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INVESTMENT AGREEMENT
by and between
ENVIRONMENTAL SOLUTIONS WORLDWIDE, INC.
and
▇▇▇▇ ▇. ▇▇▇▇▇,
BLACK FAMILY 1997 TRUST,
▇▇▇▇ ▇. ▇▇▇▇▇ TRUST UAD 11/30/92 FBO ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇.
▇▇▇▇▇ TRUST UAD 11/30/92 ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇. ▇▇▇▇▇
TRUST UAD 11/30/92 ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇. ▇▇▇▇▇ TRUST
UAD 11/30/92 ▇▇▇▇▇▇▇▇ ▇▇▇▇▇,
▇▇▇▇ ▇. ▇▇▇▇▇▇,
ORCHARD INVESTMENTS, LLC, AND
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Dated as of May 10, 2011
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TABLE OF CONTENTS
PAGE
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ARTICLE I THE RIGHTS OFFERING AND BACKSTOP COMMITMENT ................... 2
SECTION 1.1. THE RIGHTS OFFERING ................................... 2
SECTION 1.2. BACKSTOP COMMITMENT; PURCHASE OPTION .................. 3
ARTICLE II ADDITIONAL PURCHASE RIGHT .................................... 5
SECTION 2.1. ADDITIONAL SUBSCRIPTION RIGHTS ........................ 5
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY ............... 7
SECTION 3.1. ORGANIZATION, GOOD STANDING AND QUALIFICATION ......... 7
SECTION 3.2. CORPORATE CONDITION ................................... 7
SECTION 3.3. AUTHORIZATION ......................................... 8
SECTION 3.4. VALID ISSUANCE OF SHARES .............................. 8
SECTION 3.5. CURRENT PUBLIC INFORMATION ............................ 8
SECTION 3.6. [INTENTIONALLY OMITTED] ............................... 9
SECTION 3.7. NO CONFLICTS .......................................... 9
SECTION 3.8. EXEMPTION FROM REGISTRATION ........................... 9
SECTION 3.9. NO ACTION ............................................. 10
SECTION 3.10. COMPLIANCE WITH LAWS ................................. 10
SECTION 3.11. LITIGATION ........................................... 10
SECTION 3.12. DISCLOSURES .......................................... 11
SECTION 3.13. CAPITALIZATION ....................................... 11
SECTION 3.14. MATERIAL CHANGES ..................................... 12
SECTION 3.15. FINANCIAL STATEMENTS ................................. 13
SECTION 3.16. STABILIZATION ........................................ 13
SECTION 3.17. BROKERS .............................................. 13
SECTION 3.18. CONSENTS ............................................. 13
SECTION 3.19. INTELLECTUAL PROPERTY ................................ 14
SECTION 3.20. FOREIGN CORRUPT PRACTICES ACT ........................ 14
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF INVESTORS .................. 15
SECTION 4.1. EXEMPT TRANSACTION; INVESTMENT INTENT ................. 15
SECTION 4.2. INDEPENDENT INVESTIGATION ............................. 15
SECTION 4.3. ECONOMIC RISK ......................................... 16
SECTION 4.4. NO GOVERNMENT RECOMMENDATION OR APPROVAL .............. 16
SECTION 4.5. NO REGISTRATION ....................................... 16
SECTION 4.6. NO PUBLIC SOLICITATION ................................ 17
SECTION 4.7. INCORPORATION AND AUTHORITY ........................... 17
SECTION 4.8. NO RELIANCE ON TAX ADVICE ............................. 17
SECTION 4.9. INDEPENDENT LEGAL ADVICE .............................. 17
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ARTICLE V CONDITIONS TO CLOSING ......................................... 18
SECTION 5.1. CONDITIONS TO THE OBLIGATIONS OF THE COMPANY
AND THE INVESTORS ............................. 18
SECTION 5.2. CONDITIONS TO THE OBLIGATIONS OF THE COMPANY .......... 18
SECTION 5.3. CONDITIONS TO THE OBLIGATIONS OF THE INVESTORS ........ 19
ARTICLE VI TERMINATION .................................................. 20
SECTION 6.1. TERMINATION ........................................... 20
SECTION 6.2. EFFECTS OF TERMINATION ................................ 21
ARTICLE VII MISCELLANEOUS ............................................... 21
SECTION 7.1. INTERPRETATION; CERTAIN DEFINITIONS ................... 21
SECTION 7.2. SURVIVAL .............................................. 28
SECTION 7.3. INDEMNIFICATION ....................................... 28
SECTION 7.4. LEGENDS ............................................... 29
SECTION 7.5. NOTICES ............................................... 30
SECTION 7.6. FURTHER ASSURANCES .................................... 31
SECTION 7.7. AMENDMENTS AND WAIVERS ................................ 31
SECTION 7.8. FEES AND EXPENSES ..................................... 31
SECTION 7.9. SUCCESSORS AND ASSIGNS ................................ 32
SECTION 7.10. GOVERNING LAW ........................................ 32
SECTION 7.11. JURISDICTION ......................................... 32
SECTION 7.12. WAIVER OF JURY TRIAL ................................. 33
SECTION 7.13. ENTIRE AGREEMENT ..................................... 33
SECTION 7.14. EFFECT OF HEADINGS AND TABLE OF CONTENTS ............. 33
SECTION 7.15. SEVERABILITY ......................................... 33
SECTION 7.16. COUNTERPARTS; NO THIRD PARTY BENEFICIARIES ........... 34
SECTION 7.17. SPECIFIC PERFORMANCE ................................. 34
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INVESTMENT AGREEMENT dated as of May 10, 2011 (this "Agreement") between
Environmental Solutions Worldwide, Inc., a Florida corporation (the "Company")
and the Persons listed on the signature pages hereto (each an "Investor" and
collectively, the "Investors"). Capitalized terms used but not otherwise defined
are defined in Section 7.1(b) of this Agreement.
