-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, FnIvxCP3WdyPmYmCv/pO/8gnGo4h0OWqZoSEE4NEYPMrVNAS9MsjXh8O9o+Kh+FF OHClbjkZqIVofAiRFIK2DQ== 0000892569-97-002527.txt : 19970929 0000892569-97-002527.hdr.sgml : 19970929 ACCESSION NUMBER: 0000892569-97-002527 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 9 CONFORMED PERIOD OF REPORT: 19970827 ITEM INFORMATION: ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 19970911 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: CERPLEX GROUP INC CENTRAL INDEX KEY: 0000915870 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-COMPUTER PROGRAMMING, DATA PROCESSING, ETC. [7370] IRS NUMBER: 330411354 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 000-23602 FILM NUMBER: 97679082 BUSINESS ADDRESS: STREET 1: 1382 BELL AVE CITY: TUSTIN STATE: CA ZIP: 92680 BUSINESS PHONE: 7142585600 MAIL ADDRESS: STREET 1: 1382 BELL AVENUE CITY: TUSTIN STATE: CA ZIP: 92680 8-K 1 FORM 8-K FOR PERIOD ENDED AUGUST 27, 1997 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported): August 27, 1997 THE CERPLEX GROUP, INC. (Exact name of registrant as specified in charter) Delaware 0-23602 33-0411354 - -------------------------------------------------------------------------------- (State or other jurisdiction (Commission (IRS Employer of incorporation) File Number) Identification No.) 1382 Bell Avenue, Tustin, California 92780 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) (714) 258-5600 - -------------------------------------------------------------------------------- (Registrant's telephone number including area code) Not applicable - -------------------------------------------------------------------------------- (Former name or former address, if changed since last report.) 2 ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS. On August 27, 1997, The Cerplex Group, Inc., a Delaware corporation (the "Company"); Cerplex Subsidiary, Inc., a Delaware corporation and a wholly-owned subsidiary of the Company ("Cerplex Sub"); Modcomp Joint Venture, Inc., a Delaware corporation and a wholly-owned subsidiary of the Company ("MJVI"); and Modcomp/Cerplex, L.P., a Delaware limited partnership whose general and limited partnership interests are wholly-owned by Cerplex Sub and MJVI ("Modcomp") (the Company, Cerplex Sub, MJVI and Modcomp are hereinafter collectively referred to as the "Selling Entities") consummated the sale (the "Disposition") of substantially all of the assets of Modcomp to CSP, Inc., a Massachusetts corporation ("CSP") and CSPI Sub Inc., a Delaware corporation and a wholly-owned subsidiary of CSP ("CSP Sub") (CSP and CSP Sub are hereinafter together referred to as the "Purchasers"). Such assets include, without limitation, cash, accounts receivable and tangible and intangible assets of Modcomp. The Disposition was achieved pursuant to an Asset Purchase Agreement (the "Purchase Agreement") dated as of August 6, 1997, by and among the Selling Entities and the Purchasers. The Purchase Agreement provides that the Disposition is effective as of June 30, 1997. No material relationship exists between the Purchasers and the Company, the Company's affiliates, directors or officers, or any associate of any of the Company's directors or officers. The aggregate purchase price (the "Purchase Price") paid by the Purchasers to the Company was $8,540,000, of which approximately $8,447,000 was paid in cash at the closing on August 27, 1997. The net proceeds to the Company were $8,102,000. The remaining $95,000 of the Purchase Price was withheld from payment pursuant to an escrow agreement between the parties pending the determination of certain tax liabilities of Modcomp. The Purchase Price was determined through negotiations with the Purchasers. ITEM 5. OTHER EVENTS. The Company completed an amendment to its senior credit agreement with its senior lender and an amendment to its note purchase agreements with its subordinated debt holders effective August 20, 1997. Such amendments reset certain covenants to cure the Company's defaults under such agreements. In addition, the amendment to the note purchase agreements provides for the issuance by the Company of warrants to purchase an aggregate of 500,096 shares of the Company's Common Stock to its subordinated debt holders (the "New Subdebt Warrants") and an increase in the applicable interest rate from 9.5% to 15%. However, the increased interest may be paid in lieu of cash in the form of additional subordinated notes carrying the same terms as the existing subordinated notes. In the event the existing and the new subordinated notes are repaid in full by August 19, 1998, the increased interest will be eliminated and the New Subdebt Warrants will be cancelled. 2 3 The sixth amendment to the senior credit agreement also provides for the issuance by the Company of a warrant to purchase 1,262,188 shares of the Company's Common Stock to its senior lender, as well as increased interest and a reduced borrowing base. ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS. (a) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED. Not applicable. (b) PRO FORMA FINANCIAL INFORMATION. Attached is the pro forma financial information with respect to the sale by the Company of substantially all of the assets of Modcomp. (c) EXHIBITS.
EXHIBIT NUMBER DESCRIPTION OF EXHIBITS METHOD OF FILING - ------- ----------------------- ---------------- 2.1 Agreement of Merger dated as of August Incorporated herein by 30, 1993, by and among Cerplex reference to Exhibit 2.1 to the Incorporated, Diversified Manufacturing Company's Registration Services, Inc. ("DMS"), EMServe, Inc. Statement on Form S-1 (File ("EMServe"), InCirT Technology No. 33-75004) which was Incorporated ("InCirT") and Testar, Inc. declared effective by the ("Testar"). Commission on April 8, 1994. 2.2 Agreement and Plan of Merger dated Incorporated herein by November 12, 1993, between The Cerplex reference to Exhibit 2.2 to the Group Subsidiary, Inc. and Registrant Company's Registration (conformed copy to original). Statement on Form S-1 (File No. 33-75004) which was declared effective by the Commission on April 8, 1994. 2.3 Certificate of Ownership and Merger of Incorporated herein by Registrant with and into The Cerplex Group reference to Exhibit 2.2 to the Subsidiary, Inc. dated as of November 12, Company's Registration 1993. Statement on Form S-1 (File No. 33-75004) which was declared effective by the Commission on April 8, 1994.
3 4
EXHIBIT NUMBER DESCRIPTION OF EXHIBITS METHOD OF FILING - ------- ----------------------- ---------------- 2.4 Asset Purchase Agreement effective Incorporated herein by December 17, 1993 by and between Certech reference to Exhibit 2.4 to the Technology, Inc., a wholly-owned Company's Registration subsidiary of the Registrant ("Certech"), Statement on Form S-1 (File and Spectradyne, Inc. ("Spectradyne"). No. 33-75004) which was declared effective by the Commission on April 8, 1994. 2.5 Purchase and Sale Agreement dated as of Incorporated herein by July 29, 1994, by and among The Cerplex reference to Exhibit 2 to the Group, Inc., Cerplex Limited, BT Repair Form 8-K filed July 29, 1994. Services Limited and BT. 2.6 Contract for repair, calibration and Incorporated herein by warehousing of certain items of BT reference to Exhibit 10 to the Equipment dated as of July 29, 1994, Form 8-K filed July 29, 1994. among The Cerplex Group and Cerplex Limited and BT. 2.7 Formation and Contribution Agreement Incorporated herein by effective December 1, 1994 by and among reference to Exhibit 2.7 to the Modcomp/Cerplex L.P., Modular Computer Company's Annual Report on Systems, Inc., Cerplex Subsidiary, Inc. and Form 10-K for the fiscal year The Cerplex Group, Inc. ended January 1, 1995. 2.8 Contingent Promissory Note dated Incorporated herein by December 1, 1994 issued by reference to Exhibit 2.8 to the Modcomp/Cerplex L.P. to Modular Company's Annual Report on Computer Systems, Inc. Form 10-K for the fiscal year ended January 1, 1995. 2.9 Limited Partnership Agreement of Incorporated herein by Modcomp/Cerplex L.P. effective December reference to Exhibit 2.8 to the 1, 1994. Company's Annual Report on Form 10-K for the fiscal year ended January 1, 1995. 2.10 Put/Call Option Agreement effective Incorporated herein by December 1, 1994 by and among Cerplex reference to Exhibit 2.8 to the Subsidiary, Inc., The Cerplex Group, Inc., Company's Annual Report on Modular Computer Systems, Inc. and Form 10-K for the fiscal year Modcomp Joint Venture Inc. ended January 1, 1995.
4 5
EXHIBIT NUMBER DESCRIPTION OF EXHIBITS METHOD OF FILING - ------- ----------------------- ---------------- 2.11 Stock Purchase Agreement dated as of June Incorporated herein by 29, 1995 by and among The Cerplex Group, reference to Exhibit 2.11 to the Inc., Tu Nguyen and Phuc Le. Company's Quarterly Report on Form 10-Q for the quarter ended October 1, 1995. 2.12 Letter Agreement dated April 5, 1996 by Incorporated herein by and among Modular Computer Systems, reference to Exhibit 2.12 to the Inc., Modcomp Joint Venture, Inc., AEG Company's Annual Report on Aktiengesellschaft, the Company, Cerplex Form 10-K for the fiscal year Subsidiary, Inc. and Modcomp/Cerplex ended December 31, 1995. L.P. 2.13 Stock Purchase Agreement dated as of May Incorporated herein by 24, 1996, by and among The Cerplex reference to Exhibit 2.13 to the Group, Inc., Cerplex Limited, Rank Xerox Company's Current Report on - The Document Company SA and Rank Form 8-K dated May 24, 1996. Xerox Limited (conformed copy to original). 2.14 Contract of Warranty dated as of May 24, Incorporated herein by 1996, by and among The Cerplex Group, reference to Exhibit 2.14 to the Inc., Cerplex Limited, Rank Xerox - The Company's Current Report on Document Company SA and Rank Xerox Form 8-K dated May 24, 1996. Limited (conformed copy to the original). 2.15 Supply and Services Agreement dated as of Incorporated herein by May 24, 1996, by and among The Cerplex reference to Exhibit 2.15 to the Group, Inc., Cerplex Limited, Rank Xerox Company's Current Report on - The Document Company SA and Rank Form 8-K dated May 24, 1996. Xerox Limited (conformed copy to the original). 2.16 Stock Purchase Agreement dated March 28, Incorporated herein by 1997 relating to all of the outstanding stock reference to Exhibit 2.13 to the of Peripheral Computer Support, Inc. Company's Annual Report on among the Company, PCS Acquisition Co., Form 10-K for the fiscal year Inc., and Lincolnshire Equity Partners, L.P. ended December 31, 1996. 2.17 Asset Purchase Agreement dated August 6, Incorporated herein by 1997 by and among the Company, Cerplex reference to Exhibit 2.17 to the Subsidiary, Inc., Modcomp Joint Venture, Company's Quarterly Report Inc., Modcomp/Cerplex L.P. and CSP Inc. on Form 10-Q for the quarter ended June 30, 1997.
5 6
EXHIBIT NUMBER DESCRIPTION OF EXHIBITS METHOD OF FILING - ------- ----------------------- ---------------- 4.1 Stock Purchase Agreement dated as of Incorporated herein by November 19, 1993 by and among the reference to Exhibit 4.1 to the Registrant, the stockholders of the Company's Registration Registrant identified in Part A of Schedule I Statement on Form S-1 (File thereto and the purchasers of shares of the No. 33-75004) which was Registrant's Series A Preferred Stock declared effective by the identified in Schedule I thereto (including Commission on April 8, 1994. the Schedules thereto; Exhibits omitted). 4.2 Registration Rights Agreement dated as of Incorporated herein by November 19, 1993, by and among the reference to Exhibit 4.2 to the Registrant, the investors listed on Schedule Company's Registration A thereto and the security holders of the Statement on Form S-1 (File Registrant listed on Schedule B thereto, No. 33-75004) which was together with Amendment No. 1. declared effective by the Commission on April 8, 1994. 4.3 Co-Sale Agreement dated as of November Incorporated herein by 19, 1993, by and among the Registrant, the reference to Exhibit 4.3 to the managers listed on Schedule A thereto and Company's Registration the investors listed on Schedule B thereto. Statement on Form S-1 (File No. 33-75004) which was declared effective by the Commission on April 8, 1994. 4.4 Warrant Agreement dated as of November Incorporated herein by 19, 1993, by and among the Registrant and reference to Exhibit 4.4 to the the purchasers listed in Annex 1 thereto. Company's Registration Statement on Form S-1 (File No. 33-75004) which was declared effective by the Commission on April 8, 1994. 4.5 Placement Agent Warrant Purchase Incorporated herein by Agreement dated as of November 19, 1993, reference to Exhibit 4.5 to the between the Registrant and Donaldson, Company's Registration Lufkin & Jenrette Securities Corporation. Statement on Form S-1 (File No. 33-75004) which was declared effective by the Commission on April 8, 1994.
6 7
EXHIBIT NUMBER DESCRIPTION OF EXHIBITS METHOD OF FILING - ------- ----------------------- ---------------- 4.6 Observation Rights Agreement dated as of Incorporated herein by November 19, 1993, between the Registrant reference to Exhibit 4.6 to the and certain stock purchasers. Company's Registration Statement on Form S-1 (File No. 33-75004) which was declared effective by the Commission on April 8, 1994. 4.7 Observation Rights Agreement dated as of Incorporated herein by November 19, 1993, between the Registrant reference to Exhibit 4.7 to the and certain note purchasers. Company's Registration Statement on Form S-1 (File No. 33-75004) which was declared effective by the Commission on April 8, 1994. 4.8 Note Purchase Agreement dated as of Incorporated herein by November 19, 1993, by and among the reference to Exhibit 4.8 to the Registrant and The Northwestern Mutual Company's Registration Life Insurance Company, John Hancock Statement on Form S-1 (File Mutual Life Insurance, Registrant and Bank No. 33-75004) which was of Scotland London Nominees Limited. declared effective by the Commission on April 8, 1994. 4.9 Amendment No. 2 to Registration Rights Incorporated herein by Agreement dated as of April 6, 1994, by reference to Exhibit 4.9 to the and among the Registrant and certain of its Company's Registration Securities holders. Statement on Form S-1 (File No. 33-75004) which was declared effective by the Commission on April 8, 1994. 4.10 Amendment to Note Purchase Agreement, Incorporated herein by dated as of October 27, 1994, by and reference to Exhibit 4.10 to the among the Company, Northwestern Mutual Company's Annual Report on Life Insurance Company, John Hancock Form 10-K for the fiscal year Mutual Life Insurance Company and North ended March 31, 1995. Atlantic Smaller Companies Trust P.L.C. (collectively, the "Noteholders").
7 8
EXHIBIT NUMBER DESCRIPTION OF EXHIBITS METHOD OF FILING - ------- ----------------------- ---------------- 4.11 Waiver and Amendment Agreement dated Incorporated herein by April 15, 1996 by and among Company, reference to Exhibit 4.11 to the The Northwestern Mutual Life Insurance Company's Annual Report on Company, John Hancock Mutual Life Form 10-K for the fiscal year Insurance Company and North Atlantic ended December 31, 1995. Smaller Companies Investment Trust PLC. 4.12 Warrant Agreement dated as of April 15, Incorporated herein by 1996 by and among Company, The reference to Exhibit 4.12 to the Northwestern Mutual Life Insurance Company's Annual Report on Company, John Hancock Mutual Life Form 10-K for the fiscal year Insurance Company and North Atlantic ended December 31, 1995. Smaller Companies Investment Trust PLC. 4.13 First Amendment to Warrant Agreement Incorporated herein by dated April 15, 1996 by and among reference to Exhibit 4.13 to the Company and each of the holders of Company's Annual Report on warrants listed on Schedule A thereto, with Form 10-K for the fiscal year respect to that certain Warrant Agreement ended December 31, 1995. dated November 19, 1993. 4.14 First Amendment to Observation Rights Incorporated herein by Agreement dated as of April 15, 1996 reference to Exhibit 4.14 to the between Company and certain note Company's Annual Report on purchasers. Form 10-K for the fiscal year ended December 31, 1995. 4.15 Third Amendment to Registration Rights Incorporated herein by Agreement dated as of April 15, 1996 by reference to Exhibit 4.15 to the and among Company, the investors of Company's Annual Report on Company listed on Schedule A thereto and Form 10-K for the fiscal year the security holders of Company listed on ended December 31, 1995. Schedule B thereto. 4.16 Warrant Agreement dated April 15, 1996 by Incorporated herein by and among Company, Wells Fargo Bank, reference to Exhibit 4.16 to the National Association, Sumitomo Bank of Company's Annual Report on California, BHF Bank Aktiengesellschaft Form 10-K for the fiscal year and Comerica Bank-California. ended December 31, 1995. 4.17 Stock Purchase Agreement dated June 10, Incorporated herein by 1996 by and among the Company and the reference to Exhibit 4.17 to the investors listed on Schedule A thereto. Company's Quarterly Report on Form 10-Q filed August 14, 1996.
8 9
EXHIBIT NUMBER DESCRIPTION OF EXHIBITS METHOD OF FILING - ------- ----------------------- ---------------- 4.18 Fourth Amendment to Registration Rights Incorporated herein by Agreement dated June 10, 1996 by and reference to Exhibit 4.18 to the among Company, the investors listed on Company's Quarterly Report Schedule A thereto, the security holders of on Form 10-Q filed August 14, Company listed on Schedule B thereto, the 1996. banks listed on Schedule C thereto and each of the parties listed on Schedule D thereto. 4.19 Certificate of Designation of Preferences of Incorporated herein by Series B Preferred Stock of The Cerplex reference to Exhibit 3.3 to the Group, Inc. Company's Quarterly Report on Form 10-Q filed August 14, 1996. 4.20 Waiver and Amendment Agreement dated Incorporated herein by October 31, 1996 by and among the reference to Exhibit 4.17 to the company and the Noteholders. Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1996. 4.21 Waiver and Amendment Agreement dated Incorporated herein by December 9, 1996 by and among the reference to Exhibit 4.18 to the company and the Noteholders. Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1996. 4.22 Side Letter dated March 28, 1997 by and Incorporated herein by among the Company and the Noteholders. reference to Exhibit 4.19 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1996. 4.23 Amended and Restated Note Purchase Incorporated herein by Agreement dated April 9, 1997 by and reference to Exhibit 4.20 to the among the Company and the Noteholders. Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1996.
9 10
EXHIBIT NUMBER DESCRIPTION OF EXHIBITS METHOD OF FILING - ------- ----------------------- ---------------- 4.24 Second Amendment to Warrant Agreement Incorporated herein by dated April 9, 1997, by and among the reference to Exhibit 4.21 to the Company and each of the holders of Company's Annual Report on warrants listed on Schedule A thereto, Form 10-K for the fiscal year which Second Amendment amends the ended December 31, 1996. Warrant Agreement dated November 19, 1993 as amended by the First Amendment to Warrant Agreement dated April 15, 1996. 4.25 Second Amendment to Warrant Agreement Incorporated herein by dated April 9, 1997 by and among the reference to Exhibit 4.22 to the Company and each of the holders of Company's Annual Report on warrants listed on Schedule A thereto, Form 10-K for the fiscal year which Second Amendment amends the ended December 31, 1996. Warrant Agreement dated April 15, 1996, as amended by a Waiver and Amendment Agreement dated October 31, 1996. 4.26 Amended and Restated Warrant Agreement Incorporated herein by dated April 9, 1997 by and among the reference to Exhibit 4.23 to the Company; Wells Fargo Bank, National Company's Annual Report on Association; BHF-Bank Aktiengesellschaft; Form 10-K for the fiscal year and Citibank, N.A. ended December 31, 1996. 4.27 Fifth Amendment to Registration Rights Incorporated herein by Agreement dated as of April 9, 1997 by and reference to Exhibit 4.27 to the among the Company, the investors listed on Company's Quarterly Report Schedule A thereto, the security holders of on Form 10-Q for the quarter the Company listed on Schedule B thereto, ended June 30, 1997. the banks listed on Schedule C thereto, and the parties listed on Schedule D thereto. 4.28 Waiver Agreement dated as of June 30, Incorporated herein by 1997 among the Company and the reference to Exhibit 4.28 to the Noteholders. Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1997. 4.29 Side letter dated July 10, 1997 by and Incorporated herein by among the Company and the Noteholders. reference to Exhibit 4.29 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1997.
10 11
EXHIBIT NUMBER DESCRIPTION OF EXHIBITS METHOD OF FILING - ------- ----------------------- ---------------- 4.30 Side letter dated August 6, 1997 by and Incorporated herein by among the Company and the Noteholders. reference to Exhibit 4.30 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1997. 4.31 Sixth Amendment to Registration Rights Filed herein. Agreement dated as of August 20, 1997 by and among the Company, the investors listed on Schedule A thereto, the security holders of the Company listed on Schedule B thereto, the banks listed on Schedule C thereto, and the parties listed on Schedule D thereto. 4.32 First Amendment Agreement dated as of Filed herein. August 20, 1997, by and among the Company, The Northwestern Mutual Life Insurance Company, John Hancock Mutual Life Insurance Company and North Atlantic Smaller Companies Investment Trust PLC. 4.33 Warrant Agreement dated as of August 20, Filed herein. 1997 by and between the Company, The Northwestern Mutual Life Insurance Company, John Hancock Mutual Life Insurance Company and North Atlantic Smaller Companies Investment Trust PLC. 4.34 Third Amendment to Warrant Agreement Filed herein. dated as of August 20, 1997, by and among the Company and the Noteholders with respect to that certain Warrant Agreement dated as of April 15, 1996 by and among the Company and the Noteholders. 4.35 Third Amendment to Warrant Agreement Filed herein. dated as of August 20, 1997, by and among the Company and the Noteholders with respect to that certain Warrant Agreement dated as of November 19, 1993 by and among the Company and the Noteholders.
11 12
EXHIBIT NUMBER DESCRIPTION OF EXHIBITS METHOD OF FILING - ------- ----------------------- ---------------- 4.36 Warrant Agreement dated as of August 20, Filed herein. 1997 by and between the Company and Citibank, N.A. 4.37 Second Amendment to Observation Rights Filed herein. Agreement dated August 20, 1997 by and among the Company, the Northwestern Mutual Life Insurance Company and John Hancock Mutual Life Insurance Company. 27.1 Financial Data Schedule. Filed herein.
13 ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS. (b) PRO FORMA FINANCIAL INFORMATION THE CERPLEX GROUP, INC. UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET JUNE 30, 1997 (IN THOUSANDS)
ELIMINATION OF PRO FORMA CONSOLIDATED MODCOMP(1) ADJUSTMENTS(2) PRO FORMA ASSETS Current assets: Cash and cash equivalents $ 21,788 $ (2,856) $ 2,051 $ 20,983 Accounts receivable, net 17,023 (5,825) -- 11,198 Inventories 8,987 (4,169) -- 4,818 Prepaid expenses and other current assets 5,116 (1,178) -- 3,938 ------------------------------------------------------ Total current assets 52,914 (14,028) 2,051 40,937 Net assets of Modcomp -- 8,216 (8,216) -- Property, plant and equipment, net 23,836 (733) -- 23,103 Other long-term assets 1,367 269 -- 1,636 ------------------------------------------------------ Total assets $ 78,117 $ (6,276) $ (6,165) $ 65,676 ====================================================== LIABILITIES & STOCKHOLDERS' DEFICIENCY Current liabilities: Notes payable to banks $ 35,897 $ -- $ (6,051) $ 29,846 Notes payable 4,826 -- -- 4,826 Accounts payable 15,117 (1,316) -- 13,801 Accrued and other current liabilities 28,083 (4,960) -- 23,123 ------------------------------------------------------ Total current liabilities 83,923 (6,276) (6,051) 71,596 Long-term debt, less current portion 18,114 -- -- 18,114 Long-term obligations 6,214 -- -- 6,214 Stockholders' deficiency: Preferred stock 657 -- -- 657 Common stock 34 -- -- 34 Additional paid-in capital 58,646 -- -- 58,646 Accumulated deficiency (88,774) -- (114) (88,888) Cumulative translation adjustment (697) -- -- (697) ------------------------------------------------------ Total stockholders' deficiency (30,134) -- (114) (30,248) ------------------------------------------------------ Total liabilities and stockholders' deficiency $ 78,117 $ (6,276) $ (6,165) $ 65,676 ======================================================
See notes to unaudited pro forma consolidated financial statements. 14 THE CERPLEX GROUP, INC. UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS YEAR ENDED DECEMBER 31, 1996 (IN THOUSANDS, EXCEPT SHARE DATA)
ELIMINATION OF PRO FORMA CONSOLIDATED MODCOMP(3) ADJUSTMENTS(4) PRO FORMA Net sales $ 191,493 $ (27,179) $ -- $ 164,314 Cost of sales 165,248 (19,261) -- 145,987 --------------------------------------------------------- Gross profit 26,245 (7,918) -- 18,327 Selling, general and administrative expenses 39,488 (5,922) -- 33,566 Restructuring charge 2,084 -- -- 2,084 --------------------------------------------------------- Operating income (loss) (15,327) (1,996) -- (17,323) Equity in earnings from joint venture 357 (357) -- -- Gain on sale of InCirT Division 450 -- -- 450 Other expense, net 2,881 (92) -- 2,789 Interest expense, net 8,269 83 (703) 7,649 --------------------------------------------------------- Income (loss) before income taxes (25,670) (2,344) 703 (27,311) Provision for income taxes 1,718 (204) -- 1,514 --------------------------------------------------------- Net income (loss) $ (27,388) $ (2,140) $ 703 $ (28,825) ========================================================= Net loss per common share $ (2.04) $ (2.15) ========= ========= Weighted average common and common equivalent shares outstanding 13,419 13,419 ========= =========
See notes to unaudited pro forma consolidated financial statements. 15 THE CERPLEX GROUP, INC. UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS SIX MONTHS ENDED JUNE 30, 1997 (IN THOUSANDS, EXCEPT SHARE DATA)
ELIMINATION OF PRO FORMA CONSOLIDATED MODCOMP(3) ADJUSTMENTS(4) PRO FORMA Net sales $ 85,606 $(15,603) $ -- $ 70,003 Cost of sales 76,076 (10,548) -- 65,528 -------- Gross profit 9,530 (5,055) -- 4,475 Selling, general and administrative expenses 20,121 (4,035) -- 16,086 Restructuring charge 4,307 -- -- 4,307 ----------------------------------------------------- Operating income (loss) (14,898) (1,020) -- (15,918) Gain on sale of PCS 6,607 -- -- 6,607 Other expense, net 998 (683) -- 315 Interest expense, net 3,956 46 (352) 3,650 ----------------------------------------------------- Income (loss) before income taxes (13,245) (383) 352 (13,276) Provision for income taxes 1,115 (157) -- 958 ----------------------------------------------------- Net income (loss) $(14,360) $ (226) $ 352 $(14,234) ===================================================== Net loss per common share $ (0.60) $ (0.60) ======== ======== Weighted average common and common equivalent shares outstanding 23,742 23,742 ======== ========
See notes to unaudited pro forma consolidated financial statements. 16 THE CERPLEX GROUP, INC. NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS Balance Sheet Adjustments: (1) To eliminate the individual assets and liabilities of Modcomp /Cerplex, L.P. ("Modcomp") and include the net amount as "Net assets of Modcomp" in the unaudited pro forma consolidated balance sheet at June 30, 1997. (2) To reflect the sale of Modcomp for net proceeds of $8,102,000. Concurrent with the sale, a portion of the cash proceeds are used to reduce senior debt obligation. Statement of Operations Adjustments: (3) To eliminate the operating results of Modcomp from the unaudited consolidated statement of operations. (4) To reflect the decrease in interest expense resulting from the reduction of senior debt obligations from the sale of Modcomp. 17 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Date: September 10, 1997 THE CERPLEX GROUP, INC. By: /s/ ROBERT W. HUGHES ------------------------------------------------- Robert W. Hughes Senior Vice President and Chief Financial Officer 18 INDEX TO EXHIBITS
Sequentially Numbered Exhibit Description Page - ------- ------------ ------------- 4.31 Sixth Amendment to Registration Rights Agreement dated as of August 20, 1997 by and among the Company, the investors listed on Schedule A thereto, the security holders of the Company listed on Schedule B thereto, the banks listed on Schedule C thereto, and the parties listed on Schedule D thereto. 4.32 First Amendment Agreement dated as of August 20, 1997, by and among the Company, The Northwestern Mutual Life Insurance Company, John Hancock Mutual Life Insurance Company and North Atlantic Smaller Companies Investment Trust PLC. 4.33 Warrant Agreement dated as of August 20, 1997 by and between the Company, The Northwestern Mutual Life Insurance Company, John Hancock Mutual Life Insurance Company and North Atlantic Smaller Companies Investment Trust PLC. 4.34 Third Amendment to Warrant Agreement dated as of August 20, 1997, by and among the Company and the Noteholders with respect to that certain Warrant Agreement dated as of April 15, 1996 by and among the Company and the Noteholders. 4.35 Third Amendment to Warrant Agreement dated as of August 20, 1997, by and among the Company and the Noteholders with respect to that certain Warrant Agreement dated as of November 19, 1993 by and among the Company and the Noteholders. 4.36 Warrant Agreement dated as of August 20, 1997 by and between the Company and Citibank, N.A. 4.37 Second Amendment to Observation Rights Agreement dated August 20, 1997 by and among the Company, the Northwestern Mutual Life Insurance Company and John Hancock Mutual Life Insurance Company. 27.1 Financial Data Schedule.
