorized capital stock of the Company consists of sixty
seven million (67,000,000) shares, of which sixty five million
(65,000,000) are for common stock and two million (2,000,000) for
preferred stock. No shares of common stock or preferred stock are
subject to preemptive rights or any other similar rights or any
liens or encumbrances suffered or permitted by the Company. There
are no securities or instruments containing anti-dilution or
similar provisions that will be triggered by the issuance of any of
the Securities as described in this Agreement. The Company has
furnished to the Buyer copies of the Company's Restated Certificate
of Incorporation, as amended, and as in effect on the date hereof
(the "RESTATED CERTIFICATE OF INCORPORATION"), and the Company's
Bylaws, as in effect on the date hereof (the "BYLAWS"), and the
terms of all securities including the material rights of the
holders thereof in respect thereto.
d. ISSUANCE OF SECURITIES. The
Securities are duly authorized and, upon issuance in accordance
with the terms hereof, shall be (i) validly issued, fully paid and
non-assessable, (ii) free from all taxes, liens and charges with
respect to the issue thereof and (iii) entitled to the rights and
preferences set forth in the Certificate of Designation.
e. NO CONFLICTS. Except as otherwise
expressly stated herein, the execution, delivery and performance of
this Agreement, the performance by the Company of its obligations
under the Certificate of Designation and the consummation by the
Company of the transactions contemplated hereby will not (i) result
in a violation of the Restated Certificate of Incorporation, as
amended, any Certificate of Designation, Preferences and Rights of
any outstanding series of preferred stock of the Company or Bylaws
or (ii) conflict with, or constitute a default (or an event which
with notice or lapse of time or both would become a default) under,
or give to others any rights of termination, amendment,
acceleration or cancellation of, any material agreement, indenture
or instrument to which the Company or any of its subsidiaries is a
party, or result in a violation of any law, rule, regulation,
order, judgment or decree (including federal and state securities
laws and regulations and the rules and regulations of the principal
market or exchange on which the common stock is traded or listed)
applicable to the Company or by which any property or asset of the
Company is bound or affected. The Company is not in violation of
any term of or in default under its Restated Certificate of
Incorporation or Bylaws, as applicable, any Certificate of
Designation, Preferences and Rights of any outstanding series of
preferred stock of the Company, or any material contract,
agreement, indebtedness, indenture, instrument, judgment, decree or
order (collectively referred to as the "MATERIAL CONTRACTS") or any
statute, rule or regulation applicable to the Company. The business
of the Company is not being conducted, and shall not be conducted,
in violation of any material law, ordinance or regulation of any
governmental entity. Except as specifically contemplated by this
Agreement and as required under the Act and applicable blue sky
laws, the Company is not required to obtain any consent,
authorization or order of, or make any filing or registration with,
any court or governmental or regulatory or self-regulatory agency
in order for it to execute, deliver or perform any of its
obligations under or contemplated by this Agreement or perform its
obligations under the Certificate of Designation in accordance with
the terms hereof or thereof.
f. SEC DOCUMENTS; FINANCIAL
STATEMENTS. The Company has filed all reports, schedules, forms,
statements and other documents required to be filed by it with the
SEC pursuant to the reporting requirements of the Securities
Exchange Act of 1934, as amended (the "EXCHANGE ACT") (all of the
foregoing filed prior to the date hereof and all exhibits included
therein and financial statements and schedules thereto and
documents incorporated by reference therein being hereinafter
referred to as the "SEC DOCUMENTS"). As of their respective dates,
the SEC Documents complied in all material respects with the
requirements of the Exchange Act and the rules and regulations of
the SEC promulgated thereunder applicable to the SEC Documents. As
of their respective dates, the financial statements of the Company
included in the SEC Documents complied as to form in all material
respects with applicable accounting requirements and the published
rules and regulations of the SEC with respect thereto. Such
financial statements have been prepared in accordance with
generally accepted accounting principles, consistently applied
during the periods involved (except (i) as may be otherwise
indicated in such financial statements or the notes thereto, or
(ii) in the case of unaudited interim statements, to the extent
they may exclude footnotes or may be condensed or summary
statements) and fairly present in all material respects the
financial position of the Company as of the dates thereof and the
results of its operations and cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal year-end
audit adjustments).
g. ACKNOWLEDGMENT REGARDING BUYERS'
PURCHASE OF THE SERIES D PREFERRED STOCK. Purchaser's status as
Chairman of the Board of Direc
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