Item 4. Purpose of Transaction.
Between May 15, 2012 and May 18, 2012, the Issuer entered into Subscription Agreements (the “Purchase Agreements”) with several “accredited investors,” including the Reporting Persons (collectively, the “Purchasers”) in connection with a private placement of shares (the “Shares”) of Common Stock. Pursuant to the Purchase Agreements, the Issuer sold to the Purchasers an aggregate of 13,428,750 Shares at a purchase price of $0.80 per Share for aggregate gross proceeds to the Issuer of $10.7 million. The Reporting Persons purchased 11,181,250 of the 13,428,750 Shares at an aggregate purchase price of $8,945,000. As a condition to the closing of the transactions contemplated by the Purchase Agreements, the Purchasers required John W. Bordynuik to enter into a letter agreement, dated as of May 15, 2012 (“Letter Agreement”), pursuant to which Mr. Bordynuik made certain agreements regarding the voting of his shares of Common Stock and his one million shares of the Issuer’s Series A super majority voting preferred stock, $0.01 par value per share (the “Series A Preferred”). Mr. Bordynuik is the current Chief of Technology of the Issuer and the former President and Chief Executive Officer of the Issuer.
Pursuant to the Letter Agreement, Mr. Bordynuik agreed to vote his shares of Common Stock and Series A Preferred to, among other things, (i) effectuate the terms of the Letter Agreement, (ii) appoint five Qualified Independent Directors (as defined in the Letter Agreement) nominated by the Board of Directors to the Board, and (iii) change the name of the Issuer to “Plastic2Oil”. In addition, Mr. Bordynuik agreed to refrain from voting his shares of Common Stock and Series A Preferred to, among other things, (i) appoint himself or anyone who is not the President or Treasurer of the Issuer or a Qualified Independent Director as a member of the Board of Directors, (ii) amend the Issuer’s Articles of Incorporation or Bylaws, or the Certificate of Designations of the Series A Preferred or (iii) issue stock of the Issuer (other than Common Stock).
In addition, the Letter Agreement provides that in the event that Mr. Bordynuik violates the terms of the non-compete provisions of his employment agreement with the Issuer or attempts to transfer his shares of Series A Preferred, except as provided in the Letter Agreement, then he will be required to offer to purchase 100% of the respective shares of Common Stock owned by each Purchaser (the “Purchaser’s Put Right”). The Letter
Agreement also provides that in event Mr. Bordynuik takes the actions discussed in the preceding sentence or additionally Kevin Rauber, the President of the Issuer, is terminated by the Issuer “without cause” or resigns “with good reason” (as such terms are defined in Mr. Rauber’s employment agreement with the Issuer) and at such time the Board is comprised of less than three Qualified Independent Directors, or Mr. Bordynuik material breaches certain sections of the Letter Agreement, then he shall offer to sell 100% of his shares of Series A Preferred to the Purchasers pro rata (the “Purchaser’s Call Right”). The purchase price for exercise of the Purchaser’s Put Right shall be the greater of (x) $1.00 and (y) the volume-weighted average trading price of the Common Stock in the 30 consecutive day period immediately preceding the date of the event triggering the purchase. The sale price for exercise of the Purchaser’s Call Right shall be the par value of $0.001 per share of Series A Preferred.
Following execution of the Letter Agreement, [two] Purchasers (the “Waiving Purchasers”) executed irrevocable waivers of all of their rights under the Letter Agreement. The Waiving Purchasers are not Reporting Persons.
The Reporting Persons acquired the shares of Common Stock of the Issuer in the private placement for investment purposes. The Reporting Persons may, from time to time, depending upon market conditions and other factors deemed relevant by the Reporting Persons, acquire other shares of Common Stock. The Reporting Persons reserve the right to, and may in the future choose to, change their purpose with respect to the investment and take such actions as they deem appropriate in light of the circumstances, including, without limitation, to dispose of, in the open market, in a privately negotiated transaction, by transfer, by exchange or by gift, all or a portion of the shares of Common Stock which they now own or may hereafter acquire from the Issuer.
The foregoing summary of the Letter Agreement does not purport to be complete and is qualified in its entirety by reference to the complete text of the Letter Agreement attached hereto as Exhibit 1 which is incorporated herein by reference.
Except as described herein, as of the date of this Schedule 13D, each of the Reporting Persons has no present plans or proposals which would result in: (a) the acquisition by any person of additional securities of the Issuer, or the disposition of securities of the Issuer; (b) an extraordinary corporate transaction involving the Issuer or any of its subsidiaries; (c) a sale or transfer of a material amount of assets of the Issuer or any of its subsidiaries; (d) any change in the present Board of Directors or management of the Issuer; (e) any material change to the present capitalization or dividend policy of the Issuer; (f) any other material change in the Issuer’s business or corporate structure; (g) changes in the Issuer’s articles of incorporation, bylaws or instruments corresponding thereto or other actions which may impede the acquisition of control of the Issuer by any person; (h) causing a class of securities to be delisted from a national securities exchange or to cease to be authorized to be quoted in an inter-dealer quotation system of a registered national securities association; (i) a class of equity securities of the Issuer becoming eligible for termination of registration pursuant to Section 12(g)(4) of the Securities Exchange Act of 1934; or (j) any action similar to any of those actions enumerated above.
As a result of the agreements described above, including but not limited to the Letter Agreement, the Reporting Persons and the other parties to the Letter Agreement (other than Mr. Bordynuik and the Waiving Purchasers) may be deemed to comprise a “group” within the meaning of Section 13(d)(3) of the Exchange Act, although neither the fact of this filing nor any information contained herein shall be deemed to be an admission by the Reporting Persons that a “group” exists. In addition, as a result of the agreements described above, including but not limited to the Letter Agreement, the following parties may be deemed to comprise a “group” within the meaning of Section 13(d)(3) of the Exchange Act: (a) the Reporting Persons; (b) other purchasers of Common Stock (other than the Waiving Purchasers) in private placement transactions that were entered into by the Issuer between May 15, 2012 and May 18, 2012; and (c) Mr. Bordynuik.
Item 5. Interest in Securities of the Issuer.
The information contained on the cover pages to this Schedule 13D and the information set forth or incorporated in Items 2, 3, 4 and 6 is incorporated herein by reference.
The percentage ownership information as presented in Item 5(a) and Item 5(b) is calculated based on 86,605,966 shares of Common Stock issued and outstanding, consisting of (i) 73,177,216 shares of the Issuer’s Common Stock that were outstanding as of May 14, 2012, as last reported by the Issuer in its Quarterly Report on Form 10-Q filed May 15, 2012, and (ii) the issuance of an aggregate of 13,428,750 shares of Common Stock as reported by the Issuer in its Current Reports on Form 8-K filed on May 17, 2012 and May 22, 2012.
(a) – (b) At May 16, 2012, the aggregate number of shares of Common Stock beneficially owned by the Reporting Persons was 16,548,100, or approximately 18.94% of the Issuer’s issued and outstanding shares of Common Stock.
1. SCHEDULE 13D
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