EX-4.31 2 SIXTH AMENDMENT TO REGISTRATION RIGHTS AGREEMENT 1 EXHIBIT 4.31 SIXTH AMENDMENT TO REGISTRATION RIGHTS AGREEMENT THIS SIXTH AMENDMENT TO REGISTRATION RIGHTS AGREEMENT (this "Amendment") is made as of the 20th day of August, 1997, by and among The Cerplex Group, Inc., a Delaware corporation (the "Company"), the investors listed on Schedule A hereto, each of which is herein referred to as an "Investor" and collectively as the "Investors," the security holders of the Company listed on Schedule B hereto, each of which is herein referred to as a "Stockholder" and collectively as the "Stockholders," the banks listed on Schedule C hereto, each of which is herein referred to as a "Bank Holder" and collectively as the "Bank Holders," and the parties listed on Schedule D hereto, each of which is herein referred to as a "Series B Preferred Holder" and collectively as the "Series B Preferred Holders." A. The Company, the Investors, the Stockholders, the Bank Holders, the Series B Preferred Holders and certain other investors and stockholders are parties to a Registration Rights Agreement dated November 19, 1993 (as in effect prior to the effectiveness of this Amendment, the "Existing Registration Rights Agreement"). B. Pursuant to separate Note Purchase Agreements dated as of November 19, 1993 among The Northwestern Mutual Life Insurance Company, John Hancock Mutual Life Insurance Company and North Atlantic Smaller Companies Investment Trust PLC (individually, a "Warrant Investor" and collectively, the "Warrant Investors") and the Company, and a Warrant Agreement dated as of November 19, 1993 among the Warrant Investors and the Company, the Company issued warrants to purchase nine hundred twenty thousand (920,000) shares of the Company's Common Stock (the "1993 Warrants") to the Warrant Investors. C. Pursuant to a Waiver and Amendment Agreement (the "Warrantholders' Waiver and Amendment Agreement") dated as of April 15, 1996 among the Warrant Investors and the Company, and a Warrant Agreement dated as of April 15, 1996 among the Warrant Investors and the Company, the Company issued warrants to purchase one million (1,000,000) shares of the Company's Common Stock (the "1996 Warrants") to the Warrant Investors. D. Pursuant to a First Amendment Agreement (the "Sub-Debt Amendment") dated as of August 20, 1997 among the Warrant Investors and the Company, and a Warrant Agreement dated as of August 20, 1997 among the Warrant Investors and the Company, the Company issued warrants to purchase five hundred thousand (500,000) shares of the Company's Common Stock (the "1997 Warrants") to the Warrant Investors. E. As consideration for the Sub-Debt Amendment, the Warrant Investors have requested that the Existing Registration Rights Agreement be amended, as more particularly provided herein, to include the 1997 Warrants. 2 F. Pursuant to a First Amendment to Credit Agreement and Limited Waiver (the "Bank Amendment and Waiver Agreement") dated as of April 15, 1996 among the Company, Wells Fargo Bank, National Association, as administrative agent ("Administrative Agent"), and the financial institutions listed as Lenders on the signature pages thereof (such financial institutions herein collectively referred to as the "Original Bank Group") and a Warrant Agreement (the "Bank Warrant Agreement") dated as of April 15, 1996 among the Company and the Original Bank Group, the Company issued warrants to purchase one hundred twenty-five thousand (125,000) shares of the Company's Common Stock (the "Original Bank Warrants") to the Original Bank Group; the number of such Original Bank Warrants is subject to reduction, as more particularly provided for in the Bank Warrant Agreement. G. Pursuant to a Third Amendment to Credit Agreement (the "Bank Third Amendment") dated as of April 9, 1997 among the Company, Administrative Agent and the financial institutions listed as Lenders on the signature pages thereof (such financial institutions herein collectively referred to as the "Amended Bank Group") and the Amended and Restated Warrant Agreement (the "Amended Bank Warrant Agreement") dated as of April 9, 1997 among the Company and the Amended Bank Group, the Company issued warrants to purchase seven hundred fifty thousand (750,000) shares of the Company's Common Stock (the "Additional Bank Warrants") to the Amended Bank Group; the number of such Additional Bank Warrants is subject to reduction, as more particularly provided for in the Amended Bank Warrant Agreement. H. Pursuant to a Sixth Amendment to Credit Agreement and Consent (the "Bank Sixth Amendment") dated as of August 6, 1997 among the Company, Administrative Agent and the Bank Holders and the Warrant Agreement (the "Second Warrant Agreement") dated as of August 20, 1997 among the Company and the Bank Holders, the Company shall issue on or before August 20, 1997 warrants to purchase one million two hundred thirty-five thousand three hundred and thirteen (1,235,313) shares of the Company's Common Stock (the "New Bank Warrants," and, together with the Original Bank Warrants and the Additional Bank Warrants, the "Bank Warrants") to the Bank Holders; the number of such New Bank Warrants is subject to increase or decrease, as more particularly provided for in the Second Warrant Agreement. I. As consideration for the Bank Sixth Amendment, the Bank Holders have requested that the Existing Registration Rights Agreement be amended to include the New Bank Warrants, as more particularly provided herein. J. The Company, the Investors, the Stockholders, the Bank Holders and the Series B Preferred Holders agree to amend the Existing Registration Rights Agreement as set forth herein. AGREEMENT: 2 3 NOW THEREFORE, for valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: SECTION 1. DEFINED TERMS. As used in this Amendment, the following terms have the respective meanings specified below: "Additional Bank Warrants" -- Recital G. "Administrative Agent" -- Recital F. "Amended Bank Warrant Agreement" -- Recital G. "Amended Bank Group" -- Recital G. "Amendment" -- the introductory sentence. "Bank Amendment and Waiver Agreement" -- Recital F. "Bank Holder" -- the introductory sentence. "Bank Sixth Amendment" -- Recital H. "Bank Third Amendment" -- Recital G. "Bank Warrant Agreement" -- Recital F. "Bank Warrants" -- Recital H. "Company" -- the introductory sentence. "Existing Registration Rights Agreement" -- Recital A. "Investors" -- the introductory sentence. "New Bank Warrants" -- Recital H. "Original Bank Group" -- Recital F. "Original Bank Warrants" -- Recital F. "Second Warrant Agreement" -- Recital H. "Series B Preferred Holder" -- the introductory sentence. 3 4 "Stockholders" -- the introductory sentence. "Sub-Debt Amendment" -- Recital D. "Warrantholders' Waiver and Amendment Agreement" -- Recital C. "Warrant Investor" -- Recital B. "1996 Warrants" -- Recital C. "1997 Warrants" -- Recital D. SECTION 2. AMENDMENTS. 2.1 Amendments to Section 1.1 of the Existing Registration Rights Agreement (a) Section 1.1 of the Existing Registration Rights Agreement is hereby amended by amending and restating the following definitions, in their entirety, as set forth below: (i) The term "Bank Holders" means (a) each of the banks set forth on Schedule C hereto for so long as they hold any Bank Warrants issued on April 15, 1996 (the "Original Bank Warrants"), on April 9, 1997 (the "Additional Bank Warrants") or on August 20, 1997 (the "New Bank Warrants") or any Common Stock issued pursuant to the exercise of such Bank Warrants and (b) any successors thereto or direct or successive transferees thereof; it being the intention of the parties hereto that any successive holder of a Bank Warrant, or the Common Stock issued upon the exercise of such Bank Warrant, which Bank Warrant derived from an Original Bank Warrant, an Additional Bank Warrant, or a New Bank Warrant shall be included in this definition, provided that any holder of shares of Common Stock issued upon the exercise of any Original Bank Warrant, any Additional Bank Warrant, any New Bank Warrant or any Bank Warrant that derived from such Original Bank Warrant, Additional Bank Warrant, or New Bank Warrant which shares have been, or derive from shares that have been, publicly sold pursuant to a registration statement filed under the Act or pursuant to Rule 144 shall, to the extent of its holdings of such shares, be excluded from this definition. Any decisions to be made by the Bank Holders shall be made upon a vote or a majority in interest of holders of the aforesaid Bank Warrants and the aforesaid Common Stock on the basis of the number of shares of Common Stock issuable pursuant to such Bank Warrants and the number of shares of such Common Stock then held. Rights of successors, assigns and transferees of Bank Holders are subject to compliance with the requirements of Section 1.13. (ii) The term "Bank Warrants" means those certain warrants issued by the Company to the Original Bank Group on April 15, 1996 pursuant to that certain 4 5 Warrant Agreement dated as of April 15, 1996, those certain warrants issued by the Company to the Amended Bank Group on April 9, 1997 pursuant to that certain Amended and Restated Warrant Agreement dated as of April 9, 1997, those certain warrants issued by the Company to each of the banks set forth on Schedule C hereto on August 20, 1997 pursuant to that certain Second Warrant Agreement dated as of August 20, 1997 and all warrants exchanged therefor or otherwise subsequently issued in respect thereof under said Amended and Restated Warrant Agreement or Second Warrant Agreement, as the case may be. (iii) The term "Hancock Group Holders" means (a) John Hancock Mutual Life Insurance Company for so long as it holds any Warrants issued on November 19, 1993, on April 15, 1996 or on August 20, 1997 (collectively, the "Original JH Warrants") or any Common Stock issued pursuant to the exercise of such Warrants and (b) any successors thereto or direct or successive transferees thereof; it being the intention of the parties hereto that any successive holder of a Warrant, or the Common Stock issued upon the exercise of such Warrant, which Warrant derived from an Original JH Warrant, shall be included in this definition, provided that any holder of shares of Common Stock issued upon the exercise of any Original JH Warrant or any Warrant that derived from such Original JH Warrant which shares have been, or derive from shares that have been, publicly sold pursuant to a registration statement filed under the Act or pursuant to Rule 144 shall, to the extent of its holdings of such shares, be excluded from this definition. Any decisions to be made by the Hancock Group Holders shall be made upon a vote of a majority in interest of holders of the aforesaid Warrants and the aforesaid Common Stock on the basis of the number of shares of Common Stock issuable pursuant to such Warrants and the number of shares of such Common Stock then held. Rights under this Agreement of successors, assigns and transferees of Hancock Group Holders are subject to compliance with the requirements of Section 1.13. (iv) The term "Northwestern Group Holders" means (a) The Northwestern Mutual Life Insurance Company for so long as it holds any Warrants issued on November 19, 1993, on April 15, 1996 or on August 20, 1997 (collectively, the "Original NW Warrants") or any Common Stock issued pursuant to the exercise of such Warrants and (b) any successors thereto or direct or successive transferees thereof; it being the intention of the parties hereto that any successive holder of a Warrant, or the Common Stock issued upon the exercise of such Warrant, which Warrant derived from an Original NW Warrant, shall be included in this definition, provided that any holder of shares of Common Stock issued upon the exercise of any Original NW Warrant or any Warrant that derived from such Original NW Warrant which shares have been, or derive from shares that have been, publicly sold pursuant to a registration statement filed under the Act or pursuant to Rule 144 shall, to the extent of its holdings of such shares, be excluded from this definition. Any decisions to be made by the Northwestern Group Holders shall be made upon a vote of a majority in interest of holders of the aforesaid Warrants and the aforesaid Common Stock on the basis of the number of shares of Common Stock issuable pursuant to 5 6 such Warrants and the number of shares of such Common Stock then held. Rights of successors, assigns and transferees of Northwestern Group Holders are subject to compliance with the requirements of Section 1.13. (v) The term "Warrants" means the collective reference to (i) those certain warrants issued by the Company to each of The Northwestern Mutual Life Insurance Company, John Hancock Mutual Life Insurance Company and North Atlantic Smaller Companies Trust PLC on November 19, 1993 pursuant to that certain Warrant Agreement dated as of November 19, 1993 and all warrants exchanged therefor or otherwise subsequently issued in respect thereof under said Warrant Agreement; (ii) those certain warrants issued by the Company to each of The Northwestern Mutual Life Insurance Company, John Hancock Mutual Life Insurance Company and North Atlantic Smaller Companies Trust PLC on April 15, 1996 pursuant to that certain Warrant Agreement dated as of April 15, 1996 and all warrants exchanged therefor or otherwise subsequently issued in respect thereof under said Warrant Agreement; and (iii) those certain warrants issued by the Company to each of The Northwestern Mutual Life Insurance Company, John Hancock Mutual Life Insurance Company and North Atlantic Smaller Companies Trust PLC on August 20, 1997 pursuant to that certain Warrant Agreement dated as of August 20, 1997 and all warrants exchanged therefor or otherwise subsequently issued in respect thereof under said Warrant Agreement. (vi) The term "Warrant Group Holders" means (a) John Hancock Mutual Life Insurance Company, The Northwestern Mutual Life Insurance Company and North Atlantic Smaller Companies Trust PLC for so long as such persons hold any Warrants issued on November 19, 1993, on April 15, 1996, or on August 20, 1997 (collectively, the "Original Warrants") or any Common Stock issued pursuant to the exercise of such Warrants and (b) any successors thereto or direct or successive transferees thereof; it being the intention of the parties hereto that any successive holder of a Warrant, or the Common Stock issued upon the exercise of such Warrant, which Warrant derived from an Original Warrant, shall be included in this definition, provided that any holder of shares of Common Stock issued upon the exercise of any Original Warrant (or any Warrant that derived from such Original Warrant) which shares have been, or derive from shares that have been, publicly sold pursuant to a registration statement filed under the Act or pursuant to Rule 144 shall, to the extent of its holdings of such shares, be excluded from this definition. Any decisions to be made by the Warrant Group Holders (including, without limitation, the decision to make a request under Section 1.2(a) and Section 1.12(a)) shall be made upon a vote of sixty-seven percent (67%) in interest of holders of the aforesaid Warrants and the aforesaid Common Stock on the basis of the number of shares of Common Stock issuable pursuant to such Warrants and the number of shares of such Common Stock then held. Rights under this Agreement of successors, assigns and transferees of Warrant Group Holders are subject to compliance with the requirements of Section 1.13. 6 7 2.2 Amendment of Schedule C to Existing Registration Rights Agreement Schedule C to the Existing Registration Rights Agreement is hereby deleted and Schedule C hereto replaced therefor. SECTION 3. MISCELLANEOUS. 3.1 Governing Law This Amendment shall be governed by and construed under the laws of the State of New York as applied to agreements among New York residents entered into and to be performed entirely within New York. 3.2 Duplicate Originals Two or more duplicate originals of this Amendment may be signed by the parties, each of which shall be an original but all of which together shall constitute one and the same instrument. This Amendment may be executed in one or more counterparts and shall be effective when at least one counterpart shall have been executed by each party hereto, and each set of counterparts which, collectively, show execution by each party hereto shall constitute one duplicate original. 3.3 Effect of this Amendment Except as specifically provided in this Amendment, no terms or provisions of the Existing Registration Rights Agreement have been modified or changed by this Amendment and the terms and provisions of the Existing Registration Rights Agreement, as amended hereby, shall continue in full force and effect. This Amendment and the amendments contained herein shall have and be in effect on and after the date hereof upon the execution and delivery hereof by (i) each of the Investors, (ii) sixty-seven percent in interest of the Stockholders, (iii) each of the Bank Holders, (iv) sixty-seven percent in interest of the Series B Preferred Holders and (v) the Company. 3.4 Section Headings The titles of the sections hereof appear as a matter of convenience only, do not constitute a part of this Amendment and shall not affect the construction hereof. 7 8 IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed on their behalf by a duly authorized officer or agent thereof, as the case may be, as of the date first above written. THE CERPLEX GROUP, INC. By -------------------------------- Name: Title: THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY By -------------------------------- Name: Title: JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY By -------------------------------- Name: Title: NORTH ATLANTIC SMALLER COMPANIES INVESTMENT TRUST PLC By -------------------------------- Name: Title: [Signature page to the SIXTH AMENDMENT TO REGISTRATION RIGHTS AGREEMENT among THE CERPLEX GROUP, INC. and the Bank Holders, Investors, Stockholders and Series B Preferred Holders listed therein.] 8 9 Each of the undersigned Bank Holders agrees to be bound by the terms and conditions of the Existing Registration Rights Agreement, as amended by this Sixth Amendment to Registration Rights Agreement CITIBANK, N.A. By: ----------------------------- Name: Title: [Signature page to SIXTH AMENDMENT TO REGISTRATION RIGHTS AGREEMENT among THE CERPLEX GROUP, INC. and the Bank Holders, Investors, Stockholders and Series B Preferred Holders listed therein.] 9 10 Each of the undersigned Stockholders agrees to be bound by the terms and conditions of the Existing Registration Rights Agreement, as amended by this Sixth Amendment to Registration Rights Agreement - ----------------------------------- Name: William A. Klein Address: 1382 Bell Avenue Tustin, California 92680 - ----------------------------------- Name: Richard C. Davis Address: 1382 Bell Avenue Tustin, California 92680 - ----------------------------------- Name: Myron Kunin Address: Regis Corporation 7201 Metro Boulevard Minneapolis, MN 55439 - ----------------------------------- Name: Theodore J. Wisniewski Address: 1382 Bell Avenue Tustin, California 92680 [Signature page to SIXTH AMENDMENT TO REGISTRATION RIGHTS AGREEMENT among THE CERPLEX GROUP, INC. and the Bank Holders, Investors, Stockholders and Series B Preferred Holders listed therein.] 10 11 Each of the undersigned Investors agrees to be bound by the terms and conditions of the Existing Registration Rights Agreement, as amended by this Sixth Amendment to Registration Rights Agreement SPROUT GROWTH II, L.P. By: DLJ Capital Corporation, Managing General Partner By: ---------------------------------- Robert Finzi, Attorney-in-Fact DLJ CAPITAL CORPORATION By: ---------------------------------- Robert Finzi, Attorney-in-Fact BESSEMER VENTURE PARTNERS III L.P. By: Deer III & Co., General Partner By: ---------------------------------- Robert H. Buescher, General Partner By: ---------------------------------- Robert H. Buescher, Attorney-in-Fact [Signature page to SIXTH AMENDMENT TO REGISTRATION RIGHTS AGREEMENT among THE CERPLEX GROUP, INC. and the Bank Holders, Investors, Stockholders and Series B Preferred Holders listed therein.] 11 12 Each of the undersigned Series B Preferred Holders agrees to be bound by the terms and conditions of the Existing Registration Rights Agreement, as amended by this Sixth Amendment to Registration Rights Agreement SCORPION OFFSHORE INVESTMENT FUND By: ---------------------------------- Name: Ralph J. Long, Jr. Title: Chief Financial Officer, Standard Pacific Capital LLC, as Investment Advisor to Scorpion Offshore Investment Fund THE & TRUST By: ---------------------------------- Name: Ralph J. Long, Jr. Title: Chief Financial Officer, Standard Pacific Capital LLC, as Investment Advisor to The & Trust CHESTNUT PACIFIC LTD. PARTNERS By: ---------------------------------- Name: Ralph J. Long, Jr. Title: Chief Financial Officer, Standard Pacific Capital LLC, as Investment Advisor to Chestnut Pacific Ltd. Partners STANDARD GLOBAL EQUITY PARTNERS L.P. By: ---------------------------------- Name: Ralph J. Long, Jr. Title: Chief Financial Officer, Standard Pacific Capital LLC, as General Partner of Standard Global Equity Partners L.P. [Signature page to SIXTH AMENDMENT TO REGISTRATION RIGHTS AGREEMENT among THE CERPLEX GROUP, INC. and the Bank Holders, Investors, Stockholders and Series B Preferred Holders listed therein.] 12 13 STANDARD PACIFIC CAPITAL OFFSHORE FUND LTD. By: ---------------------------------- Name: Ralph J. Long, Jr. Title: Chief Financial Officer, Standard Pacific Capital LLC, as Investment Advisor to Standard Pacific Capital Offshore Fund Ltd. COMMON FUND EQUITY FUND By: ---------------------------------- Name: Ralph J. Long, Jr. Title: Chief Financial Officer, Standard Pacific Capital LLC, as Investment Advisor to Common Fund Equity Fund WHITMAN PARTNERS, L.P. By: ---------------------------------- Name: Douglas F. Whitman Title: General Partner [Signature page to SIXTH AMENDMENT TO REGISTRATION RIGHTS AGREEMENT among THE CERPLEX GROUP, INC. and the Bank Holders, Investors, Stockholders and Series B Preferred Holders listed therein.] 13 14 SCHEDULE A Schedule of Investors Warrant Investors The Northwestern Mutual Life Insurance Company 720 East Wisconsin Avenue Milwaukee. Wisconsin 53202 John Hancock Mutual Life Insurance Company John Hancock Place 200 Clarendon Street Boston, Massachusetts 02117 North Atlantic Smaller Companies Trust PLC c/o J.0. Hambro & Co., Ltd. 10 Park Place London, England SW1A1LP Independent Equity Group Sprout Growth II, L,P. DLJ Capital Corp. Deepak Kamra Bessemer Venture Partners II L.P. Neill H. Brownstein Robert H. Buescher C. Samantha Chen Rodney A. Cohen Richard R. Davis Adam P. Godfrey Barbara M. Heragan Robert D. Lindsay Bradford Mills Thomas F. Ruhm Ward W. Woods, Jr. Leo & Nicole Arnaboldi, JTWROS Perry H. Braun Norman H. Brown, Jr. John G. Danhakl Hoyt L. Davidson Thompson Dean Peter K. Deeks Ralph L. DeGroff, Jr. Schedule A-1 15 Anthony M. DeLuise David L. Dennis Thomas S. DePre Robert E. Diemar Robert Finzi Daniel K. Flatley Mark K, Gormley Joyce I. Greenberg Thomas G. Greig, III James D. Hann & Bonnie J. Hann, JTWROS Douglas M. Hayes Stephen J. Ketchum Richard E. Kroon Frederick C. Lane Mark Lanigan Steven E. Lebow Brian McLoughlin Kenneth David Moelis & Julie Lynn Moelis, Trustees Under The Moelis Family Trust Joseph Navin, III Michael R. Nicolais Peter J. Nolan Steven G. Puccinelli Larry E. Reeder Elan Adiel Schultz James T. Sington Jon R. Stone Steven F. Strandberg Kenneth A. Tucker R. Scott Turricchi Warren Woo Kirk B. Wortman Schedule A-2 16 SCHEDULE B Schedule of Stockholders Catherine Bartholomew Frank Cameron Tom Cherry Roberta Claborn David O. Creasman Raymond Cruz Richard C. Davis Randle Dewees Edward Diaz Susan Eaton Harry Edmiston Dennis Fandrich Jon Gill Jacqueline Gillett Gary Graff Nelson Guillory Peggy Hams Jerome Jacobson James Jones Roberta Kean Jennifer Klein Melissa Klein William A. Klein Myron Kunin Pollianna Lewis Van Nguyen Richard Ollech Thomas D. Pipkin Juanita Pitts Keith Rathbone Richard Richardson Vincent E. Simpson Grover Smith Joyce Valdez Earnest Vernon Alan Weaver Theodore J. Wisniewski Schedule B-1 17 SCHEDULE C Schedule of Bank Holders Citibank, N.A. Schedule C-1 18 SCHEDULE D Schedule of Series B Preferred Holders Sprout Growth II, L.P. DLJ Capital Corporation Scorpion Offshore Investment Fund The & Trust Chestnut Pacific Ltd. Partners Standard Global Equity Partners L.P. Standard Pacific Capital Offshore Fund Ltd. Common Fund Equity Fund Malcolm and Emily Fairbairn Andrea Martin Nitin T. Mehta Peak Investment Limited Partnership Pleiades Investment Partners Whitman Partners, L.P. Schedule D-1 EX-4.32 3 FIRST AMENDMENT AGREEMENT 1 EXHIBIT 4.32 ================================================================================ THE CERPLEX GROUP, INC. ------------------------------------- FIRST AMENDMENT AGREEMENT ------------------------------------- DATED AS OF AUGUST 20, 1997 $17,250,000 SENIOR SUBORDINATED NOTES DUE NOVEMBER 19, 2001 ================================================================================ 2 FIRST AMENDMENT AGREEMENT FIRST AMENDMENT AGREEMENT (this "AGREEMENT"), dated as of August 20, 1997, by and among THE CERPLEX GROUP, INC., a Delaware corporation (together with its successors and assigns, the "COMPANY"), THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY, JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY and NORTH ATLANTIC SMALLER COMPANIES INVESTMENT TRUST PLC (collectively, the "NOTEHOLDERS"). RECITALS: A. The Company has entered into those certain separate Amended and Restated Note Purchase Agreements, each dated as of April 9, 1997 (collectively, as in effect prior to the effectiveness of this Agreement, the "EXISTING NOTE PURCHASE AGREEMENT" and, as amended by this Agreement, the "AMENDED NOTE PURCHASE AGREEMENT") with each of the Noteholders. B. The Existing Note Purchase Agreement amended and restated those certain separate Note Purchase Agreements, each dated as of November 19, 1993, with each of the Noteholders, as amended, pursuant to which the Company originally issued and sold to the Noteholders an aggregate principal amount of $17,250,000 of the Company's Series A 9.00% Senior Subordinated Notes Due November 19, 2001 (the "SERIES A NOTES") and an aggregate principal amount of $5,750,000 of the Company's Series B 9.00% Senior Subordinated Notes Due November 19, 2001 (the "SERIES B NOTES"). C. Pursuant to the terms of the Existing Note Purchase Agreement, the Series A Notes were amended and restated (as in effect prior to the effectiveness of this Agreement, the "EXISTING NOTES" and, as amended and restated by this Agreement, the "NOTES"). The Company has prepaid the Series B Notes and the Series B Notes are no longer issued and outstanding. D. The Noteholders are the current holders of one hundred percent (100%) of the Existing Notes outstanding as of the Effective Date. E. The Company has requested that certain of the provisions in the Existing Note Purchase Agreement and the Existing Notes be amended, as more particularly provided herein. F. The Noteholders are agreeable, subject to the terms and conditions set forth below, to modifying the Existing Note Purchase Agreement and the Existing Notes as hereinafter set forth, and in connection therewith, each of the Company and the Noteholders has agreed to amend the Existing Note Purchase Agreement and the Existing Notes as set forth herein. AGREEMENT: NOW THEREFORE, for valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 1 3 SECTION 1. DEFINED TERMS. The terms used herein and not defined herein shall have the meanings assigned to such terms in the Existing Note Purchase Agreement. As used in this Agreement, the following terms have the respective meanings specified below: "AGREEMENT, THIS" -- means this First Amendment Agreement, as it may be amended from time to time. "AMENDED FINANCING DOCUMENTS" -- means the collective reference to the Amended Note Purchase Agreement, the Notes, the Amended Registration Rights Agreement, the Amended Observation Rights Agreement, the Amended 1993 Warrant Agreement and the Amended 1996 Warrant Agreement. "AMENDED NOTE PURCHASE AGREEMENT" -- Recital A. "AMENDED REGISTRATION RIGHTS AGREEMENT" -- Section 6.4. "AMENDED OBSERVATION RIGHTS AGREEMENT" -- Section 6.4. "AMENDED 1996 WARRANT AGREEMENT" -- Section 6.4. "AMENDED 1993 WARRANT AGREEMENT" -- Section 6.4. "COMPANY" -- the introductory sentence. "EFFECTIVE DATE" -- Section 6. "EXISTING NOTE PURCHASE AGREEMENT" -- Recital A. "EXISTING NOTES" -- Recital C. "EXISTING OUTSTANDING PRINCIPAL" -- Section 3. "INITIAL CAPITALIZED INTEREST AMOUNT" -- Section 3. "1997 EQUITY AMENDMENTS" -- means the collective reference to the Sixth Amendment to Registration Rights Agreement, the Second Amendment to Observation Rights Agreement, the Third Amendment to 1993 Warrant Agreement and the Third Amendment to 1996 Warrant Agreement. "1997 FINANCING DOCUMENTS" -- means the collective reference to this Agreement, the 1997 Warrant Documents and the 1997 Equity Amendments. "1997 WARRANT DOCUMENTS" -- means the collective reference to the 1997 Warrant Agreement and the 1997 Warrants. 2 4 "1997 WARRANT AGREEMENT" -- Section 6.3. "1997 WARRANTS" -- Section 6.3. "1996 WARRANT AGREEMENT" -- means the Warrant Agreement dated as of April 15, 1996, among the Company and the Noteholders, as amended, and as such agreement may be further amended, supplemented or restated from time to time. "1993 WARRANT AGREEMENT" -- means the Warrant Agreement dated as of November 19, 1993, among the Company and the Noteholders, as amended, and as such agreement may be further amended, supplemented or restated from time to time. "NOTEHOLDERS" -- the introductory sentence. "NOTES" -- Recital C. "OBSERVATION RIGHTS AGREEMENT" -- means the Observation Rights Agreement dated as of November 19, 1993, among the Company, The Northwestern Mutual Life Insurance Company and John Hancock Mutual Life Insurance Company, as amended, and as such agreement may be further amended, supplemented or restated from time to time. "REGISTRATION RIGHTS AGREEMENT" -- means the Registration Rights Agreement dated November 19, 1993, among the Company, the Noteholders, and the investors and security holders of the Company set forth on the signature pages thereto, as amended, and as such agreement may be further amended, supplemented or restated from time to time. "SECOND AMENDMENT TO OBSERVATION RIGHTS AGREEMENT" -- Section 6.4. "SERIES A NOTES" -- Recital B. "SERIES B NOTES" -- Recital B. "SIXTH AMENDMENT TO REGISTRATION RIGHTS AGREEMENT" -- Section 6.4. "SOP" -- means the Company's 1990 Stock Option Plan (as amended from time to time). "THIRD AMENDMENT TO 1996 WARRANT AGREEMENT" -- Section 6.4. "THIRD AMENDMENT TO 1993 WARRANT AGREEMENT" -- Section 6.4. "TOTAL OUTSTANDING PRINCIPAL" -- Section 3. SECTION 2. AMENDMENTS TO EXISTING NOTE PURCHASE AGREEMENT AND EXISTING NOTES; AFFIRMATION. 3 5 2.1 AMENDMENTS TO EXISTING NOTE PURCHASE AGREEMENT. The Company and, subject to the satisfaction of the conditions set forth in Section 6, each of the Noteholders, each hereby consents and agrees to the amendments to the Existing Note Purchase Agreement set forth in Exhibit A to this Agreement. Each such amendment is incorporated herein by reference as if set forth verbatim in this Agreement. 2.2 AMENDMENT AND RESTATEMENT OF EXISTING NOTES. The Company and, subject to the satisfaction of the conditions set forth in Section 6, each of the Noteholders, each hereby consents and agrees to the amendment and restatement of the form of the Existing Notes in its entirety in the form attached as Attachment 1 to Exhibit A to this Agreement. On the Effective Date, each of the terms of each outstanding Existing Note shall be deemed to be amended in accordance with such form, without any further action on the part of the Company or any holder of any Existing Note. Upon surrender of any outstanding Existing Note, the Company shall deliver to the registered holder thereof a new Note in the form attached as Attachment 1 to Exhibit A to this Agreement, in the principal amount of such Existing Note. Each such new Note shall be dated and bear interest from the date to which interest shall have been paid on the related Existing Note or dated the date of the related Existing Note if no interest shall have been paid thereon. 2.3 AFFIRMATION OF OBLIGATIONS. The Company hereby acknowledges and affirms all of its obligations under the terms of the Existing Note Purchase Agreement and the Existing Notes, as amended hereby. SECTION 3. ADDITIONAL PRINCIPAL AMOUNT. On the August 19, 1997 interest payment date in respect of the Existing Notes, so long as the principal amount of the Existing Notes shall not have become due and payable at such time and no Default or Event of Default shall then exist, the Company may satisfy its obligation to pay interest on each Existing Note by adding an additional principal amount (the "INITIAL CAPITALIZED INTEREST AMOUNT") to the then outstanding principal amount (the "EXISTING OUTSTANDING PRINCIPAL") of such Existing Note, which additional principal amount shall be equal to the aggregate amount of the interest payment in respect of such Existing Note that is due on such interest payment date in accordance with the provisions of Section 4.1 of the Existing Note Purchase Agreement (the Initial Capitalized Interest Amount of each Note, together with the Existing Outstanding Principal of such Note, is herein referred to as the "TOTAL OUTSTANDING PRINCIPAL" of such Note). Schedule 3 hereto sets forth the Existing Outstanding Principal, Initial Capitalized Interest Amount and Total Outstanding Principal for each Existing Note outstanding on the Effective Date. SECTION 4. WARRANTIES AND REPRESENTATIONS. To induce the Noteholders to enter into this Agreement, the Company warrants and represents to the Noteholders that as of the Effective Date: 4 6 4.1 CORPORATE ORGANIZATION AND AUTHORITY. The Company: (a) is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Delaware; (b) has all legal and corporate power and authority to own and operate its Properties and to carry on its business as now conducted and as presently proposed to be conducted; (c) has all licenses, certificates, permits, franchises and other governmental authorizations necessary to own and operate its Properties and to carry on its business as now conducted and as presently proposed to be conducted, except where the failure to have such licenses, certificates and permits, either individually or in the aggregate, would not have, and could not reasonably be expected to have, a Material Adverse Effect; and (d) has duly qualified or has been duly licensed, and is authorized to do business and is in good standing, as a foreign corporation in each state except where the failure to be so qualified or licensed and authorized and in good standing, either individually or in the aggregate, would not have, and could not reasonably be expected to have, a Material Adverse Effect. 4.2 COMPLIANCE WITH LAW. The Company: (a) is not in violation of any law, ordinance, governmental rule or regulation to which it is subject; and (b) has not failed to obtain any license, certificate, permit, franchise or other governmental authorization necessary to the ownership of its Property or to the conduct of its business; which violation or failure to obtain, either individually or in the aggregate, would have, or could reasonably be expected to have, a Material Adverse Effect. 4.3 LEGAL AND AUTHORIZED; OBLIGATIONS ARE ENFORCEABLE. (A) AUTHORIZATION. The execution and delivery by the Company of the 1997 Financing Documents and the performance by the Company of its obligations thereunder and under the Amended Financing Documents are within the corporate powers of the Company and do not conflict with, result in any breach in any of the provisions of, constitute a default under, or result in the creation of any Lien upon any Property of the Company under the provisions of, any agreement, charter instrument, bylaw or other instrument to which it is a party or by which it or any of its Property may be bound. 5 7 (B) OBLIGATIONS ARE LEGAL AND ENFORCEABLE. The execution and delivery by the Company of the 1997 Financing Documents have been duly authorized by all necessary action on the part of the Company, and the 1997 Financing Documents have been executed and delivered by one or more duly authorized officers of the Company. The 1997 Financing Documents and the Amended Financing Documents constitute legal, valid and binding obligations of the Company, enforceable against the Company in accordance with their respective terms, except that the enforceability thereof may be: (i) limited by applicable bankruptcy, reorganization, arrangement, insolvency, moratorium or other similar laws affecting the enforceability of creditors' rights generally; (ii) subject to the availability of equitable remedies; and (iii) with respect to indemnity and contribution, limited by state or federal laws relating to Securities or by the public policy underlying such laws. 4.4 PENDING LITIGATION. Except as set forth in Schedule 4.4, there are no proceedings, actions or investigations pending or, to the knowledge of the Company, threatened against or affecting the Company in any court or before any Governmental Authority or arbitration board or tribunal that, either individually or in the aggregate, would have or could reasonably be expected to have a Material Adverse Effect. The Company is not in default with respect to any judgment, order, writ, injunction or decree of any court, Governmental Authority or arbitration board or tribunal that, either individually or in the aggregate, would have or could reasonably be expected to have a Material Adverse Effect. Except as previously disclosed to the Noteholders, the Company has not received any notice of termination of any material contract, lease or other agreement or suffered any material damage, destruction or loss (whether or not covered by insurance) or had any employee strike, work-stoppage, slowdown or lock-out or any substantial, non-frivolous threat directed to it of any imminent strike, work-stoppage, slowdown or lock-out. 4.5 GOVERNMENTAL CONSENT. Neither the nature of the Company, nor of any of its businesses or Properties, nor any relationship between the Company and any other Person, nor any circumstance in connection herewith or in connection with the execution and delivery of the 1997 Financing Documents is such as to require a consent, approval or authorization of, or filing, registration or qualification with, any Governmental Authority on the part of the Company as a condition to the execution and delivery thereof. 6 8 4.6 NO DEFAULTS. (A) NO DEFAULTS. After giving effect to this Agreement, no Defaults or Events of Default shall exist. (B) NO DEFAULTS IN CONNECTION WITH 1997 FINANCING DOCUMENTS. No event has occurred and no condition exists that, upon the execution, delivery and effectiveness of the 1997 Financing Documents, would constitute a Default or an Event of Default. (C) CHARTER INSTRUMENT, OTHER AGREEMENTS. The Company is not in violation in any respect of any term of any charter instrument or bylaw. Except as set forth in Schedule 4.6, the Company is not in violation in any material respect of any term in any agreement or other instrument to which it is a party or by which it or any of its Property may be bound, which would have, or could reasonably be expected to have, a Material Adverse Effect. 4.7 CAPITAL STOCK; OWNERSHIP. As of the Effective Date and after giving effect to the issuance of the 1997 Warrants and the other transactions contemplated to occur simultaneously therewith: (a) the authorized capital stock of the Company, the issued and outstanding capital stock of the Company, and the reservation of shares of capital stock of the Company are set forth in Part A of Schedule 4.7; (b) all outstanding shares of the Common Stock have been duly authorized and validly issued and are fully paid, nonassessable and not subject to any preemptive rights; all such shares reserved for issuance upon exercise or conversion of other Securities have been duly authorized and, upon such exercise or conversion, will be validly issued and fully paid, nonassessable and not subject to any preemptive rights; the issuance and sale of all of such shares have been in full compliance with the registration requirements of all applicable federal and state securities laws; (c) other than as set forth in Part A of Schedule 4.7, the Company does not have outstanding any subscriptions, warrants, options, rights or convertible Securities with respect to any of its Common Stock, nor has the Company authorized or entered into any agreements or commitments to issue any such warrants, options, rights or convertible Securities, except agreements and commitments related to the warrants, options, rights and convertible Securities set forth in Part A of Schedule 4.7; and (d) except as set forth in Part B of Schedule 4.7, the Company is not subject to any obligation (contingent or otherwise) to repurchase or otherwise acquire or retire any shares of its Common Stock or Preferred Stock or any warrant, option, right or convertible Security in respect of its Common Stock or Preferred Stock. 7 9 4.8 PRIVATE OFFERING; COMPLIANCE WITH SECURITIES LAWS. Neither the Company nor any other Person has offered any of the 1997 Warrants for sale or other issuance to, or solicited offers to buy or acquire any thereof from, or otherwise approached or negotiated with respect thereto with, any Person, other than the Noteholders. Except as provided in the Amended Registration Rights Agreement in connection with shares of Common Stock issuable upon the exercise of the 1997 Warrants, the Company has not taken, nor will it take (other than as expressly provided for in the Amended Financing Documents), any action that would subject the issuance of any of the 1997 Warrants to the provisions of section 5 of the Securities Act or to the registration or qualification provisions of any securities or "blue sky" law of any applicable jurisdiction. SECTION 5. COVENANTS OF THE COMPANY. 5.1 ADDITIONAL INFORMATION. To induce the Noteholders to enter into this Agreement, the Company agrees that in addition to the information required to be delivered by the Company to the Noteholders pursuant to Section 7.1 of the Amended Note Purchase Agreement, the Company will provide to each Noteholder such financial monitoring reports as the Noteholders shall request. Such reports shall be delivered via telecopy or to the address of each Noteholder, with copies to Hebb & Gitlin. Upon request by the Noteholders, the Company shall participate in monthly meetings with the Noteholders, either by conference call or in person (at the discretion of the Noteholders), to discuss the financial performance of the Company and such other matters as the Noteholders shall request. 5.2 RESERVE ACCOUNT FOR COUNSEL. The Company agrees to pay to Hebb & Gitlin, special counsel to the Noteholders, on or prior to August 22, 1997, a fee reserve in the amount of $50,000 on account of amounts to be charged by Hebb & Gitlin with respect to its representation of the Noteholders. Such reserve will be the property of the Noteholders and Hebb & Gitlin will hold such reserve on behalf of the Noteholders in its clients' funds account. Hebb & Gitlin expects to bill the Company without applying its charges against the reserve in order to maintain the reserve in case it is needed for subsequent billings. However, at the direction of the Noteholders or if the Company is not in compliance with its obligation to pay amounts charged by Hebb & Gitlin, Hebb & Gitlin may at any time apply the reserve against its fees and expenses (whether or not yet billed, provided that Hebb & Gitlin shall promptly deliver a statement that reconciles any application of the reserve against actual fees and expenses). Any part of the reserve so applied will, at the direction of the Noteholders, be promptly replenished by the Company so that at all times the amount of the reserve will remain at $50,000. Any portion of the reserve which Hebb & Gitlin does not apply against its fees and expenses will be applied or paid, subject to the provisions of Section 10 of the Amended Note Purchase Agreement, either to the reduction of indebtedness of the Company to the Noteholders or to the Company, as directed by the Noteholders. 8 10 SECTION 6. CONDITIONS. The amendments described in Section 2 shall become effective on the date (the "EFFECTIVE DATE") upon which all of the following conditions have been satisfied: 6.1 EXECUTION AND DELIVERY OF THIS AGREEMENT. The Company and the Noteholders shall have executed and delivered counterparts of this Agreement. 6.2 AMENDMENT OF SENIOR CREDIT DOCUMENTS. The Company shall have delivered to each Noteholder copies of the Sixth Amendment to Credit Agreement and Consent and the warrant agreement entered into among the Company and the holders of Senior Debt, in form and substance satisfactory to the Noteholders in their sole discretion, together with a certification by a Senior Officer of the Company stating that such copies are true and correct copies. 6.3 WARRANT AGREEMENT; WARRANTS. The Company and each of the Noteholders shall have executed and delivered a warrant agreement (as may be amended from time to time, the "1997 WARRANT AGREEMENT"), in form and substance satisfactory to the Noteholders, and each of the Noteholders shall have received a fully executed counterpart thereof. The Company shall have issued warrants (the "1997 WARRANTS") in accordance with the terms of the 1997 Warrant Agreement to each of the Noteholders in the respective amounts indicated below each Noteholder's name in Annex 1 thereto. 6.4 AMENDMENTS TO EQUITY DOCUMENTS. The Company and each of the Noteholders shall have executed and delivered: (a) an amendment to the Registration Rights Agreement (the "SIXTH AMENDMENT TO REGISTRATION RIGHTS AGREEMENT" and, the Registration Rights Agreement, as amended by the Sixth Amendment to Registration Rights Agreement, the "AMENDED REGISTRATION RIGHTS AGREEMENT"), (b) an amendment to the 1993 Warrant Agreement (the "THIRD AMENDMENT TO 1993 WARRANT AGREEMENT" and, the 1993 Warrant Agreement, as amended by the Third Amendment to 1993 Warrant Agreement, the "AMENDED 1993 WARRANT AGREEMENT"), (c) an amendment to the 1996 Warrant Agreement (the "THIRD AMENDMENT TO 1996 WARRANT AGREEMENT" and, the 1996 Warrant Agreement, as amended by the Third Amendment to 1996 Warrant Agreement, the "AMENDED 1996 WARRANT AGREEMENT") and 9 11 (d) an amendment to the Observation Rights Agreement (the "SECOND AMENDMENT TO OBSERVATION RIGHTS AGREEMENT" and, the Observation Rights Agreement, as amended by the Second Amendment to Observation Rights Agreement, the "AMENDED OBSERVATION RIGHTS AGREEMENT"), and each of the Noteholders shall have received a fully executed counterpart of each such agreement. 6.5 RESERVATION OF COMMON STOCK. The shares of Common Stock (as such term is defined in the 1997 Warrant Agreement) issuable upon exercise of the 1997 Warrants shall have been duly authorized and reserved for issuance upon such exercise. 6.6 PRIVATE PLACEMENT NUMBER. There shall have been obtained a private placement number for the 1997 Warrants from the CUSIP Service Bureau of Standard & Poor's (a division of McGraw Hill, Inc.) and each Noteholder shall have been informed of such private placement number. 6.7 NO DEFAULT; REPRESENTATIONS AND WARRANTIES TRUE. After giving effect to Section 2 hereof, no Default or Event of Default under the Amended Note Purchase Agreement shall exist, the warranties and representations set forth in Section 4 hereof shall be true and correct on the Effective Date, and the Noteholders shall have received a certificate, dated as of the Effective Date and signed by a Senior Officer, certifying to such matters, and certifying that all of the conditions specified in this Section 6 have been satisfied. 6.8 AUTHORIZATION OF TRANSACTIONS. The Company shall have authorized, by all necessary corporate action, its execution, delivery and performance of the 1997 Financing Documents and the consummation of all transactions contemplated by the 1997 Financing Documents and evidence of the same shall have been delivered to the Noteholders. The Noteholders shall have received a certificate, dated as of the Effective Date and signed by the Secretary or the Assistant Secretary of the Company, certifying to the resolutions in respect of such authorization and to such other matters as the Noteholders shall reasonably request. 6.9 OPINIONS OF COUNSEL. The Noteholders shall have received from each of (a) Brobeck, Phleger & Harrison, counsel to the Company, and (b) Hebb & Gitlin, a legal opinion substantially in the form set forth in Exhibit B1 and Exhibit B2, respectively, and as to such other matters as the Noteholders may reasonably request. 10 12 6.10 EXPENSES. The Company shall have paid all costs and expenses to the Noteholders relating to the 1997 Financing Documents in accordance with Section 7.6 (including, without limitation, any attorney's fees and disbursements). 