R E C I T A L S
WHEREAS, the Company has proposed to offer and sell certain shares of
Common Stock pursuant to a Rights Offering, on the terms and subject to the
conditions set forth herein;
WHEREAS, the Company desires that each Investor provide, and each Investor
has agreed to provide a Backstop Commitment to the Rights Offering, on the terms
and subject to the conditions set forth herein; and
WHEREAS, the Company desires to offer (a) to the Investors, the Purchase
Option, (b) to each Investor, its pro-rata share of the Additional Subscription
Offer and (c) to ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ and Orchard Investments, LLC (the "Orchard
Investors"), the Special Additional Subscription Offer, in each case, providing
for the Investors to, in certain circumstances, subscribe for additional shares
of Common Stock, on the terms and subject to the conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained in this Agreement, the receipt and sufficiency of which are hereby
acknowledged, the parties to this Agreement hereby agree as follows:
ARTICLE I
THE RIGHTS OFFERING AND BACKSTOP COMMITMENT
SECTION 1.1. THE RIGHTS OFFERING.
(a) The Company is contemplating commencing a rights offering on the
following terms: (i) the Company shall distribute, at no charge to its
stockholders, one Right to each holder of record of Common Stock for each share
of Common Stock held by such holder as of the Record Date, (ii) each Right shall
entitle the holder thereof to purchase, at the election of such holder, such
number of shares of Common Stock at the Rights Subscription Price thereby
entitling such holders of rights, in the aggregate, to subscribe for an
aggregate of sixty six million six hundred sixty-six thousand and six-hundred
and sixty-seven (66,666,667) shares of Common Stock, provided that no fractional
shares of Common Stock shall be issued and the Rights Subscription Price
multiplied by the aggregate number of shares of Common Stock offered shall not
exceed the aggregate offering amount described in the Registration Statement,
(iii) each such Right shall be non-transferable, (iv) the rights offering shall
remain open for twenty (20) days or such longer period as required by Law (the
"Subscription Period") and (v) each holder who fully exercises all Rights held
by him shall be entitled to subscribe for additional shares of Common Stock that
were not subscribed for in the Rights Offering (such exercising holders, the
"Exercising Holders"), provided if an insufficient number of unsubscribed shares
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of Common Stock are available, all such over-subscription requests shall be
honored proportionately among the Exercising Holders based on the number of
shares of Common Stock each such holder subscribed for in accordance with clause
(ii) (such rights offering, the "Rights Offering"). In the event the Company
commences the Rights Offering, the Company shall prepare and file with the SEC a
registration statement (including each amendment and supplement thereto, the
"Registration Statement") on Form S-3, covering the issuance of the Registered
Rights and the Registered Common Stock. In the event such a Registration
Statement is filed and not otherwise withdrawn, the Company shall print and file
with the SEC a final prospectus relating to the Rights Offering filed pursuant
to Rule 424 of the Securities Act (as amended or supplemented, the "Prospectus")
and distribute the Prospectus to the Company's stockholders of record as of the
Record Date as promptly as practicable following the date on which the
Registration Statement is declared effective by the SEC (the "Registration
Effective Date"). Any Rights issued to the Investors in the Rights Offering and
shares of Common Stock issued in respect of the Investors participation in the
Rights Offering shall be issued in reliance on an exemption from the
registration requirements of the Securities Act and shall not be covered by the
Registration Statement.
(b) [Intentionally Omitted].
(c) The Company shall pay all of its expenses associated with the
Registration Statement, the Prospectus, the Rights Offering and the other
transactions contemplated hereby, including filing and printing fees, fees and
expenses of any subscription and information agents, its counsel and accounting
fees and expenses and costs associated with clearing the Common Stock offered
thereby for sale under applicable state securities Laws.