6.11 PROCEEDINGS SATISFACTORY. All proceedings taken in connection with the 1997 Financing Documents shall be satisfactory to the Noteholders and their special counsel. The Noteholders and their special counsel shall have received copies of such documents and papers as they may reasonably request in connection therewith, in form and substance satisfactory to them. SECTION 7. MISCELLANEOUS. 7.1 GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED, INTERPRETED AND ENFORCED IN ACCORDANCE WITH, AND GOVERNED BY, INTERNAL NEW YORK LAW. 7.2 DUPLICATE ORIGINALS. Two or more duplicate originals of this Agreement may be signed by the parties, each of which shall be an original but all of which together shall constitute one and the same instrument. This Agreement may be executed in one or more counterparts and shall be effective when at least one counterpart shall have been executed by each party hereto, and each set of counterparts which, collectively, show execution by each party hereto shall constitute one duplicate original. 7.3 EFFECT OF THIS AGREEMENT. Except as specifically provided in this Agreement, no terms or provisions of the Existing Note Purchase Agreement or the Existing Notes have been modified or changed by this Agreement and the terms and provisions of the Existing Note Purchase Agreement and the Existing Notes, as amended hereby, shall continue in full force and effect. This Agreement and the amendments contained herein shall have and be in effect on and after the Effective Date. 7.4 WAIVERS AND AMENDMENTS OF THIS AGREEMENT. Neither this Agreement nor any term hereof may be changed, waived, discharged or terminated orally, or by any action or inaction, but only by an instrument in writing signed by the party against which enforcement of the change, waiver, discharge or termination is sought. 11 13 7.5 SECTION HEADINGS. The titles of the sections hereof appear as a matter of convenience only, do not constitute a part of this Agreement and shall not affect the construction hereof. 7.6 COSTS AND EXPENSES. On the Effective Date, the Company shall pay (a) all costs and expenses of the Noteholders related hereto and to the other 1997 Financing Documents, including, but not limited to, the statement for fees and disbursements of the Noteholders' special counsel presented to the Company on the Effective Date for matters in connection with the 1997 Financing Documents and (b) all statements for fees and disbursements of the Noteholders' special counsel delivered to the Company prior to the Effective Date. The Company will also pay upon receipt of any statement thereof, each additional statement for fees and disbursements of the Noteholders' special counsel rendered after the Effective Date in connection with the 1997 Financing Documents. The obligations of the Company under this Section 7.6 shall survive the payment or prepayment of the Notes and the termination of the Amended Note Purchase Agreement. 7.7 SURVIVAL. All warranties, representations, certifications and covenants made by the Company hereunder and in the other 1997 Financing Documents or in any certificate or other instrument delivered pursuant hereto or thereto shall be considered to have been relied upon by the Noteholders and shall survive the execution of this Agreement and the other 1997 Financing Documents, regardless of any investigation made by or on behalf of the Noteholders. All statements in any such certificate or other instrument shall constitute warranties and representations of the Company hereunder. [REMAINDER OF PAGE INTENTIONALLY BLANK. NEXT PAGE IS SIGNATURE PAGE.] 12 14 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed on their behalf by a duly authorized officer or agent thereof, as the case may be, as of the date first above written. THE CERPLEX GROUP, INC. By ------------------------------ Name: Title: THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY By ------------------------------ Name: Title: JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY By ------------------------------ Name: Title: NORTH ATLANTIC SMALLER COMPANIES INVESTMENT TRUST PLC By ------------------------------- Name: Title: [Signature page to the FIRST AMENDMENT AGREEMENT among The Cerplex Group, Inc. and the Noteholders listed therein.] 15 CONSENT: The undersigned, the holder of all outstanding Senior Debt, consents to the terms of this Agreement. CITIBANK, N.A. By ------------------------------- Name: Title: [Consent page to the FIRST AMENDMENT AGREEMENT among The Cerplex Group, Inc. and the Noteholders listed therein.] 16 EXHIBIT A AMENDMENTS TO EXISTING NOTE PURCHASE AGREEMENT 1. AMENDMENT TO SECTION 4.1. Section 4.1 of the Existing Note Purchase Agreement is hereby amended and restated to read, in its entirety, as follows: 4.1 INTEREST. (A) INTEREST ON NOTES. Interest shall accrue on the unpaid principal balance of the Notes on the basis of a 360-day year of twelve 30-day months as follows: (i) for the period from and including February 19, 1997 through and including August 18, 1997, at the rate of nine and fifty one-hundredths percent (9.50%) per annum; and (ii) at all times on and after August 19, 1997, at the rate of fifteen percent (15%) per annum, and shall be payable, in arrears, (x) semi-annually on August 19, 1997 and February 19, 1998 and (y) monthly on the nineteenth (19th) day of each month thereafter commencing March 19, 1998, until the principal amount of the Notes in respect of which such interest shall have accrued shall become due and payable, and interest shall accrue on any overdue principal (including any overdue prepayment of principal) and Make-Whole Amount, if any, and (to the extent permitted by applicable law) on any overdue installment of interest, at a rate (the "DEFAULT RATE") equal to the lesser of (A) the highest rate allowed by applicable law, and (B) (1) for the period from and including February 19, 1997 through and including August 18, 1997, the greater of (x) thirteen and fifty one-hundredths percent (13.50%) per annum or (y) the Chase Manhattan Prime Rate, from time to time in effect; and (2) at all times on and after August 19, 1997, the greater of (x) seventeen percent (17)% per annum or (y) the Chase Manhattan Prime Rate, from time to time in effect. (B) CAPITALIZED INTEREST AMOUNTS. (i) On the August 19, 1997 interest payment date in respect of the Notes, so long as the principal amount of the Notes shall not have become due and payable at such time and no Default or Event of Default Exhibit A-1 17 shall then exist, the Company may satisfy its obligation to pay interest on each Note by adding an additional principal amount (the "INITIAL CAPITALIZED INTEREST AMOUNT") to the then outstanding principal amount of such Note (such Initial Capitalized Interest Amount, together with such outstanding principal amount, herein referred to as the "BASE PRINCIPAL AMOUNT"), which additional principal amount shall be equal to the aggregate amount of the interest payment in respect of such Note that is due on such interest payment date. (ii) On any interest payment date commencing with the February 19, 1998 interest payment date, so long as the principal amount of the Notes shall not have become due and payable at such time and no Default or Event of Default shall then exist, the Company may satisfy its obligation to pay interest on each Note by: (A) paying, in cash, an amount equal to not less than the amount of interest which would have accrued on such Note for the semi-annual or monthly period, as the case may be, ended on such interest payment date, calculated in accordance with Section 4.1(a) but at the rate of nine and fifty one-hundredths percent (9.50%) per annum; and (B) adding an additional principal amount (an "ADDITIONAL CAPITALIZED INTEREST AMOUNT") to the then outstanding principal amount of such Note equal to the difference between: (1) the aggregate amount of the interest payment in respect of such Note that is due on such interest payment date in accordance with the provisions of Section 4.1(a); minus (2) the portion of the amount of such interest paid in cash pursuant to Section 4.1(b)(ii)(A). Interest at the rate specified in Section 4.1(a)(ii) shall begin to accrue on such Initial Capitalized Interest Amount or Additional Capitalized Interest Amount, as the case may be, from and including the interest payment date on which such Initial Capitalized Interest Amount or Additional Capitalized Interest Amount is added to the principal amount of the related Note. In the event that a Default or Event of Default shall have occurred and shall be continuing on any interest payment date, the Company shall pay the entire amount of interest due in respect of all Notes on such interest payment date in cash. (C) EXERCISE OF ELECTION TO ADD ADDITIONAL CAPITALIZED INTEREST AMOUNTS. In the event that the Company elects to make any portion of any interest payment in respect of the Notes by adding to the principal thereof Additional Capitalized Interest Amounts pursuant to Section 4.2(b)(ii)(B), the Company shall exercise such election by: Exhibit A-2 18 (i) giving each holder of a Note for which the interest payment thereon is to be satisfied in part by the addition to the principal thereof of an Additional Capitalized Interest Amount, written notice of such election not less than three (3) Business Days prior to the relevant interest payment date; (ii) setting forth in such notice the Additional Capitalized Interest Amount in respect of such Note; and (iii) delivering to such holder on or prior to such relevant interest payment date the portion of such interest payment that is to be paid in cash, pursuant to the terms of the Notes. Each addition of the Initial Capitalized Interest Amount or an Additional Capitalized Interest Amount, as the case may be, to the principal amount of a Note shall be recorded by the holder of such Note in its manual or data processing records, and/or on Schedule A annexed to such Note. In the absence of manifest error, such records and Schedule shall be conclusive as to the outstanding principal amount of such Note, provided that the failure to make any such record entry with respect to the Initial Capitalized Interest Amount or any Additional Capitalized Interest Amount shall not limit or otherwise affect the obligations of the Company under such Note. (D) INTEREST ACCRUAL DURING BLOCKAGE PERIODS. At all times during any postponement of payments on or in respect of the Subordinated Debt pursuant to Section 10, the unpaid principal balance of the Notes and any overdue installment of interest shall bear interest at the Default Rate. Immediately upon the termination of such postponement, the Company shall (i) pay, in cash, an amount equal to not less than the amount of interest that accrued on such Note during such postponement, calculated in accordance with Section 4.1(a) but at the rate of nine and fifty one-hundredths percent (9.50%) per annum; and (ii) add an additional principal amount to the then outstanding principal amount of each Note equal to the difference between: (A) the aggregate amount of the interest payment in respect of such Note that is due upon the termination of such postponement, calculated in accordance with Section 4.1(a) but at the Default Rate; minus (B) the portion of the amount of such interest paid in cash pursuant to Section 4.1(d)(i). (E) PREPAYMENT OF BASE PRINCIPAL AMOUNT. The Company may, on or prior to August 19, 1998, prepay, in cash, the Base Principal Amount of all outstanding Notes, together with all accrued and unpaid interest thereon at the Exhibit A-3 19 rate of nine and fifty one-hundredths percent (9.50%) per annum and all other amounts due and payable hereunder and under the Notes, other than the aggregate amount of all Additional Capitalized Interest Amounts, and such payment shall be deemed to satisfy all of the Company's obligations in respect of the Notes (including, without limitation, in respect of all Additional Capitalized Interest Amounts). 2. AMENDMENT TO SECTION 4.2. Section 4.2 of the Existing Note Purchase Agreement is hereby amended by adding the following as the final paragraph thereof: If the sum of (x) the aggregate principal amount of Revolving Loans (as such term is defined in the Wells Fargo Credit Agreement) then outstanding plus (y) the aggregate principal amount of Revolving Loans then available to the Company pursuant to the Wells Fargo Credit Agreement, equals: (i) on August 20, 1997 and August 21, 1997, less than $4,886,984; (ii) at any time from August 22, 1997 through August 31, 1997, inclusive, less than $4,386,984; and (iii) at any time on and after September 1, 1997, less than $4,886,984; (any such event being a "REVOLVING LOAN REDUCTION"), then the Company shall immediately give notice of such Revolving Loan Reduction to each holder of Notes. On the date that a Revolving Loan Reduction first occurs, the Initial Capitalized Interest Amount in respect of each Note shall be immediately due and payable, with accrued interest thereon at the Default Rate, for the period of August 19, 1997 to the date of such Revolving Loan Reduction, as determined in accordance with Section 4.1(a) of this Agreement. The Company shall pay such Initial Capitalized Interest Amount and interest thereon as aforesaid to each Noteholder as set forth in Annex 1 to this Agreement and, upon such payment, the outstanding principal amount of each Note shall be the outstanding principal amount of such Note prior to the addition of the Initial Capitalized Interest Amount thereto. 3. AMENDMENT TO SECTION 6.18. Section 6.18 of the Existing Note Purchase Agreement is hereby amended and restated to read, in its entirety, as follows: 6.18 MINIMUM PROFITABILITY. The Company shall not permit Consolidated Net Income (excluding any gain on the sale of Peripheral Computer Support, Inc.) for the fiscal quarters of the Company ending on the dates set forth in the table below to be less than the amounts set forth opposite such dates. Exhibit A-4 20 ================================================================================ Fiscal Quarter Ending Consolidated Net Income - -------------------------------------------------------------------------------- June 30, 1997 $(16,609,000) - -------------------------------------------------------------------------------- September 30, 1997 $ 1,458,000) - -------------------------------------------------------------------------------- December 31, 1997 $ (838,000) - -------------------------------------------------------------------------------- March 31, 1998 $ (391,000) - -------------------------------------------------------------------------------- June 30, 1998 and thereafter $ 5,000,000 ================================================================================ 4. AMENDMENT TO SECTION 6.19. Section 6.19 of the Existing Note Purchase Agreement is hereby amended and restated to read, in its entirety, as follows: 6.19 MINIMUM RATIO OF ACCOUNTS RECEIVABLE TO LOANS. The Company shall not permit the ratio of (a) the sum of (i) Consolidated Accounts Receivable as of the last day of the fiscal quarters of the Company set forth in the table below plus (ii) Consolidated Inventory as of such day to (b) the aggregate amount of all outstanding Wells Fargo Credit Agreement Debt as of such day to be less than the applicable ratio set forth in the following table: ================================================================================ Fiscal Quarter Ending Minimum Ratio - -------------------------------------------------------------------------------- September 30, 1997, December 31, 1997 and March 31, 1998 0.425 to 1.00 - -------------------------------------------------------------------------------- June 30, 1998 and thereafter 0.670 to 1.00 ================================================================================ Exhibit A-5 21 5. AMENDMENT TO SECTION 6.20. Section 6.20 of the Existing Note Purchase Agreement is hereby amended and restated to read, in its entirety, as follows: 6.20 CURRENT RATIO. The Company shall not permit the ratio of Consolidated Current Assets to Consolidated Current Liabilities as of the last day of the fiscal quarters of the Company set forth in the table below to be less than the applicable ratio set forth opposite such days. ================================================================================ Fiscal Quarter Ending Minimum Ratio - -------------------------------------------------------------------------------- June 30, 1997 0.47 to 1.00 - -------------------------------------------------------------------------------- September 30, 1997 0.42 to 1.00 - -------------------------------------------------------------------------------- December 31, 1997 0.44 to 1.00 - -------------------------------------------------------------------------------- March 31, 1998 0.45 to 1.00 - -------------------------------------------------------------------------------- June 30, 1998 and thereafter 1.00 to 1.00 ================================================================================ 6. AMENDMENT TO SECTION 6.21. Section 6.21 of the Existing Note Purchase Agreement is hereby amended and restated to read, in its entirety, as follows: 6.21 MINIMUM CONSOLIDATED TANGIBLE NET WORTH. The Company shall not permit Consolidated Tangible Net Worth at any time during any period set forth in the table below to be less than the applicable amount set forth opposite such period, plus one hundred percent (100%) of Net Securities Proceeds. ================================================================================ Minimum Consolidated Period Tangible Net Worth - -------------------------------------------------------------------------------- June 30, 1997 through September 29, 1997 $(15,714,000) - -------------------------------------------------------------------------------- September 30, 1997 through December 30, 1997 $(15,365,000) - -------------------------------------------------------------------------------- December 31, 1997 through March 30, 1998 $(14,642,000) - -------------------------------------------------------------------------------- March 31, 1998 through May 1, 1998 $(13,842,000) - -------------------------------------------------------------------------------- May 2, 1998 and thereafter $ 5,000,000 ================================================================================ Exhibit A-6 22 7. AMENDMENT TO SECTION 9.1. Section 9.1 of the Existing Note Purchase Agreement is hereby amended as follows: (A) the following defined terms shall be added in their proper alphabetical order: ADDITIONAL CAPITALIZED INTEREST AMOUNT -- Section 4.1(b). BASE PRINCIPAL AMOUNT -- Section 4.1(b). INITIAL CAPITALIZED INTEREST AMOUNT -- Section 4.1(b). 1997 WARRANT AGREEMENT -- means the Warrant Agreement dated as of August 20, 1997, among the Company and the Existing Noteholders, as amended, and as such agreement may be further amended, supplemented or restated from time to time. PERMANENT REDUCTIONS -- means the aggregate of repayments, prepayments and reductions of the Term Loan Facility or the Revolving Credit Facility, as the case may be, as set forth in subsection 2.4 of the Wells Fargo Credit Agreement (other than repayments, prepayments and reductions that do not permanently reduce the Term Loan Facility or commitments to make loans under the Revolving Credit Facility). REVOLVING LOAN REDUCTION -- Section 4.2. (B) clause (a) of the defined term "Senior Debt" shall be amended and restated in its entirety as follows: (a) the outstanding principal amount of the Wells Fargo Credit Agreement Debt, provided that if the aggregate of such principal so outstanding shall exceed the sum of (i) the Term Loan Facility, in an aggregate amount not exceeding $31,390,000 minus Permanent Reductions plus (ii) the Revolving Credit Facility, in an aggregate amount not exceeding $4,900,000 minus Permanent Reductions, such excess shall not constitute Senior Debt; (C) the defined term "Warrant Agreement" shall be amended and restated in its entirety as follows: WARRANT AGREEMENT -- means the collective reference to the 1993 Warrant Agreement, the 1996 Warrant Agreement and the 1997 Warrant Agreement. (D) the defined term "Wells Fargo Credit Limit" shall be amended and restated in its entirety as follows: WELLS FARGO CREDIT LIMIT -- means the sum of (a) the Term Loan Facility, in an aggregate amount not exceeding $31,390,000 minus Permanent Reductions plus (b) the Revolving Credit Facility, in an aggregate amount not exceeding $4,900,000 minus Permanent Reductions. 8. AMENDMENT TO EXHIBIT A. Exhibit A of the Existing Note Purchase Agreement is hereby amended and restated to read in its entirety as set forth in Attachment 1 to this Exhibit A. Exhibit A-7 EX-4.33 4 WARRANT AGREEMENT 1 EXHIBIT 4.33 =============================================================================== THE CERPLEX GROUP, INC. WARRANT AGREEMENT DATED AS OF AUGUST 20, 1997 WARRANTS TO PURCHASE SHARES OF COMMON STOCK =============================================================================== 2 TABLE OF CONTENTS (NOT A PART OF THE AGREEMENT)
PAGE 1. FORM, EXECUTION AND TRANSFER OF WARRANT CERTIFICATES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 1.1 Form of Warrant Certificates. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 1.2 Execution of Warrant Certificates; Registration Books etc. . . . . . . . . . . . . . . . . . . . . . . . . 2 1.3 Transfer, Split Up, Combination and Exchange of Warrant Certificates; Lost or Stolen Warrant Certificates. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 1.4 Subsequent Issuance of Warrant Certificates. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 2. EXERCISE OF WARRANTS; PAYMENT OF PURCHASE PRICE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 2.1 Exercise of Warrants. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 2.2 Issuance of Common Stock. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 2.3 Unexercised Warrants. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 2.4 Cancellation and Destruction of Warrant Certificates. . . . . . . . . . . . . . . . . . . . . . . . . . . 5 3. REPRESENTATIONS AND COVENANTS OF THE COMPANY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 3.1 Representations and Warranties. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 3.2 Reservation of Common Stock. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 3.3 Common Stock to be Duly Authorized and Issued, Fully Paid and Nonassessable. . . . . . . . . . . . . . . . 6 3.4 Transfer Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 3.5 Common Stock Record Date. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 3.6 Financial and Business Information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 4. ADJUSTMENT OF PURCHASE PRICE AND NUMBER OF SHARES OF COMMON STOCK ISSUABLE PER WARRANT . . . . . . . . . . . . . . 9 4.1 Mechanical Adjustments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 4.2 Fractional Shares. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 4.3 Special Agreements of the Company. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 5. INTERPRETATION OF THIS AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 5.1 Terms Defined. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 5.2 Directly or Indirectly. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 5.3 Section Headings and Table of Contents and Construction. . . . . . . . . . . . . . . . . . . . . . . . . . 23 5.4 Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 6. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 6.1 Communications. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 6.2 Reproduction of Documents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 6.3 Survival. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 6.4 Successors and Assigns. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 6.5 Amendment and Waiver. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 6.6 Right of Action. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 6.7 Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 6.8 Filings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
i 3 6.9 Entire Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 6.10 Term. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 6.11 Duplicate Originals, Execution in Counterpart. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 Annex 1 -- Information as to Initial Holders Exhibit A -- Form of Warrant Certificate Exhibit B -- Determination of Fair Market Share Price Exhibit C -- Confidentiality
ii 4 WARRANT AGREEMENT WARRANT AGREEMENT, dated as of August 20, 1997 (as may be amended from time to time, this "AGREEMENT"), among THE CERPLEX GROUP, INC., a Delaware corporation (together with its successors and assigns, the "COMPANY"), and each of the Persons identified as an Initial Holder in Annex 1 (individually, an "INITIAL HOLDER" and, collectively, the "INITIAL HOLDERS"). RECITALS: A. Certain capitalized terms used in this Agreement have the meanings assigned to them in Section 5.1 hereof. B. The Company has entered into those certain separate Amended and Restated Note Purchase Agreements, each dated as of April 9, 1997 (as amended and, as may be further amended, modified or restated from time to time, individually, a "NOTE PURCHASE AGREEMENT" and, collectively, the "NOTE PURCHASE AGREEMENTS") with each of the Initial Holders. The Note Purchase Agreement amended and restated those certain separate Note Purchase Agreements, each dated as of November 19, 1993, with each of the Initial Holders, as amended, pursuant to which the Company originally issued and sold to the Initial Holders an aggregate principal amount of $17,250,000 of the Company's Series A 9.00% Senior Subordinated Notes Due November 19, 2001 (the "SERIES A NOTES") and an aggregate principal amount of $5,750,000 of the Company's Series B 9.00% Senior Subordinated Notes Due November 19, 2001 (the "SERIES B NOTES"). Pursuant to the terms of the Note Purchase Agreement, the Series A Notes were amended and restated (such notes, together with any notes issued in substitution therefor, as amended and, as may be further amended, modified or restated from time to time, the "NOTES"). The Company has prepaid the Series B Notes and the Series B Notes are no longer issued and outstanding. C. In consideration of certain amendments set forth in the First Amendment Agreement, dated as of August 20, 1997, among the Company and the Initial Holders, the Company has agreed to issue five hundred thousand ninety-six (500,096) Warrants of the Company to the Initial Holders, and, under certain circumstances set forth therein, to issue to the holders of the Warrants Additional Warrants, each Warrant representing the right to purchase, upon the terms and subject to the conditions set forth in this Agreement, and subject to adjustment as set forth herein, one (1) share of Common Stock. AGREEMENT: NOW, THEREFORE, in consideration of the premises and the mutual agreements set forth herein, the parties to this Agreement hereby agree as follows: 1 5 1. FORM, EXECUTION AND TRANSFER OF WARRANT CERTIFICATES 1.1 FORM OF WARRANT CERTIFICATES. The warrant certificates (individually, a "WARRANT CERTIFICATE" and, collectively, the "WARRANT CERTIFICATES") evidencing the Warrants, and the forms of assignment and of election to purchase shares to be attached to such certificates, shall be substantially in the form set forth in Exhibit A and may have such letters, numbers or other marks of identification or designation as may be required to comply with any law or with any rule or regulation of any governmental authority, stock exchange or self-regulatory organization made pursuant thereto. Each Warrant Certificate shall be dated as of the date of issuance thereof by the Company, either upon initial issuance or upon transfer or exchange, and on its face shall initially entitle the holder thereof to purchase the number of shares of Common Stock equal to the number of Warrants represented by such Warrant Certificate at a price per share equal to the Purchase Price, but the number of such shares and the Purchase Price shall be subject to adjustment as provided herein. 1.2 EXECUTION OF WARRANT CERTIFICATES; REGISTRATION BOOKS ETC. (a) EXECUTION OF WARRANT CERTIFICATES. The Warrant Certificates shall be executed on behalf of the Company by its President, one of its Vice Presidents or any other officer of the Company authorized by the Board of Directors, which execution shall be attested by the Secretary or an Assistant Secretary of the Company. In case any officer of the Company who shall have signed any Warrant Certificate shall cease to be such officer of the Company before issuance and delivery by the Company of such Warrant Certificate, such Warrant Certificate nevertheless may be issued and delivered with the same force and effect as though the individual who signed such Warrant Certificate had not ceased to be such officer of the Company, and any Warrant Certificate may be signed on behalf of the Company by any individual who, at the actual date of the execution of such Warrant Certificate, shall be a proper officer of the Company to sign such Warrant Certificate, although at the date of the execution of this Agreement any such individual was not such an officer. (b) REGISTRATION BOOKS, ETC. The Company will keep or cause to be kept at its office maintained at the address of the Company set forth in Section 6.1 hereof, or at such other office of the Company in the United States of America of which the Company shall have given notice to each holder of Warrant Certificates, books for registration and transfer of the Warrant Certificates issued hereunder. Such books shall show the names and addresses of the respective holders of the Warrant Certificates, the registration number and the number of Warrants evidenced on its face by each of the Warrant Certificates and the date of each of the Warrant Certificates. Every holder of a Warrant Certificate by accepting the same consents and agrees with the Company and with every other holder of a Warrant Certificate that: (i) the Warrant Certificates are transferable only on the registry books of the Company if surrendered at the office of the Company referred to 2 6 in this Section 1.2(b), duly endorsed or accompanied by an instrument of transfer (substantially in the form attached to Exhibit A); and (ii) the Company may deem and treat the Person in whose name each Warrant Certificate is registered as the absolute owner thereof and of the Warrants evidenced thereby (notwithstanding any notations of ownership or writing on the Warrant Certificates made by anyone other than the Company) for all purposes whatsoever, and the Company shall not be affected by any notice to the contrary. (c) ACQUISITION FOR INVESTMENT. Each Initial Holder represents that it is acquiring the Warrants for its own account for investment and not with a view to any resale or distribution thereof, within the meaning of the Securities Act, but without prejudice to its right at all times to sell or otherwise dispose of all or any part of the Warrants or the shares of Common Stock issuable upon the exercise of such Warrant under a registration statement filed under the Securities Act or in a transaction exempt from the registration requirements of the Securities Act. Each Initial Holder agrees that each outstanding Warrant Certificate (and each certificate representing a share or shares of Common Stock issued upon the exercise of a Warrant) which it owns shall, unless the Securities represented by such certificate have been registered or have been sold in accordance with Rule 144 (or any successor regulation thereto) under the Securities Act, bear an endorsement reading substantially as follows: The securities represented by this certificate have not been registered under the Securities Act of 1933, as amended, or any state securities law. These securities may not be sold, transferred, pledged or hypothecated in any transaction unless first registered under such laws or unless such transaction is exempt from the registration requirements of such laws. The securities represented by this certificate are subject to certain market holdback provisions set forth in that certain registration rights agreement dated November 19, 1993, as amended, among The Cerplex Group, Inc. and the other parties thereto. 1.3 TRANSFER, SPLIT UP, COMBINATION AND EXCHANGE OF WARRANT CERTIFICATES; LOST OR STOLEN WARRANT CERTIFICATES. (a) TRANSFER, SPLIT UP, ETC. Any Warrant Certificate, with or without other Warrant Certificates, may be transferred, split up, combined or exchanged for another Warrant Certificate or Warrant Certificates, entitling the registered holder or transferee thereof to purchase a like number of shares of Common Stock as the Warrant Certificate or Warrant Certificates surrendered then entitled such registered holder to 3 7 purchase. Any registered holder desiring to transfer, split up, combine or exchange any Warrant Certificate shall make such request in writing delivered to the Company, and shall surrender the Warrant Certificate or Warrant Certificates to be transferred, split up, combined or exchanged at the office of the Company referred to in Section 1.2(b) hereof, whereupon the Company shall deliver promptly to the Person entitled thereto a Warrant Certificate or Warrant Certificates, as the case may be, as so requested. Each holder of Warrants after any such transfer or exchange shall, by its acceptance of the Warrants and Warrant Certificates being so transferred, be deemed to have agreed to the terms and provisions of confidentiality set forth on Exhibit C. (b) LOSS, THEFT, ETC. Upon receipt of written notice from the holder of any Warrant Certificate of the loss, theft, destruction or mutilation of such Warrant Certificate and, in the case of any such loss, theft or destruction, upon receipt of such holder's unsecured indemnity agreement, or, in the case of any such mutilation, upon surrender and cancellation of such Warrant Certificate, the Company will make and deliver a new Warrant Certificate, of like tenor, in lieu of the lost, stolen, destroyed or mutilated Warrant Certificate. 1.4 SUBSEQUENT ISSUANCE OF WARRANT CERTIFICATES. Subsequent to their original issuance, no Warrant Certificates shall be issued except: (a) Warrant Certificates issued upon any transfer, combination, split up or exchange of Warrants pursuant to Section 1.3(a) hereof; (b) Warrant Certificates issued in replacement of mutilated, destroyed, lost or stolen Warrant Certificates pursuant to Section 1.3(b) hereof; and (c) Warrant Certificates issued pursuant to Section 2.3 hereof upon the partial exercise of any Warrant Certificate to evidence the unexercised portion of such Warrant Certificate. 2. EXERCISE OF WARRANTS; PAYMENT OF PURCHASE PRICE 2.1 EXERCISE OF WARRANTS. (a) PURCHASE PRICE PAYMENT UPON EXERCISE. At any time on or after August 20, 1998 and prior to 5:00 p.m. (Los Angeles, California time) on the Termination Date, the holder of any Warrant Certificate may exercise the Warrants evidenced thereby in whole or in part, by surrender of such Warrant Certificate, with an election to purchase (a form of which is attached as part of the form of Warrant Certificate attached as Exhibit A) attached thereto duly executed, to the Company at its office referred to in Section 1.2(b) hereof, together with payment of the Purchase Price, payable as set forth below in this Section 2.1, for each share of Common Stock as to which the Warrants are exercised. The Purchase Price shall be (i) payable in cash, by certified or official bank check payable to the order of the Company or by wire transfer of immediately available funds to the account of the Company or (ii) 4 8 satisfied by the delivery of Warrant Certificates to the Company for cancellation in accordance with the formula set forth in Section 2.1(b). (b) NET EXERCISE PRICE. In lieu of any holder of a Warrant Certificate exercising the Warrants (or any portion thereof) evidenced by such Warrant Certificate for cash, as contemplated by Section 2.1(a), such holder may, in connection with such exercise, elect to receive shares of Common Stock equal to the product of (i) the number of shares of Common Stock issuable upon such exercise of such Warrant Certificate (or, if only a portion of such Warrant Certificate is being exercised, issuable upon the exercise of such portion) multiplied by (ii) a fraction, the numerator of which is the Market Price per share of Common Stock at the time of such exercise minus the Purchase Price per share of Common Stock at the time of such exercise, and the denominator of which is the Market Price per share of Common Stock at the time of such exercise. 2.2 ISSUANCE OF COMMON STOCK. Upon timely receipt on or after August 20, 1998 of a Warrant Certificate, with the form of election to purchase duly executed, accompanied by payment of the Purchase Price for each of the shares to be purchased in the manner provided in Section 2.1 hereof and an amount equal to any applicable transfer tax (if not payable by the Company as provided in Section 3.4 hereof), the Company shall thereupon promptly cause certificates for the number of whole shares of Common Stock then being purchased to be delivered to or upon the order of the registered holder of such Warrant Certificate, registered in such name or names as may be designated by such holder, and, promptly after such receipt deliver the cash, if any, to be paid in lieu of fractional shares pursuant to Section 4.2 hereof to or upon the order of the registered holder of such Warrant Certificate. 2.3 UNEXERCISED WARRANTS. In case the registered holder of any Warrant Certificate shall exercise less than all the Warrants evidenced thereby, a new Warrant Certificate evidencing Warrants equal in number to the number of Warrants remaining unexercised shall be issued by the Company to the registered holder of such Warrant Certificate or to its duly authorized assigns. 2.4 CANCELLATION AND DESTRUCTION OF WARRANT CERTIFICATES. All Warrant Certificates surrendered to the Company for the purpose of exercise, exchange, substitution or transfer shall be cancelled by it, and no Warrant Certificates shall be issued in lieu thereof except as expressly permitted by any of the provisions of this Agreement. The Company shall cancel and retire any other Warrant Certificates purchased or acquired by the Company otherwise than upon the exercise thereof. 5 9 3. REPRESENTATIONS AND COVENANTS OF THE COMPANY 3.1 REPRESENTATIONS AND WARRANTIES. (a) CORPORATE AUTHORITY. The Company has the corporate power and authority to: (i) authorize, execute, deliver and enter into this Agreement and the Warrant Certificates; (ii) issue and sell the Warrants; (iii) perform its obligations under this Agreement and the Warrants; and (iv) authorize, execute, deliver, issue and sell the shares of the Common Stock issuable upon exercise of the Warrants. (b) ENFORCEABILITY OF OBLIGATIONS. This Agreement and the Warrant Certificates issued on the date hereof have been, and any Warrants issued after the date hereof will be, duly authorized, executed and delivered by the Company. This Agreement, the Warrant Certificates and the Warrants constitute, or upon execution and delivery will constitute, the legal, valid and binding obligations of the Company, enforceable in accordance with their respective terms, except: (i) as such enforceability may be limited by bankruptcy, insolvency or other similar laws affecting the enforceability of creditors' rights generally; and (ii) as such enforceability may be subject to the availability of equitable remedies. The holders of the Warrants are entitled to the benefits of this Agreement. 3.2 RESERVATION OF COMMON STOCK. The Company represents and warrants that it has reserved for issuance a sufficient number of shares of Common Stock to permit the exercise of all the Warrants, and all other rights, options or warrants exercisable into Common Stock. The Company covenants and agrees that it will at all times cause to be reserved and kept available out of its authorized and unissued shares of Common Stock such number of shares of Common Stock as will be sufficient to permit the exercise in full of all Warrants outstanding hereunder. 6 10 3.3 COMMON STOCK TO BE DULY AUTHORIZED AND ISSUED, FULLY PAID AND NONASSESSABLE. The Company covenants and agrees that it will take all such action as may be necessary to ensure that all shares of Common Stock delivered upon the exercise of any Warrants, at the time of delivery of the certificates for such shares, shall be duly and validly authorized and issued and fully paid and nonassessable, free of any preemptive rights and free of any pledge, security interest, lien or other encumbrance. 3.4 TRANSFER TAXES. The Company covenants and agrees that it will pay when due and payable any and all federal and state transfer taxes and charges that may be payable in respect of (a) the execution and delivery of this Agreement; (b) the initial issuance and delivery of each Warrant Certificate hereunder; (b) the issuance and delivery of each Warrant Certificate issued in exchange for any other Warrant Certificate pursuant to Section 1.3 or Section 2.3 hereof; and (c) the issuance and delivery of each share of Common Stock issued upon the exercise of any Warrant. The Company shall not, however, be required to (i) pay any transfer tax that may be payable in respect of the transfer or delivery of Warrant Certificates or the issuance or delivery of certificates for shares of Common Stock in a name other than that of the registered holder of the Warrant Certificate evidencing any Warrant surrendered for exercise (any such tax being payable by the holder of such Warrant Certificate at the time of surrender) or (ii) issue or deliver any such certificates referred to in the foregoing clause (i) for shares of Common Stock upon the exercise of any Warrant until any such tax referred to in the foregoing clause (i) shall have been paid. 3.5 COMMON STOCK RECORD DATE. Each Person in whose name any certificate for shares of Common Stock is issued upon the exercise of Warrants shall for all purposes be deemed to have become the holder of record of the Common Stock represented thereby on, and such certificate shall be dated, the date upon which the Warrant Certificate evidencing such Warrants was duly surrendered with an election to purchase attached thereto duly executed and payment of the aggregate Purchase Price (and any applicable transfer taxes, if payable by such Person) was made. Prior to the exercise of the Warrants evidenced thereby, the holder of a Warrant Certificate shall not be entitled to any rights of a shareholder in the Company with respect to shares for which the Warrants shall be exercisable, including, without limitation, any right to vote, to receive 7 11 dividends or other distributions or to exercise any preemptive rights, and shall not be entitled to receive any notice of any proceedings of the Company, except as provided herein or in any other applicable agreement between the Company and such holder. 3.6 FINANCIAL AND BUSINESS INFORMATION. The Company shall deliver to each holder of Warrants: (a) QUARTERLY STATEMENTS -- as soon as practicable after the end of each quarterly fiscal period in each fiscal year of the Company (other than the last quarterly fiscal period of each such fiscal year), and in any event within forty-five (45) days thereafter, duplicate copies of (i) a consolidated balance sheet of the Company and the Subsidiaries as at the end of such quarter, and (ii) consolidated statements of income and cash flows of the Company and the Subsidiaries for such quarter and (in the case of the second and third quarters) for the portion of the fiscal year ending with such quarter, setting forth in each case in comparative form the figures for the corresponding periods in the immediately preceding fiscal year, all in reasonable detail, prepared in accordance with GAAP applicable to quarterly financial statements generally (provided that such financial statements need not contain footnotes), and certified as complete and correct, subject to changes resulting from year-end adjustments, by a Senior Financial Officer; (b) ANNUAL STATEMENTS -- as soon as practicable after the end of each fiscal year of the Company, and in any event within ninety (90) days thereafter, duplicate copies of (i) consolidated and consolidating balance sheets of the Company and the Subsidiaries, as at the end of such year, and (ii) consolidated and consolidating statements of income, shareholders' equity and cash flows of the Company and the Subsidiaries for such year, setting forth in each case in comparative form the figures for the immediately preceding fiscal year, all in reasonable detail, prepared in accordance with GAAP, and accompanied by (A) in the case of such consolidated statements, a report thereon of independent certified public accountants of recognized national standing, which report shall express an opinion in the form of the standard auditor's report under generally accepted auditing standards which shall state that such financial statements present fairly, in all material respects, the financial position 8 12 of the companies being reported upon and their results of operations and cash flows and have been prepared in conformity with GAAP, and that the examination of such accountants in connection with such financial statements has been made in accordance with generally accepted auditing standards, and that such audit provides a reasonable basis for such opinion in the circumstances, (B) a statement from such independent certified public accountants that such consolidating statements were prepared using the same work papers as were used in the preparation of such consolidated statements, and (C) a certification by a Senior Financial Officer that such consolidated and consolidating statements are complete and correct; (c) SEC AND OTHER REPORTS -- promptly upon their becoming available, a copy of each financial statement, report (including, without limitation, each Quarterly Report on Form 10-Q, each Annual Report on Form 10-K and each Current Report on Form 8-K), notice or proxy statement sent by the Company or any Subsidiary to shareholders generally and of each regular or periodic report and any registration statement, prospectus or written communication (other than transmittal letters), and each amendment thereto, in respect thereof filed by the Company or any Subsidiary with, or received by, such Person in connection therewith from, the National Association of Securities Dealers, any securities exchange or the SEC; and (d) REQUESTED INFORMATION -- with reasonable promptness, such other data and information as from time to time may be reasonably requested, including, without limitation, information required by 17 C.F.R. Section 230.144A, as amended from time to time. Each of the Initial Holders hereby agrees to the terms of confidentiality set forth on Exhibit C. 4. ADJUSTMENT OF PURCHASE PRICE AND NUMBER OF SHARES OF COMMON STOCK ISSUABLE PER WARRANT 4.1 MECHANICAL ADJUSTMENTS. The number of shares of Common Stock purchasable upon the exercise of each Warrant, and the Purchase Price, shall be subject to adjustment as follows: (a) DIVIDENDS, SUBDIVISIONS AND COMBINATIONS. In the event that the Company shall (i) pay a dividend in shares of Common Stock or make a distribution in shares of Common Stock, 9 13 (ii) subdivide its outstanding shares of Common Stock into a greater number of shares or combine its outstanding shares of Common Stock into a smaller number of shares, then the Purchase Price in effect at the time of the record date for such dividend or of the effective date of such subdivision or combination shall be adjusted to the price determined by multiplying the Purchase Price in effect immediately prior to such event by the quotient of: (A) the total number of shares of Adjusted Outstanding Common Stock immediately prior to such event; divided by (B) the total number of Adjusted Outstanding Common Stock immediately after such event. An adjustment made pursuant to this Section 4.1(a) shall become effective on the effective date of such event. (b) RIGHTS, OPTIONS, WARRANTS AND CONVERTIBLE OR EXCHANGEABLE SECURITIES. In the event that the Company shall issue any rights, options, warrants or convertible or exchangeable Securities to all holders of its shares of Common Stock, without charge to such holders, entitling such holders to subscribe for or purchase shares of Common Stock at a price per share (or having a conversion or exchange price per share, in the case of a Security convertible or exchangeable into shares of Common Stock) that is (or to amend or modify any provision of any thereof such that the conversion, exchange or exercise price becomes) lower at the record date in respect of which such rights, warrants, options or Securities were issued or amended than the Reference Price on such record date, then the Purchase Price in effect immediately after such record date shall be determined by multiplying the Purchase Price in effect immediately prior to such record date by the quotient of: (i) the sum of (A) the number of shares of Adjusted Outstanding Common Stock as of such record date, plus (B) the quotient of (I) the Aggregate Consideration Receivable in respect of such rights, options, warrants or convertible or exchangeable Securities, divided by (II) the Reference Price on such record date; 10 14 divided by (ii) the sum of (A) the number of shares of Adjusted Outstanding Common Stock as of such record date, plus (B) the number of additional shares of Common Stock initially issuable pursuant to such rights, options or warrants or into which such convertible or exchangeable Securities are initially convertible or exchangeable. Such adjustment shall be made whenever such rights, options, or warrants or convertible or exchangeable Securities are issued or amended, and shall become effective on the date of issuance or amendment of such rights, options, warrants or convertible or exchangeable Securities. (c) DISTRIBUTIONS OF PROPERTY. In the event that the Company shall distribute to holders of shares of Common Stock (including, without limitation, any such distribution made in connection with a consolidation or merger in which the Company is the continuing corporation) shares of stock (other than Common Stock) or evidences of its indebtedness or assets (excluding (x) cash dividends paid out of retained earnings after November 19, 1998, (y) Regular Cash Dividends paid after the date hereof and on or prior to November 19, 1998 and (z) dividends payable solely in additional shares of the Common Stock) or rights, options or warrants or convertible or exchangeable Securities (excluding those referred to in Section 4.1(b) and Section 4.1(d) hereof), then in each case the Purchase Price in effect immediately after the record date in respect of which such stock, indebtedness, assets, rights, options, warrants or Securities were issued shall be determined by multiplying the Purchase Price in effect immediately prior to such record date by the quotient of: (i) the result of (A) the Reference Price on such record date, minus (B) the quotient of (I) the then fair value (as determined in good faith and on a reasonable basis by the Board of Directors, whose determination, if so made, shall be conclusive) of the shares of stock or assets or evidences of indebtedness so distributed or of such rights, options or warrants, or of such convertible or exchangeable Securities, divided by (II) the number of shares of Adjusted Outstanding Common Stock as of the record date; 11 15 divided by (ii) the Reference Price on such record date. Such adjustment shall be made whenever any such distribution is made, and shall become effective on the date of such distribution. (d) ISSUANCES OF COMMON STOCK AND OTHER SECURITIES. (i) In the event that the Company shall issue or sell shares of Common Stock, or rights, options, warrants or convertible or exchangeable Securities containing the right to subscribe for or purchase shares of Common Stock (excluding Excluded Securities, as defined in Section 4.1(d)(ii) hereof) at a price per share of Common Stock lower than the Reference Price in effect on the date (the "ADJUSTMENT DATE") of such issuance or sale, then the Purchase Price in effect immediately after the Adjustment Date shall be determined by multiplying the Purchase Price in effect immediately prior to such Adjustment Date by the quotient of: (A) the sum of (I) the number of shares of Adjusted Outstanding Common Stock outstanding immediately prior to such issuance or sale, plus (II) the quotient of (1) the Aggregate Consideration Receivable in respect of such rights, options, warrants or convertible or exchangeable Securities, divided by (2) the Reference Price on the Adjustment Date; divided by (B) the sum of (I) the number of shares of Adjusted Outstanding Common Stock outstanding immediately prior to such issuance or sale, plus (II) the number of additional shares of Common Stock so issued or sold (or initially issuable pursuant to such rights, options or warrants or into which such convertible or exchangeable Securities are initially convertible or exchangeable). For purposes of this clause (i), "Adjustment Date" may, in connection with certain consolidations and mergers, have the meaning provided for in Section 4.1(e). 12 16 (ii) "EXCLUDED SECURITIES" shall mean and include: (A) shares of Common Stock, rights, options, warrants or convertible or exchangeable Securities issued in any of the transactions described in Section 4.1(a), Section 4.1(b), Section 4.1(c) or Section 4.1(e) hereof and with respect to which an adjustment to the Purchase Price has been made in accordance with any of such Sections; (B) shares of Common Stock issuable upon exercise of the Warrants (including, without limitation, the Additional Warrants); (C) shares of Common Stock issuable upon exercise of rights, options or warrants or conversion or exchange of convertible or exchangeable Securities issued or sold under circumstances which caused an adjustment pursuant to this Section 4.1(d); (D) rights to acquire shares of Common Stock ,and shares of Common Stock issuable upon exercise of such rights, issued to employees of the Company and it Subsidiaries pursuant to any employee stock purchase plan maintained by the Company or any of its Subsidiaries, provided that any such rights issued pursuant to any such plan and any shares of Common Stock issuable upon the exercise thereof which, in the aggregate, exceed, at the time of the issuance thereof, two percent (2%) of the Fully Diluted Outstanding Common Stock, determined at such time, shall not constitute Excluded Securities; (E) shares of Common Stock and/or rights, options, warrants or convertible or exchangeable Securities (and the shares of Common Stock issuable upon the exercise of such rights, options, warrants or convertible or exchangeable Securities), provided that (1) such shares of Common Stock and/or rights, options, warrants or convertible or exchangeable Securities are issued in connection with one or more private placements of equity Securities of the Company effected on or prior to July 15, 1996, (2) the total aggregate consideration paid in cash in respect of such shares of Common Stock and/or rights, options, warrants or convertible or exchangeable Securities is not more than $8,000,000, (3) all such shares of Common Stock together with all shares of Common Stock issuable upon the exercise of any of such rights, options, warrants or convertible or exchangeable Securities shall not, in the aggregate, exceed 12% of Fully Diluted Outstanding Common Stock, determined as of April 16, 1996, and (4) the sale of such shares of Common Stock and/or rights, options, warrants or convertible or exchangeable Securities is done on an arm's-length basis and the setting of the exercise, strike or conversion prices in respect of such rights, options, warrants or convertible or exchangeable Securities is done on an arm's-length basis; 13 17 (F) warrants issued on or prior to the date hereof to any holder of the senior or subordinated indebtedness, warrants issued on or after the date hereof pursuant to provisions comparable to Section 4.4(a), Section 4.4(b) or Section 4.4(c) hereof contained in any agreement between the Company and such holders pursuant to which such senior or subordinated indebtedness is issued and shares of Common Stock issuable upon the exercise of any such Warrants; and (G) shares of Common Stock, rights, options, warrants or convertible or exchangeable Securities issued in any of the transactions described in Sections 4.4(a), Section 4.4(b) or Section 4.4(c) hereof and with respect to which additional Warrants have been issued in accordance with any of such Sections. (iii) In the case of rights, options, warrants or convertible or exchangeable Securities, the "price per share of Common Stock" referred to in Section 4.1(d)(i) hereof shall be equal to the quotient of (A) the Aggregate Consideration Receivable in respect of such rights, options, warrants or convertible or exchangeable Securities, divided by (B) the total number of shares of Common Stock covered by such rights, options, warrants or convertible or exchangeable Securities. (iv) "AGGREGATE CONSIDERATION RECEIVABLE" shall mean, in the case of a sale of shares of Common Stock, the aggregate gross amount paid (without deduction for fees and expenses, underwriting discounts or investment banking fees associated therewith) in connection therewith and, in the case of an issuance or sale of rights, options, warrants or convertible or exchangeable Securities, the sum of (A) the aggregate gross amount paid for such rights, options, warrants or convertible or exchangeable Securities, plus (B) the aggregate consideration or premiums stated in such rights, options, warrants or convertible or exchangeable Securities to be payable for the shares of Common Stock covered thereby. (v) In the event that the Company shall issue and sell shares of Common Stock, or rights, options, warrants or convertible or exchangeable Securities containing the right to subscribe for or purchase shares of Common Stock, for a consideration consisting, in whole or in part, of Property other than cash, then in determining the "price per share of Common Stock" referred to in Section 4.1(d)(i) and Section 4.1(d)(iii) hereof and the "Aggregate Consideration Receivable" referred to in Section 4.1(d)(i), Section 4.1(d)(iii) and Section 4.1(d)(iv) hereof, the Board of Directors shall determine, in good faith 14 18 and on a reasonable basis, the fair value of such Property, and such determination, if so made, shall be binding upon all holders of Warrants. (e) CONSOLIDATION; MERGER; SALE OF THE COMPANY. In the event that there shall be: (i) any consolidation of the Company with, or merger of the Company with or into, another corporation (other than a merger in which the Company is the surviving corporation and that does not result in any reclassification or change of shares of Common Stock outstanding immediately prior to such merger); (ii) any sale or conveyance to another corporation of the Property of the Company substantially as an entirety; or (iii) any reclassification of the Common Stock that results in the issuance of other Securities of the Company; then lawful provision shall be made as a part of the terms of such transaction or otherwise so that the holders of Warrants shall thereafter have the right to purchase the number and kind of shares of stock, other Securities, cash, Property and rights receivable upon such consolidation, merger, sale, conveyance or reclassification by a holder of such number of shares of Common Stock as the holder of a Warrant would have had the right to acquire upon the exercise of such Warrant immediately prior to such consolidation, merger, sale or conveyance, at the Purchase Price then in effect, provided that nothing in this clause (e) shall entitle any holder of Warrants to acquire or have the right to purchase any of the foregoing in connection with any sale or conveyance referred to in clause (ii) above if, with respect to such sale or conveyance, no holder of Common Stock would have the right to acquire or purchase any of the foregoing and none of the foregoing were in fact distributed to holders of Common Stock and provided further that nothing in the foregoing proviso in this clause (e) shall restrict the rights of the holders of Warrants under Section 4.1(c). To the extent that (A) the Company shall issue any shares of Common Stock or rights, options, warrants or convertible or exchangeable Securities containing the right to subscribe for or purchase shares of Common Stock (other than Excluded Securities) in connection with any consolidation or merger of the Company and (B) such issuance of such shares, rights, options, warrants or convertible or exchangeable Securities would otherwise cause an adjustment under Section 4.1(d), the Adjustment Date in respect of such adjustment, notwithstanding the definition of such term, shall be the business day immediately preceding the date of the public announcement by the Company of such merger or consolidation or, if such merger or consolidation shall have been generally known to the public prior to such announcement date, the date on which the Required Warrantholders and the Company 15 19 shall mutually agree upon in good faith and in accordance with the essential intent and principles of this Section 4 of fairly protecting the exercise rights of the holders of Warrants and, if no such date can be so mutually agreed upon, the Company shall appoint (at its expense) a firm of independent certified public accountants of recognized national standing, which may not be the regular auditors of the Company and which are reasonably acceptable to the Required Warrantholders, which shall give their opinion as to the appropriate date for such adjustment (after giving effect to the aforesaid intent and principles of this Section 4); upon receipt of such opinion, the Company will promptly mail a copy of such opinion to the holders of Warrants and make the adjustments required under this Section 4 as of the date stipulated therein. For purposes of determining the number of shares subject to any Warrant with respect to any adjustments made pursuant to this Section 4.1(e), the Company shall make the adjustments provided for in Section 4.4 in respect of any issuances of Employee Options or Director Options that occurred during the period from the date of the last determination pursuant to such Section to the date immediately prior to such consolidation, merger, sale or conveyance. (f) DE MINIMIS CHANGES IN PURCHASE PRICE. No adjustment in the Purchase Price shall be required unless such adjustment would require an increase or decrease of at least one percent (1%) in the Purchase Price; provided that any adjustments that, at the time of the calculation thereof, are less than one percent (1%) of the Purchase Price at such time and by reason of this Section 4.1(f) are not required to be made at such time shall be carried forward and added to any subsequent adjustment or adjustments for purposes of determining whether such subsequent adjustment or adjustments, as so supplemented, exceed the one percent (1%) amount set forth in this Section 4.1(f) and, if any such subsequent adjustment, as so supplemented or otherwise, should exceed such one percent (1%) amount, all adjustments deferred prior thereto and not previously made shall then be made. In any case, all such adjustments being carried forward pursuant to this Section 4.1(f) shall be given effect upon the exercise of any Warrants by any holder thereof for purposes of determining the Purchase Price thereof. All calculations shall be made to the nearest ten-thousandth of a Dollar ($0.0001). (g) ADJUSTMENT OF NUMBER OF SHARES ISSUABLE PURSUANT TO WARRANTS. Upon each adjustment of the Purchase Price as a result of the calculations made in this Section 4.1, each Warrant outstanding immediately prior to the making of such adjustment shall thereafter evidence the right to purchase, at the adjusted Purchase Price, that number of shares of Common Stock (calculated to the nearest one-thousandth) obtained by multiplying the number of shares of Common Stock covered by such Warrant immediately prior to such adjustment by the quotient of: (i) the Purchase Price in effect immediately prior to such adjustment, divided by (ii) the Purchase Price in effect immediately after such adjustment. 16 20 All Warrants originally issued by the Company hereunder shall, subsequent to any adjustment made to the Purchase Price hereunder, evidence the right to purchase, at the adjusted Purchase Price, the number of shares of Common Stock determined to be purchasable from time to time hereunder upon exercise of such Warrants, all subject to further adjustment as provided herein. Each such adjustment shall be valid and binding upon the Company and the holders of Warrants irrespective of whether the Warrant Certificates theretofore and thereafter issued express the Purchase Price per share of Common Stock and the number of shares of Common Stock that were expressed upon the initial Warrant Certificates issued hereunder. (h) MISCELLANEOUS. (i) Adjustments shall be made pursuant to this Section 4.1 successively whenever any of the events referred to in Section 4.1(a) through Section 4.1(e), inclusive, hereof shall occur. (ii) Shares of Common Stock owned by or held for the account of the Company, including shares acquired by the Company during any time any Warrants are outstanding, shall not, for purposes of the adjustments set forth in this Section 4.1, be deemed outstanding. (i) EXPIRATION OF RIGHTS, OPTIONS, ETC. (i) Upon the expiration of any rights, options, warrants or conversion or exchange privileges referred to above in this Section 4.1 without the exercise thereof, the Purchase Price and the number of shares of Common Stock purchasable upon the exercise of each Warrant shall be readjusted and shall thereafter be such as such Purchase Price and such number of shares of Common Stock would have been had they been originally adjusted (or had the original adjustment not been required, as the case may be) as if: (A) the only shares of Common Stock so issued were the shares of Common Stock, if any, actually issued or sold upon the exercise of such rights, options, warrants or conversion or exchange privileges; and (B) such shares of Common Stock, if any, were issued or sold for the consideration actually received by the Company upon such exercise plus the aggregate consideration, if any, actually received by the Company for the issuance, sale or grant of all of such rights, options, warrants or conversion or exchange privileges whether or not exercised; provided that no such readjustment shall have the effect of increasing the Purchase Price by an amount in excess of the amount of the reduction initially made in respect of the issuance, sale, or grant of such rights, options, warrants or conversion or exchange privileges. 17 21 (ii) In the event that during any calendar quarter after the date hereof, any Employee Option, Director Option or portion thereof expires without the exercise thereof and the issuance of any such Employee Option or Director Option had resulted in the issuance of Additional Warrants pursuant to Section 4.4(a) hereof, the number of shares of Common Stock purchasable upon the exercise of the Additional Warrants shall be reduced as of the first day of the next succeeding calendar quarter by the number of shares of Common Stock subject to such terminated or expired Employee Option, Director Option or portion thereof. (j) OTHER SECURITIES. In the event that at any time, as a result of an adjustment made pursuant to this Section 4.1, each holder of Warrants shall become entitled to purchase any Securities of the Company other than shares of Common Stock, the number or amount of such other Securities so purchasable and the Purchase Price of such Securities shall be subject to adjustment from time to time in a manner and on terms as nearly equivalent as practicable to the provisions contained in Section 4.1(a) through Section 4.1(e), inclusive, hereof, and all other relevant provisions of this Section 4.1, and the definitions used in this Section 4.1, that are applicable to shares of Common Stock shall be applicable to such other Securities. (k) NOTICE OF ADJUSTMENT. Whenever the number of shares of Common Stock issuable upon the exercise of Warrants is adjusted or the Purchase Price in respect thereof is adjusted, as herein provided, the Company shall promptly give to each holder of Warrants notice of such adjustment or adjustments and shall promptly deliver to each holder of Warrants a certificate of the Company's chief financial officer setting forth: (i) the number of shares of Common Stock issuable upon the exercise of each Warrant and the Purchase Price of such shares after such adjustment; (ii) a brief statement of the facts requiring such adjustment; and (iii) the computation by which such adjustment was made. So long as any Warrant is outstanding and an adjustment in respect of the number of shares issuable upon the exercise of Warrants or the Purchase Price in respect thereof shall have occurred in any fiscal year of the Company, within ninety (90) days of the end of such fiscal year of the Company, the Company shall deliver to each holder of Warrants a certificate of independent certified public accountants of recognized national standing selected by the Company (which may be the regular auditors of the Company) setting forth (A) the number of shares of Common Stock issuable upon the exercise of each Warrant and the Purchase Price of such shares as of the end of such fiscal year, 18 22 (B) a brief statement of the facts requiring each such adjustment required to be made in such fiscal year and (C) the computation by which each such adjustment was made. (l) NOTICE OF CERTAIN EVENTS. Whenever the Company shall authorize any Notice Event, the Company shall, not less than thirty (30) days prior to the record date with respect to such event, give to each holder of Warrants, notice of such event setting forth any change in the number of shares of Common Stock the Company estimates will be issuable upon the exercise of such holder's Warrants, the estimated Purchase Price of such shares after any adjustment required to be made hereunder and a brief statement of the facts requiring such adjustment and the computation by which the Company expects such adjustment will be made. "NOTICE EVENT" shall mean any of the following: (i) any event that would require an adjustment pursuant to this Section 4.1; (ii) any distribution of cash or other Property in respect of Common Stock (including, without limitation, a cash dividend payable out of retained earnings); (iii) any consolidation, merger or sale, transfer or other disposition of all or substantially all of the Property of the Company, provided that, if as a result of the circumstances concerning such consolidation, merger, sale, transfer or other disposition, it shall be impossible for the Company to give the thirty (30) days' prior notice referred to above, the Company shall give such notice as far in advance of the record date in respect of such consolidation, merger, sale, transfer or other disposition as reasonably feasible and, in any case, no later than two (2) business days prior to such record date; and (iv) the liquidation, dissolution or winding up of the Company. The Company shall, not less than thirty (30) days prior to the issuance of any Preferred Stock, give to each holder of Warrants notice of such issuance setting forth any change in the number of shares of Common Stock the Company estimates will be issuable upon the exercise of such holder's Warrants, the estimated Purchase Price of such shares after any adjustment required to be made hereunder and a brief statement of the facts requiring such adjustment and the computation by which the Company expects such adjustment will be made. 4.2 FRACTIONAL SHARES. The Company shall not be required to issue fractional shares of Common Stock upon the exercise of any Warrant. Upon the exercise of any Warrant, there shall be paid to the holder thereof, in lieu of any fractional share of Common Stock resulting therefrom, an amount of cash equal to the product of: 19 23 (a) the fractional amount of such share; multiplied by (b) the Market Price with respect to the Common Stock determined as of the date of exercise of such Warrant. 4.3 SPECIAL AGREEMENTS OF THE COMPANY. The Company covenants and agrees that: (a) The Company shall not, by amendment to the Certificate of Incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issuance or sale of Securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed hereunder by the Company, but shall at all times in good faith assist in the carrying out of all the provisions of this Section 4 and in the taking of all such actions as may be necessary or appropriate in order to protect the rights of the holders of the Warrant Certificates against dilution or other impairment. (b) Before taking any action that would result in an adjustment to the then current Purchase Price to a price that would be below the then current par value of Common Stock issuable upon exercise of any Warrant, the Company will take or cause to be taken any and all necessary corporate or other action that may be necessary in order that the Company may validly and legally issue fully paid and nonassessable shares of Common Stock upon payment of such Purchase Price as so adjusted. 4.4 ISSUANCE OF ADDITIONAL WARRANTS. (a) GRANT OF EMPLOYEE OPTIONS AND DIRECTOR OPTIONS. In the event that, during any calendar quarter after August 20, 1997: (i) Employee Options (other than Employee Options issued in a transaction described in Section 4.1(d) hereof) are issued and the aggregate number of such Employee Options plus all other Employee Options issued on or prior to the date of such issuance, other than Terminated Employee Options, exceeds the then effective Employee Option Threshold; or (ii) Director Options (other than Director Options issued in a transaction described in Section 4.1(d) hereof) are issued and the aggregate number of such Director Options plus all other Director Options issued on or prior to the date of such issuance, other than Terminated Director Options, exceeds the Director Option Threshold; then the Company shall, as of the first day of the next succeeding calendar quarter, issue Additional Warrants to the holders of the Warrants on a pro rata basis covering that number of shares equal to the product of the Dilution Percentage multiplied by the number of the Employee Options or Director Options, as the case may be, issued during such period (or, with respect to the first calendar quarter in which the number 20 24 of Employee Options or Director Options issued during such quarter plus the aggregate number of Employee Options and Director Options, as the case may be, issued on or prior to the date of such issuance other than Terminated Employee Options or Terminated Director Options, as the case may be, exceeds the then effective Employee Option Threshold or the Director Option Threshold, as the case may be, the amount such excess). (b) ISSUANCES IN CONNECTION WITH CONVERSION OF SENIOR DEBT. In the event that, on or after August 20, 1997: (i) all or any portion of the principal amount of the Senior Debt is converted into shares of Common Stock, or Securities convertible into or exchangeable for shares of Common Stock; and (ii) the Post-Conversion Market Price per share of Common Stock following such conversion is less than the Measurement Price per share of Common Stock prior to such conversion; the Company shall issue Additional Warrants to the holders of the Warrants on a pro rata basis covering that number of shares equal to: (A) the product of: (1) the difference between the Post-Conversion Market Price per share of Common Stock and the Measurement Price per share of Common Stock; multiplied by (2) the total number of shares of Common Stock issuable upon exercise of the Warrants held by such holders immediately prior to such issuance; divided by (B) the Post-Conversion Market Price per share of Common Stock; provided, however, that in no event shall the number of Warrants issued pursuant to this Section 4.4(b) as a result of any single issuance of shares of Common Stock, or Securities convertible into or exchangeable for shares of Common Stock to the holders of the Senior Debt exceed the product of: (y) the aggregate number of shares of Common Stock issued or issuable pursuant to such convertible or exchangeable Securities to the holders of the Senior Debt Warrants with respect to such single issuance; multiplied by (z) a fraction, the numerator of which is the number of shares of Common Stock underlying the Warrants outstanding immediately prior to such 21 25 issuance and the denominator of which is the Fully Diluted Outstanding Common Stock; and provided further that no Warrants shall be issued pursuant to this provision in connection with any transaction in which both the holders of the Senior Debt convert all or any portion of the aggregate principal amount of the Senior Debt into shares of Common Stock, or Securities convertible into or exchangeable for shares of Common Stock, and the holders of the Warrants convert all or a portion of the aggregate principal amount of indebtedness then outstanding under the Notes into shares of Common Stock or Securities convertible into or exchangeable for shares of Common Stock. The Initial Purchase Price of such Warrants shall be the Post-Conversion Market Price per share. (c) ISSUANCE OF OTHER SECURITIES TO HOLDERS OF SENIOR DEBT. In the event that, on or after August 20, 1997, rights, options or warrants containing the right to subscribe for or purchase shares of Common Stock are issued to the holders of the Senior Debt Warrants (other than in a transaction described in Section 4.1(d) hereof), the Company shall issue Additional Warrants to the holders of the Warrants on a pro rata basis covering that number of shares equal to the product of: (i) the aggregate number of shares of Common Stock underlying the rights, options or warrants issued to the holders of the Senior Debt Warrants; multiplied by (ii) a fraction, the numerator of which is the number of shares of Common Stock underlying the Warrants outstanding immediately prior to such issuance and the denominator of which is the Fully Diluted Outstanding Common Stock; and provided further that no Warrants shall be issued pursuant to this provision in connection with any transaction in which both the holders of the Senior Debt Warrants and the holders of the Warrants are issued shares of Common Stock or rights, options or warrants containing the right to subscribe for or purchase shares of Common Stock pursuant to a negotiated transaction as opposed to pursuant to this Section 4.4(c). The Initial Purchase Price of such Warrants shall be the per share exercise price of the rights, options or warrants in respect of which such Additional Warrants are being issued. (d) EXCLUDED ISSUANCES OF SECURITIES TO HOLDERS OF SENIOR DEBT WARRANTS. Notwithstanding the foregoing, no Warrants shall be issued pursuant to Sections 4.4(a), 4.4(b) or 4.4(c) hereof as result of any issuance of additional Warrants to the holders of the Senior Debt Warrants pursuant to provisions comparable to Section 4.4(a), Section 4.4(b) or Section 4.4(c) hereof contained in any agreement between the Company and such holders pursuant to which such Senior Debt Warrants are issued. 22 26 5. INTERPRETATION OF THIS AGREEMENT 5.1 TERMS DEFINED. ADDITIONAL WARRANTS -- means any additional Warrants issued pursuant to the terms of Section 4.4 hereof. ADJUSTED OUTSTANDING COMMON STOCK -- means, at any time, the number of shares of Common Stock outstanding at such time (excluding all shares constituting "treasury stock" and all shares held or beneficially owned by a Subsidiary) together with the number of shares of additional Common Stock that would be outstanding at such time assuming: (a) the conversion immediately prior to such time of all then outstanding Securities that are convertible into shares of Common Stock or that are issuable upon exercise of any warrants, options and other rights, whether or not the conditions for such conversion or exercise then exist, provided that no such Securities shall be included in this clause (a) unless such Securities were issued and outstanding on the date hereof or are derived through transfers and/or exchanges from Securities that were issued and outstanding on the date hereof; and (b) the exercise immediately prior to such time of all then outstanding warrants, options and similar rights to acquire shares of Common Stock (including, without limitation, the Warrants), whether or not the conditions for such exercise then exist, provided that no such warrants, options and similar rights shall be included in this clause (b) unless they were issued and outstanding on the date hereof or are derived through transfers and/or exchanges from Securities that were issued and outstanding on the date hereof. ADJUSTMENT DATE -- Section 4.1(d)(i) hereof. AGGREGATE CONSIDERATION RECEIVABLE -- Section 4.1(d)(iv) hereof. AGREEMENT -- introductory paragraph hereof. AFFILIATE -- means, at any time, a Person (other than a Subsidiary): (a) that directly or indirectly through one or more intermediaries controls, or is controlled by, or is under common control with, the Company; (b) that beneficially owns or holds five percent (5%) or more of any class of the voting capital stock of the Company; (c) five percent (5%) or more of the voting capital stock (or in the case of a Person that is not a corporation, five percent (5%) or more of the equity interest) of which is beneficially owned or held by the Company or any Subsidiary; or 23 27 (d) that is an officer or director (or a member of the immediate family of an officer or director) of the Company or any Subsidiary; at such time. As used in this definition, "control" -- means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise. APPRAISER -- means and includes one or more nationally recognized investment banking firms or appraisers that shall be experienced in evaluating companies in the same or similar lines of business as the Company and the Subsidiaries. AVERAGE CLOSING BID PRICE -- means, with respect to any period and any class of Common Stock, the per share price of such class determined as follows: (a) the average daily closing bid prices of such class of Common Stock on each trading day during such period, as officially reported on the principal national securities exchange on which such class of Common Stock is then listed or admitted to trading; or (b) if such class of Common Stock is not then listed or admitted to trading on any national securities exchange, the average of the last reported bid prices for each trading day during such period of such class of Common Stock. BOARD OF DIRECTORS -- means, at any time, the board of directors of the Company or any committee thereof that, in the instance, shall have the lawful power to exercise the power and authority of such board of directors. CERTIFICATE OF INCORPORATION -- means the restated certificate of incorporation of the Company, as may be amended by the Company from time to time after the Effective Date. CLOSING BID PRICE - means, with respect to any date and any class of Common Stock, the per share price determined as follows: (a) the closing bid prices on such date, as officially reported on the principal national securities exchange on which such class of Common Stock is then listed or admitted to trading; or (b) if such class of Common Stock is not then listed or admitted to trading on any national securities exchange, the last reported bid price of such class of Common Stock on such date. 24 28 COMMON STOCK -- means: (a) on the date hereof, the Company's $0.001 par value capital stock designated as "Common Stock"; and (b) on any other date, any capital stock into which such "Common Stock" shall have been changed or any capital stock resulting from any reclassification of such "Common Stock", and all other capital stock of any class or classes (however designated) of the Company the holders of which have the right, without limitation as to amount, either to all or to a share of the balance of current dividends and liquidating dividends after the payment of dividends and distributions of any shares thereof entitled to preference. COMPANY -- introductory paragraph hereof. DILUTION PERCENTAGE -- means the percentage interest in the fully-diluted equity of the Company represented by all Warrants on August 21, 1997; provided however, that in the event that any of the Warrants are exercised after the date hereof, the Dilution Percentage shall be reduced by multiplying the then-effective Dilution Percentage by a fraction, the numerator of which is the number of Warrants remaining immediately following such exercise and the denominator of which is the number of Warrants outstanding immediately prior to such exercise. DIRECTOR OPTIONS -- means rights, options, warrants or convertible or exchangeable Securities containing the right to subscribe for or purchase shares of Common Stock issued to any directors of the Company or any of its Subsidiaries who were members of the Board of Directors of the Company or any of its Subsidiaries as of the date hereof; provided, however, that: (a) rights, warrants, options or convertible or exchangeable Securities purchased from the Company to acquire shares of the Common Stock in a bona fide arm's-length transaction for consideration at least equal to the Reference Price; (b) any rights, options, warrants or convertible or exchangeable securities purchased from Persons other than the Company or its Subsidiaries to acquire shares of Common Stock; and (c) any shares of the Series B Preferred Stock held by any employees, officers or directors of the Company or any of its Subsidiaries on the date hereof; shall not constitute Director Options. DIRECTOR OPTION THRESHOLD -- means 1,460,424 shares, as such number may be adjusted from time to time to reflect any subdivision or combination of shares of Common Stock. 25 29 EFFECTIVE DATE -- means the date of the first issuance of any Warrants pursuant to this Agreement. EMPLOYEE OPTIONS -- means rights, options, warrants or convertible or exchangeable Securities containing the right to subscribe for or purchase shares of Common Stock issued to any employees, officers or directors of Company or any of its Subsidiaries, including, without limitation, Employee Options issued to Stephen Hopkins as consideration for his services as President and Chief Executive Officer of the Company; provided, however, that: (a) rights, warrants, options or convertible or exchangeable Securities purchased from the Company to acquire shares of Common Stock in a bona fide arm's-length transaction for consideration at least equal to the Reference Price; (b) any rights, options, warrants or convertible or exchangeable securities acquired from Persons other than the Company or its Subsidiaries to acquire shares of Common Stock; and (c) any shares of the Series B Preferred Stock held by any employees, officers or directors of the Company or any of its Subsidiaries on the date hereof; shall not constitute Employee Options. EMPLOYEE OPTION THRESHOLD -- means 7,302,121 shares, as such number may be adjusted from time to time to reflect any subdivision or combination of shares of Common Stock; provided, however, that in the event that Additional Warrants are issued pursuant to Section 4.4(a) during any calendar quarter after the date hereof, the Employee Option Threshold shall be increased by the number of Director Options issued during the immediately preceding calendar quarter (or, with respect to the first calendar quarter during which the number of Director Options exceeds the Director Option Threshold, the amount of such excess). EXCLUDED SECURITIES -- Section 4.1(d)(ii) hereof. FAIR MARKET SHARE PRICE -- means, at any time, the sale value of a single share of Common Stock, as determined by an Appraiser in accordance with the provisions of Exhibit B attached hereto. FULLY DILUTED OUTSTANDING COMMON STOCK -- means, at any time, the number of shares of Common Stock outstanding at such time (excluding all shares constituting "treasury stock" and all shares held or beneficially owned by a Subsidiary) together with the number of shares of additional Common Stock that would be outstanding at such time assuming: (a) the conversion immediately prior to such time of all Securities convertible into shares of Common Stock outstanding at such time or issuable upon exercise of any warrants, options and other rights outstanding at such time, whether or not the conditions for such conversion or exercise then exist; and 26 30 (b) the exercise immediately prior to such time of all then outstanding warrants, options and similar rights to acquire shares of Common Stock (including, without limitation, the Warrants), whether or not the conditions for such exercise then exist. INDEPENDENT INVESTOR -- means a corporation, limited liability or other company that is neither an Affiliate nor a Subsidiary. INITIAL HOLDER -- introductory paragraph hereof. INITIAL PURCHASE PRICE -- means: (a) with respect to the Warrants issued on the date hereof, Fifty-Nine Cents ($0.59) per share; (b) with respect to any Warrants issued pursuant to Section 4.4(a), the Average Closing Bid Price of a share of Common Stock during the calendar quarter in respect of which the adjustment is being made; (c) with respect to any Warrants issued pursuant to Section 4.4(b), the Post-Conversion Market Price per share; and (d) with respect to any Warrants issued pursuant to Section 4.4(c) hereof, the per share exercise price of the rights, options or warrants in respect of which the Additional Warrants are being issued. MARKET PRICE -- means, with respect to any date and any class of Common Stock, the per share price of such class equal to the product of (a) ninety-five percent (95%) times (b) the average of the daily Closing Prices of Common Stock for fifteen (15) consecutive trading days commencing twenty (20) trading days before such date, provided that, if the Closing Prices referred to in clause (b) are not then available for such class of Common Stock in order to make the determination in said clause (b), "Market Price" shall mean the Fair Market Share Price. As used in this definition, Closing Price -- means, with respect to any date and any class of Common Stock, the per share price of such class determined as follows: (a) the last sale price, regular way, on such date or, if no such sale takes place on such date, the average of the closing bid and asked prices on such date, in each case as officially reported on the principal national securities exchange on which such class of Common Stock is then listed or admitted to trading; or (b) if such class of Common Stock is not then listed or admitted to trading on any national securities exchange, but is designated as a national 27 31 market system security by the National Association of Securities Dealers, the last trading price of such class of Common Stock on such date, or if there shall have been no trading on such date or if such class of Common Stock is not so designated, the average of the reported closing bid and asked prices on such date as shown by the NASDAQ. MEASUREMENT PRICE - means, with respect to any date and any class of Common Stock, the average of the daily Closing Bid Prices of such class of Common Stock for five (5) consecutive trading days prior to the public announcement of any conversion of any Senior Debt; provided, however, that the date on which such public announcement is made shall not be considered a trading day. NASDAQ -- means the National Association of Securities Dealers Automated Quotation System. NOTE PURCHASE AGREEMENTS -- Recital paragraph B hereof. NOTES -- Recital paragraph B hereof. NOTICE EVENT -- Section 4.1(l) hereof. PERSON -- means an individual, partnership, corporation, trust, unincorporated organization, or a government or agency or political subdivision thereof. POST-CONVERSION MARKET PRICE - means, with respect to any date and any class of Common Stock, the average of the daily Closing Bid Prices of such class of Common Stock for five (5) consecutive trading days after the filing of a Current Report on Form 8-K with respect to any conversion of any Senior Debt; provided, however, that the date on which such Current Report on Form 8-K is filed shall not be considered a trading day. PREFERRED STOCK -- means the class of capital stock of the Company designated as "Preferred Stock," having a par value $.001 per share, and enjoying the rights and preferences set forth in, and subject to the restrictions of, the Certificate of Incorporation as in effect on November 19, 1993. PROPERTY -- means any interest in any kind of property or asset, whether real, personal or mixed, and whether tangible or intangible. PURCHASE PRICE -- means, prior to any adjustment pursuant to Section 4.1 hereof, the Initial Purchase Price and thereafter, the Initial Purchase Price as adjusted and readjusted from time to time. REFERENCE PRICE -- means, in respect of any date, the Market Price of one share of Common Stock as of such date. REGULAR CASH DIVIDENDS -- means cash dividends paid by the Company out of its retained earnings, provided that any such cash dividends paid during any fiscal year of the 28 32 Company shall be deemed to constitute Regular Cash Dividends to the extent, and only to the extent, that immediately after giving effect to the payment of such cash dividends the aggregate amount of all cash dividends paid by the Company out of its retained earnings during such fiscal year does not exceed five percent (5%) of the product of (a) the Market Price determined as of the record date in respect of such payment multiplied by (b) the aggregate number of shares of Common Stock outstanding as of such record date (after assuming that all then outstanding Warrants had been exercised). REQUIRED WARRANTHOLDERS -- means, at any time, any holder or holders (other than the Company, any Subsidiary or any Affiliate) then holding more than fifty percent (50%) of the Warrants (excluding any Warrants directly or indirectly held by the Company or any Subsidiary or Affiliate) then outstanding. SEC -- means, at any time, the Securities and Exchange Commission or any other federal agency at such time administering the Securities Act. SECURITIES ACT -- means the Securities Act of 1933, as amended. SECURITY -- means "security" as defined in section 2(1) of the Securities Act. SENIOR DEBT -- has the meaning set forth in the Note Purchase Agreement. SENIOR DEBT WARRANTS -- means all warrants initially issued to the holders of the Senior Debt and any additional warrants issued pursuant to any agreement between the Company and the holders of the Senior Debt pursuant to which such warrants were issued. SENIOR FINANCIAL OFFICER -- means the chief financial officer, the principal accounting officer, the controller or the treasurer of the Company. SERIES A NOTES -- Recital paragraph B hereof. SERIES B NOTES -- Recital paragraph B hereof. SERIES B PREFERRED STOCK -- means the Series B Preferred Stock of the Company as provided for in its certificate of incorporation. SOP -- means the Company's 1990 Stock Option Plan (as amended from time to time). SUBSIDIARY -- means, at any time, any corporation more than fifty percent (50%) of the total combined voting power of all classes of the voting capital stock of which shall, at the time as of which any determination is being made, be owned by the Company either directly or indirectly through any one or more Subsidiaries. TERMINATED DIRECTOR OPTIONS -- means any Director Options issued on or prior to the date hereof that have been exercised or have terminated or expired prior to the date hereof. 29 33 TERMINATED EMPLOYEE OPTIONS -- means any Employee Options issued on or prior to the date hereof that have been exercised or have terminated or expired prior to the date hereof. TERMINATION DATE -- means the earlier of (a) May 19, 2002 and (b) the satisfaction of the conditions set forth in Section 4.1(e) of the Note Purchase Agreements. WARRANTS -- all Warrants issued under this Agreement and any Warrant issued after the date hereof, including, without limitation, all Additional Warrants. WARRANT CERTIFICATE -- Section 1.1 hereof. 5.2 DIRECTLY OR INDIRECTLY. Where any provision herein refers to action to be taken by any Person, or that such Person is prohibited from taking, such provision shall be applicable whether such action is taken directly or indirectly by such Person, including actions taken by or on behalf of any partnership in which such Person is a general partner. 5.3 SECTION HEADINGS AND TABLE OF CONTENTS AND CONSTRUCTION. (a) SECTION HEADINGS AND TABLE OF CONTENTS, ETC. The titles of the Sections and the Table of Contents appear as a matter of convenience only, do not constitute a part hereof and shall not affect the construction hereof. The words "herein," "hereof," "hereunder" and "hereto" refer to this Agreement as a whole and not to any particular Section or other subdivision. Unless otherwise specified, references to Sections are to Sections of this Agreement, references to Annexes are to Annexes to this Agreement and references to Exhibits are to Exhibits to this Agreement. (b) CONSTRUCTION. Each covenant contained herein shall be construed (absent an express contrary provision herein) as being independent of each other covenant contained herein, and compliance with any one covenant shall not (absent such an express contrary provision) be deemed to excuse compliance with one or more other covenants. 