SECTION 1.2. BACKSTOP COMMITMENT; PURCHASE OPTION.
(a) Subject to the consummation of the Rights Offering and the terms
and conditions of this Agreement, (i) each Investor shall purchase, severally
and not jointly, from the Company, and the Company shall issue to each Investor,
at a price per share equal to the Rights Subscription Price, a number of shares
of Common Stock (the "Backstop Commitment") equal to such Investor's Applicable
Backstop Allocation of the Backstopped Amount; and (ii) each Investor shall have
the option, in his or its sole discretion, to purchase, severally and not
jointly, from the Company, and the Company shall issue to each Investor, at a
price per share equal to the Rights Subscription Price, a number of shares of
Common Stock equal to such Investor's Option Allocation of the Option Amount
(the "Purchase Option").
(b) Within two (2) Business Days after the closing of the Rights
Offering, the Company shall issue to each Investor a notice setting forth the
Backstopped Amount and Option Amount. Within four (4) Business Days after the
closing of the Rights Offering, the Investors shall (i) agree on an allocation
among the Investors of the Backstopped Amount (such allocation for each
Investor, the "Applicable Backstop Allocation") and the Option Amount (such
allocation for each Investor, the "Option Allocation"), (ii) exercise their
rights to acquire shares of Common Stock pursuant to the Purchase Option, and
(iii) issue to the Company a notice setting forth (A) each Investor's Applicable
Backstop Allocation, (B) the aggregate number of shares of Common Stock to be
purchased pursuant to the Purchase Option and (C) each Investor's Option
Allocation. Any shares of Common Stock issued to the Investors pursuant to the
Backstop Commitment and the Purchase Option shall be issued in reliance on an
exemption from the registration requirements of the Securities Act and shall not
be covered by the Registration Statement.
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(c) On the terms and subject to the conditions set forth in this
Agreement, the closing of the Backstop Commitment (the "Closing") shall occur on
the later of (i) the eighth Business Day after the closing of the Rights
Offering and (ii) the date that all of the conditions to the Closing set forth
in Article V have been satisfied or waived (other than those conditions that by
their nature are to be satisfied at the Closing), at 9:30 a.m. (New York City
time) at the offices of ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇
▇▇▇▇, ▇▇ ▇▇▇▇▇, or such other place, time and date as shall be agreed between
the Company and the Investors (the date on which the Closing occurs, the
"Closing Date").
(d) At the Closing, the Company shall (i) deliver to each Investor the
certificates representing the Acquired Shares against payment by or on behalf of
such Investor of the purchase price therefor by (A) wire transfer in immediately
available funds to the account designated by the Company in writing, (B)
delivery to the Company by such Investor of an equivalent amount of principal
and accrued and unpaid interest of indebtedness payable by the Company to such
Investor (including with respect to any Bridge Notes), or (C) any combination of
(A) and (B), and (ii) all other documents and certificates required to be
delivered to the Investors pursuant to Section 5.3. The Investors shall deliver
all documents and certificates required to be delivered to the Company pursuant
to Section 5.2.
ARTICLE II
ADDITIONAL PURCHASE RIGHT
SECTION 2.1. ADDITIONAL SUBSCRIPTION RIGHTS.
(a) If, after giving effect to the Rights Offering (including the
over-subscription rights pursuant to Section 1.1(a)(v)), the Backstop Commitment
and the Purchase Option, any Investor shall have failed to exchange any portion
of his or its Bridge Notes as payment for shares in the Rights Offering and for
Acquired Shares, notwithstanding such Investors' having exchanged the maximum
amount of Bridge Notes permitted to be exchanged for the purchase of shares in
the Rights Offering and the Acquired Shares, the Company shall offer such
Investor the right to purchase additional shares of Common Stock at the Rights
Subscription Price such that all of such Investor's Bridge Notes may be
exchanged for shares of Common Stock (the "Additional Subscription Offer").
(b) If, after giving effect to the Rights Offering (including the
over-subscription rights pursuant to Section 1.1(a)(v)), the Backstop
Commitment, the Purchase Option and the Additional Subscription Offer, the
Orchard Investors collectively acquire less than eight million three-hundred
thirty-three thousand and three-hundred thirty-three (8,333,333) shares of
Common Stock (such number of shares less than eight million three-hundred
thirty-three thousand and three-hundred thirty-three (8,333,333), the "Shortfall
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Amount"), the Company shall offer the Orchard Investors (the "Special Additional
Subscription Offer") an additional number of shares of Common Stock, equal to
the Shortfall Amount at the Rights Subscription Price. In the event a Shortfall
Amount exists, the Subscription Notice shall also set forth the number of shares
of Common Stock to be acquired by such Investors pursuant to the Special
Additional Subscription Offer.