5.4 GOVERNING LAW. THIS AGREEMENT AND THE WARRANT CERTIFICATES SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, INTERNAL NEW YORK LAW. 6. MISCELLANEOUS 6.1 COMMUNICATIONS. (a) METHOD; ADDRESS. All communications hereunder or under the Warrants shall be in writing, shall be hand delivered, deposited into the United States mail (registered or certified mail), postage prepaid, or sent by overnight courier of national or international reputation, and shall be addressed, 30 34 (i) if to the Company, The Cerplex Group, Inc. 1382 Bell Avenue Tustin, California 92680 Attention: Chief Executive Officer Facsimile: (714) 258-0730 (with a copy to: Brobeck, Phleger & Harrison 4675 MacArthur Court, Suite 1000 Newport Beach, California 92660 Attention: Frederic A. Randall, Jr., Esq. Facsimile: (714) 752-7535 provided that the failure to provide any such copy shall in no way affect the validity or effectiveness of any communication to the Company for purposes of this Agreement) or at such other address as the Company shall have furnished in writing to all holders of the Warrants at the time outstanding; and (ii) if to any of the holders of the Warrants: (A) if such holders are the Initial Holders, at their respective addresses set forth on Annex 1, and further including any parties referred to on such Annex 1 that are required to receive notices in addition to such holders of the Warrants; and (B) if such holders are not the Initial Holders, at their respective addresses set forth in the register for the registration and transfer of Warrants maintained pursuant to Section 1.2(b) hereof; or to any such party at such other address as such party may designate by notice duly given in accordance with this Section 6.1 to the Company (which other address shall be entered in such register). (b) WHEN GIVEN. Any communication so addressed and deposited in the United States mail, postage prepaid, by registered or certified mail (in each case, with return receipt requested) shall be deemed to be received on the third (3rd) succeeding business day after the day of such deposit (not including the date of such deposit). Any notice so addressed and otherwise delivered shall be deemed to be received when actually received at the address of the addressee. 31 35 6.2 REPRODUCTION OF DOCUMENTS. This Agreement and all documents relating thereto, including, without limitation, (a) consents, waivers and modifications that may hereafter be executed, (b) documents received by each Initial Holder at the closing of the issuance of Warrants (except the Warrant Certificates themselves) and (c) financial statements, certificates and other information previously or hereafter furnished to any Initial Holder or any other holder of Warrants, may be reproduced by any holder of Warrants by any photographic, photostatic, microfilm, micro-card, miniature photographic, digital or other similar process and each holder of Warrants may destroy any original document so reproduced. The Company agrees and stipulates that any such reproduction shall be admissible in evidence as the original itself in any judicial or administrative proceeding (whether or not the original is in existence and whether or not such reproduction was made by such holder of Warrants in the regular course of business) and that any enlargement, facsimile or further reproduction of such reproduction shall likewise be admissible in evidence. Nothing in this Section 6.2 shall prohibit the Company or any holder of Warrants from contesting the accuracy of any such reproduction. 6.3 SURVIVAL. All warranties, representations, certifications and covenants made by the Company herein or in any certificate or other instrument delivered by it or on its behalf hereunder shall be considered to have been relied upon by the Initial Holders and shall survive the delivery to the Initial Holders of the Warrants regardless of any investigation made by the Initial Holders or on their behalf. All statements in any such certificate or other instrument shall constitute warranties and representations by the Company hereunder. 6.4 SUCCESSORS AND ASSIGNS. This Agreement shall inure to the benefit of and be binding upon the successors and assigns of each of the parties hereto. The provisions hereof are intended to be for the benefit of all holders, from time to time, of Warrants, and shall be enforceable by any such holder, whether or not an express assignment to such holder of rights hereunder shall have been made by any successor or assign of any Initial Holder. 6.5 AMENDMENT AND WAIVER. This Agreement may be amended, and the observance of any term of this Agreement may be waived, with and only with the written consent of the Company and the Required Warrantholders, provided that no change in, or waiver of performance under, Section 1, Section 2, Section 4 or this Section 6.5 (or any definition used in connection with any of such sections) shall be effected without the written consent of all holders of Warrants. 6.6 RIGHT OF ACTION. All rights of action in respect of the Warrants are vested in the respective registered holders of the Warrant Certificates or, in lieu thereof, the beneficial owner thereof (to the extent such beneficial owner is a party to this Agreement or disclosed to the Company in 32 36 writing), and any registered holder or beneficial owner (to the extent such beneficial owner is a party to this Agreement or disclosed to the Company in writing) of any Warrant Certificate, without the consent of the holder of any other Warrant Certificate, may, in its own behalf and for its own benefit, enforce, and may institute and maintain any suit, action or proceeding against the Company to enforce, or otherwise act in respect of, its right to exercise the Warrants evidenced by such Warrant Certificate in the manner provided in such Warrant Certificate and in this Agreement. 6.7 EXPENSES. The Company will promptly (and in any event within thirty (30) days of receiving any statement or invoice therefor) pay all fees, expenses and costs relating hereto, including, but not limited to: (a) the cost of reproducing this Agreement and the Warrants; (b) the fees and disbursements of the special counsel to the Initial Holders; (c) the cost of delivering to the home office or custodian bank of each Initial Holder, insured to such party's satisfaction, the Warrant Certificates acquired by such party on the Effective Date; and (d) all fees, expenses, costs and disbursements (including, without limitation, the reasonable fees and the disbursements of the attorneys, accountants and other expert, legal and financial advisers of each holder of Warrant Certificates) relating to (i) the consideration, evaluation, analysis, assessment, negotiation, preparation and/or execution of any amendments, waivers or consents pursuant to the provisions hereof, whether in the ordinary course of performance hereof or in connection with any controversy or potential controversy hereunder or resulting from any work-out, restructuring or other similar proceedings relating to such performance and whether or not any such amendments, waivers or consents are executed or otherwise consummated and/or (ii) the enforcement of the rights of such holder hereunder. 6.8 FILINGS. The Company shall, at its own expense, promptly execute and deliver, or cause to be executed and delivered, to any holder of Warrants all applications, certificates, instruments, registration statements, and all other documents and papers that such holder of Warrants may reasonably request in connection with the obtaining of any consent, approval, registration, qualification, or authorization of any federal, state or local government (or any agency or commission thereof) necessary or appropriate in connection with, or for the effective exercise of, any Warrants then held by such holder. 33 37 6.9 ENTIRE AGREEMENT. This Agreement constitutes the final written expression of all of the terms hereof and is a complete and exclusive statement of those terms. 6.10 TERM. All unexercised Warrants will be void and not exercisable after 5:00 p.m. (Los Angeles, California time) on the Termination Date and the Warrant Certificates in respect thereof shall after such time be deemed cancelled for all purposes of this Agreement. Shares of Common Stock issuable upon the exercise of a Warrant shall be issued after the Termination Date if such Warrant is exercised, as provided in Section 2.1, on or prior to 5:00 p.m. (Los Angeles, California time) on the Termination Date. 6.11 DUPLICATE ORIGINALS, EXECUTION IN COUNTERPART. Two or more duplicate originals hereof may be signed by the parties, each of which shall be an original but all of which together shall constitute one and the same instrument. This Agreement may be executed in one or more counterparts and shall be effective when at least one counterpart shall have been executed by each party hereto, and each set of counterparts which, collectively, show execution by each party hereto shall constitute one duplicate original. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK; NEXT PAGE IS SIGNATURE PAGE.] 34 38 IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be duly executed and delivered by one of its duly authorized officers or representatives. THE CERPLEX GROUP, INC. By___________________________________ Name: Title: THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY By___________________________________ Name: Title: JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY By___________________________________ Name: Title: NORTH ATLANTIC SMALLER COMPANIES INVESTMENT TRUST PLC By___________________________________ Name: Title: [Signature page to the WARRANT AGREEMENT among THE CERPLEX GROUP, INC. and the Initial Holders listed in Annex 1] 39 ANNEX 1 INFORMATION AS TO INITIAL HOLDERS
======================================================================================= INITIAL HOLDER NAME THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY - --------------------------------------------------------------------------------------- Name in which to register Warrant The Northwestern Mutual Life Insurance Company Certificate(s) - --------------------------------------------------------------------------------------- Warrant Certificate registration WR-1; 239,176 Warrants number; Number of Warrants (PPN for the Warrants: 15678@ 13 1) - --------------------------------------------------------------------------------------- Address for notices The Northwestern Mutual Life Insurance Company 720 East Wisconsin Avenue Milwaukee, WI 53202 Attention: Securities Department =======================================================================================
Annex 1-1 40
============================================================================================ INITIAL HOLDER NAME JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY - -------------------------------------------------------------------------------------------- Name in which to register Warrant John Hancock Mutual Life Insurance Company Certificate(s) - -------------------------------------------------------------------------------------------- Warrant Certificate registration WR-2; 86,972 Warrants number; WR-3; 152,204 Warrants Number of Warrants (PPN for the Warrants: 15678@ 13 1) - -------------------------------------------------------------------------------------------- Address for notices John Hancock Mutual Life Insurance Company John Hancock Place 200 Clarendon Street Boston, Massachusetts 02117 Attention: Bond and Corporate Finance Department T-57 Fax No.: (617) 572-1606 ============================================================================================
Annex 1-2 41
======================================================================================= INITIAL HOLDER NAME NORTH ATLANTIC SMALLER COMPANIES TRUST PLC - --------------------------------------------------------------------------------------- Name in which to register Warrant Bank of Scotland London Nominees Ltd. Certificate(s) - --------------------------------------------------------------------------------------- Warrant Certificate registration WR-4; 21,744 Warrants number; Number of Warrants (PPN for the Warrants: 15678@ 13 1) - --------------------------------------------------------------------------------------- Address for notices North Atlantic Smaller Companies Trust PLC c/o J.O. Hambro & Co., Ltd. 10 Park Place London, England SW1A1LP Attention: Mr. Christopher Mills Facsimile: 011-44-171-233-1503 =======================================================================================
Annex 1-3 42 EXHIBIT A [FORM OF WARRANT CERTIFICATE] THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAW. THESE SECURITIES MAY NOT BE SOLD, TRANSFERRED, PLEDGED OR HYPOTHECATED IN ANY TRANSACTION UNLESS FIRST REGISTERED UNDER SUCH LAWS OR UNLESS SUCH TRANSACTION IS EXEMPT FROM THE REGISTRATION REQUIREMENTS OF SUCH LAWS. [THE HOLDER OF THIS WARRANT CERTIFICATE IS A [[NORTHWESTERN GROUP HOLDER]][[HANCOCK GROUP HOLDER]] FOR PURPOSES OF THAT CERTAIN REGISTRATION RIGHTS AGREEMENT DATED NOVEMBER 19, 1993, AS AMENDED, AMONG THE CERPLEX GROUP, INC. AND THE OTHER PARTIES THERETO.] WARRANT CERTIFICATE THE CERPLEX GROUP, INC. No. WR-______ ____________ Warrants Date: ____________ PPN: 15678@ 13 1 This WARRANT CERTIFICATE certifies that ________________________, or registered assigns, is the registered holder of ________________________ (____________) Warrants. Each Warrant entitles the owner thereof to purchase, at any time on or after August 20, 1998 and prior to 5:00 p.m. (Los Angeles, California time) on the Termination Date (as such term is defined in the Warrant Agreement referred to below), one fully paid and nonassessable share of Common Stock (as such term is defined in the Warrant Agreement referred to below) of THE CERPLEX GROUP, INC., a Delaware corporation (the "COMPANY"), at the Initial Purchase Price of ___________________ per share of Common Stock (the "PURCHASE PRICE") upon (i) presentation and surrender of this Warrant Certificate with a form of election to purchase duly executed and (ii) satisfaction of the Purchase Price in the manner set forth in the Warrant Agreement. The number of shares of Common Stock that may be purchased upon exercise of each Warrant, and the Purchase Price, are the number and the Purchase Price as of the date hereof and are subject to adjustment under certain circumstances as provided in the Warrant Agreement referred to below. The Warrants are issued pursuant to the Warrant Agreement, dated as of August 20, 1997 (as amended from time to time, the "WARRANT AGREEMENT"), among the Company and certain initial holders named therein, and are subject to all of the terms, provisions and conditions thereof, which Warrant Agreement is hereby incorporated herein by reference and made a part hereof and to which Warrant Agreement reference is hereby made for a full description of the rights, obligations, duties and immunities of the Company and the holders Exhibit A-1 43 of the Warrant Certificates. Capitalized terms used, but not defined, herein have the meanings assigned to them in the Warrant Agreement. This Warrant Certificate shall be exercisable, at the election of the holder, either as an entirety or in part from time to time. If this Warrant Certificate shall be exercised in part, the holder shall be entitled to receive, upon surrender hereof, another Warrant Certificate or Warrant Certificates for the number of Warrants not exercised. This Warrant Certificate, with or without other Warrant Certificates, upon surrender at the office of the Company referred to in Section 1.2(b) of the Warrant Agreement, may be exchanged for another Warrant Certificate or Warrant Certificates of like tenor evidencing Warrants entitling the holder to purchase a like aggregate number of shares of Common Stock as the Warrants evidenced by the Warrant Certificate or Warrant Certificates surrendered shall have entitled such holder to purchase. Except as expressly set forth in the Warrant Agreement, no holder of this Warrant Certificate shall be entitled to any right to vote or receive dividends or be deemed for any purpose the holder of shares of Common Stock or of any other Securities of the Company that may at any time be issued upon the exercise hereof, nor shall anything contained in the Warrant Agreement or herein be construed to confer upon the holder hereof, as such, any of the rights of a holder of a share of Common Stock in the Company or any right to vote upon any matter submitted to holders of shares of Common Stock at any meeting thereof, or to give or withhold consent to any corporate action (whether upon any recapitalization, issuance of stock, reclassification of Securities, change of par value, consolidation, merger, conveyance, or otherwise) or, except as provided in the Warrant Agreement, to receive notice of meetings, or to receive dividends or subscription rights, or otherwise, until the Warrant or Warrants evidenced by this Warrant Certificate shall have been exercised as provided in the Warrant Agreement. [Other than with respect to the original issuance of the Warrants pursuant to the Warrant Agreement, if the Warrant Certificate of the immediate transferor of the holder of this Warrant Certificate bore the second paragraph of the legend set forth above, this Warrant Certificate shall also bear such second paragraph.] Exhibit A-2 44 THIS WARRANT CERTIFICATE AND THE WARRANT AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, INTERNAL NEW YORK LAW. WITNESS the signature of a proper officer of the Company as of the date first above written. THE CERPLEX GROUP, INC.. By__________________________________ Name: Title: ATTEST: _______________________________ [Assistant] Secretary Exhibit A-3 45 [FORM OF ASSIGNMENT] (TO BE EXECUTED BY THE REGISTERED HOLDER IF SUCH HOLDER DESIRES TO TRANSFER THE WARRANT CERTIFICATE) FOR VALUE RECEIVED, _______________________________________ hereby sells, assigns and transfers unto ____________________________________________________________________________ (Please print name and address of transferee.) the accompanying Warrant Certificate, together with all right, title and interest therein, and does hereby irrevocably constitute and appoint: _____________________________________________________________________________ attorney in fact, to transfer the accompanying Warrant Certificate on the books of the Company, with full power of substitution. Dated: ____________________, ________. ________________________________ By _____________________________ NOTICE The signature to the foregoing Assignment must correspond to the name as written upon the face of the accompanying Warrant Certificate or any prior assignment thereof in every particular, without alteration or enlargement or any change whatsoever. Exhibit A-4 46 [FORM OF ELECTION TO PURCHASE] (TO BE EXECUTED BY THE REGISTERED HOLDER IF SUCH HOLDER DESIRES TO EXERCISE ANY WARRANTS REPRESENTED BY THE WARRANT CERTIFICATE) To THE CERPLEX GROUP, INC.: The undersigned hereby irrevocably elects to exercise ______________________________ Warrants represented by the accompanying Warrant Certificate to purchase the shares of Common Stock issuable upon the exercise of such Warrants and requests that certificates for such shares be issued in the name of: _______________________________________________________________________________ (Please print name and address.) ___________________________________________________________ (Please insert social security or other identifying number.) If such number of Warrants shall not be all the Warrants evidenced by the accompanying Warrant Certificate, a new Warrant Certificate for the balance remaining of such Warrants shall be registered in the name of and delivered to: ______________________________________________________________________________ (Please print name and address.) ___________________________________________________________ (Please insert social security or other identifying number.) Dated: __________________, ______. ________________________________ By______________________________ NOTICE The signature to the foregoing Election to Purchase must correspond to the name as written upon the face of the accompanying Warrant Certificate or any prior assignment thereof in every particular, without alteration or enlargement or any change whatsoever. Exhibit A-5 47 EXHIBIT B DETERMINATION OF FAIR MARKET SHARE PRICE. (a) Within two (2) days of the happening of any event requiring a determination of the Fair Market Share Price, the Company shall give written notice thereof to each holder of Warrants (which notice shall contain a description of such event). (b) Within ten (10) days of the happening of each event requiring a determination of the Fair Market Share Price, each of the Required Warrantholders (as a group) and the Company shall designate an Appraiser for purposes of determining the Fair Market Share Price and shall notify the other party or parties of such designation (provided that, if the Company and such holders so agree, they may jointly designate a single Appraiser, in which event the determination of the Fair Market Share Price of the single Appraiser so jointly designated shall be binding upon both the Company and the holders of Warrants for the purposes of the determination of the Fair Market Share Price hereunder). Each Appraiser will take such evidence, make such investigations and examine such documents as it shall in its discretion determine to be necessary and advisable to make a determination with respect to the Fair Market Share Price. A detailed report from each Appraiser setting forth such Appraiser's determination with respect to the Fair Market Share Price shall be delivered to the Company and to each of the holders of Warrants as soon as possible following such determination and, in any event, not later than thirty (30) days following the happening of the event requiring determination of the Fair Market Share Price. (c) If either: (i) the Company or such holders shall fail, neglect or refuse to designate an Appraiser within the time period set forth in clause (b) above; or (ii) either of the two Appraisers so designated shall fail to deliver its detailed report within the time period set forth in said clause (b); then, in each such case, the determination of the Fair Market Share Price of the single Appraiser actually designated or the single Appraiser actually delivering its detailed report, as the case may be, shall be binding upon both the Company and the holders of Warrants for the purposes of the determination of the Fair Market Share Price hereunder. (d) If the determinations of the Fair Market Share Price by both such Appraisers do not differ by more than fifteen percent (15%) of the lower of the two determinations, then the Fair Market Share Price shall be the arithmetic average of those two determinations. Exhibit B-1 48 (e) If the determinations of the Fair Market Share Price by both such Appraisers differ by more than fifteen percent (15%) of the lower of the two determinations, then the parties shall promptly direct the two Appraisers to consult with one another for the purpose of jointly designating a third Appraiser, which designation shall be made not later than ten (10) days following the delivery of the determinations pursuant to clause (b) above. The third Appraiser shall review the first two appraisals and shall make an independent determination with respect to the Fair Market Share Price. (i) In the event that the third Appraiser's determination is equal to or greater than the greater determination made by the first two Appraisers, the Fair Market Share Price shall equal the higher of the determinations of the first two Appraisers. (ii) In the event that the third Appraiser's determination is equal to or less than the lesser determination made by the first two Appraisers, the Fair Market Share Price shall equal the lesser of the determinations of the first two Appraisers. (iii) In the event that the third Appraiser's determination is between those of the first two Appraisers, the Fair Market Share Price shall equal the arithmetic average of the determinations of all three Appraisers. A detailed report from the third Appraiser setting forth such Appraiser's determination with respect to the Fair Market Share Price shall be delivered to the Company and to each of the holders of Warrants as soon as possible following such determination and, in any event, not later than thirty (30) days following the earlier of (A) the delivery of the reports referred to in clause (b) above, and (B) the first date upon which such reports are due to be delivered pursuant to clause (b) above. (f) The Company agrees to cooperate with each Appraiser to the full extent necessary to permit determination of the Fair Market Share Price. (g) All fees and expenses incurred in connection with the foregoing determination of the Fair Market Share Price (including any and all fees and expenses of each Appraiser) shall be borne by the Company. Any determination made in accordance with this definition shall be effective for a period of ninety (90) days immediately following such determination, unless there has been a material development in the business of the Company and the Subsidiaries, in which case there shall be a redetermination in accordance with the provisions of this Exhibit. Exhibit B-2 49 EXHIBIT C CONFIDENTIALITY With respect to all data and information that has been or in the future is furnished to or obtained by any holder of Warrant Certificates in connection with this Agreement (excluding, in any case, any such data and information that was or is available to the public or was not or is not treated as confidential by any one or more of the Company, the Subsidiaries or the Affiliates), such holder will hold such data and information in confidence in accordance with the customary practices and standards of confidentiality generally employed by such holder in respect of similar data and information obtained in connection with other comparable investment transactions of such holder. Notwithstanding the foregoing, any such holder may disclose any data and information furnished to or obtained by it in connection with this Agreement: (a) the disclosure of which is, in such holder's sole good faith business and/or legal judgment, reasonably required in connection with regulatory requirements (including, without limitation, the requirements of the National Association of Insurance Commissioners but excluding, in any case, delivery of periodic financial statements and information to the National Association of Insurance Commissioners, the Securities Valuation Office thereof or any other agency thereof in connection with the rating, evaluation or other regulatory treatment of the Warrants or the Notes) or other legal requirements related to such holder's affairs, including, without limitation, the disclosure of such data and information in connection with or in response to (i) compliance with any law, ordinance or governmental order, regulation, rule, policy, subpoena, investigation or request, or (ii) any order, decree, judgment, subpoena, notice of discovery or similar ruling, or pleading issued, filed, served or purported on its face to be issued, filed or served (A) by or under authority of any court, tribunal, arbitration board or any governmental agency, commission, authority, board or similar entity or (B) in connection with any proceeding (including, without limitation, any proceeding to enforce the obligations of the Company under this Agreement), cause or matter pending (or on its face purported to be pending) before any court, tribunal, arbitration board or any governmental agency, commission, authority, board or similar entity; (b) to any one or more of the employees, officers, directors, agents, attorneys, accountants, professional consultants or trustees of such holder (or of any subsidiary or affiliate of such holder) who would have access to such data and information in the normal course of the performance of such Person's duties for such holder (or for such subsidiary or affiliate); (c) to Moody's Investors Service, Inc., Standard & Poor's Corporation or any other nationally recognized financial rating service that is reviewing the credit rating of any holder of Warrant Certificates or is rating or reviewing the rating of the Warrants or the Common Stock issuable upon the exercise thereof; and Exhibit C-1 50 (d) to any prospective purchaser, securities broker or dealer or investment banker in connection with the resale or proposed resale, in accordance with the terms hereof, of all or any portion of the Warrants or Common Stock issuable upon the exercise thereof by such holder. In connection with any disclosure by any holder of Warrant Certificates under clause (a) above, such holder will use reasonable efforts to notify the Company of any such pending disclosure, provided that (x) such holder shall in no case be liable to the Company for its failure to effect such notification, (y) the failure to effect such notification shall not affect the ability of such holder to make the disclosures contemplated under said clause (a) and (z) this sentence shall not apply to the delivery of periodic financial statements and information to the National Association of Insurance Commissioners, the Securities Valuation Office thereof or any other agency thereof in connection with the rating, evaluation or other regulatory treatment of the Warrants or the Notes. In connection with any disclosure by any holder of Warrant Certificates under clause (d) above, such holder will use reasonable efforts to cause any prospective purchaser, securities broker or dealer or investment banker referred to in said clause (d) to enter into a written confidentiality agreement with the Company containing terms of confidentiality substantially similar to the terms of confidentiality set forth in this Exhibit prior to effecting such disclosure, provided that (yy) such holder shall in no case be liable to the Company if such prospective purchaser, securities broker or dealer or investment banker shall for any reason not enter into any such confidentiality agreement with the Company and (zz) the failure of such prospective purchaser, securities broker or dealer or investment banker to enter into any such confidentiality agreement with the Company shall not affect the ability of such holder to make the disclosures contemplated under said clause (d). No holder of Warrant Certificates will be liable for the breach of the provisions of this Exhibit or of any provision in any aforesaid confidentiality agreement by any other holder of Warrant Certificates or by any Person to which any confidential data or information shall be delivered in accordance with the provisions of this Exhibit C. Exhibit C-2 EX-4.34 5 THIRD AMENDMENT TO WARRANT AGREEMENT 1 EXHIBIT 4.34 THIRD AMENDMENT TO WARRANT AGREEMENT THIS THIRD AMENDMENT TO WARRANT AGREEMENT (this "Amendment") is made as of the 20th day of August, 1997, by and among The Cerplex Group, Inc., a Delaware corporation (the "COMPANY") and each of the holders of warrants listed on Schedule A hereto, each of which is herein referred to as a "HOLDER" and collectively as the "HOLDERS". RECITALS: A. The Company and the Holders entered into a Warrant Agreement dated as of April 15, 1996, as amended by a Waiver and Amendment Agreement dated as of October 31, 1996 and a Second Amendment to Warrant Agreement dated as of April 9, 1997 (as in effect prior to the effectiveness of this Amendment, the "EXISTING WARRANT AGREEMENT"). B. The Holders are the holders of all of the Warrants (as such term is defined in the Existing Warrant Agreement) outstanding as of the date hereof. C. The Company has requested that the Existing Warrant Agreement be amended, as more particularly provided herein, and the Holders have agreed to amend the Existing Warrant Agreement as set forth herein. AGREEMENT: NOW THEREFORE, for valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: SECTION 1. DEFINED TERMS. As used in this Amendment, the following terms have the respective meanings specified below: "AMENDMENT, THIS" -- means this Third Amendment to Warrant Agreement. "COMPANY" -- the introductory sentence. "EXISTING WARRANT AGREEMENT" -- Recital A. "HOLDERS" -- the introductory sentence. SECTION 2. AMENDMENTS TO EXISTING WARRANT AGREEMENT. 2.1 AMENDMENT TO SECTION 3.1(B). Section 3.1(b) of the Existing Warrant Agreement is hereby amended and restated in its entirety to read as follows: "(b) ENFORCEABILITY OF OBLIGATIONS. This Agreement and the Warrant Certificates issued on the date hereof have been, and any Warrants issued after the date hereof will be, duly authorized, executed and delivered by the Company. This Agreement, the Warrant Certificates and the Warrants constitute, or upon execution 2 and delivery will constitute, the legal, valid and binding obligations of the Company, enforceable in accordance with their respective terms, except: "(i) as such enforceability may be limited by bankruptcy, insolvency or other similar laws affecting the enforceability of creditors' rights generally; and "(ii) as such enforceability may be subject to the availability of equitable remedies. "The holders of the Warrants are entitled to the benefits of this Agreement." 2.2 AMENDMENT TO SECTION 4.1(D)(I). The introductory paragraph to Section 4.1(d)(i) of the Existing Warrant Agreement is hereby amended and restated in its entirety to read as follows: "(d) ISSUANCES OF COMMON STOCK AND OTHER SECURITIES. "(i) In the event that the Company shall issue or sell shares of Common Stock, or rights, options, warrants or convertible or exchangeable Securities containing the right to subscribe for or purchase shares of Common Stock (excluding Excluded Securities, as defined in Section 4.1(d)(ii) hereof) at a price per share of Common Stock lower than the Reference Price in effect on the date (the "ADJUSTMENT DATE") of such issuance or sale, then the Purchase Price in effect immediately after the Adjustment Date shall be determined by multiplying the Purchase Price in effect immediately prior to such Adjustment Date by the quotient of:" The remainder of Section 4.1(d)(i) of the Existing Warrant Agreement shall remain in effect without amendment. 2.3 AMENDMENT TO SECTION 4.1(D)(II). Section 4.1(d)(ii) of the Existing Warrant Agreement is hereby amended and restated in its entirety to read as follows: "(ii) "EXCLUDED SECURITIES" shall mean and include: "(A) shares of Common Stock, rights, options, warrants or convertible or exchangeable Securities issued in any of the transactions described in Section 4.1(a), Section 4.1(b), Section 4.1(c) or Section 4.1(e) hereof and with respect to which an adjustment to the Purchase Price has been made in accordance with any of such Sections; "(B) shares of Common Stock issuable upon exercise of the Warrants (including, without limitation, the Additional Warrants); "(C) shares of Common Stock issuable upon exercise of rights, options or warrants or conversion or exchange of convertible or 2 3 exchangeable Securities issued or sold under circumstances which caused an adjustment pursuant to this Section 4.1(d); "(D) rights to acquire shares of Common Stock, and shares of Common Stock issuable upon exercise of such rights, issued to employees of the Company and it Subsidiaries pursuant to any employee stock purchase plan maintained by the Company or any of its Subsidiaries, provided that any such rights issued pursuant to any such plan and any shares of Common Stock issuable upon the exercise thereof which, in the aggregate, exceed, at the time of the issuance thereof, two percent (2%) of the Fully Diluted Outstanding Common Stock, determined at such time, shall not constitute Excluded Securities; "(E) shares of Common Stock and/or rights, options, warrants or convertible or exchangeable Securities (and the shares of Common Stock issuable upon the exercise of such rights, options, warrants or convertible or exchangeable Securities), provided that (1) such shares of Common Stock and/or rights, options, warrants or convertible or exchangeable Securities are issued in connection with one or more private placements of equity Securities of the Company effected on or prior to July 15, 1996, (2) the total aggregate consideration paid in cash in respect of such shares of Common Stock and/or rights, options, warrants or convertible or exchangeable Securities is not more than $8,000,000, (3) all such shares of Common Stock together with all shares of Common Stock issuable upon the exercise of any of such rights, options, warrants or convertible or exchangeable Securities shall not, in the aggregate, exceed 12% of Fully Diluted Outstanding Common Stock, determined as of April 16, 1996, and (4) the sale of such shares of Common Stock and/or rights, options, warrants or convertible or exchangeable Securities is done on an arm's-length basis and the setting of the exercise, strike or conversion prices in respect of such rights, options, warrants or convertible or exchangeable Securities is done on an arm's-length basis; "(F) warrants issued on or prior to August 20, 1997, to any holder of the senior or subordinated indebtedness, warrants issued on or after the date hereof pursuant to provisions comparable to Section 4.4(a), Section 4.4(b) or Section 4.4(c) hereof contained in any agreement between the Company and such holders pursuant to which such senior or subordinated indebtedness is issued and shares of Common Stock issuable upon the exercise of any such Warrants; and "(G) shares of Common Stock, rights, options, warrants or convertible or exchangeable Securities issued in any of the transactions described in Sections 4.4(a), Section 4.4(b) or Section 4.4(c) hereof and with respect to which additional Warrants have been issued in accordance with any of such Sections." 3 4 2.4 AMENDMENT TO SECTION 4.1(E). Section 4.1(e) of the Existing Warrant Agreement is hereby amended by adding the following sentence at the end of such section" "For purposes of determining the number of shares subject to any Warrant with respect to any adjustments made pursuant to this Section 4.1(e), the Company shall make the adjustments provided for in Section 4.4 in respect of any issuances of Employee Options or Director Options that occurred during the period from the date of the last determination pursuant to such Section to the date immediately prior to such consolidation, merger, sale or conveyance." 2.5 AMENDMENT TO SECTION 4.1(I). Section 4.1(i) of the Existing Warrant Agreement is hereby amended and restated in its entirety to read as follows: "(i) EXPIRATION OF RIGHTS, OPTIONS, ETC. "(i) Upon the expiration of any rights, options, warrants or conversion or exchange privileges referred to above in this Section 4.1 without the exercise thereof, the Purchase Price and the number of shares of Common Stock purchasable upon the exercise of each Warrant shall be readjusted and shall thereafter be such as such Purchase Price and such number of shares of Common Stock would have been had they been originally adjusted (or had the original adjustment not been required, as the case may be) as if: "(A) the only shares of Common Stock so issued were the shares of Common Stock, if any, actually issued or sold upon the exercise of such rights, options, warrants or conversion or exchange privileges; and "(B) such shares of Common Stock, if any, were issued or sold for the consideration actually received by the Company upon such exercise plus the aggregate consideration, if any, actually received by the Company for the issuance, sale or grant of all of such rights, options, warrants or conversion or exchange privileges whether or not exercised; "provided that no such readjustment shall have the effect of increasing the Purchase Price by an amount in excess of the amount of the reduction initially made in respect of the issuance, sale, or grant of such rights, options, warrants or conversion or exchange privileges. "(ii) In the event that during any calendar quarter after August 20, 1997, any Employee Option, Director Option or portion thereof expires without the exercise thereof and the issuance of any such Employee Option or Director Option had resulted in the issuance of Additional Warrants pursuant to Section 4.4(a) hereof, the number of shares of Common Stock purchasable upon the exercise of the Additional Warrants shall be reduced as of the first day of the next succeeding calendar quarter by the number of shares of Common Stock 4 5 subject to such terminated or expired Employee Option, Director Option or portion thereof." 2.6 AMENDMENT TO SECTION 4. Section 4 of the Existing Warrant Agreement is hereby amended by adding a new Section 4.4 at the end thereof, such Section 4.4 to read in its entirety as follows: "4.4 ISSUANCE OF ADDITIONAL WARRANTS. "(a) GRANT OF EMPLOYEE OPTIONS AND DIRECTOR OPTIONS. In the event that, during any calendar quarter after August 20, 1997: "(i) Employee Options (other than Employee Options issued in a transaction described in Section 4.1(d) hereof) are issued and the aggregate number of such Employee Options plus all other Employee Options issued on or prior to the date of such issuance, other than Terminated Employee Options, exceeds the then effective Employee Option Threshold; or "(ii) Director Options (other than Director Options issued in a transaction described in Section 4.1(d) hereof) are issued and the aggregate number of such Director Options plus all other Director Options issued on or prior to the date of such issuance, other than Terminated Director Options, exceeds the Director Option Threshold; "then the Company shall, as of the first day of the next succeeding calendar quarter, issue Additional Warrants to the holders of the Warrants on a pro rata basis covering that number of shares equal to the product of the Dilution Percentage multiplied by the number of the Employee Options or Director Options, as the case may be, issued during such period (or, with respect to the first calendar quarter in which the number of Employee Options or Director Options issued during such quarter plus the aggregate number of Employee Options and Director Options, as the case may be, issued on or prior to the date of such issuance other than Terminated Employee Options or Terminated Director Options, as the case may be, exceeds the then effective Employee Option Threshold or the Director Option Threshold, as the case may be, the amount such excess). "(b) ISSUANCES IN CONNECTION WITH CONVERSION OF SENIOR DEBT. In the event that, on or after August 20, 1997: "(i) all or any portion of the principal amount of the Senior Debt is converted into shares of Common Stock, or Securities convertible into or exchangeable for shares of Common Stock; and "(ii) the Post-Conversion Market Price per share of Common Stock following such conversion is less than the Measurement Price per share of Common Stock prior to such conversion; 5 6 "the Company shall issue Additional Warrants to the holders of the Warrants on a pro rata basis covering that number of shares equal to: "(A) the product of: "(1) the difference between the Post-Conversion Market Price per share of Common Stock and the Measurement Price per share of Common Stock; multiplied by "(2) the total number of shares of Common Stock issuable upon exercise of the Warrants held by such holders immediately prior to such issuance; "divided by "(B) the Post-Conversion Market Price per share of Common Stock; "provided, however, that in no event shall the number of Warrants issued pursuant to this Section 4.4(b) as a result of any single issuance of shares of Common Stock, or Securities convertible into or exchangeable for shares of Common Stock to the holders of the Senior Debt exceed the product of: "(y) the aggregate number of shares of Common Stock issued or issuable pursuant to such convertible or exchangeable Securities to the holders of the Senior Debt Warrants with respect to such single issuance; multiplied by "(z) a fraction, the numerator of which is the number of shares of Common Stock underlying the Warrants outstanding immediately prior to such issuance and the denominator of which is the Fully Diluted Outstanding Common Stock; "and provided further that no Warrants shall be issued pursuant to this provision in connection with any transaction in which both the holders of the Senior Debt convert all or any portion of the aggregate principal amount of the Senior Debt into shares of Common Stock, or Securities convertible into or exchangeable for shares of Common Stock, and the holders of the Warrants convert all or a portion of the aggregate principal amount of indebtedness then outstanding under the Notes into shares of Common Stock or Securities convertible into or exchangeable for shares of Common Stock. The Initial Purchase Price of such Warrants shall be the Post-Conversion Market Price per share. "(c) ISSUANCE OF OTHER SECURITIES TO HOLDERS OF SENIOR DEBT. In the event that, on or after August 20, 1997, rights, options or warrants containing the right to subscribe for or purchase shares of Common Stock are issued to the holders of the Senior Debt Warrants (other than in a transaction described in Section 4.1(d) hereof), the Company shall issue Additional Warrants to the holders of the Warrants on a pro rata basis covering that number of shares equal to the product of: 6 7 "(i) the aggregate number of shares of Common Stock underlying the rights, options or warrants issued to the holders of the Senior Debt Warrants; multiplied by "(ii) a fraction, the numerator of which is the number of shares of Common Stock underlying the Warrants outstanding immediately prior to such issuance are exercisable and the denominator of which is the Fully Diluted Outstanding Common Stock; "and provided further that no Warrants shall be issued pursuant to this provision in connection with any transaction in which both the holders of the Senior Debt Warrants and the holders of the Warrants are issued shares of Common Stock or rights, options or warrants containing the right to subscribe for or purchase shares of Common Stock pursuant to a negotiated transaction as opposed to pursuant to this Section 4.4(c). The Initial Purchase Price of such Warrants shall be the per share exercise price of the rights, options or warrants in respect of which such Additional Warrants are being issued. "(d) EXCLUDED ISSUANCES OF SECURITIES TO HOLDERS OF SENIOR DEBT WARRANTS. Notwithstanding the foregoing, no Warrants shall be issued pursuant to Sections 4.4(a), 4.4(b) or 4.4(c) hereof as result of any issuance of additional Warrants to the holders of the Senior Debt Warrants pursuant to provisions comparable to Section 4.4(a), Section 4.4(b) or Section 4.4(c) hereof contained in any agreement between the Company and such holders pursuant to which such Senior Debt Warrants are issued." 2.7 ADDITIONS TO SECTION 5.1. The following additional defined terms shall be added to Section 5.1 of the Existing Warrant Agreement, each in its appropriate alphabetical position: "ADDITIONAL WARRANTS -- means any additional Warrants issued pursuant to the terms of Section 4.4 hereof." "AVERAGE CLOSING BID PRICE -- means, with respect to any period and any class of Common Stock, the per share price of such class determined as follows: "(a) the average daily closing bid prices of such class of Common Stock on each trading day during such period, as officially reported on the principal national securities exchange on which such class of Common Stock is then listed or admitted to trading; or "(b) if such class of Common Stock is not then listed or admitted to trading on any national securities exchange, the average of the last reported bid prices for each trading day during such period of such class of Common Stock." "CLOSING BID PRICE - means, with respect to any date and any class of Common Stock, the per share price determined as follows: 7 8 "(a) the closing bid prices on such date, as officially reported on the principal national securities exchange on which such class of Common Stock is then listed or admitted to trading; or "(b) if such class of Common Stock is not then listed or admitted to trading on any national securities exchange, the last reported bid price of such class of Common Stock on such date." "DILUTION PERCENTAGE -- means the percentage interest in the fully-diluted equity of the Company represented by all Warrants on August 21, 1997; provided however, that in the event that any of the Warrants are exercised after August 20, 1997, the Dilution Percentage shall be reduced by multiplying the then-effective Dilution Percentage by a fraction, the numerator of which is the number of Warrants remaining immediately following such exercise and the denominator of which is the number of Warrants outstanding immediately prior to such exercise." "DIRECTOR OPTIONS -- means rights, options, warrants or convertible or exchangeable Securities containing the right to subscribe for or purchase shares of Common Stock issued to any directors of the Company or any of its Subsidiaries who were members of the Board of Directors of the Company or any of its Subsidiaries as of August 20, 1997; provided, however, that: "(a) rights, warrants, options or convertible or exchangeable Securities purchased from the Company to acquire shares of the Common Stock in a bona fide arm's-length transaction for consideration at least equal to the Reference Price; "(b) any rights, options, warrants or convertible or exchangeable securities purchased from Persons other than the Company or its Subsidiaries to acquire shares of Common Stock; and "(c) any shares of the Series B Preferred Stock held by any employees, officers or directors of the Company or any of its Subsidiaries on the August 20, 1997; "shall not constitute Director Options." "DIRECTOR OPTION THRESHOLD -- means 1,460,424 shares, as such number may be adjusted from time to time to reflect any subdivision or combination of shares of Common Stock." "EMPLOYEE OPTIONS -- means rights, options, warrants or convertible or exchangeable Securities containing the right to subscribe for or purchase shares of Common Stock issued to any employees, officers or directors of Company or any of its Subsidiaries, including, without limitation, Employee Options issued to Stephen Hopkins as consideration for his services as President and Chief Executive Officer of the Company; provided, however, that: 8 9 "(a) rights, warrants, options or convertible or exchangeable Securities purchased from the Company to acquire shares of Common Stock in a bona fide arm's-length transaction for consideration at least equal to the Reference Price; "(b) any rights, options, warrants or convertible or exchangeable securities acquired from Persons other than the Company or its Subsidiaries to acquire shares of Common Stock; and "(c) any shares of the Series B Preferred Stock held by any employees, officers or directors of the Company or any of its Subsidiaries on August 20, 1997; "shall not constitute Employee Options." "EMPLOYEE OPTION THRESHOLD -- means 7,302,121 shares, as such number may be adjusted from time to time to reflect any subdivision or combination of shares of Common Stock; provided, however, that in the event that Additional Warrants are issued pursuant to Section 4.4(a) during any calendar quarter after August 20, 1997, the Employee Option Threshold shall be increased by the number of Director Options issued during the immediately preceding calendar quarter (or, with respect to the first calendar quarter during which the number of Director Options exceeds the Director Option Threshold, the amount of such excess)." "MEASUREMENT PRICE - means, with respect to any date and any class of Common Stock, the average of the daily Closing Bid Prices of such class of Common Stock for five (5) consecutive trading days prior to the public announcement of any conversion of any Senior Debt; provided, however, that the date on which such public announcement is made shall not be considered a trading day." "POST-CONVERSION MARKET PRICE - means, with respect to any date and any class of Common Stock, the average of the daily Closing Bid Prices of such class of Common Stock for five (5) consecutive trading days after the filing of a Current Report on Form 8-K with respect to any conversion of any Senior Debt; provided, however, that the date on which such Current Report on Form 8-K is filed shall not be considered a trading day." "SENIOR DEBT -- has the meaning provided in the Note Purchase Agreement." "SENIOR DEBT WARRANTS -- means all warrants initially issued to the holders of the Senior Debt and any additional warrants issued pursuant to any agreement between the Company and the holders of the Senior Debt pursuant to which such warrants were issued." "SERIES B PREFERRED STOCK -- means the Series B Preferred Stock of the Company as provided for in its certificate of incorporation." 9 10 "TERMINATED DIRECTOR OPTIONS -- means any Director Options issued on or prior to the August 20, 1997 that have been exercised or have terminated or expired prior to the August 20, 1997." "TERMINATED EMPLOYEE OPTIONS -- means any Employee Options issued on or prior to the August 20, 1997 that have been exercised or have terminated or expired prior to the August 20, 1997." 2.8 AMENDMENTS TO SECTION 5.1. Each of the following definitions shall amend and restate in its entirety to corresponding definition contained in the Existing Warrant Agreement. "INITIAL PURCHASE PRICE -- means: "(a) with respect to the Warrants issued on the date hereof, Fifty-Nine Cents ($0.59) per share; "(b) with respect to any Warrants issued pursuant to Section 4.4(a), the Average Closing Bid Price of a share of Common Stock during the calendar quarter in respect of which the adjustment is being made; "(c) with respect to any Warrants issued pursuant to Section 4.4(b), the Post-Conversion Market Price per share; and "(d) with respect to any Warrants issued pursuant to Section 4.4(c) hereof, the per share exercise price of the rights, options or warrants in respect of which the Additional Warrants are being issued." "WARRANTS -- all Warrants issued under this Agreement, including, without limitation, all Additional Warrants." 2.9 AMENDMENT TO FORM OF WARRANT. For the avoidance of doubt, any Warrant Certificates issued evidencing Additional Warrants issued pursuant to Section 4.4 shall bear the actual Initial Purchase Price thereof in the first paragraph of such Warrant Certificate in lieu of the price reflected in the form of Warrant contained in Exhibit A to the Existing Warrant Agreement. SECTION 3. MISCELLANEOUS. 3.1 GOVERNING LAW. This Amendment shall be governed by, and construed and enforced in accordance with, internal New York law. 3.2 DUPLICATE ORIGINALS. Two or more duplicate originals of this Amendment may be signed by the parties, each of which shall be an original but all of which together shall constitute one and the same 10 11 instrument. This Amendment may be executed in one or more counterparts and shall be effective when at least one counterpart shall have been executed by each party hereto, and each set of counterparts which, collectively, show execution by each party hereto shall constitute one duplicate original. 3.3 EFFECT OF THIS AMENDMENT. Except as specifically provided in this Amendment, no terms or provisions of the Existing Warrant Agreement have been modified or changed by this Amendment and the terms and provisions of the Existing Warrant Agreement, as amended hereby, shall continue in full force and effect. This Amendment and the amendments contained herein shall have and be in effect on and after the date hereof. 3.4 SECTION HEADINGS. The titles of the sections hereof appear as a matter of convenience only, do not constitute a part of this Amendment and shall not affect the construction hereof. [REMAINDER OF PAGE INTENTIONALLY BLANK. NEXT PAGE IS SIGNATURE PAGE.] 11 12 IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed on their behalf by a duly authorized officer or agent thereof, as the case may be, as of the date first above written. THE CERPLEX GROUP, INC. By_______________________________ Name: Title: THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY By_______________________________ Name: Title: JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY By_______________________________ Name: Title: NORTH ATLANTIC SMALLER COMPANIES INVESTMENT TRUST PLC By_______________________________ Name: Title: 13 SCHEDULE A Schedule of Holders The Northwestern Mutual Life Insurance Company 720 East Wisconsin Avenue Milwaukee, Wisconsin 53202 John Hancock Mutual Life Insurance Company John Hancock Place 200 Clarendon Street Boston, Massachusetts 02117 North Atlantic Smaller Companies Trust PLC c/o J.O. Hambro & Co., Ltd. 10 Park Place London, England SW1A1LP Schedule A-1 EX-4.35 6 THIRD AMENDMENT TO WARRANT AGREEMENT 1 EXHIBIT 4.35 THIRD AMENDMENT TO WARRANT AGREEMENT THIS THIRD AMENDMENT TO WARRANT AGREEMENT (this "Amendment") is made as of the 20th day of August, 1997, by and among The Cerplex Group, Inc., a Delaware corporation (the "COMPANY") and each of the holders of warrants listed on Schedule A hereto, each of which is herein referred to as a "HOLDER" and collectively as the "HOLDERS". RECITALS: A. The Company and the Holders entered into a Warrant Agreement dated as of November 19, 1993, as amended by a First Amendment to Warrant Agreement dated as of April 15, 1996 and a Second Amendment to Warrant Agreement dated as of April 9, 1997 (as in effect prior to the effectiveness of this Amendment, the "EXISTING WARRANT AGREEMENT"). B. The Holders are the holders of all of the Warrants (as such term is defined in the Existing Warrant Agreement) outstanding as of the date hereof. C. The Company has requested that the Existing Warrant Agreement be amended, as more particularly provided herein, and the Holders have agreed to amend the Existing Warrant Agreement as set forth herein. AGREEMENT: NOW THEREFORE, for valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: SECTION 1. DEFINED TERMS. As used in this Amendment, the following terms have the respective meanings specified below: "AMENDMENT, THIS" -- means this Third Amendment to Warrant Agreement. "COMPANY" -- the introductory sentence. "EXISTING WARRANT AGREEMENT" -- Recital A. "HOLDERS" -- the introductory sentence. SECTION 2. AMENDMENTS TO EXISTING WARRANT AGREEMENT. 2.1 AMENDMENT TO SECTION 3.1(B). Section 3.1(b) of the Existing Warrant Agreement is hereby amended and restated in its entirety to read as follows: "(b) ENFORCEABILITY OF OBLIGATIONS. This Agreement and the Warrant Certificates issued on the date hereof have been, and any Warrants issued after the date hereof will be, duly authorized, executed and delivered by the Company. This Agreement, the Warrant Certificates and the Warrants constitute, or upon execution 2 and delivery will constitute, the legal, valid and binding obligations of the Company, enforceable in accordance with their respective terms, except: "(i) as such enforceability may be limited by bankruptcy, insolvency or other similar laws affecting the enforceability of creditors' rights generally; and "(ii) as such enforceability may be subject to the availability of equitable remedies. "The holders of the Warrants are entitled to the benefits of this Agreement." 2.2 AMENDMENT TO SECTION 4.1(d)(I). The introductory paragraph to Section 4.1(d)(i) of the Existing Warrant Agreement is hereby amended and restated in its entirety to read as follows: "(d) ISSUANCES OF COMMON STOCK AND OTHER SECURITIES. "(i) In the event that the Company shall issue or sell shares of Common Stock, or rights, options, warrants or convertible or exchangeable Securities containing the right to subscribe for or purchase shares of Common Stock (excluding Excluded Securities, as defined in Section 4.1(d)(ii) hereof) at a price per share of Common Stock lower than the Reference Price in effect on the date (the "ADJUSTMENT DATE") of such issuance or sale, then the Purchase Price in effect immediately after the Adjustment Date shall be determined by multiplying the Purchase Price in effect immediately prior to such Adjustment Date by the quotient of:" The remainder of Section 4.1(d)(i) of the Existing Warrant Agreement shall remain in effect without amendment. 2.3 AMENDMENT TO SECTION 4.1(d)(II). Section 4.1(d)(ii) of the Existing Warrant Agreement is hereby amended and restated in its entirety to read as follows: "(ii) "EXCLUDED SECURITIES" shall mean and include: "(A) shares of Common Stock, rights, options, warrants or convertible or exchangeable Securities issued in any of the transactions described in Section 4.1(a), Section 4.1(b), Section 4.1(c) or Section 4.1(e) hereof and with respect to which an adjustment to the Purchase Price has been made in accordance with any of such Sections; "(B) shares of Common Stock issuable upon exercise of the Warrants (including, without limitation, the Additional Warrants); "(C) shares of Common Stock issuable upon exercise of rights, options or warrants or conversion or exchange of convertible or 2 3 exchangeable Securities issued or sold under circumstances which caused an adjustment pursuant to this Section 4.1(d); "(D) rights to acquire shares of Common Stock, and shares of Common Stock issuable upon exercise of such rights, issued to employees of the Company and it Subsidiaries pursuant to any employee stock purchase plan maintained by the Company or any of its Subsidiaries, provided that any such rights issued pursuant to any such plan and any shares of Common Stock issuable upon the exercise thereof which, in the aggregate, exceed, at the time of the issuance thereof, two percent (2%) of the Fully Diluted Outstanding Common Stock, determined at such time, shall not constitute Excluded Securities; "(E) shares of Common Stock and/or rights, options, warrants or convertible or exchangeable Securities (and the shares of Common Stock issuable upon the exercise of such rights, options, warrants or convertible or exchangeable Securities), provided that (1) such shares of Common Stock and/or rights, options, warrants or convertible or exchangeable Securities are issued in connection with one or more private placements of equity Securities of the Company effected on or prior to July 15, 1996, (2) the total aggregate consideration paid in cash in respect of such shares of Common Stock and/or rights, options, warrants or convertible or exchangeable Securities is not more than $8,000,000, (3) all such shares of Common Stock together with all shares of Common Stock issuable upon the exercise of any of such rights, options, warrants or convertible or exchangeable Securities shall not, in the aggregate, exceed 12% of Fully Diluted Outstanding Common Stock, determined as of April 16, 1996, and (4) the sale of such shares of Common Stock and/or rights, options, warrants or convertible or exchangeable Securities is done on an arm's-length basis and the setting of the exercise, strike or conversion prices in respect of such rights, options, warrants or convertible or exchangeable Securities is done on an arm's-length basis; "(F) warrants issued on or prior to August 20, 1997, to any holder of the senior or subordinated indebtedness, warrants issued on or after the date hereof pursuant to provisions comparable to Section 4.4(a), Section 4.4(b) or Section 4.4(c) hereof contained in any agreement between the Company and such holders pursuant to which such senior or subordinated indebtedness is issued and shares of Common Stock issuable upon the exercise of any such Warrants; and "(G) shares of Common Stock, rights, options, warrants or convertible or exchangeable Securities issued in any of the transactions described in Sections 4.4(a), Section 4.4(b) or Section 4.4(c) hereof and with respect to which additional Warrants have been issued in accordance with any of such Sections." 3 4 2.4 AMENDMENT TO SECTION 4.1(e). Section 4.1(e) of the Existing Warrant Agreement is hereby amended by adding the following sentence at the end of such section" "For purposes of determining the number of shares subject to any Warrant with respect to any adjustments made pursuant to this Section 4.1(e), the Company shall make the adjustments provided for in Section 4.4 in respect of any issuances of Employee Options or Director Options that occurred during the period from the date of the last determination pursuant to such Section to the date immediately prior to such consolidation, merger, sale or conveyance." 2.5 AMENDMENT TO SECTION 4.1(i). Section 4.1(i) of the Existing Warrant Agreement is hereby amended and restated in its entirety to read as follows: "(i) EXPIRATION OF RIGHTS, OPTIONS, ETC. "(i) Upon the expiration of any rights, options, warrants or conversion or exchange privileges referred to above in this Section 4.1 without the exercise thereof, the Purchase Price and the number of shares of Common Stock purchasable upon the exercise of each Warrant shall be readjusted and shall thereafter be such as such Purchase Price and such number of shares of Common Stock would have been had they been originally adjusted (or had the original adjustment not been required, as the case may be) as if: "(A) the only shares of Common Stock so issued were the shares of Common Stock, if any, actually issued or sold upon the exercise of such rights, options, warrants or conversion or exchange privileges; and "(B) such shares of Common Stock, if any, were issued or sold for the consideration actually received by the Company upon such exercise plus the aggregate consideration, if any, actually received by the Company for the issuance, sale or grant of all of such rights, options, warrants or conversion or exchange privileges whether or not exercised; "provided that no such readjustment shall have the effect of increasing the Purchase Price by an amount in excess of the amount of the reduction initially made in respect of the issuance, sale, or grant of such rights, options, warrants or conversion or exchange privileges. "(ii) In the event that during any calendar quarter after August 20, 1997, any Employee Option, Director Option or portion thereof expires without the exercise thereof and the issuance of any such Employee Option or Director Option had resulted in the issuance of Additional Warrants pursuant to Section 4.4(a) hereof, the number of shares of Common Stock purchasable upon the exercise of the Additional Warrants shall be reduced as of the first day of the next succeeding calendar quarter by the number of shares of Common Stock 4 5 subject to such terminated or expired Employee Option, Director Option or portion thereof." 2.6 AMENDMENT TO SECTION 4. Section 4 of the Existing Warrant Agreement is hereby amended by adding a new Section 4.4 at the end thereof, such Section 4.4 to read in its entirety as follows: "4.4 ISSUANCE OF ADDITIONAL WARRANTS. "(a) GRANT OF EMPLOYEE OPTIONS AND DIRECTOR OPTIONS. In the event that, during any calendar quarter after August 20, 1997: "(i) Employee Options (other than Employee Options issued in a transaction described in Section 4.1(d) hereof) are issued and the aggregate number of such Employee Options plus all other Employee Options issued on or prior to the date of such issuance, other than Terminated Employee Options, exceeds the then effective Employee Option Threshold; or "(ii) Director Options (other than Director Options issued in a transaction described in Section 4.1(d) hereof) are issued and the aggregate number of such Director Options plus all other Director Options issued on or prior to the date of such issuance, other than Terminated Director Options, exceeds the Director Option Threshold; "then the Company shall, as of the first day of the next succeeding calendar quarter, issue Additional Warrants to the holders of the Warrants on a pro rata basis covering that number of shares equal to the product of the Dilution Percentage multiplied by the number of the Employee Options or Director Options, as the case may be, issued during such period (or, with respect to the first calendar quarter in which the number of Employee Options or Director Options issued during such quarter plus the aggregate number of Employee Options and Director Options, as the case may be, issued on or prior to the date of such issuance other than Terminated Employee Options or Terminated Director Options, as the case may be, exceeds the then effective Employee Option Threshold or the Director Option Threshold, as the case may be, the amount such excess). "(b) ISSUANCES IN CONNECTION WITH CONVERSION OF SENIOR DEBT. In the event that, on or after August 20, 1997: "(i) all or any portion of the principal amount of the Senior Debt is converted into shares of Common Stock, or Securities convertible into or exchangeable for shares of Common Stock; and "(ii) the Post-Conversion Market Price per share of Common Stock following such conversion is less than the Measurement Price per share of Common Stock prior to such conversion; 5 6 "the Company shall issue Additional Warrants to the holders of the Warrants on a pro rata basis covering that number of shares equal to: "(A) the product of: "(1) the difference between the Post-Conversion Market Price per share of Common Stock and the Measurement Price per share of Common Stock; multiplied by "(2) the total number of shares of Common Stock issuable upon exercise of the Warrants held by such holders immediately prior to such issuance; "divided by "(B) the Post-Conversion Market Price per share of Common Stock; "provided, however, that in no event shall the number of Warrants issued pursuant to this Section 4.4(b) as a result of any single issuance of shares of Common Stock, or Securities convertible into or exchangeable for shares of Common Stock to the holders of the Senior Debt exceed the product of: "(y) the aggregate number of shares of Common Stock issued or issuable pursuant to such convertible or exchangeable Securities to the holders of the Senior Debt Warrants with respect to such single issuance; multiplied by "(z) a fraction, the numerator of which is the number of shares of Common Stock underlying the Warrants outstanding immediately prior to such issuance and the denominator of which is the Fully Diluted Outstanding Common Stock; "and provided further that no Warrants shall be issued pursuant to this provision in connection with any transaction in which both the holders of the Senior Debt convert all or any portion of the aggregate principal amount of the Senior Debt into shares of Common Stock, or Securities convertible into or exchangeable for shares of Common Stock, and the holders of the Warrants convert all or a portion of the aggregate principal amount of indebtedness then outstanding under the Notes into shares of Common Stock or Securities convertible into or exchangeable for shares of Common Stock. The Initial Purchase Price of such Warrants shall be the Post-Conversion Market Price per share. "(c) ISSUANCE OF OTHER SECURITIES TO HOLDERS OF SENIOR DEBT. In the event that, on or after August 20, 1997, rights, options or warrants containing the right to subscribe for or purchase shares of Common Stock are issued to the holders of the Senior Debt Warrants (other than in a transaction described in Section 4.1(d) hereof), the Company shall issue Additional Warrants to the holders of the Warrants on a pro rata basis covering that number of shares equal to the product of: 6 7 "(i) the aggregate number of shares of Common Stock underlying the rights, options or warrants issued to the holders of the Senior Debt Warrants; multiplied by "(ii) a fraction, the numerator of which is the number of shares of Common Stock underlying the Warrants outstanding immediately prior to such issuance are exercisable and the denominator of which is the Fully Diluted Outstanding Common Stock; "and provided further that no Warrants shall be issued pursuant to this provision in connection with any transaction in which both the holders of the Senior Debt Warrants and the holders of the Warrants are issued shares of Common Stock or rights, options or warrants containing the right to subscribe for or purchase shares of Common Stock pursuant to a negotiated transaction as opposed to pursuant to this Section 4.4(c). The Initial Purchase Price of such Warrants shall be the per share exercise price of the rights, options or warrants in respect of which such Additional Warrants are being issued. "(d) EXCLUDED ISSUANCES OF SECURITIES TO HOLDERS OF SENIOR DEBT WARRANTS. Notwithstanding the foregoing, no Warrants shall be issued pursuant to Sections 4.4(a), 4.4(b) or 4.4(c) hereof as result of any issuance of additional Warrants to the holders of the Senior Debt Warrants pursuant to provisions comparable to Section 4.4(a), Section 4.4(b) or Section 4.4(c) hereof contained in any agreement between the Company and such holders pursuant to which such Senior Debt Warrants are issued." 2.7 ADDITIONS TO SECTION 5.1. The following additional defined terms shall be added to Section 5.1 of the Existing Warrant Agreement, each in its appropriate alphabetical position: "ADDITIONAL WARRANTS -- means any additional Warrants issued pursuant to the terms of Section 4.4 hereof." "AVERAGE CLOSING BID PRICE -- means, with respect to any period and any class of Common Stock, the per share price of such class determined as follows: "(a) the average daily closing bid prices of such class of Common Stock on each trading day during such period, as officially reported on the principal national securities exchange on which such class of Common Stock is then listed or admitted to trading; or "(b) if such class of Common Stock is not then listed or admitted to trading on any national securities exchange, the average of the last reported bid prices for each trading day during such period of such class of Common Stock." 7 8 "CLOSING BID PRICE - means, with respect to any date and any class of Common Stock, the per share price determined as follows: "(a) the closing bid prices on such date, as officially reported on the principal national securities exchange on which such class of Common Stock is then listed or admitted to trading; or "(b) if such class of Common Stock is not then listed or admitted to trading on any national securities exchange, the last reported bid price of such class of Common Stock on such date." "DILUTION PERCENTAGE -- means the percentage interest in the fully-diluted equity of the Company represented by all Warrants on August 21, 1997; provided however, that in the event that any of the Warrants are exercised after August 20, 1997, the Dilution Percentage shall be reduced by multiplying the then-effective Dilution Percentage by a fraction, the numerator of which is the number of Warrants remaining immediately following such exercise and the denominator of which is the number of Warrants outstanding immediately prior to such exercise." "DIRECTOR OPTIONS -- means rights, options, warrants or convertible or exchangeable Securities containing the right to subscribe for or purchase shares of Common Stock issued to any directors of the Company or any of its Subsidiaries who were members of the Board of Directors of the Company or any of its Subsidiaries as of August 20, 1997; provided, however, that: "(a) rights, warrants, options or convertible or exchangeable Securities purchased from the Company to acquire shares of the Common Stock in a bona fide arm's-length transaction for consideration at least equal to the Reference Price; "(b) any rights, options, warrants or convertible or exchangeable securities purchased from Persons other than the Company or its Subsidiaries to acquire shares of Common Stock; and "(c) any shares of the Series B Preferred Stock held by any employees, officers or directors of the Company or any of its Subsidiaries on the August 20, 1997; "shall not constitute Director Options." "DIRECTOR OPTION THRESHOLD -- means 1,460,424 shares, as such number may be adjusted from time to time to reflect any subdivision or combination of shares of Common Stock." "EMPLOYEE OPTIONS -- means rights, options, warrants or convertible or exchangeable Securities containing the right to subscribe for or purchase shares of Common Stock issued to any employees, officers or directors of Company or any of 8 9 its Subsidiaries, including, without limitation, Employee Options issued to Stephen Hopkins as consideration for his services as President and Chief Executive Officer of the Company; provided, however, that: "(a) rights, warrants, options or convertible or exchangeable Securities purchased from the Company to acquire shares of Common Stock in a bona fide arm's-length transaction for consideration at least equal to the Reference Price; "(b) any rights, options, warrants or convertible or exchangeable securities acquired from Persons other than the Company or its Subsidiaries to acquire shares of Common Stock; and "(c) any shares of the Series B Preferred Stock held by any employees, officers or directors of the Company or any of its Subsidiaries on August 20, 1997; "shall not constitute Employee Options." "EMPLOYEE OPTION THRESHOLD -- means 7,302,121 shares, as such number may be adjusted from time to time to reflect any subdivision or combination of shares of Common Stock; provided, however, that in the event that Additional Warrants are issued pursuant to Section 4.4(a) during any calendar quarter after August 20, 1997, the Employee Option Threshold shall be increased by the number of Director Options issued during the immediately preceding calendar quarter (or, with respect to the first calendar quarter during which the number of Director Options exceeds the Director Option Threshold, the amount of such excess)." "MEASUREMENT PRICE - means, with respect to any date and any class of Common Stock, the average of the daily Closing Bid Prices of such class of Common Stock for five (5) consecutive trading days prior to the public announcement of any conversion of any Senior Debt; provided, however, that the date on which such public announcement is made shall not be considered a trading day." "POST-CONVERSION MARKET PRICE - means, with respect to any date and any class of Common Stock, the average of the daily Closing Bid Prices of such class of Common Stock for five (5) consecutive trading days after the filing of a Current Report on Form 8-K with respect to any conversion of any Senior Debt; provided, however, that the date on which such Current Report on Form 8-K is filed shall not be considered a trading day." "SENIOR DEBT -- has the meaning provided in the Note Purchase Agreement." "SENIOR DEBT WARRANTS -- means all warrants initially issued to the holders of the Senior Debt and any additional warrants issued pursuant to any agreement between the Company and the holders of the Senior Debt pursuant to which such warrants were issued." 9 10 "SERIES B PREFERRED STOCK -- means the Series B Preferred Stock of the Company as provided for in its certificate of incorporation." "TERMINATED DIRECTOR OPTIONS -- means any Director Options issued on or prior to the August 20, 1997 that have been exercised or have terminated or expired prior to the August 20, 1997." "TERMINATED EMPLOYEE OPTIONS -- means any Employee Options issued on or prior to the August 20, 1997 that have been exercised or have terminated or expired prior to the August 20, 1997." 2.8 AMENDMENTS TO SECTION 5.1. Each of the following definitions shall amend and restate in its entirety to corresponding definition contained in the Existing Warrant Agreement. "INITIAL PURCHASE PRICE -- means: "(a) with respect to the Warrants issued on the date hereof, Fifty-Nine Cents ($0.59) per share; "(b) with respect to any Warrants issued pursuant to Section 4.4(a), the Average Closing Bid Price of a share of Common Stock during the calendar quarter in respect of which the adjustment is being made; "(c) with respect to any Warrants issued pursuant to Section 4.4(b), the Post-Conversion Market Price per share; and "(d) with respect to any Warrants issued pursuant to Section 4.4(c) hereof, the per share exercise price of the rights, options or warrants in respect of which the Additional Warrants are being issued." "WARRANTS -- all Warrants issued under this Agreement, including, without limitation, all Additional Warrants." 2.9 AMENDMENT TO FORM OF WARRANT. For the avoidance of doubt, any Warrant Certificates issued evidencing Additional Warrants issued pursuant to Section 4.4 shall bear the actual Initial Purchase Price thereof in the first paragraph of such Warrant Certificate in lieu of the price reflected in the form of Warrant contained in Exhibit A to the Existing Warrant Agreement. SECTION 3. MISCELLANEOUS. 3.1 GOVERNING LAW. This Amendment shall be governed by, and construed and enforced in accordance with, internal New York law. 10 11 3.2 DUPLICATE ORIGINALS. Two or more duplicate originals of this Amendment may be signed by the parties, each of which shall be an original but all of which together shall constitute one and the same instrument. This Amendment may be executed in one or more counterparts and shall be effective when at least one counterpart shall have been executed by each party hereto, and each set of counterparts which, collectively, show execution by each party hereto shall constitute one duplicate original. 3.3 EFFECT OF THIS AMENDMENT. Except as specifically provided in this Amendment, no terms or provisions of the Existing Warrant Agreement have been modified or changed by this Amendment and the terms and provisions of the Existing Warrant Agreement, as amended hereby, shall continue in full force and effect. This Amendment and the amendments contained herein shall have and be in effect on and after the date hereof. 3.4 SECTION HEADINGS. The titles of the sections hereof appear as a matter of convenience only, do not constitute a part of this Amendment and shall not affect the construction hereof. [REMAINDER OF PAGE INTENTIONALLY BLANK. NEXT PAGE IS SIGNATURE PAGE.] 11 12 IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed on their behalf by a duly authorized officer or agent thereof, as the case may be, as of the date first above written. THE CERPLEX GROUP, INC. By________________________________ Name: Title: THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY By________________________________ Name: Title: JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY By________________________________ Name: Title: NORTH ATLANTIC SMALLER COMPANIES INVESTMENT TRUST PLC By________________________________ Name: Title: 13 SCHEDULE A Schedule of Holders The Northwestern Mutual Life Insurance Company 720 East Wisconsin Avenue Milwaukee, Wisconsin 53202 John Hancock Mutual Life Insurance Company John Hancock Place 200 Clarendon Street Boston, Massachusetts 02117 North Atlantic Smaller Companies Trust PLC c/o J.O. Hambro & Co., Ltd. 10 Park Place London, England SW1A1LP 13 EX-4.36 7 WARRANT AGREEMENT 1 EXHIBIT 4.36 EXECUTION COPY THE CERPLEX GROUP, INC. --------------------- WARRANT AGREEMENT --------------------- DATED AS OF AUGUST 20, 1997 WARRANTS TO PURCHASE SHARES OF COMMON STOCK 2 TABLE OF CONTENTS (Not a Part of the Agreement)
PAGE 1. FORM, EXECUTION AND TRANSFER OF WARRANT CERTIFICATES................................................................................ 2 1.1 Form of Warrant Certificates.................................................... 2 1.2 Execution of Warrant Certificates; Registration Books etc....................... 2 1.3 Transfer, Split Up, Combination and Exchange of Warrant Certificates; Lost or Stolen Warrant Certificates............................... 4 1.4 Subsequent Issuance of Warrant Certificates..................................... 4 2. EXERCISE OF WARRANTS; PAYMENT OF PURCHASE PRICE............................................ 5 2.1 Exercise of Warrants............................................................ 5 2.2 Issuance of Common Stock........................................................ 5 2.3 Unexercised Warrants............................................................ 6 2.4 Cancellation and Destruction of Warrant Certificates............................ 6 3. REPRESENTATIONS AND COVENANTS OF THE COMPANY................................................ 6 3.1 Representations and Warranties.................................................. 6 3.2 Reservation of Common Stock..................................................... 7 3.3 Common Stock to be Duly Authorized and Issued, Fully Paid and Nonassessable................................................................... 7 3.4 Transfer Taxes.................................................................. 7 3.5 Common Stock Record Date........................................................ 8 3.6 Financial and Business Information.............................................. 8 4. ADJUSTMENT OF PURCHASE PRICE AND NUMBER OF SHARES OF COMMON STOCK ISSUABLE PER WARRANT........................................................ 10 4.1 Mechanical Adjustments.......................................................... 10 4.2 Fractional Shares............................................................... 21 4.3 Special Agreements of the Company............................................... 21 4.4 Issuance of Additional Warrants................................................. 22 5. INTERPRETATION OF THIS AGREEMENT............................................................ 23 5.1 Terms Defined................................................................... 23 5.2 Directly or Indirectly.......................................................... 30 5.3 Section Headings and Table of Contents and Construction......................... 30 5.4 Governing Law................................................................... 30 6. MISCELLANEOUS............................................................................... 31 6.1 Communications.................................................................. 31 6.2 Reproduction of Documents....................................................... 32 6.3 Survival........................................................................ 33
i 3 6.4 Successors and Assigns.......................................................... 33 6.5 Amendment and Waiver............................................................ 33 6.6 Right of Action................................................................. 33 6.7 Expenses........................................................................ 34 6.8 Filings......................................................................... 34 6.9 Entire Agreement................................................................ 34 6.10 Term............................................................................ 35 6.11 Duplicate Originals, Execution in Counterpart................................... 35
Annex 1 -- Information as to Holders Exhibit A -- Form of Warrant Certificate Exhibit B -- Determination of Fair Market Share Price Exhibit C -- Confidentiality ii 4 WARRANT AGREEMENT WARRANT AGREEMENT, dated as of August 20, 1997 (as may be amended from time to time, this "AGREEMENT"), among THE CERPLEX GROUP, INC., a Delaware corporation (together with its successors and assigns, the "COMPANY"), and each of the Persons identified as a Holder in Annex 1 individually, a "HOLDER" and, collectively, the "HOLDERS"). RECITALS: A. Certain capitalized terms used in this Agreement have the meanings assigned to them in Section 5.1 hereof. B. Holders, the Company and Wells Fargo Bank, National Association, as administrative agent, have entered into a Credit Agreement dated as of October 12, 1994 (as amended to the date hereof, the "CREDIT AGREEMENT"). C. In accordance with the First Amendment to Credit Agreement and Limited Waiver (the "FIRST AMENDMENT"), dated as of April 15, 1996 and entered into by and among the Company, the financial institutions listed on the signature pages thereof ("LENDERS") and Wells Fargo Bank, National Association, as administrative agent for the Lenders ("ADMINISTRATIVE AGENT"), and in consideration of certain waivers and amendments set forth in the First Amendment, the Company issued in the aggregate one hundred twenty-five thousand (125,000) warrants (individually, an "ORIGINAL WARRANT" and, collectively, the "ORIGINAL WARRANTS") of the Company to the Lenders, each Original Warrant representing the right to purchase, upon the terms and subject to the conditions set forth in that certain Warrant Agreement dated as of April 15, 1996 between the Company and the Lenders (the "ORIGINAL WARRANT AGREEMENT"), and subject to adjustment as set forth herein, one (1) share of Common Stock. D. In accordance with the Third Amendment to Credit Agreement (the "THIRD AMENDMENT"), dated as of April 9, 1997 and entered into by and among the Company, Lenders and Administrative Agent, and in consideration of certain amendments set forth in the Third Amendment, the Company issued in the aggregate an additional seven hundred fifty thousand (750,000) warrants (individually, an "ADDITIONAL WARRANT" and, collectively, the "ADDITIONAL WARRANTS") of the Company to the Lenders, each Additional Warrant representing the right to purchase, upon the terms and subject to the conditions set forth in the Original Warrant Agreement, as amended and restated by that certain Amended and Restated Warrant Agreement dated as of April 9, 1997 (the "AMENDED AND RESTATED AGREEMENT"), and subject to adjustment as set forth herein, one (1) share of Common Stock. E. In accordance with the Sixth Amendment to Credit Agreement and Consent (the "SIXTH AMENDMENT"), dated as of August 6, 1997 and entered into by and 1 5 among the Company, Lenders and Administrative Agent, and in consideration of certain amendments set forth in the Sixth Amendment, the Company has agreed to issue in the aggregate an additional one million two hundred sixty-two thousand one hundred eighty- eight (1,262,188) warrants (individually, a "WARRANT" and, collectively, the "WARRANTS") of the Company to Lenders and, under certain circumstances set forth in the Sixth Amendment, to issue to Lenders additional Warrants, each Warrant representing the right to purchase, upon the terms and subject to the conditions set forth in the Amended and Restated Agreement, as amended and restated hereby, and subject to adjustment as set forth herein, one (1) share of Common Stock. AGREEMENT: NOW, THEREFORE, in consideration of the premises and the mutual agreements set forth herein, the parties to this Agreement hereby agree as follows: 1. FORM, EXECUTION AND TRANSFER OF WARRANT CERTIFICATES 1.1 FORM OF WARRANT CERTIFICATES. The warrant certificates (individually, a "WARRANT CERTIFICATE" and, collectively, the "WARRANT CERTIFICATES") evidencing the Warrants, and the forms of assignment and of election to purchase shares to be attached to such certificates, shall be substantially in the form set forth in Exhibit A and may have such letters, numbers or other marks of identification or designation as may be required to comply with any law or with any rule or regulation of any governmental authority, stock exchange or self-regulatory organization made pursuant thereto. Each Warrant Certificate shall be dated as of the date of issuance thereof by the Company, either upon initial issuance or upon transfer or exchange, and on its face shall initially entitle the holder thereof to purchase the number of shares of Common Stock equal to the number of Warrants represented by such Warrant Certificate at a price per share equal to the Purchase Price, but the number of such shares and the Purchase Price shall be subject to adjustment as provided herein. 1.2 EXECUTION OF WARRANT CERTIFICATES; REGISTRATION BOOKS ETC. (a) EXECUTION OF WARRANT CERTIFICATES. The Warrant Certificates shall be executed on behalf of the Company by its President, one of its Vice Presidents or any other officer of the Company authorized by the Board of Directors, which execution shall be attested by the Secretary or an Assistant Secretary of the Company. In case any officer of the Company who shall have signed any Warrant Certificate shall cease to be such officer of the Company before issuance and delivery by the Company of such Warrant Certificate, such Warrant Certificate nevertheless may be issued and delivered with the same force and effect as though the individual who signed such Warrant Certificate had not ceased to be such officer of the Company, and any Warrant Certificate may be signed on behalf of the Company by any individual who, at the actual date of the execution of such 2 6 Warrant Certificate, shall be a proper officer of the Company to sign such Warrant Certificate, although at the date of the execution of this Agreement any such individual was not such an officer. (b) REGISTRATION BOOKS, ETC. The Company will keep or cause to be kept at its office maintained at the address of the Company set forth in Section 6.1 hereof, or at such other office of the Company in the United States of America of which the Company shall have given notice to each holder of Warrant Certificates, books for registration and transfer of the Warrant Certificates issued hereunder. Such books shall show the names and addresses of the respective holders of the Warrant Certificates, the registration number and the number of Warrants evidenced on its face by each of the Warrant Certificates and the date of each of the Warrant Certificates. Every holder of a Warrant Certificate by accepting the same consents and agrees with the Company and with every other holder of a Warrant Certificate that: (i) the Warrant Certificates are transferable only on the registry books of the Company if surrendered at the office of the Company referred to in this Section 1.2(b), duly endorsed or accompanied by an instrument of transfer (substantially in the form attached to Exhibit A); and (ii) the Company may deem and treat the Person in whose name each Warrant Certificate is registered as the absolute owner thereof and of the Warrants evidenced thereby (notwithstanding any notations of ownership or writing on the Warrant Certificates made by anyone other than the Company) for all purposes whatsoever, and the Company shall not be affected by any notice to the contrary. (c) ACQUISITION FOR INVESTMENT. Each Holder represents that it is acquiring the Warrants for its own account for investment and not with a view to any resale or distribution thereof, within the meaning of the Securities Act, but without prejudice to its right at all times to sell or otherwise dispose of all or any part of the Warrants or the shares of Common Stock issuable upon the exercise of such Warrant under a registration statement filed under the Securities Act or in a transaction exempt from the registration requirements of the Securities Act. Each Holder agrees that each outstanding Warrant Certificate (and each certificate representing a share or shares of Common Stock issued upon the exercise of a Warrant) which it owns shall, unless the Securities represented by such certificate have been registered or have been sold in accordance with Rule 144 (or any successor regulation thereto) under the Securities Act, bear an endorsement reading substantially as follows: The securities represented by this certificate have not been registered under the Securities Act of 1933, as amended, or any state securities 3 7 law. These securities may not be sold, transferred, pledged or hypothecated in any transaction unless first registered under such laws or unless such transaction is exempt from the registration requirements of such laws. The securities represented by this certificate are subject to certain market holdback provisions set forth in that certain registration rights agreement dated November 19, 1993, as amended, among The Cerplex Group, Inc. and the other parties thereto. 1.3 TRANSFER, SPLIT UP, COMBINATION AND EXCHANGE OF WARRANT CERTIFICATES; LOST OR STOLEN WARRANT CERTIFICATES. (a) TRANSFER, SPLIT UP, ETC. Any Warrant Certificate, with or without other Warrant Certificates, may be transferred, split up, combined or exchanged for another Warrant Certificate or Warrant Certificates, entitling the registered holder or transferee thereof to purchase a like number of shares of Common Stock as the Warrant Certificate or Warrant Certificates surrendered then entitled such registered holder to purchase. Any registered holder desiring to transfer, split up, combine or exchange any Warrant Certificate shall make such request in writing delivered to the Company, and shall surrender the Warrant Certificate or Warrant Certificates to be transferred, split up, combined or exchanged at the office of the Company referred to in Section 1.2(b) hereof, whereupon the Company shall deliver promptly to the Person entitled thereto a Warrant Certificate or Warrant Certificates, as the case may be, as so requested. Each holder of Warrants after any such transfer or exchange shall, by its acceptance of the Warrants and Warrant Certificates being so transferred, be deemed to have agreed to the terms and provisions of confidentiality set forth on Exhibit C. (b) LOSS, THEFT, ETC. Upon receipt of written notice from the holder of any Warrant Certificate of the loss, theft, destruction or mutilation of such Warrant Certificate and, in the case of any such loss, theft or destruction, upon receipt of such holder's unsecured indemnity agreement, or, in the case of any such mutilation, upon surrender and cancellation of such Warrant Certificate, the Company will make and deliver a new Warrant Certificate, of like tenor, in lieu of the lost, stolen, destroyed or mutilated Warrant Certificate. 1.4 SUBSEQUENT ISSUANCE OF WARRANT CERTIFICATES. Subsequent to their original issuance, no Warrant Certificates shall be issued except: 4 8 (a) Warrant Certificates issued upon any transfer, combination, split up or exchange of Warrants pursuant to Section 1.3(a) hereof; (b) Warrant Certificates issued in replacement of mutilated, destroyed, lost or stolen Warrant Certificates pursuant to Section 1.3(b) hereof; and (c) Warrant Certificates issued pursuant to Section 2.3 hereof upon the partial exercise of any Warrant Certificate to evidence the unexercised portion of such Warrant Certificate. 