(c) The closing of the purchases pursuant to the Additional
Subscription Offer and the Special Additional Subscription Offer (if any) shall
occur concurrently with the Closing on the Closing Date at which time the
Company shall deliver to each Investor certificates representing such
additionally acquired shares against payment by or on behalf of such Investor of
the purchase price therefor by wire transfer in immediately available funds to
the account designated by the Company.
(d) Shares of Common Stock acquired by the Investors pursuant to the
Rights Offering (including pursuant to the over-subscription right), the
Additional Subscription Offer and the Special Additional Subscription Offer (if
any) and together with the Acquired Shares shall be collectively referred to as
the "Investor Acquired Shares".
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as Previously Disclosed, the Company represents and warrants to the
Investors that:
SECTION 3.1. ORGANIZATION, GOOD STANDING AND QUALIFICATION.
The Company is a corporation duly organized, validly existing and in good
standing under the laws of the State of Florida and has all requisite corporate
power and authority to carry on its business as now conducted and as proposed to
be conducted. The Company and its Subsidiaries are duly qualified to transact
business and are in good standing as foreign corporations or other entities in
each jurisdiction in which the nature of the business conducted or property
owned by them makes such qualification necessary, except where the failure to so
qualify would not, individually or in the aggregate, have a material adverse
effect on the business, condition (financial or otherwise), earnings,
properties, prospects or results of operations of the Company or any of its
Subsidiaries (a "Material Adverse Effect").
SECTION 3.2. CORPORATE CONDITION. None of the Company's filings made with
the SEC (such filings, the "SEC Reports"), including, but not limited to, those
reports referenced in Section 3.5 below, contains any untrue statement of a
material fact or omits to state a material fact necessary in order to make the
statements made, in light of the circumstances under which they were made, not
misleading. There have been no material adverse changes in the Company's
business, properties, results of operations, condition (financial or otherwise)
or prospects since the date of those reports which have not been disclosed to
the Investors in writing. Further, all material non-public information
respecting the Company, its business and its financial condition, as the same
would be required to be disclosed in an SEC Report or registration statement (or
corresponding prospectus) has been so publicly reported or disclosed prior to
the issuance of the shares of Common Stock as contemplated herein.
4
SECTION 3.3. AUTHORIZATION. The transactions contemplated by this
Agreement and the Registration Rights Agreement have been approved by the Board.
This Agreement and the Registration Rights Agreement constitutes valid and
legally binding obligations of the Company, enforceable in accordance with their
respective terms.
SECTION 3.4. VALID ISSUANCE OF SHARES. When executed and delivered in
accordance with the terms hereof for the consideration expressed herein, the
shares of Common Stock will have been issued in compliance with all applicable
U.S. federal securities laws. Upon issue, the Investors will acquire good and
marketable title to such shares, free and clear of all liens, claims and
encumbrances. Subject in part to the truth and accuracy of each Investor's
representations set forth in this Agreement, the offer, sale and issuance of the
shares of Common Stock to the Investors, as contemplated by this Agreement are
exempt from the registration pursuant to any applicable securities laws, and
neither the Company nor any authorized agent acting on its behalf has taken any
action hereafter that would cause the loss of such exemption.
SECTION 3.5. CURRENT PUBLIC INFORMATION. The Company is a "reporting
issuer" and it has a class of securities registered under Section 12(g) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and has timely
filed all the materials required to be filed as reports pursuant to the Exchange
Act for a period of at least twelve (12) months preceding the date hereof (or
for such shorter period as the Company was required by law to file such
material). All such reports (including, without limitation, the SEC Reports)
complied in all material respects with all applicable requirements of Federal
securities laws and the rules and regulations promulgated thereunder.
SECTION 3.6. [Intentionally Omitted].
SECTION 3.7. NO CONFLICTS. The execution and delivery of this Agreement
and the consummation of the issuance of the shares of Common Stock and the
transactions contemplated by this Agreement and the Registration Rights
Agreement do not and will not conflict with or result in a breach by the Company
of any of the terms or provisions of, or constitute a default under, the
certificate of incorporation or bylaws of the Company, or any indenture, credit
agreement, mortgage, deed of trust or other agreement or instrument to which the
Company or any of its Subsidiaries is a party or by which it or any of its
Subsidiaries or any of its or any of its Subsidiaries' properties or assets are
bound, or any existing applicable decree, judgment or order of any court,
Federal or state regulatory body, administrative agency or other governmental
body having jurisdiction over the Company or any of its Subsidiaries or any of
its or any of its Subsidiaries' properties or assets.
SECTION 3.8. EXEMPTION FROM REGISTRATION. The issuance of the Rights and
the sale of Common Stock to the Investors the pursuant to this Agreement are
exempt from the registration and prospectus delivery requirements of the
Securities Act. In the case of the issuance of the Rights to the Investors and
each offer or sale of the Investor Acquired Securities, no form of general
solicitation or general advertising was used by the Company or its
representatives, including, but not limited to, advertisements, articles,
notices or other communications published in any newspaper, magazine or similar
5
medium or broadcast over television or radio, or any seminar or meeting whose
attendees have been invited by any general solicitation or general advertising.