2. EXERCISE OF WARRANTS; PAYMENT OF PURCHASE PRICE 2.1 EXERCISE OF WARRANTS. (a) PURCHASE PRICE PAYMENT UPON EXERCISE. At any time on or after the Effective Date and prior to 5:00 p.m. (Los Angeles, California time) on the Termination Date, the holder of any Warrant Certificate may exercise the Warrants evidenced thereby in whole or in part, by surrender of such Warrant Certificate, with an election to purchase (a form of which is attached as part of the form of Warrant Certificate attached as Exhibit A) attached thereto duly executed, to the Company at its office referred to in Section 1.2(b) hereof, together with payment of the Purchase Price, payable as set forth below in this Section 2.1, for each share of Common Stock as to which the Warrants are exercised. The Purchase Price shall be (i) payable in cash, by certified or official bank check payable to the order of the Company or by wire transfer of immediately available funds to the account of the Company or (ii) satisfied by the delivery of Warrant Certificates to the Company for cancellation in accordance with the formula set forth in Section 2.1(b) hereof. (b) NET EXERCISE PRICE. In lieu of any holder of a Warrant Certificate exercising the Warrants (or any portion thereof) evidenced by such Warrant Certificate for cash, as contemplated by Section 2.1(a) hereof, such holder may, in connection with such exercise, elect to receive shares of Common Stock equal to the product of (i) the number of shares of Common Stock issuable upon such exercise of such Warrant Certificate (or, if only a portion of such Warrant Certificate is being exercised, issuable upon the exercise of such portion) multiplied by (ii) a fraction, the numerator of which is the Market Price per share of Common Stock at the time of such exercise minus the Purchase Price per share of Common Stock at the time of such exercise, and the denominator of which is the Market Price per share of Common Stock at the time of such exercise. 2.2 ISSUANCE OF COMMON STOCK. Upon timely receipt on or after the Effective Date of a Warrant Certificate, with the form of election to purchase duly executed, accompanied by 5 9 payment of the Purchase Price for each of the shares to be purchased in the manner provided in Section 2.1 hereof and an amount equal to any applicable transfer tax (if not payable by the Company as provided in Section 3.4 hereof), the Company shall thereupon promptly cause certificates for the number of whole shares of Common Stock then being purchased to be delivered to or upon the order of the registered holder of such Warrant Certificate, registered in such name or names as may be designated by such holder, and, promptly after such receipt deliver the cash, if any, to be paid in lieu of fractional shares pursuant to Section 4.2 hereof to or upon the order of the registered holder of such Warrant Certificate. 2.3 UNEXERCISED WARRANTS. In case the registered holder of any Warrant Certificate shall exercise less than all the Warrants evidenced thereby, a new Warrant Certificate evidencing Warrants equal in number to the number of Warrants remaining unexercised shall be issued by the Company to the registered holder of such Warrant Certificate or to its duly authorized assigns. 2.4 CANCELLATION AND DESTRUCTION OF WARRANT CERTIFICATES. All Warrant Certificates surrendered to the Company for the purpose of exercise, exchange, substitution or transfer shall be cancelled by it, and no Warrant Certificates shall be issued in lieu thereof except as expressly permitted by any of the provisions of this Agreement. The Company shall cancel and retire any other Warrant Certificates purchased or acquired by the Company otherwise than upon the exercise thereof. 3. REPRESENTATIONS AND COVENANTS OF THE COMPANY 3.1 REPRESENTATIONS AND WARRANTIES. (a) CORPORATE AUTHORITY. The Company has the corporate power and authority to: (i) authorize, execute, deliver and enter into this Agreement and the Warrant Certificates; (ii) issue and sell the Warrants; (iii) perform its obligations under this Agreement and the Warrants; (iv) authorize, execute, deliver, issue and sell the shares of the Common Stock issuable upon exercise of the Warrants. (b) ENFORCEABILITY OF OBLIGATIONS. This Agreement and the Warrant 6 10 Certificates issued on the date hereof have been, and any Warrants issued after the date hereof will be, duly authorized, executed and delivered by the Company. This Agreement, the Warrant Certificates and the Warrants constitute, or upon execution and delivery will constitute, the legal, valid and binding obligations of the Company, enforceable in accordance with their respective terms, except: (c) as such enforceability may be limited by bankruptcy, insolvency or other similar laws affecting the enforceability of creditors' rights generally; and (d) as such enforceability may be subject to the availability of equitable remedies. The holders of the Warrants are entitled to the benefits of this Agreement. 3.2 RESERVATION OF COMMON STOCK. The Company represents and warrants that it has reserved for issuance a sufficient number of shares of Common Stock to permit the exercise of all the Warrants, and all other rights, options or warrants exercisable into Common Stock. The Company covenants and agrees that it will at all times cause to be reserved and kept available out of its authorized and unissued shares of Common Stock such number of shares of Common Stock as will be sufficient to permit the exercise in full of all Warrants outstanding hereunder. 3.3 COMMON STOCK TO BE DULY AUTHORIZED AND ISSUED, FULLY PAID AND NONASSESSABLE. The Company covenants and agrees that it will take all such action as may be necessary to ensure that all shares of Common Stock delivered upon the exercise of any Warrants, at the time of delivery of the certificates for such shares, shall be duly and validly authorized and issued and fully paid and nonassessable, free of any preemptive rights and free of any pledge, security interest, lien or other encumbrance. 3.4 TRANSFER TAXES. The Company covenants and agrees that it will pay when due and payable any and all federal and state transfer taxes and charges that may be payable in respect of (a) the execution and delivery of this Agreement; (b) the initial issuance and delivery of each Warrant Certificate hereunder; 7 11 (c) the issuance and delivery of each Warrant Certificate issued in exchange for any other Warrant Certificate pursuant to Section 1.3 or Section 2.3 hereof; and (d) the issuance and delivery of each share of Common Stock issued upon the exercise of any Warrant. The Company shall not, however, be required to (i) pay any transfer tax that may be payable in respect of the transfer or delivery of Warrant Certificates or the issuance or delivery of certificates for shares of Common Stock in a name other than that of the registered holder of the Warrant Certificate evidencing any Warrant surrendered for exercise (any such tax being payable by the holder of such Warrant Certificate at the time of surrender) or (ii) issue or deliver any such certificates referred to in the foregoing clause (i) for shares of Common Stock upon the exercise of any Warrant until any such tax referred to in the foregoing clause (i) shall have been paid. 3.5 COMMON STOCK RECORD DATE. Each Person in whose name any certificate for shares of Common Stock is issued upon the exercise of Warrants shall for all purposes be deemed to have become the holder of record of the Common Stock represented thereby on, and such certificate shall be dated, the date upon which the Warrant Certificate evidencing such Warrants was duly surrendered with an election to purchase attached thereto duly executed and payment of the aggregate Purchase Price (and any applicable transfer taxes, if payable by such Person) was made. Prior to the exercise of the Warrants evidenced thereby, the holder of a Warrant Certificate shall not be entitled to any rights of a shareholder in the Company with respect to shares for which the Warrants shall be exercisable, including, without limitation, any right to vote, to receive dividends or other distributions or to exercise any preemptive rights, and shall not be entitled to receive any notice of any proceedings of the Company, except as provided herein or in any other applicable agreement between the Company and such holder. 3.6 FINANCIAL AND BUSINESS INFORMATION. The Company shall deliver to each holder of Warrants: (a) QUARTERLY STATEMENTS -- as soon as practicable after the end of each quarterly fiscal period in each fiscal year of the Company (other than the last quarterly fiscal period of each such fiscal year), and in any event within forty-five (45) days thereafter, duplicate copies of 8 12 (i) a consolidated balance sheet of the Company and the Subsidiaries as at the end of such quarter, and (ii) consolidated statements of income and cash flows of the Company and the Subsidiaries for such quarter and (in the case of the second and third quarters) for the portion of the fiscal year ending with such quarter, setting forth in each case in comparative form the figures for the corresponding periods in the immediately preceding fiscal year, all in reasonable detail, prepared in accordance with GAAP applicable to quarterly financial statements generally (provided that such financial statements need not contain footnotes), and certified as complete and correct, subject to changes resulting from year-end adjustments, by a Senior Financial Officer; (b) ANNUAL STATEMENTS -- as soon as practicable after the end of each fiscal year of the Company, and in any event within ninety (90) days thereafter, duplicate copies of (i) consolidated and consolidating balance sheets of the Company and the Subsidiaries, as at the end of such year, and (ii) consolidated and consolidating statements of income, shareholders' equity and cash flows of the Company and the Subsidiaries for such year, setting forth in each case in comparative form the figures for the immediately preceding fiscal year, all in reasonable detail, prepared in accordance with GAAP, and accompanied by (A) in the case of such consolidated statements, a report thereon of independent certified public accountants of recognized national standing, which report shall express an opinion in the form of the standard auditor's report under generally accepted auditing standards which shall state that such financial statements present fairly, in all material respects, the financial position of the companies being reported upon and their results of operations and cash flows and have been prepared in conformity with GAAP, and that the examination of such accountants in connection with such financial statements has been made in accordance with generally accepted auditing standards, and that such audit provides a reasonable basis for such opinion in the circumstances, (B) a statement from such independent certified public accountants that such consolidating statements were prepared using the same work papers as were used in the preparation of such consolidated statements, and 9 13 (C) a certification by a Senior Financial Officer that such consolidated and consolidating statements are complete and correct; (c) SEC AND OTHER REPORTS -- promptly upon their becoming available, a copy of each financial statement, report (including, without limitation, each Quarterly Report on Form 10-Q, each Annual Report on Form 10-K and each Current Report on Form 8-K), notice or proxy statement sent by the Company or any Subsidiary to shareholders generally and of each regular or periodic report and any registration statement, prospectus or written communication (other than transmittal letters), and each amendment thereto, in respect thereof filed by the Company or any Subsidiary with, or received by, such Person in connection therewith from, the National Association of Securities Dealers, any securities exchange or the SEC; and (d) REQUESTED INFORMATION -- with reasonable promptness, such other data and information as from time to time may be reasonably requested, including, without limitation, information required by 17 C.F.R. Section230.144A, as amended from time to time. Each of the Holders hereby agrees to the terms of confidentiality set forth on Exhibit C. 4. ADJUSTMENT OF PURCHASE PRICE AND NUMBER OF SHARES OF COMMON STOCK ISSUABLE PER WARRANT 4.1 MECHANICAL ADJUSTMENTS. The number of shares of Common Stock purchasable upon the exercise of each Warrant, and the Purchase Price, shall be subject to adjustment as follows: (a) DIVIDENDS, SUBDIVISIONS AND COMBINATIONS. In the event that the Company shall (i) pay a dividend in shares of Common Stock or make a distribution in shares of Common Stock, (ii) subdivide its outstanding shares of Common Stock into a greater number of shares or combine its outstanding shares of Common Stock into a smaller number of shares, then the Purchase Price in effect at the time of the record date for such dividend or of the effective date of such subdivision or combination shall be adjusted to the price determined by multiplying the Purchase Price in effect immediately prior to such event by the quotient of: 10 14 (A) the total number of shares of Adjusted Outstanding Common Stock immediately prior to such event; divided by (B) the total number of Adjusted Outstanding Common Stock immediately after such event. An adjustment made pursuant to this Section 4.1(a) shall become effective on the effective date of such event. (b) RIGHTS, OPTIONS, WARRANTS AND CONVERTIBLE OR EXCHANGEABLE SECURITIES. In the event that the Company shall issue any rights, options, warrants or convertible or exchangeable Securities to all holders of its shares of Common Stock, without charge to such holders, entitling such holders to subscribe for or purchase shares of Common Stock at a price per share (or having a conversion or exchange price per share, in the case of a Security convertible or exchangeable into shares of Common Stock) that is (or to amend or modify any provision of any thereof such that the conversion, exchange or exercise price becomes) lower at the record date in respect of which such rights, warrants, options or Securities were issued or amended than the Reference Price on such record date, then the Purchase Price in effect immediately after such record date shall be determined by multiplying the Purchase Price in effect immediately prior to such record date by the quotient of: (i) the sum of (A) the number of shares of Adjusted Outstanding Common Stock as of such record date, plus (B) the quotient of (ii) the Aggregate Consideration Receivable in respect of such rights, options, warrants or convertible or exchangeable Securities, divided by (ii) the Reference Price on such record date; divided by (ii) the sum of (A) the number of shares of Adjusted Outstanding Common Stock as of such record date, plus 11 15 (B) the number of additional shares of Common Stock initially issuable pursuant to such rights, options or warrants or into which such convertible or exchangeable Securities are initially convertible or exchangeable. Such adjustment shall be made whenever such rights, options, or warrants or convertible or exchangeable Securities are issued or amended, and shall become effective on the date of issuance or amendment of such rights, options, warrants or convertible or exchangeable Securities. (c) DISTRIBUTIONS OF PROPERTY. In the event that the Company shall distribute to holders of shares of Common Stock (including, without limitation, any such distribution made in connection with a consolidation or merger in which the Company is the continuing corporation) shares of stock (other than Common Stock) or evidences of its indebtedness or assets (excluding (x) cash dividends paid out of retained earnings after November 19, 1998, (y) Regular Cash Dividends paid after the date hereof and on or prior to November 19, 1998 and (z) dividends payable solely in additional shares of the Common Stock) or rights, options or warrants or convertible or exchangeable Securities (excluding those referred to in Section 4.1(b) and Section 4.1(d) hereof), then in each case the Purchase Price in effect immediately after the record date in respect of which such stock, indebtedness, assets, rights, options, warrants or Securities were issued shall be determined by multiplying the Purchase Price in effect immediately prior to such record date by the quotient of: (i) the result of (A) the Reference Price on such record date, minus (B) the quotient of (i) the then fair value (as determined in good faith and on a reasonable basis by the Board of Directors, whose determination, if so made, shall be conclusive) of the shares of stock or assets or evidences of indebtedness so distributed or of such rights, options or warrants, or of such convertible or exchangeable Securities, divided by (ii) the number of shares of Adjusted Outstanding Common Stock as of the record date; divided by (ii) the Reference Price on such record date. 12 16 Such adjustment shall be made whenever any such distribution is made, and shall become effective on the date of such distribution. (d) ISSUANCES OF COMMON STOCK AND OTHER SECURITIES. (i) In the event that the Company shall issue or sell shares of Common Stock, or rights, options, warrants or convertible or exchangeable Securities containing the right to subscribe for or purchase shares of Common Stock (excluding Excluded Securities, as defined in Section 4.1 (d)(ii) hereof) at a price per share of Common Stock lower than the Reference Price in effect on the date (the "ADJUSTMENT DATE") of such issuance or sale, then the Purchase Price in effect immediately after the Adjustment Date shall be determined by multiplying the Purchase Price in effect immediately prior to such Adjustment Date by the quotient of: (A) the sum of (i) the number of shares of Adjusted Outstanding Common Stock outstanding immediately prior to such issuance or sale, plus (ii) the quotient of (1) the Aggregate Consideration Receivable in respect of such rights, options, warrants or convertible or exchangeable Securities, divided by (2) the Reference Price on the Adjustment Date; divided by (B) the sum of (i) the number of shares of Adjusted Outstanding Common Stock outstanding immediately prior to such issuance or sale, plus (ii) the number of additional shares of Common Stock so issued or sold (or initially issuable pursuant to such rights, options or warrants or into which such convertible or exchangeable Securities are initially convertible or exchangeable). For purposes of this clause (i), "ADJUSTMENT DATE" may, in connection with certain consolidations and mergers, have the meaning provided for in Section 4.1(e) hereof. (ii) "EXCLUDED SECURITIES" shall mean and include: 13 17 (A) shares of Common Stock, rights, options, warrants or convertible or exchangeable Securities issued in any of the transactions described in Section 4.1(a), Section 4.1(b), Section 4.1(c) or Section 4.1(e) hereof and with respect to which an adjustment to the Purchase Price has been made in accordance with any of such Sections; (B) shares of Common Stock issuable upon exercise of the Warrants, the Original Warrants or the Additional Warrants; (C) shares of Common Stock issuable upon exercise of rights, options or warrants or conversion or exchange of convertible or exchangeable Securities issued or sold under circumstances which caused an adjustment pursuant to this Section 4.1(d); (D) rights to acquire shares of Common Stock, and shares of Common Stock issuable upon exercise of such rights, issued to employees of Company and its Subsidiaries, pursuant to any employee stock purchase plan maintained by the Company or any of its Subsidiaries, provided that any such rights issued pursuant to any such plan and any shares of Common Stock issuable upon the exercise thereof which, in the aggregate, exceed, at the time of the issuance thereof, two percent (2%) of the Fully Diluted Outstanding Common Stock, determined at such time, shall not constitute Excluded Securities; (E) shares of Common Stock and/or rights, options, warrants or convertible or exchangeable Securities (and the shares of Common Stock issuable upon the exercise of such rights, options, warrants or convertible or exchangeable Securities), provided that (1) such shares of Common Stock and/or rights, options, warrants or convertible or exchangeable Securities are issued in connection with one or more private placements of equity Securities of the Company effected on or prior to July 15, 1996, (2) the total aggregate consideration paid in cash in respect of such shares of Common Stock and/or rights, options, warrants or convertible or exchangeable Securities is not more than $8,000,000, (3) all such shares of Common Stock together with all shares of Common Stock issuable upon the exercise of any of such rights, options, warrants or convertible or exchangeable Securities shall not, in the aggregate, exceed 12% of Fully Diluted Outstanding Common Stock, determined as of April 16, 1996, and (4) the sale of such shares of Common Stock and/or rights, options, warrants or convertible or exchangeable Securities is done on an arm's-length basis and the setting of the exercise, strike or conversion prices in respect of such 14 18 rights, options, warrants or convertible or exchangeable Securities is done on an arm's-length basis; (F) warrants issued on or prior to August 20, 1997 to any holder of the Company's Subordinated Notes, Subordinated Debt Warrants issued on or after the date hereof pursuant to provisions comparable to Section 4.4(a), Section 4.4(b) or Section 4.4(c) hereof contained in any agreement between the Company and such holders pursuant to which Subordinated Debt Warrants are issued and shares of Common Stock issuable upon the exercise of any Subordinated Debt Warrants; and (G) shares of Common Stock, rights, options, warrants or convertible or exchangeable Securities issued in any of the transactions described in Sections 4.4(a), Section 4.4(b) or Section 4.4(c) hereof and with respect to which additional Warrants have been issued in accordance with any of such Sections. (iii) In the case of rights, options, warrants or convertible or exchangeable Securities, the "price per share of Common Stock" referred to in Section 4.1(d)(i) hereof shall be equal to the quotient of (A) the Aggregate Consideration Receivable in respect of such rights, options, warrants or convertible or exchangeable Securities, divided by (B) the total number of shares of Common Stock covered by such rights, options, warrants or convertible or exchangeable Securities. (iv) "AGGREGATE CONSIDERATION RECEIVABLE" shall mean, in the case of a sale of shares of Common Stock, the aggregate gross amount paid (without deduction for fees and expenses, underwriting discounts or investment banking fees associated therewith) in connection therewith and, in the case of an issuance or sale of rights, options, warrants or convertible or exchangeable Securities, the sum of (A) the aggregate gross amount paid for such rights, options, warrants or convertible or exchangeable Securities, plus (B) the aggregate consideration or premiums stated in such rights, options, warrants or convertible or exchangeable Securities to be payable for the shares of Common Stock covered thereby. 15 19 (v) In the event that the Company shall issue and sell shares of Common Stock, or rights, options, warrants or convertible or exchangeable Securities containing the right to subscribe for or purchase shares of Common Stock, for a consideration consisting, in whole or in part, of Property other than cash, then in determining the "price per share of Common Stock" referred to in Section 4.1(d)(i) and Section 4.1(d)(iii) hereof and the "Aggregate Consideration Receivable" referred to in Section 4.1(d)(i), Section 4.1(d)(iii) and Section 4.1(d)(iv) hereof, the Board of Directors shall determine, in good faith and on a reasonable basis, the fair value of such Property, and such determination, if so made, shall be binding upon all holders of Warrants. (e) CONSOLIDATION; MERGER; SALE OF THE COMPANY. In the event that there shall be: (i) any consolidation of the Company with, or merger of the Company with or into, another corporation (other than a merger in which the Company is the surviving corporation and that does not result in any reclassification or change of shares of Common Stock outstanding immediately prior to such merger); (ii) any sale or conveyance to another corporation of the Property of the Company substantially as an entirety; or (iii) any reclassification of the Common Stock that results in the issuance of other Securities of the Company; then lawful provision shall be made as a part of the terms of such transaction or otherwise so that the holders of Warrants shall thereafter have the right to purchase the number and kind of shares of stock, other Securities, cash, Property and rights receivable upon such consolidation, merger, sale, conveyance or reclassification by a holder of such number of shares of Common Stock as the holder of a Warrant would have had the right to acquire upon the exercise of such Warrant immediately prior to such consolidation, merger, sale or conveyance, at the Purchase Price then in effect, provided that nothing in this clause (e) shall entitle any holder of Warrants to acquire or have the right to purchase any of the foregoing in connection with any sale or conveyance referred to in clause (ii) above if, with respect to such sale or conveyance, no holder of Common Stock would have the right to acquire or purchase any of the foregoing and none of the foregoing were in fact distributed to holders of Common Stock and provided further that nothing in the foregoing proviso in this clause (e) shall restrict the rights of the holders of Warrants under Section 4.1(c) hereof. To the extent that (A) the Company shall issue any shares of Common Stock or rights, options, warrants or convertible or exchangeable Securities 16 20 containing the right to subscribe for or purchase shares of Common Stock (other than Excluded Securities) in connection with any consolidation or merger of the Company and (B) such issuance of such shares, rights, options, warrants or convertible or exchangeable Securities would otherwise cause an adjustment under Section 4.1(d) hereof, the Adjustment Date in respect of such adjustment, notwithstanding the definition of such term, shall be the business day immediately preceding the date of the public announcement by the Company of such merger or consolidation or, if such merger or consolidation shall have been generally known to the public prior to such announcement date, the date on which the Required Warrantholders and the Company shall mutually agree upon in good faith and in accordance with the essential intent and principles of this Section 4 of fairly protecting the exercise rights of the holders of Warrants and, if no such date can be so mutually agreed upon, the Company shall appoint (at its expense) a firm of independent certified public accountants of recognized national standing, which may not be the regular auditors of the Company and which are reasonably acceptable to the Required Warrantholders, which shall give their opinion as to the appropriate date for such adjustment (after giving effect to the aforesaid intent and principles of this Section 4); upon receipt of such opinion, the Company will promptly mail a copy of such opinion to the holders of Warrants and make the adjustments required under this Section 4 as of the date stipulated therein. For purposes of determining the number of shares subject to any Warrant with respect to any adjustments made pursuant to this Section 4.1(e), the Company shall make the adjustment provided for in Section 4.1(j) and 4.4(a) hereof in respect of any Series B Preferred Stock conversions or issuances of Employee Options or Director Options that occurred during the period from the date of the last determination pursuant to such Sections to the date immediately prior to such consolidation, merger, sale or conveyance. (f) DE MINIMIS CHANGES IN PURCHASE PRICE. No adjustment in the Purchase Price shall be required unless such adjustment would require an increase or decrease of at least one percent (1%) in the Purchase Price; provided that any adjustments that, at the time of the calculation thereof, are less than one percent (1%) of the Purchase Price at such time and by reason of this Section 4.1(f) are not required to be made at such time shall be carried forward and added to any subsequent adjustment or adjustments for purposes of determining whether such subsequent adjustment or adjustments, as so supplemented, exceed the one percent (1%) amount set forth in this Section 4.1(f) and, if any such subsequent adjustment, as so supplemented or otherwise, should exceed such one percent (1%) amount, all adjustments deferred prior thereto and not previously made shall then be made. In any case, all such adjustments being carried forward pursuant to this Section 4.1(f) shall be given effect upon the exercise of any 17 21 Warrants by any holder thereof for purposes of determining the Purchase Price thereof. All calculations shall be made to the nearest ten-thousandth of a Dollar ($0.0001). (g) ADJUSTMENT OF NUMBER OF SHARES ISSUABLE PURSUANT TO WARRANTS. Upon each adjustment of the Purchase Price as a result of the calculations made in this Section 4.1, each Warrant outstanding immediately prior to the making of such adjustment shall thereafter evidence the right to purchase, at the adjusted Purchase Price, that number of shares of Common Stock (calculated to the nearest one thousandth) obtained by multiplying the number of shares of Common Stock covered by such Warrant immediately prior to such adjustment by the quotient of: (i) the Purchase Price in effect immediately prior to such adjustment, divided by (ii) the Purchase Price in effect immediately after such adjustment. All Warrants originally issued by the Company hereunder shall, subsequent to any adjustment made to the Purchase Price hereunder, evidence the right to purchase, at the adjusted Purchase Price, the number of shares of Common Stock determined to be purchasable from time to time hereunder upon exercise of such Warrants, all subject to further adjustment as provided herein. Each such adjustment shall be valid and binding upon the Company and the holders of Warrants irrespective of whether the Warrant Certificates theretofore and thereafter issued express the Purchase Price per share of Common Stock and the number of shares of Common Stock that were expressed upon the initial Warrant Certificates issued hereunder. (h) MISCELLANEOUS. (i) Adjustments shall be made pursuant to this Section 4.1 successively whenever any of the events referred to in Section 4.1(a) through Section 4.1(e), inclusive, hereof shall occur. (ii) Shares of Common Stock owned by or held for the account of the Company, including shares acquired by the Company during any time any Warrants are outstanding, shall not, for purposes of the adjustments set forth in this Section 4.1, be deemed outstanding. (i) EXPIRATION OF RIGHTS, OPTIONS, ETC. 18 22 (i) Upon the expiration of any rights, options, warrants or conversion or exchange privileges referred to above in this Section 4.1 without the exercise thereof, the Purchase Price and the number of shares of Common Stock purchasable upon the exercise of each Warrant shall be readjusted and shall thereafter be such as such Purchase Price and such number of shares of Common Stock would have been had they been originally adjusted (or had the original adjustment not been required, as the case may be) as if: (A) the only shares of Common Stock so issued were the shares of Common Stock, if any, actually issued or sold upon the exercise of such rights, options, warrants or conversion or exchange privileges; and (B) such shares of Common Stock, if any, were issued or sold for the consideration actually received by the Company upon such exercise plus the aggregate consideration, if any, actually received by the Company for the issuance, sale or grant of all of such rights, options, warrants or conversion or exchange privileges whether or not exercised; provided that no such readjustment shall have the effect of increasing the Purchase Price by an amount in excess of the amount of the reduction initially made in respect of the issuance, sale, or grant of such rights, options, warrants or conversion or exchange privileges. (ii) In the event that, during any calendar quarter after the date hereof, any Employee Option, Director Option or portion thereof expires without the exercise thereof and the issuance of any such Employee Option or Director Option had resulted in the issuance of additional Warrants pursuant to Section 4.4(a) hereof, the number of shares of Common Stock purchasable upon the exercise of the Warrants shall be reduced as of the first day of the next succeeding calendar quarter by the number of shares of Common Stock subject to such terminated or expired Employee Option, Director Option or portion thereof. (j) CONVERSION OF SERIES B PREFERRED STOCK. In the event that any share of the Series B Preferred Stock of the Company outstanding on the date hereof is converted into shares of Common Stock following the date hereof at a conversion ratio that is greater than or less than 2500 shares of Common Stock for each share of Series B Preferred Stock, then the number of shares of Common Stock purchasable upon the exercise of the Warrants shall be increased or decreased, as the case may be, by the Dilution Percentage multiplied by the difference between the number of shares of Common Stock into which such share of Series B Preferred Stock of the Company was converted and 2500. Such increase or 19 23 decrease shall be determined in the aggregate with respect to all conversions during the period commencing on the date hereof and ending on December 31, 1997 and each six-month period commencing on each January 1 and July 1 thereafter and shall be effective as of January 1, 1998 or the first day of the six-month period next succeeding the period in respect of which the determination is made, as the case may be. (k) OTHER SECURITIES. In the event that at any time, as a result of an adjustment made pursuant to this Section 4.1, each holder of Warrants shall become entitled to purchase any Securities of the Company other than shares of Common Stock, the number or amount of such other Securities so purchasable and the Purchase Price of such Securities shall be subject to adjustment from time to time in a manner and on terms as nearly equivalent as practicable to the provisions contained in Section 4.1(a) through Section 4.1(e), inclusive, hereof, and all other relevant provisions of this Section 4. 1, and the definitions used in this Section 4. 1, that are applicable to shares of Common Stock shall be applicable to such other Securities. (l) NOTICE OF ADJUSTMENT. Whenever the number of shares of Common Stock issuable upon the exercise of Warrants is adjusted or the Purchase Price in respect thereof is adjusted, as herein provided, the Company shall promptly give to each holder of Warrants notice of such adjustment or adjustments and shall promptly deliver to each holder of Warrants a certificate of the Company's chief financial officer setting forth: (i) the number of shares of Common Stock issuable upon the exercise of each Warrant and the Purchase Price of such shares after such adjustment; (ii) a brief statement of the facts requiring such adjustment; and (iii) the computation by which such adjustment was made. So long as any Warrant is outstanding and an adjustment in respect of the number of shares issuable upon the exercise of Warrants or the Purchase Price in respect thereof shall have occurred in any fiscal year of the Company, within ninety (90) days of the end of such fiscal year of the Company, the Company shall deliver to each holder of Warrants a certificate of independent certified public accountants of recognized national standing selected by the Company (which may be the regular auditors of the Company) setting forth (A) the number of shares of Common Stock issuable upon the exercise of each Warrant and the Purchase Price of such shares as of the end of such fiscal year, 20 24 (B) a brief statement of the facts requiring each such adjustment required to be made in such fiscal year and (C) the computation by which each such adjustment was made. (m) NOTICE OF CERTAIN EVENTS. Whenever the Company shall authorize any Notice Event, the Company shall, not less than thirty (30) days prior to the record date with respect to such event, give to each holder of Warrants, notice of such event setting forth any change in the number of shares of Common Stock the Company estimates will be issuable upon the exercise of such holder's Warrants, the estimated Purchase Price of such shares after any adjustment required to be made hereunder and a brief statement of the facts requiring such adjustment and the computation by which the Company expects such adjustment will be made. "NOTICE EVENT" shall mean any of the following: (i) any event that would require an adjustment pursuant to this Section 4.1; (ii) any distribution of cash or other Property in respect of Common Stock (including, without limitation, a cash dividend payable out of retained earnings); (iii) any consolidation, merger or sale, transfer or other disposition of all or substantially all of the Property of the Company, provided that, if as a result of the circumstances concerning such consolidation, merger, sale, transfer or other disposition, it shall be impossible for the Company to give the thirty (30) days' prior notice referred to above, the Company shall give such notice as far in advance of the record date in respect of such consolidation, merger, sale, transfer or other disposition as reasonably feasible and, in any case, no later than two (2) business days prior to such record date; and (iv) the liquidation, dissolution or winding up of the Company. The Company shall, not less than thirty (30) days prior to the issuance of any Preferred Stock, give to each holder of Warrants notice of such issuance setting forth any change in the number of shares of Common Stock the Company estimates will be issuable upon the exercise of such holder's Warrants, the estimated Purchase Price of such shares after any adjustment required to be made hereunder and a brief statement of the facts requiring such adjustment and the computation by which the Company expects such adjustment will be made. 4.2 FRACTIONAL SHARES. 21 25 The Company shall not be required to issue fractional shares of Common Stock upon the exercise of any Warrant. Upon the exercise of any Warrant, there shall be paid to the holder thereof, in lieu of any fractional share of Common Stock resulting therefrom, an amount of cash equal to the product of: (a) the fractional amount of such share; multiplied by (b) the Market Price with respect to the Common Stock determined as of the date of exercise of such Warrant. 4.3 SPECIAL AGREEMENTS OF THE COMPANY. The Company covenants and agrees that: (a) The Company shall not, by amendment to the Certificate of Incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issuance or sale of Securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed hereunder by the Company, but shall at all times in good faith assist in the carrying out of all the provisions of this Section 4 and in the taking of all such actions as may be necessary or appropriate in order to protect the rights of the holders of the Warrant Certificates against dilution or other impairment. (b) Before taking any action that would result in an adjustment to the then current Purchase Price to a price that would be below the then current par value of Common Stock issuable upon exercise of any Warrant, the Company will take or cause to be taken any and all necessary corporate or other action that may be necessary in order that the Company may validly and legally issue fully paid and nonassessable shares of Common Stock upon payment of such Purchase Price as so adjusted. 4.4 ISSUANCE OF ADDITIONAL WARRANTS. (a) GRANT OF EMPLOYEE OPTIONS AND DIRECTOR OPTIONS. In the event that, during any calendar quarter after the date hereof, (i) Employee Options (other than Employee Options issued in a transaction described in Section 4.1(d) hereof) are issued and the aggregate number of such Employee Options plus all other Employee Options issued on or prior to the date of such issuance, other than Terminated Employee Options, exceeds the then effective Employee Option Threshold, or (ii) Director Options (other than Director Options issued in a transaction described in Section 4.1(d) hereof) are issued and the aggregate 22 26 number of such Director Options plus all other Director Options issued on or prior to the date of such issuance, other than Terminated Director Options, exceeds the Director Option Threshold, the Company shall, as of the first day of the next succeeding calendar quarter, issue additional Warrants to the holders of the Warrants on a pro rata basis covering that number of shares equal to the product of the Dilution Percentage multiplied by the number of the Employee Options or Director Options, as the case may be, issued during such period (or, with respect to the first calendar quarter in which the number of Employee Options or Director Options issued during such quarter plus the aggregate number of Employee Options and Director Options, as the case may be, issued on or prior to the date of such issuance (other than Terminated Employee Options or Terminated Director Options, as the case may be, exceeds the then effective Employee Option Threshold or the Director Option Threshold, as the case may be) the amount of such excess). (b) ISSUANCES IN CONNECTION WITH CONVERSION OF SUBORDINATED NOTES. In the event that, on or after the date hereof, (i) all or any portion of the aggregate principal amount of the Subordinated Notes is converted into shares of Common Stock, or Securities convertible into or exchangeable for shares of Common Stock and (ii) the Post-Conversion Market Price per share of Common Stock following such conversion is less than the Measurement Price per share of Common Stock prior to such conversion, the Company shall issue additional Warrants to the holders of the Warrants on a pro rata basis covering that number of shares equal to (A) the product of (1) the difference between the Post-Conversion Market Price per share of Common Stock and the Measurement Price per share of Common Stock multiplied by (2) the total number of shares of Common Stock issuable upon exercise of the Warrants held by such holders immediately prior to such issuance divided by (B) the Post-Conversion Market Price per share of Common Stock; provided, however, that in no event shall the number of Warrants issued pursuant to this Section 4.4(b) as a result of any single issuance of shares of Common Stock, or Securities convertible into or exchangeable for shares of Common Stock to the holders of the Subordinated Debt Warrants exceed the product of (y) the aggregate number of shares of Common Stock issued or issuable pursuant to such convertible or exchangeable Securities to the holders of the Subordinated Debt Warrants with respect to such single issuance multiplied by (z) a fraction, the numerator of which is the number of shares of Common Stock underlying the Warrants outstanding immediately prior to such issuance and the denominator of which is the Fully Diluted Outstanding Common Stock and provided further, that no Warrants shall be issued pursuant to this provision in connection with any transaction in which both the holders of the Subordinated Notes convert all or any portion of the aggregate principal amount of the Subordinated Notes into shares of Common Stock, or Securities convertible into or exchangeable for shares of Common Stock, and the holders of the Warrants convert all or a portion of the aggregate principal amount of indebtedness then 23 27 outstanding under the Credit Agreement into shares of Common Stock or Securities convertible into or exchangeable for shares of Common Stock. The Initial Purchase Price of such Warrants shall be the Post-Conversion Market Price per share. (c) ISSUANCES OF OTHER SECURITIES TO HOLDERS OF SUBORDINATED DEBT WARRANTS. In the event that, on or after the date hereof, rights, options or warrants containing the right to subscribe for or purchase shares of Common Stock are issued to the holders of the Subordinated Debt Warrants (other than in a transaction described in Section 4.1(d) hereof), the Company shall issue additional Warrants to the holders of the Warrants on a pro rata basis covering that number of shares equal to the product of (i) the aggregate number of shares of Common Stock underlying the rights, options or warrants issued to the holders of the Subordinated Debt Warrants multiplied by (ii) a fraction, the numerator of which is the number of shares of Common Stock underlying the Warrants outstanding immediately prior to such issuance and the denominator of which is the Fully Diluted Outstanding Common Stock and provided further, that no Warrants shall be issued pursuant to this provision in connection with any transaction in which both the holders of the Subordinated Debt Warrants and the holders of the Warrants are issued shares of Common Stock or rights, options or warrants containing the right to subscribe for or purchase shares of Common Stock pursuant to a negotiated transaction as opposed to pursuant to this Section 4.4(c). The Initial Purchase Price of such Warrants shall be the per share exercise price of the rights, options or warrants in respect of which such additional Warrants are being issued. (d) EXCLUDED ISSUANCES OF SECURITIES TO HOLDERS OF SUBORDINATED DEBT WARRANTS. Notwithstanding the foregoing, no Warrants shall be issued pursuant to Sections 4.4(a), 4.4(b) or 4.4(c) hereof as result of any issuance of additional Subordinated Debt Warrants pursuant to provisions comparable to Section 4.4(a), Section 4.4(b) or Section 4.4(c) hereof contained in any agreement between the Company and such holders pursuant to which Subordinated Debt Warrants are issued. 5. INTERPRETATION OF THIS AGREEMENT 5.1 TERMS DEFINED. ADDITIONAL WARRANTS -- Recital D hereof. ADJUSTED OUTSTANDING COMMON STOCK -- means, at any time, the number of shares of Common Stock outstanding at such time (excluding all shares constituting "treasury stock" and all shares held or beneficially owned by a Subsidiary) together with the number of shares of additional Common Stock that would be outstanding at such time assuming: 24 28 (a) the conversion immediately prior to such time of all then Outstanding Securities that are convertible into shares of Common Stock or that are issuable upon exercise of any warrants, options and other rights, whether or not the conditions for such conversion or exercise then exist, provided that no such Securities shall be included in this clause (a) unless such Securities were issued and outstanding on the date hereof or are derived through transfers and/or exchanges from Securities that were issued and outstanding on the date hereof; and (b) the exercise immediately prior to such time of all then outstanding warrants, options and similar rights to acquire shares of Common Stock (including, without limitation, the Warrants), whether or not the conditions for such exercise then exist, provided that no such warrants, options and similar rights shall be included in this clause (b) unless they were issued and outstanding on the date hereof or are derived through transfers and/or exchanges from Securities that were issued and outstanding on the date hereof. ADJUSTMENT DATE -- Section 4.1(d)(i) hereof. AGGREGATE CONSIDERATION RECEIVABLE -- Section 4.1 (d)(iv) hereof. AGREEMENT -- introductory paragraph hereof. APPRAISER -- means and includes one or more nationally recognized investment banking firms or appraisers that shall be experienced in evaluating companies in the same or similar lines of business as the Company and the Subsidiaries. AVERAGE CLOSING BID PRICE -- means, with respect to any period and any class of Common Stock, the per share price of such class determined as follows: (a) the average daily closing bid prices of such class of Common Stock on each trading day during such period, as officially reported on the principal national securities exchange on which such class of Common Stock is then listed or admitted to trading; or (b) if such class of Common Stock is not then listed or admitted to trading on any national securities exchange, the average of the last reported bid prices for each trading day during such period of such class of Common Stock. BOARD OF DIRECTORS -- means, at any time, the board of directors of the Company or any committee thereof that, in the instance, shall have the lawful power to exercise the power and authority of such board of directors. 