Neither the Company nor any person acting on its behalf has offered or sold, nor
will the Company or any person acting on its behalf offer or sell directly or
indirectly, any Common Stock or any other security in any manner that would
render the issuance of the Rights and the issuance and sale of any of the
Investor Acquired Securities a violation of Section 5 of the Securities Act or
the registration or qualification requirements of any state securities laws, nor
has the Company authorized, nor will it authorize, any person to act in such
manner.
SECTION 3.9. NO ACTION. The Company has not taken and will not take any
action that will affect in any way any Investor's ability to resell his or its
Investor Acquired Shares in accordance with applicable securities laws.
SECTION 3.10. COMPLIANCE WITH LAWS. As of the date hereof, the conduct of
the business of the Company and its Subsidiaries complies (and has complied) in
all material respects with all applicable Law. The Company and its Subsidiaries
have not received notice of any alleged violation of applicable Law from any
Governmental Entity. The Company shall comply with all applicable securities
laws with respect to the sale of the shares of Common Stock, including, but not
limited to, the filing of all reports required to be filed in connection
therewith with the SEC or any other regulatory authority.
SECTION 3.11. LITIGATION. There is no action, suit or proceeding before or
by any Governmental Entity, now pending or, to the knowledge of the Company,
threatened, against or affecting the Company and its Subsidiaries, or any of the
Company or its Subsidiaries, their respective assets or properties, which could
reasonably be expected, individually or in the aggregate, to have a Material
Adverse Effect. The Company and its Subsidiaries are not the subject of any
pending or, to their knowledge, threatened investigation or administrative or
legal proceeding by the Internal Revenue Service, the taxing authorities of any
state or local jurisdiction, or the SEC or any state securities commission which
have not been disclosed in the reports referred to in Section 3.5.
SECTION 3.12. DISCLOSURES. There is no fact known to the Company (other
than general economic conditions known to the public generally) that has not
been disclosed in writing to the Investors that (a) could reasonably be
expected, individually or in the aggregate, to have a Material Adverse Effect or
(b) could reasonably be expected, individually or in the aggregate, to
materially and adversely affect the ability of the Company to perform its
obligations pursuant this Agreement or the Registration Rights Agreement.
SECTION 3.13. CAPITALIZATION.
(a) The Company, as of the date of the Closing, will have 250,000,000
shares of Common Stock authorized pursuant to its certificate of incorporation
and 129,463,767 shares of Common Stock issued and outstanding. All of the issued
and outstanding shares of capital stock of the Company and each of its
Subsidiaries have been duly authorized and are validly issued, fully paid and
non-assessable. No personal liability attaches to the registered holders of the
Common Stock by reason of their being registered holders thereof.
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(b) (i) No subscription, warrant, option, convertible security or
other right (contingent or otherwise) to purchase or acquire any shares of
capital stock of the Company or any of its Subsidiaries that is authorized or
outstanding, (ii) neither the Company nor any of its Subsidiaries has any
obligation (contingent or otherwise) to issue any subscription, warrant, option,
convertible security or other such right or to issue or distribute to holders of
any shares of its capital stock or other equity securities any evidences of
indebtedness or assets of the Company or such Subsidiary, (iii) neither the
Company nor any of its Subsidiaries has any obligation (contingent or otherwise)
to purchase, redeem or otherwise acquire any shares of its capital stock (or
other equity securities) or any interest therein or to pay any dividend or make
any other distribution in respect thereof, and (iv) there are no outstanding or
authorized stock appreciation, phantom stock or similar rights with respect to
the Company or any of its Subsidiaries.
(c) All of the issued and outstanding shares of the Company's and its
Subsidiaries' capital stock (or other equity securities) have been offered,
issued and sold by the Company and such Subsidiaries in compliance with
applicable Federal and state securities Laws.
SECTION 3.14. MATERIAL CHANGES. Except as disclosed in the SEC Reports:
(a) the Company and its Subsidiaries have not incurred any material liabilities
or obligations, indirect, or contingent, or entered into any material oral or
written agreement or other transaction which is not in the ordinary course of
business or which could reasonably be expected to result in a material reduction
in the future earnings or prospects of the Company and its Subsidiaries; (b)
each of the Company and its Subsidiaries have not sustained any material loss or
interference with its businesses or properties from fire, flood, windstorm,
accident or other calamity not covered by insurance; (c) except as described in
the SEC Reports, the Company and its Subsidiaries have not paid or declared any
dividends or other distributions with respect to its capital stock and neither
the Company nor any of its Subsidiaries is in default in the payment of
principal or interest on any outstanding debt obligations; (d) there has not
been any change in the capital stock of the Company or any of its Subsidiaries
other than the issuance of the Common Stock hereunder, shares or options issued
pursuant to stock option plans or purchase plans approved by the Board and
repurchases of shares or options pursuant to repurchase plans already approved
by the Board, or indebtedness material to the Company or any of its Subsidiaries
(other than in the ordinary course of business); and (e) there has not been any
other event or change that would have, individually or in the aggregate, a
Material Adverse Effect.