25 29 CERTIFICATE OF INCORPORATION -- means the restated certificate of incorporation of the Company, as may be amended by the Company from time to time after the Effective Date. COMMON STOCK - means: (a) on the date hereof, the Company's $0.001 par value capital stock designated as "Common Stock"; and (b) on any other date, any capital stock into which such "Common Stock shall have been changed or any capital stock resulting from any reclassification of such "Common Stock", and all other capital stock of any class or classes (however designated) of the Company the holders of which have the right, without limitation as to amount, either to all or to a share of the balance of current dividends and liquidating dividends after the payment of dividends and distributions of any shares thereof entitled to preference. COMPANY -- introductory paragraph hereof. DILUTION PERCENTAGE -- means 5.1%; provided, however, that in the event that any of the Warrants are exercised after the date hereof, the Dilution Percentage shall be reduced by multiplying the then effective Dilution Percentage by a fraction, the numerator of which is the number of Warrants remaining immediately following such exercise and the denominator of which is the number of Warrants outstanding immediately prior to such exercise. DIRECTOR OPTIONS -- means rights, options, warrants or convertible or exchangeable Securities containing the right to subscribe for or purchase shares of Common Stock issued to any directors of the Company or any of its Subsidiaries who were members of the Board of Directors of the Company or any of its Subsidiaries as of the date hereof; provided, however, that (a) rights, options, warrants or convertible or exchangeable Securities purchased from the Company to acquire shares of Common Stock in a bona fide arm's-length transaction for consideration at least equal to the Reference Price, (b) rights, options, warrants or convertible or exchangeable Securities purchased from Persons other than the Company or its Subsidiaries to acquire shares of Common Stock and (c) any shares of the Series B Preferred Stock held by any director of the Company or any of its Subsidiaries on the date hereof shall not constitute Director Options. DIRECTOR OPTION THRESHOLD -- means 1,460,424 shares, as such number may be adjusted from time to time to reflect any subdivision or combination of shares of Common Stock. 26 30 EFFECTIVE DATE -- means the date of the first issuance of any Warrants pursuant to this Agreement. EMPLOYEE OPTIONS -- means rights, options, warrants or convertible or exchangeable Securities containing the right to subscribe for or purchase shares of Common Stock issued to any employees, officers or directors of Company or any of its Subsidiaries, including, without limitation, Employee Options issued to Stephen Hopkins as consideration for his services as President and Chief Executive Officer of the Company; provided, however, that (a) rights, options, warrants or convertible or exchangeable Securities purchased from the Company to acquire shares of Common Stock in a bona fide arm's-length transaction for consideration at least equal to the Reference Price, (b) rights, options, warrants or convertible or exchangeable Securities purchased from Persons other than the Company or its Subsidiaries to acquire shares of Common Stock and (c) any shares of the Series B Preferred Stock held by any employees, officers or directors of the Company or any of its Subsidiaries on the date hereof shall not constitute Employee Options. EMPLOYEE OPTION THRESHOLD -- means 7,302,121 shares, as such number may be adjusted from time to time to reflect any subdivision or combination of shares of Common Stock; provided, however, that in the event that additional Warrants are issued pursuant to Section 4.4(a) hereof during any calendar quarter after the date hereof, the Employee Option Threshold shall be increased by the number of Director Options issued during the immediately preceding calendar quarter (or, with respect to the first calendar quarter during which the number of Director Options exceeds the Director Option Threshold, the amount of such excess). EXCLUDED SECURITIES -- Section 4.1(d)(ii) hereof. FAIR MARKET SHARE PRICE - means, at any time, the sale value of a single share of Common Stock, as determined by an Appraiser in accordance with the provisions of Exhibit B attached hereto. FULLY DILUTED OUTSTANDING COMMON STOCK -- means, at any time, the number of shares of Common Stock outstanding at such time (excluding all shares constituting "treasury stock" and all shares held or beneficially owned by a Subsidiary) together with the number of shares of additional Common Stock that would be outstanding at such time assuming: (a) the conversion immediately prior to such time of all Securities convertible into shares of Common Stock outstanding at such time or issuable upon exercise of any warrants, options and other rights outstanding at such time, whether or not the conditions for such conversion or exercise then exist; and 27 31 (b) the exercise immediately prior to such time of all then outstanding warrants, options and similar rights to acquire shares of Common Stock (including, without limitation, the Warrants), whether or not the conditions for such exercise then exist. HOLDER - introductory paragraph hereof. INITIAL PURCHASE PRICE -- means (a) with respect to the Warrants issued on the date hereof, Fifty-Nine Cents ($0.59) per share, (b) with respect to any Warrants issued pursuant to Section 4.4(a) hereof, the Average Closing Bid Price of a share of Common Stock during the calendar quarter in respect of which the adjustment is being made, (c) with respect to any Warrants issued pursuant to Section 4.4(b) hereof, the Post-Conversion Market Price per share and (d) with respect to any Warrants issued pursuant to Section 4.4(c) hereof, the per share exercise price of the rights, options or warrants in respect of which the additional Warrants are being issued. MARKET PRICE -- means, with respect to any date and any class of Common Stock, the per share price of such class equal to the product of (a) ninety-five percent (95%) times (b) the average of the daily Closing Prices of Common Stock for fifteen (15) consecutive trading days commencing twenty (20) trading days before-such date, provided that, if the Closing Prices referred to in clause (b) are not then available for such class of Common Stock in order to make the determination in said clause (b), "MARKET PRICE" shall mean the Fair Market Share Price. As used in this definition, Closing Price -- means, with respect to any date and any class of Common Stock, the per share price of such class determined as follows: (a) the last sale price, regular way, on such date or, if no such sale takes place on such date, the average of the closing bid and asked prices on such date, in each case as officially reported on the principal national securities exchange on which such class of Common Stock is then listed or admitted to trading; or (b) if such class of Common Stock is not then listed or admitted to trading on any national securities exchange, the last trading price of such class of Common Stock on such date, or if there shall have been no trading on such date or if such class of Common Stock is not so designated, the average of the reported closing bid and asked prices on such date. 28 32 MEASUREMENT PRICE -- means, with respect to any date and any class of Common Stock, the average of the daily Closing Bid Prices of such class of Common Stock for the five (5) consecutive trading days prior to the public announcement of any conversion of the Subordinated Notes; provided, however, that the date on which such public announcement is made shall not be considered a trading day. As used in this definition, Closing Bid Price -- means, with respect to any date and any class of Common Stock, the per share price determined as follows: (a) the closing bid prices on such date, as officially reported on the principal national securities exchange on which such class of Common Stock is then listed or admitted to trading; or (b) if such class of Common Stock is not then listed or admitted to trading on any national securities exchange, the last reported bid price of such class of Common Stock on such date. NOTICE EVENT -- Section 4.1(1) hereof. ORIGINAL WARRANTS -- Recital C hereof. PERSON -- means an individual, partnership, corporation, limited liability or other company or partnership, trust, unincorporated organization, or a government or agency or political subdivision thereof. POST CONVERSION MARKET PRICE -- means, with respect to any date, the average of the daily Closing Bid Prices of the Common Stock for the five (5) consecutive trading days after the filing of a Current Report on Form 8-K with respect to any conversion of the Subordinated Notes; provided, however, that the date on which such Current Report on Form 8-K is filed shall not be considered a trading day. As used in this definition, Closing Bid Price -- means, with respect to any date, the per share price determined as follows: (a) the closing bid prices on such date, as officially reported on the principal national securities exchange on which the Common Stock is then listed or admitted to trading; or 29 33 (b) if the Common Stock is not then listed or admitted to trading on any national securities exchange, but is designated as a national market system security by the National Association of Securities Dealers, the last reported bid price of the Common Stock on such date. PREFERRED STOCK -- means the class of capital stock of the Company designated as "Preferred Stock," having a par value $.001 per share, and enjoying the rights and preferences set forth in, and subject to the restrictions of, the Certificate of Incorporation as in effect on November 19, 1993. PROPERTY -- means any interest in any kind of property or asset, whether real, personal or mixed, and whether tangible or intangible. PURCHASE PRICE -- means, prior to any adjustment pursuant to Section 4.1 hereof, the Initial Purchase Price and thereafter, the Initial Purchase Price as adjusted and readjusted from time to time. REFERENCE PRICE -- means, in respect of any date, the Market Price of one share of Common Stock as of such date. REGULAR CASH DIVIDENDS -- means cash dividends paid by the Company out of its retained earnings, provided that any such cash dividends paid during any fiscal year of the Company shall be deemed to constitute Regular Cash Dividends to the extent, and only to the extent, that immediately after giving effect to the payment of such cash dividends the aggregate amount of all cash dividends paid by the Company out of its retained earnings during such fiscal year does not exceed five percent (5%) of the product of (a) the Market Price determined as of the record date in respect of such payment multiplied by (b) the aggregate number of shares of Common Stock outstanding as of such record date (after assuming that all then outstanding Warrants had been exercised). REQUIRED WARRANTHOLDERS -- means, at any time, any holder or holders (other than the Company, any Subsidiary or any Affiliate) then holding more than fifty percent (50%) of the Warrants (excluding any Warrants directly or indirectly held by the Company or any Subsidiary or Affiliate) then outstanding. SEC -- means, at any time, the Securities and Exchange Commission or any other federal agency at such time administering the Securities Act. SECURITIES ACT -- means the Securities Act of 1933, as amended. SECURITY -- means "security" as defined in section 2(1) of the Securities Act. 30 34 SENIOR FINANCIAL OFFICER -- means the chief financial officer, the principal accounting officer, the controller or the treasurer of the Company. SERIES B PREFERRED STOCK -- means the Series B Preferred Stock of the Company as provided for in its certificate of incorporation. SUBORDINATED DEBT WARRANTS -- means the warrants initially issued to the holders of the Subordinated Notes and any additional warrants issued pursuant to any agreement between the Company and the holders of the Subordinated Notes pursuant to which such warrants were issued. SUBORDINATED NOTES -- means the Series A 9.00% Senior Subordinated Notes Due November 19, 2001. SUBSIDIARY -- means, at any time, any corporation more than fifty percent (50%) of the total combined voting power of all classes of the voting capital stock of which shall, at the time as of which any determination is being made, be owned by the Company either directly or indirectly through any one or more Subsidiaries. TERMINATED DIRECTOR OPTIONS -- any Director Options issued on or prior to the date hereof that have been exercised or have terminated or expired prior to the date hereof. TERMINATED EMPLOYEE OPTIONS -- any Employee Options issued on or prior to the date hereof that have been exercised or have terminated or expired prior to the date hereof. TERMINATION DATE -- means May 19, 2002. WARRANTS -- Recital E hereof and any Warrants issued after the date hereof, including, without limitation, pursuant to Section 4.4 hereof. WARRANT CERTIFICATE -- Section 1.1 hereof. 5.2 DIRECTLY OR INDIRECTLY. Where any provision herein refers to action to be taken by any Person, or that such Person is prohibited from taking, such provision shall be applicable whether such action is taken directly or indirectly by such Person, including actions taken by or on behalf of any partnership in which such Person is a general partner. 5.3 SECTION HEADINGS AND TABLE OF CONTENTS AND CONSTRUCTION. (a) SECTION HEADINGS AND TABLE OF CONTENTS, ETC. The titles of the Sections and the Table of Contents appear as a matter of convenience only, do 31 35 not constitute a part hereof and shall not affect the construction hereof. The words "herein," "hereof," "hereunder" and "hereto" refer to this Agreement as a whole and not to any particular Section or other subdivision. Unless otherwise specified, references to Sections are to Sections of this Agreement, references to Annexes are to Annexes to this Agreement and references to Exhibits are to Exhibits to this Agreement. (b) CONSTRUCTION. Each covenant contained herein shall be construed (absent an express contrary provision herein) as being independent of each other covenant contained herein, and compliance with any one covenant shall not (absent such an express contrary provision) be deemed to excuse compliance with one or more other covenants. 5.4 GOVERNING LAW. THIS AGREEMENT AND THE WARRANT CERTIFICATES SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, INTERNAL NEW YORK LAW. 6. MISCELLANEOUS 6.1 COMMUNICATIONS. (a) METHOD; ADDRESS. All communications hereunder or under the Warrants shall be in writing, shall be hand delivered, deposited into the United States mail (registered or certified mail), postage prepaid, or sent by overnight courier of national or international reputation, and shall be addressed, (i) if to the Company, The Cerplex Group, Inc. 1382 Bell Avenue Tustin, California 92680 Attention: Chief Executive Officer Facsimile: (714) 258-0730 32 36 (with a copy to: Brobeck, Phleger & Harrison LLP 4675 MacArthur Court, Suite 1000 Newport Beach, California 92660 Attention: Frederic A. Randall, Jr., Esq. Facsimile: (714) 752-7535 provided that the failure to provide any such copy shall in no way affect the validity or effectiveness of any communication to the Company for purposes of this Agreement) or at such other address as the Company shall have furnished in writing to all holders of the Warrants at the time outstanding; and (ii) if to any of the holders of the Warrants: (A) if such holders are the Holders, at their respective addresses set forth on Annex 1, and further including any parties referred to on such Annex 1 that are required to receive notices in addition to such holders of the Warrants; and (B) if such holders are not the Holders, at their respective addresses set forth in the register for the registration and transfer of Warrants maintained pursuant to Section 1.2(b) hereof; or to any such party at such other address as such party may designate by notice duly given in accordance with this Section 6.1 to the Company (which other address shall be entered in such register). (b) WHEN GIVEN. Any communication so addressed and deposited in the United States mail, postage prepaid, by registered or certified mail (in each case, with return receipt requested) shall be deemed to be received on the third (3rd) succeeding business day after the day of such deposit (not including the date of such deposit). Any notice so addressed and otherwise delivered shall be deemed to be received when actually received at the address of the addressee. 6.2 REPRODUCTION OF DOCUMENTS. This Agreement and all documents relating thereto, including, without limitation, (a) consents, waivers and modifications that may hereafter be executed, (b) documents received by each Holder at the closing of the issuance of Warrants (except the Warrant Certificates themselves) and (c) financial statements, certificates and other information previously or hereafter furnished to any Holder or any other holder of Warrants, may be reproduced by any holder of Warrants by any photographic, photostatic, microfilm, 33 37 micro-card, miniature photographic, digital or other similar process and each holder of Warrants may destroy any original document so reproduced. The Company agrees and stipulates that any such reproduction shall be admissible in evidence as the original itself in any judicial or administrative proceeding (whether or not the original is in existence and whether or not such reproduction was made by such holder of Warrants in the regular course of business) and that any enlargement, facsimile or further reproduction of such reproduction shall likewise be admissible in evidence. Nothing in this Section 6.2 shall prohibit the Company or any holder of Warrants from contesting the accuracy of any such reproduction. 6.3 SURVIVAL. All warranties, representations, certifications and covenants made by the Company herein or in any certificate or other instrument delivered by it or on its behalf hereunder shall be considered to have been relied upon by the Holders and shall survive the delivery to the Holders of the Warrants regardless of any investigation made by the Holders or on their behalf. All statements in any such certificate or other instrument shall constitute warranties and representations by the Company hereunder. 6.4 SUCCESSORS AND ASSIGNS. This Agreement shall inure to the benefit of and be binding upon the successors and assigns of each of the parties hereto. The provisions hereof are intended to be for the benefit of all holders, from time to time, of Warrants, and shall be enforceable by any such holder, whether or not an express assignment to such holder of rights hereunder shall have been made by any successor or assign of any Holder. 6.5 AMENDMENT AND WAIVER. This Agreement may be amended, and the observance of any term of this Agreement may be waived, with and only with the written consent of the Company and the Required Warrantholders, provided that no change in, or waiver of performance under, Section 1, Section 2, Section 4 or this Section 6.5 (or any definition used in connection with any of such sections) shall be effected without the written consent of all holders of Warrants. 6.6 RIGHT OF ACTION. All rights of action in respect of the Warrants are vested in the respective registered holders of the Warrant Certificates or, in lieu thereof, the beneficial owner thereof (to the extent such beneficial owner is a party to this Agreement or disclosed to the Company in writing), and any registered holder or beneficial owner (to the extent such beneficial owner is a party to this Agreement or disclosed to the Company in writing) of any Warrant Certificate, without the consent of the holder of any other Warrant Certificate, may, in its own behalf and for its own benefit, enforce, and may 34 38 institute and maintain any suit, action or proceeding against the Company to enforce, or otherwise act in respect of, its right to exercise the Warrants evidenced by such Warrant Certificate in the manner provided in such Warrant Certificate and in this Agreement. 6.7 EXPENSES. The Company will promptly (and in any event within thirty (30) days of receiving any statement or invoice therefor) pay all fees, expenses and costs relating hereto, including, but not limited to: (a) the cost of reproducing this Agreement and the Warrants; (b) the fees and disbursements of the special counsel to the Holders; (c) the cost of delivering to the home office or custodian bank of each Holder, insured to such party's satisfaction, the Warrant Certificates acquired by such party on the Effective Date; and (d) all fees, expenses, costs and disbursements (including, without limitation, the reasonable fees and the disbursements of the attorneys, accountants and other expert, legal and financial advisers of each holder of Warrant Certificates) relating to (i) the consideration, evaluation, analysis, assessment, negotiation, preparation and/or execution of any amendments, waivers or consents pursuant to the provisions hereof, whether in the ordinary course of performance hereof or in connection with any controversy or potential controversy hereunder or resulting from any work-out, restructuring or other similar proceedings relating to such performance and whether or not any such amendments, waivers or consents are executed or otherwise consummated and/or (ii) the enforcement of the rights of such holder hereunder. 6.8 FILINGS. The Company shall, at its own expense, promptly execute and deliver, or cause to be executed and delivered, to any holder of Warrants all applications, certificates, instruments, registration statements, and all other documents and papers that such holder of Warrants may reasonably request in connection with the obtaining of any consent, approval, registration, qualification, or authorization of any federal, state or local government (or any agency or commission thereof) necessary or appropriate in connection with, or for the effective exercise of, any Warrants then held by such holder. 6.9 ENTIRE AGREEMENT. This Agreement constitutes the final written expression of all of the terms hereof and is a complete and exclusive statement of those terms. 35 39 6.10 TERM. All unexercised Warrants will be void and not exercisable after 5:00 p.m. (Los Angeles, California time) on the Termination Date and the Warrant Certificates in respect thereof shall after such time be deemed cancelled for all purposes of this Agreement. Shares of Common Stock issuable upon the exercise of a Warrant shall be issued after the Termination Date if such Warrant is exercised, as provided in Section 2.1 hereof, on or prior to 5:00 p.m. (Los Angeles, California time) on the Termination Date. 6.11 DUPLICATE ORIGINALS, EXECUTION IN COUNTERPART. Two or more duplicate originals hereof may be signed by the parties, each of which shall be an original but all of which together shall constitute one and the same instrument. This Agreement may be executed in one or more counterparts and shall be effective when at least one counterpart shall have been executed by each party hereto, and each set of counterparts which, collectively, show execution by each party hereto shall constitute one duplicate original. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK; NEXT PAGE IS SIGNATURE PAGE.] 36 40 IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be duly executed and delivered by one of its duly authorized officers or representatives. THE CERPLEX GROUP, INC. By___________________________________ Name: Title: CITIBANK, N.A. By___________________________________ Name: Title: S-1 41 ANNEX 1 INFORMATION AS TO HOLDERS
========================================================= HOLDER NAME CITIBANK, N.A. - --------------------------------------------------------- Name in which to register Citibank, N.A. Note(s) - --------------------------------------------------------- Warrant Certificate WR-[10]; registration number; Number of Warrants Warrants - --------------------------------------------------------- Address for notices Citibank, N.A. Attention: Facsimile: =========================================================
Annex 1-1 42 EXHIBIT A [FORM OF WARRANT CERTIFICATE] THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAW. THESE SECURITIES MAY NOT BE SOLD, TRANSFERRED, PLEDGED OR HYPOTHECATED IN ANY TRANSACTION UNLESS FIRST REGISTERED UNDER SUCH LAWS OR UNLESS SUCH TRANSACTION IS EXEMPT FROM THE REGISTRATION REQUIREMENTS OF SUCH LAWS. THE HOLDER OF THIS WARRANT CERTIFICATE IS A BANK FOR PURPOSES OF THAT CERTAIN REGISTRATION RIGHTS AGREEMENT, DATED NOVEMBER 19, 1993, AS AMENDED, AMONG THE CERPLEX GROUP, INC. AND THE OTHER PARTIES THERETO. WARRANT CERTIFICATE THE CERPLEX GROUP, INC. No. WR-________ ___________ Warrants Date: _____________ PPN: ___________________ This WARRANT CERTIFICATE certifies that ______________________, or registered assigns; is the registered holder of ____________________ (___________) Warrants. Each Warrant entitles the owner thereof to purchase, at any time on or after the Effective Date (as such term is defined in the Warrant Agreement referred to below) and prior to 5:00 p.m. (Los Angeles, California time) on the Termination Date (as such term is defined in the Warrant Agreement referred to below), one fully paid and nonassessable share of Common Stock (as such term is defined in the Warrant Agreement referred to below) of THE CERPLEX GROUP, INC., a Delaware corporation (the "COMPANY"), at the Initial Purchase Price of __________ ($_____) per share of Common Stock (the "PURCHASE PRICE") upon (i) presentation and surrender of this Warrant Certificate with a form of election to purchase duly executed and (ii) satisfaction of the Purchase Price in the manner set forth in the Warrant Agreement. The number of shares of Common Stock that may be purchased upon exercise of each Warrant, and the Purchase Price, are the number and the Purchase Price as of the date hereof and are subject to adjustment under certain circumstances as provided in the Warrant Agreement referred to below. The Warrants are issued pursuant to the Warrant Agreement, dated as of April 15, 1996, as amended and restated as of April 9, 1997 and as further amended and restated as of August 20, 1997 (as further amended from time to time, the "WARRANT Exhibit A-1 43 AGREEMENT"), among the Company and certain initial holders named therein, and are subject to all of the terms, provisions and conditions thereof, which Warrant Agreement is hereby incorporated herein by reference and made a part hereof and to which Warrant Agreement reference is hereby made for a full description of the rights, obligations, duties and immunities of the Company and the holders of the Warrant Certificates. Capitalized terms used, but not defined, herein have the meanings assigned to then, in the Warrant Agreement. This Warrant Certificate shall be exercisable, at the election of the holder, either as an entirety or in part from time to time. If this Warrant Certificate shall be exercised in part, the holder shall be entitled to receive, upon surrender hereof, another Warrant Certificate or Warrant Certificates for the number of Warrants not exercised. This Warrant Certificate, with or without other Warrant Certificates, upon surrender at the office of the Company referred to in Section 1.2(b) of the Warrant Agreement, may be exchanged for another Warrant Certificate or Warrant Certificates of like tenor evidencing Warrants entitling the holder to purchase a like aggregate number of shares of Common Stock as the Warrants evidenced by the Warrant Certificate or Warrant Certificates surrendered shall have entitled such holder to purchase. Except as expressly set forth in the Warrant Agreement, no holder of this Warrant Certificate shall be entitled to any right to vote or receive dividends or be deemed for any purpose the holder of shares of Common Stock or of any other Securities of the Company that may at any time be issued upon the exercise hereof, nor shall anything contained in the Warrant Agreement or herein be construed to confer upon the holder hereof, as such, any of the rights of a holder of a share of Common Stock in the Company or any right to vote upon any matter submitted to holders of shares of Common Stock at any meeting thereof, or to give or withhold consent to any corporate action (whether upon any recapitalization, issuance of stock, reclassification of Securities, change of par value, consolidation, merger, conveyance, or otherwise) or, except as provided in the Warrant Agreement, to receive notice of meetings, or to receive dividends or subscription rights, or otherwise, until the Warrant or Warrants evidenced by this Warrant Certificate shall have been exercised as provided in the Warrant Agreement. Other than with respect to the original issuance of the Warrants pursuant to the Warrant Agreement, if the Warrant Certificate of the immediate transferor of the holder of this Warrant Certificate bore the second paragraph of the legend set forth above, this Warrant Certificate shall also bear such second paragraph. THIS WARRANT CERTIFICATE AND THE WARRANT AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, INTERNAL NEW YORK LAW. Exhibit A-2 44 WITNESS the signature of a proper officer of the Company as of the date first above written. THE CERPLEX GROUP, INC., By ____________________________ Name: Title: ATTEST: - ---------------------------- [Assistant] Secretary Exhibit A-3 45 [FORM OF ASSIGNMENT] (TO BE EXECUTED BY THE REGISTERED HOLDER IF SUCH HOLDER DESIRES TO TRANSFER THE WARRANT CERTIFICATE) FOR VALUE RECEIVED, ___________________________________ hereby sells, assigns and transfers unto - --------------------------------------------------------------------- (Please print name and address of transferee.) the accompanying Warrant Certificate, together with all right, title and interest therein, and does hereby irrevocably constitute and appoint: - ---------------------------------------------------------------------- attorney in fact, to transfer the accompanying Warrant Certificate on the books of the Company, with full power of substitution. Dated: _______________, _______. -------------------------------- By _____________________________ NOTICE The signature to the foregoing Assignment must correspond to the name as written upon the face of the accompanying Warrant Certificate or any prior assignment thereof in every particular, without alteration or enlargement or any change whatsoever. Exhibit A-4 46 [FORM OF ELECTION TO PURCHASE] (TO BE EXECUTED BY THE REGISTERED HOLDER IF SUCH HOLDER DESIRES TO EXERCISE ANY WARRANTS REPRESENTED BY THE WARRANT CERTIFICATE) To THE CERPLEX GROUP, INC.: The undersigned hereby irrevocably elects to exercise ___________________ Warrants represented by the accompanying Warrant Certificate to purchase the shares of Common Stock issuable upon the exercise of such Warrants and requests that certificates for such shares be issued in the name of: - ------------------------------------------------------------------------ (Please print name and address.) - ------------------------------------------------------------------------ (Please insert social security or other identifying number.) If such number of Warrants shall not be all the Warrants evidenced by the accompanying Warrant Certificate, a new Warrant Certificate for the balance remaining of such Warrants shall be registered in the name of and delivered to: - ------------------------------------------------------------------------ (Please print name and address.) - ------------------------------------------------------------------------ (Please insert social security or other identifying number.) Dated: ________________, ____. ----------------------------- By __________________________ NOTICE The signature to the foregoing Election to Purchase must correspond to the name as written upon the face of the accompanying Warrant Certificate or any prior Exhibit A-5 47 assignment thereof in every particular, without alteration or enlargement or any change whatsoever. Exhibit A-6 48 EXHIBIT B DETERMINATION OF FAIR MARKET SHARE PRICE. (a) Within two (2) days of the happening of any event requiring a determination of the Fair Market Share Price, the Company shall give written notice thereof to each holder of Warrants (which notice shall contain a description of such event). (b) Within ten (10) days of the happening of each event requiring a determination of the Fair Market Share Price, each of the Required Warrantholders (as a group) and the Company shall designate an Appraiser for purposes of determining the Fair Market Share Price and shall notify the other party or parties of such designation (provided that, if the Company and such holders so agree, they may jointly designate a single Appraiser, in which event the determination of the Fair Market Share Price of the single Appraiser so jointly designated shall be binding upon both the Company and the holders of Warrants for the purposes of the determination of the Fair Market Share Price hereunder). Each Appraiser will take such evidence, make such investigations and examine such documents as it shall in its discretion determine to be necessary and advisable to make a determination with respect to the Fair Market Share Price. A detailed report from each Appraiser setting forth such Appraiser's determination with respect to the Fair Market Share Price shall be delivered to the Company and to each of the holders of Warrants as soon as possible following such determination and, in any event, not later than thirty (30) days following the happening of the event requiring determination of the Fair Market Share Price. (c) If either: (i) the Company or such holders shall fail, neglect or refuse to designate an Appraiser within the time period set forth in clause (b) above; or (ii) either of the two Appraisers so designated shall fail to deliver its detailed report within the time period set forth in said clause (b); then, in each such case, the determination of the Fair Market Share Price of the single Appraiser actually designated or the single Appraiser actually delivering its detailed report, as the case may be, shall be binding upon both the Company and the holders of Warrants for the purposes of the determination of the Fair Market Share Price hereunder. (d) If the determinations of the Fair Market Share Price by both such Appraisers do not differ by more than fifteen percent (15%) of the lower of the two determinations, then the Fair Market Share Price shall be the arithmetic average of those two determinations. Exhibit B-1 49 (e) If the determinations of the Fair Market Share Price by both such Appraisers differ by more than fifteen percent (15%) of the lower of the two determinations, then the parties shall promptly direct the two Appraisers to consult with one another for the purpose of jointly designating a third Appraiser, which designation shall be made not later than ten (10) days following the delivery of the determinations pursuant to clause (b) above. The third Appraiser shall review the first two appraisals and shall make an independent determination with respect to the Fair Market Share Price. (i) In the event that the third Appraiser's determination is equal to or greater than the greater determination made by the first two Appraisers, the Fair Market Share Price shall equal the higher of the determinations of the first two Appraisers. (ii) In the event that the third Appraiser's determination is equal to or less than the lesser determination made by the first two Appraisers, the Fair Market Share Price shall equal the lesser of the determinations of the first two Appraisers. (iii) In the event that the third Appraiser's determination is between those of the first two Appraisers, the Fair Market Share Price shall equal the arithmetic average of the determinations of all three Appraisers. A detailed report from the third Appraiser setting forth such Appraiser's determination with respect to the Fair Market Share Price shall be delivered to the Company and to each of the holders of Warrants as soon as possible following such determination and, in any event, not later than thirty (30) days following the earlier of (A) the delivery of the reports referred to in clause (b) above, and (B) the first date upon which such reports are due to be delivered pursuant to clause (b) above. (f) The Company agrees to cooperate with each Appraiser to the full extent necessary to permit determination of the Fair Market Share Price. (g) All fees and expenses incurred in connection with the foregoing determination of the Fair Market Share Price (including any and all fees and expenses of each Appraiser) shall be borne by the Company. Any determination made in accordance with this definition shall be effective for a period of ninety (90) days immediately following such determination, unless there has been a material development in the business of the Company and the Subsidiaries, in which case there shall be a redetermination in accordance with the provisions of this Exhibit. Exhibit B-2 50 EXHIBIT C CONFIDENTIALITY With respect to all data and information that has been or in the future is furnished to or obtained by any holder of Warrant Certificates in connection with this Agreement (excluding, in any case, any such data and information that was or is available to the public or was not or is not treated as confidential by any one or more of the Company, the , Subsidiaries or the Affiliates), such holder will hold such data and information in confidence in accordance with the customary practices and standards of confidentiality generally employed by such holder in respect of similar data and information obtained in connection with other comparable investment transactions of such holder. Notwithstanding the foregoing, any such holder may disclose any data and information furnished to or obtained by it in connection with this Agreement: (a) the disclosure of which is, in such holder's sole good faith business and/or legal judgment, reasonably required in connection with regulatory requirements (including, without limitation, the requirements of the National Association of Insurance Commissioners but excluding, in any case, delivery of periodic financial statements and information to the National Association of Insurance Commissioners, the Securities Valuation Office thereof or any other agency thereof in connection with the rating, evaluation or other regulatory treatment of the Warrants or the Notes) or other legal requirements related to such holder's affairs, including, without limitation, the disclosure of such data and information in connection with or in response to (i) compliance with any law, ordinance or governmental order, regulation, rule, policy, subpoena, investigation or request, or (ii) any order, decree, judgment, subpoena, notice of discovery or similar ruling, or pleading issued, filed, served or purported on its face to be issued, filed or served (A) by or under authority of any court, tribunal, arbitration board or any governmental agency, commission, authority, board or similar entity or (B) in connection with any proceeding (including, without limitation, any proceeding to enforce the obligations of the Company under this Agreement), cause or matter pending (or on its face purported to be pending) before any court, tribunal, arbitration board or any governmental agency, commission, authority, board or similar entity; (b) to any one or more of the employees, officers, directors, agents, attorneys, accountants, professional consultants or trustees of such holder (or of any subsidiary or affiliate of such holder) who would have access to such data and information in the normal course of the performance of such Person's duties for such holder (or for such subsidiary or affiliate); (c) to Moody's Investors Service, Inc., Standard & Poor's Corporation or any other nationally recognized financial rating service that is reviewing the credit rating of any holder of Warrant Certificates or is rating or reviewing the Exhibit C-1 51 rating of the Warrants or the Common Stock issuable upon the exercise thereof; and (d) to any prospective purchaser, securities broker or dealer or investment banker in connection with the resale or proposed resale, in accordance with the terms hereof, of all or any portion of the Warrants or Common Stock issuable upon the exercise thereof by such holder. In connection with any disclosure by any holder of Warrant Certificates under clause (a) above, such holder will use reasonable efforts to notify the Company of any such pending disclosure, provided that (x) such holder shall in no case be liable to the Company for its failure to effect such notification, (y) the failure to effect such notification shall not affect the ability of such holder to make the disclosures contemplated under said clause (a) and (z) this sentence shall not apply to the delivery of periodic financial statements and information to the National Association of Insurance Commissioners, the Securities Valuation Office thereof or any other agency thereof in connection with the rating, evaluation or other regulatory treatment of the Warrants or the Notes. In connection with any disclosure by any holder of Warrant Certificates under clause (d) above, such holder will use reasonable efforts to cause any prospective purchaser, securities broker or dealer or investment banker referred to in said clause (d) to enter into a written confidentiality agreement with the Company containing terms of confidentiality substantially similar to the terms of confidentiality set forth in this Exhibit prior to effecting such disclosure, provided that (yy) such holder shall in no case be liable to the Company if such prospective purchaser, securities broker or dealer or investment banker shall for any reason not enter into any such confidentiality agreement with the Company and (zz) the failure of such prospective purchaser, securities broker or dealer or investment banker to enter into any such confidentiality agreement with the Company shall not affect the ability of such holder to make the disclosures contemplated under said clause (d). No holder of Warrant Certificates will be liable for the breach of the provisions of this Exhibit or of any provision in any aforesaid confidentiality agreement by any other holder of Warrant Certificates or by any Person to which any confidential data or information shall be delivered in accordance with the provisions of this Exhibit C. Exhibit C-2 EX-4.37 8 SECOND AMENDMENT TO OBSERVATION RIGHTS AGREEMENT 1 EXHIBIT 4.37 SECOND AMENDMENT TO OBSERVATION RIGHTS AGREEMENT Dated as of August 20, 1997 The Northwestern Mutual Life Insurance Company 720 East Wisconsin Avenue Milwaukee, Wisconsin 53202 John Hancock Mutual Life Insurance Company John Hancock Place 200 Clarendon Street Boston, Massachusetts 02117 Re: The Cerplex Group, Inc. -- Senior Subordinated Notes due November 19, 2001 and Warrants to Purchase Common Stock Ladies and Gentlemen: THE CERPLEX GROUP, INC., a Delaware corporation (together with its successors and assigns, the "Company"), hereby agrees with each of (A) The Northwestern Mutual Life Insurance Company (together with its successors, subsidiaries and affiliates, "Northwestern"), and (B) John Hancock Mutual Life Insurance Company (together with its successors, subsidiaries and affiliates, "John Hancock") (Northwestern and John Hancock are herein referred to, collectively, as the "Qualified Observers") as follows: 1. RECITALS. The Company and the Qualified Observers entered into an Observation Rights Agreement dated as of November 19, 1993 (as amended by a First Amendment to Observation Rights Agreement dated as of April 15, 1996 and as in effect prior to the effectiveness of this Amendment, the "Existing Observation Rights Agreement"). Pursuant to a First Amendment Agreement dated as of August 20, 1997 among the Company, the Qualified Observers and certain other persons, and a Warrant Agreement dated as of August 20, 1997 among the Company, the Qualified Observers and certain other persons, the Company is issuing five hundred thousand (500,000) warrants (the "1997 Warrants") to purchase common stock of the Company to the Qualified Observers and certain other persons. The Qualified Observers have requested, as additional consideration for their entering into the aforesaid First Amendment Agreement, that the Existing Observation Rights Agreement be amended, as more particularly provided herein, to include the 1997 Warrants being issued to the Qualified Observers, and the Company has agreed to amend the Existing Observation Rights Agreement as set forth herein. 2 2. AMENDMENTS TO EXISTING OBSERVATION RIGHTS AGREEMENT. Section 1 of the Existing Observation Rights Agreement is hereby amended and restated in its entirety, as set forth below: 1. BACKGROUND. (a) The Company entered into separate Note Purchase Agreements, each dated as of November 19, 1993, with certain purchasers named in Annex 1 thereto, providing for the issuance by the Company and the purchase by the Purchasers of (1) an aggregate principal amount of $17,250,000 of the Company's Series A 9.00% Senior Subordinated Notes due November 19, 2001 (the "Series A Notes") and (2) an aggregate principal amount of $5,750,000 of the Company's Series B 9.00% Senior Subordinated Notes due November 19, 2001 (the "Series B Notes"). The Note Purchase Agreements dated as of November 19, 1993 have been amended and restated pursuant to the terms of separate Amended and Restated Note Purchase Agreements, each dated as of April 9, 1997 (as may be amended or restated from time to time, the "Note Purchase Agreements"), with certain purchasers named on Annex 1 thereto (collectively, the "Purchasers") (including, without limitation, Northwestern and John Hancock), pursuant to which the Series A Notes were amended and restated (such notes, together with any notes issued in substitution therefor, and as may be further amended or restated from time to time, are referred to as the "Notes"). (b) Concurrently with, and in consideration of, the purchase of the Series B Notes by the Purchasers, the Company issued to the Purchasers, pursuant to a Warrant Agreement, dated as of November 19, 1993 (as may be amended from time to time, the "1993 Warrant Agreement") among the Company and the Purchasers, its Warrants (as such term is defined in the 1993 Warrant Agreement) to purchase Common Stock, $0.001 par value per share, of the Company, as represented by certain Warrant Certificates (as such term is defined in the 1993 Warrant Agreement). (c) In consideration of the Purchasers entering into a Waiver and Amendment Agreement dated as of April 15, 1996 among the Company and the Purchasers, the Company issued to the Purchasers, pursuant to a Warrant Agreement, dated as of April 15, 1996 (as may be amended from time to time, the "1996 Warrant Agreement") among the Company and the Purchasers, its Warrants (as such term is defined in the 1996 Warrant Agreement) to purchase Common Stock, $0.001 par value per share, of the Company, as represented by certain Warrant Certificates (as such term is defined in the 1996 Warrant Agreement). 2 3 (d) In consideration of the Purchasers entering into a First Amendment Agreement dated as of August 20, 1997 among the Company and the Purchasers, the Company issued to the Purchasers, pursuant to a Warrant Agreement, dated as of August 20, 1997 (as may be amended from time to time, the "1997 Warrant Agreement") among the Company and the Purchasers, its Warrants (as such term is defined in the 1997 Warrant Agreement) to purchase Common Stock, $0.001 par value per share, of the Company, as represented by certain Warrant Certificates (as such term is defined in the 1997 Warrant Agreement). (e) As used herein, the terms "Warrants" and "Warrant Certificates" shall include all Warrants and Warrant Certificates, respectively, issued pursuant to the 1993 Warrant Agreement, the 1996 Warrant Agreement and the 1997 Warrant Agreement to the Qualified Observers. Other capitalized terms used herein without definition shall have the respective meanings ascribed to them in the Note Purchase Agreements. 3. MISCELLANEOUS. (a) GOVERNING LAW. This Amendment shall be governed by and construed and enforced in accordance with, internal New York law. (b) DUPLICATE ORIGINALS. Two or more duplicate originals of this Amendment may be signed by the parties, each of which shall be an original but all of which together shall constitute one and the same instrument. This Amendment may be executed in one or more counterparts and shall be effective when at least one counterpart shall have been executed by each party hereto, and each set of counterparts which, collectively, show execution by each party hereto shall constitute one duplicate original. (c) EFFECT OF THIS AMENDMENT. Except as specifically provided in this Amendment, no terms or provisions of the Existing Observation Rights Agreement have been modified or changed by this Amendment and the terms and provisions of the Existing Observation Rights Agreement, as amended hereby, shall continue in full force and effect. This Amendment and the amendments contained herein shall have and be in effect on and after the date hereof. (d) SECTION HEADINGS. The titles of the sections hereof appear as a matter of convenience only, do not constitute a part of this Amendment and shall not affect the construction hereof. [REMAINDER OF PAGE INTENTIONALLY BLANK. NEXT PAGE IS SIGNATURE PAGE.] 3 4 IN WITNESS WHEREOF, each of the undersigned has executed this Amendment as of the date first written above. Very truly yours, THE CERPLEX GROUP, INC. By:________________________________ Name: Title: The foregoing Amendment is hereby accepted as of the date hereof. THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY By:________________________________ Name: Title: JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY By:________________________________ Name: Title: 4 EX-27.1 9 FINANCIAL DATA SCHEDULE
5 6-MOS DEC-31-1996 JAN-01-1997 JUN-30-1997 21,788 0 18,874 1,807 8,987 52,914 40,035 16,199 78,117 83,923 0 0 657 34 30,825 78,117 85,606 85,608 76,076 96,197 998 0 3,956 (13,245) 1,115 (14,360) 0 0 0 (14,360) (0.60) 0
-----END PRIVACY-ENHANCED MESSAGE-----