SECTION 3.15. FINANCIAL STATEMENTS. The consolidated financial statements
of the Company and the related notes contained in the SEC Reports present
fairly, in accordance with GAAP, the consolidated financial position of the
Company and its Subsidiaries as of the dates indicated, and the results of their
operations, cash flows and the changes in shareholders' equity for the periods
therein specified, subject, in the case of unaudited financial statements for
interim periods, to normal year-end audit adjustments. Such consolidated
financial statements (including the related notes) have been prepared in
accordance with GAAP applied on a consistent basis throughout the periods
therein specified, except that unaudited financial statements may not contain
all footnotes required by GAAP. The Company and each of its Subsidiaries have
fully complied with the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act of 2002; however, auditor attestation
of the Company's compliance is not currently required.
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SECTION 3.16. STABILIZATION. Neither the Company nor any of its
Subsidiaries has taken, directly or indirectly, any action which was designed to
or which has constituted or which might reasonably be expected to cause or
result in stabilization or manipulation of the price of any security of the
Company to facilitate the sale or resale of the Common Stock.
SECTION 3.17. BROKERS. The Company has taken no action which would give
rise to any claim by any person for brokerage commissions, finders' fees or
similar payments by the Investors relating to this Agreement or the transactions
contemplated hereby.
SECTION 3.18. CONSENTS. Except as to filings which may be required under
applicable state securities regulations, no consent, authorization, approval,
order, license, certificate, or permit of or from, or declaration or filing
with, any federal, state, local, or other governmental authority or of any court
or other tribunal is required by the Company or any of its Subsidiaries in
connection with the transactions contemplated hereby. No consent of any party to
any Contract to which the Company or any of its Subsidiaries is a party, or by
which any of its properties or assets is bound, is required for the execution,
delivery, or performance by the Company of the transactions contemplated by the
Agreement.
SECTION 3.19. INTELLECTUAL PROPERTY. To the Company's knowledge, the
Company or its Subsidiaries own, or have the right to use, all patents,
trademarks, service marks, trade names, copyrights, licenses, trade secrets or
other proprietary rights necessary to their business as now conducted without
conflicting with or infringing upon the right or claimed right of any person or
entity under or with respect to any of the foregoing. Except for hardware and
software licenses entered into in the ordinary course of business, the Company
and its Subsidiaries are not bound by or a party to any options, licenses or
agreements of any kind with respect to patents, trademarks, service marks, trade
names, copyrights, licenses, trade secrets or other proprietary rights of any
other person or entity. The Company and its Subsidiaries have not received any
communications alleging that the Company or any of its Subsidiaries have
violated the patents, trademarks, service marks, trade names, copyrights or
trade secrets or other proprietary rights of any other person or entity. The
Company and its Subsidiaries are not aware of any violation by a third party of
any of the Company's or its Subsidiaries patents, trade marks, service marks,
trade names, copyrights, trade secrets or other proprietary rights.
SECTION 3.20. FOREIGN CORRUPT PRACTICES ACT. Neither the Company or any of
its Subsidiaries nor any director, officer, agent, or other person acting on
behalf of the Company or any of its Subsidiaries has, in the course of his or
its actions for or on behalf of the Company or any of its Subsidiaries violated
any provision of the United States Foreign Corrupt Practices Act of 1977, as
amended, or the regulations there under.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF INVESTORS
Each Investor represents and warrants, on a several (and not joint) basis,
to the Company that:
SECTION 4.1. EXEMPT TRANSACTION; INVESTMENT INTENT.
(a) The Investor is an accredited investor as the term is defined in Rule
501(a) under the Securities Act and (b) the Investor is purchasing Investor
Acquired Shares for its own account (or for beneficiaries' accounts over which
the Investor has investment discretion) and not with a view of reselling its
Investor Acquired Shares in violation of the Securities Act.
SECTION 4.2. INDEPENDENT INVESTIGATION. In agreeing to purchase Investor
Acquired Shares pursuant to this Agreement, the Investor has relied upon an
independent investigation made by him or it and, to his or its knowledge has,
prior to the date hereof, been given access to and the opportunity to examine
all books and records of the Company, and all material contracts and documents
of the Company; provided, that such investigation shall not affect the
Investor's ability to rely on the accuracy of the representations and warranties
of the Company set forth herein. The Investor will keep confidential all
non-public information regarding the Company that the Investor receives from the
Company unless disclosure of such information is compelled by a court or other
administrative body or, in the opinion of the Investor's counsel, to comply with
applicable law. In making the investment decision to purchase the Investor
Acquired Shares, the Investor is not relying on any oral or written
representations or assurances from the Company or any other person or any
representation of the Company or any other person other than as set forth in
this Agreement, the public filings of the Company or in a document executed by a
duly authorized representative of the Company making reference to this
Agreement. The Investor has such experience in business and financial matters
that it is capable of evaluating the risk of its investment and determining the
suitability of its investment.
SECTION 4.3. ECONOMIC RISK. The Investor understands and acknowledges that
an investment in Investor Acquired Shares involves a high degree of risk,
including a possible total loss of investment. The Investor represents that he
or it is able to bear the economic risk of the investment. In making this
statement, the Investor hereby represents and warrants that the Investor has
adequate means of providing for the Investor's current needs and contingencies.
The Investor further represents that the Investor has such knowledge and
experience in financial and business matters that the Investor is capable of
evaluating the merits and risks of the investment in the Investor Acquired
Shares to be received by the Investor. Further, the Investor represents that it
has no present need for liquidity in the Investor Acquired Shares.
SECTION 4.4. NO GOVERNMENT RECOMMENDATION OR APPROVAL. The Investor
understands that no United States federal or state agency or similar agency of
any other country has passed upon or made any recommendation or endorsement of
the Company, this transaction or the subscription of its Investor Acquired
Shares.
9
SECTION 4.5. NO REGISTRATION. The Investor understands that the Investor
Acquired Shares to be received by the Investor pursuant to this Agreement have
not been registered under the Securities Act and are being offered and sold
pursuant to and in reliance of an exemption from registration contained in the
Securities Act based in part upon the representations of the Investor contained
herein and that the Company is relying upon the truth and accuracy of the
representations, warranties, agreements, acknowledgments and understandings of
the Investor set forth herein in order to determine the applicability of such
exemptions and the suitability of the Investor to acquire such Investor Acquired
Shares.
SECTION 4.6. NO PUBLIC SOLICITATION. Without conducting any independent
investigation, the Investor knows of no public solicitation or advertisement of
an offer in connection with the proposed issuance and sale of the Investor
Acquired Shares to the Investor.
SECTION 4.7. INCORPORATION AND AUTHORITY. The Investor, (a) if not a
natural person, has the full power and authority, and (b) if a natural person,
has the legal capacity, to execute, deliver and perform this Agreement and to
perform its obligations hereunder. This Agreement has been duly approved by all
necessary action of the Investor, as applicable, has been executed by persons
duly authorized by the Investor, and constitutes a valid and legally binding
obligation of the Investor, enforceable in accordance with its terms.
SECTION 4.8. NO RELIANCE ON TAX ADVICE. The Investor has reviewed with
his, her or its own tax advisors the foreign, Federal, state and local tax
consequences of this investment, where applicable, and the transactions
contemplated by this Agreement. The Investor is relying solely on such advisors
and not on any statements or representations of the Company or any of its agents
and understands that the Investor (and not the Company) shall be responsible for
the Investor own income tax liability that may arise as a result of this
investment or the transactions contemplated by this Agreement.
SECTION 4.9. INDEPENDENT LEGAL ADVICE. The Investor and the Company
acknowledge that each has had the opportunity to review this Agreement and the
Registration Rights Agreement and the transactions contemplated by this
Agreement and the Registration Rights Agreement, and has consulted with its own
legal counsel, and other advisors prior to execution of the Agreement and the
Registration Rights Agreement.
ARTICLE V
CONDITIONS TO CLOSING
SECTION 5.1. CONDITIONS TO THE OBLIGATIONS OF THE COMPANY AND THE
INVESTORS. The obligations of the Company and each Investor to effect the
Closing shall be subject to the following conditions:
(a) all authorizations, consents, orders or permits of, or filings with,
and the expirations of waiting periods required from (as applicable), any
Governmental Entity shall have been filed, have occurred or been obtained (all
such authorizations, consents, orders, permits or filings, and the lapse of all
such waiting periods being referred to as the "Requisite Regulatory Approvals")
and all such Requisite Regulatory Approvals shall be in full force and effect;
(b) no provision of any applicable Law and no judgment, injunction, order
or decree shall prohibit the consummation of any of the transactions
contemplated at the Closing; and
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(c) the consummation of the Rights Offering in accordance in all material
respects with the terms and subject to the conditions set forth in Section
1.1(b).
SECTION 5.2. CONDITIONS TO THE OBLIGATIONS OF THE COMPANY. The obligations
of the Company to effect the Closing shall be subject to the following
conditions:
(a) all representations and warranties of the Investors in this Agreement
shall be true and correct as of the date hereof and as of the Closing Date
(except to the extent that any such representation and warranty expressly speaks
as of an earlier date, in which case such representation and warranty shall be
true and correct as of such earlier date);
(b) each Investor shall have performed in all material respects all of his
or its obligations hereunder required to be performed by each Investor at or
prior to the Closing; and
(c) the Company shall have received a certificate, signed by (i) an
authorized Person of each Investor that is not a natural person and (ii) each
Investor that is a natural person, certifying as to the matters set forth in
Sections 5.2(a) and 5.2(b).
SECTION 5.3. CONDITIONS TO THE OBLIGATIONS OF THE INVESTORS. The
obligations of each Investor to effect the Closing shall be subject to the
following conditions:
(a) the representations and warranties of the Company contained in this
Agreement shall be true and correct as of the date hereof and as of the
Registration Effective Date (except to the extent that any such representation
and warranty expressly speaks as of an earlier date, in which case such
representation and warranty shall be true and correct as of such earlier date);
(b) the Company shall have performed in all material respects all of its
obligations hereunder required to be performed by it at or prior to the Closing;
(c) the Investors shall have received a certificate, signed by an officer
of the Company, certifying as to the matters set forth in Sections 5.3(a) and
5.3(b);
(d) since the date of this Agreement, there shall not have been any
Material Adverse Effect or any effect that would, individually or in the
aggregate, have or reasonably be expected to have a Material Adverse Effect; and
(e) the Investors shall have received a registration rights agreement
substantially in the form of Annex A hereto, duly executed by the Company (the
"Registration Rights Agreement").
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ARTICLE VI
TERMINATION
SECTION 6.1. TERMINATION. This Agreement may be terminated at any time
prior to the Closing:
(a) by mutual written agreement of the Company and the Investors;
(b) by either the Company or the Investors, upon written notice to the
other, in the event that the Closing does not occur on or before June 29, 2011
(as may be extended at the option of the Investors); provided, however; the
right to terminate this Agreement pursuant to this Section 6.1(b) shall not be
available to any party whose failure to fulfill any obligation under this
Agreement shall have been the cause of, or shall have resulted in, the failure
of the Closing to occur on or prior to such date; or
(c) by either the Company or the Investors, upon written notice to the
other party, in the event that any Governmental Entity shall have issued any
order, decree or injunction or taken any other action restraining, enjoining or
prohibiting any of the transactions contemplated by this Agreement, and such
order, decree, injunction or other action shall have become final and
nonappealable.
SECTION 6.2. EFFECTS OF TERMINATION. In the event of the termination of
this Agreement as provided in Section 6.1, this Agreement (other than Article
VII which shall remain in full force and effect) shall forthwith become wholly
void and of no further force and effect; provided that nothing herein shall
relieve any party from liability for intentional breach of this Agreement. In
the event this Agreement is terminated pursuant to Section 6.1, the Company
shall, immediately following such termination, pay the Investors all amounts
payable to them pursuant to Section 7.8, by wire transfer of immediately
available funds to an account designated by the Investors.
ARTICLE VII
MISCELLANEOUS
SECTION 7.1. INTERPRETATION; CERTAIN DEFINITIONS.
(a) INTERPRETATION. When a reference is made in this Agreement to
"Preamble," "Articles," "Sections" or "Annexes," such reference shall be to a
Preamble, Article or Section of, or Annex to, this Agreement unless otherwise
indicated. The terms defined in the singular have a comparable meaning when used
in the plural, and vice versa. The table of contents and headings contained in
this Agreement are for reference purposes only and are not part of this
Agreement. Whenever the words "include," "includes" or "including" are used in
this Agreement, they shall be deemed followed by the words "without limitation."
No rule of construction against the draftsperson shall be applied in connection
with the interpretation or enforcement of this Agreement, as this Agreement is
the product of negotiation between sophisticated parties advised by counsel. All
references to "$" or "dollars" mean the lawful currency of the United States of
America. Except as expressly stated in this Agreement, all references to any
statute, rule or regulation are to the statute, rule or regulation as amended,
modified, supplemented or replaced from time to time (and, in the case of
statutes, include any rules and regulations promulgated under the statute) and
to any section of any statute, rule or regulation include any successor to the
section. References to "words of similar import" with respect to Material
Adverse Effect or materiality, does not include knowledge qualifiers. The use
herein of masculine, feminine or neuter forms shall also denote the other forms,
as in each case the context may require.
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(b) CERTAIN DEFINITIONS. As used in this Agreement, the terms have the
following meanings:
"Acquired Shares" means shares of Common Stock acquired by the Investors
pursuant to the Backstop Commitment and the Purchase Option.
"Additional Subscription Offer" shall have the meaning set forth in
Section 2.1(a).
"Affiliate" of any Person means any other Person directly or indirectly
controlling or controlled by or under direct or indirect common control with
such Person; provided, for purposes of this Agreement, the Company and its
Subsidiaries shall not be deemed to be Affiliates of any Investor.
"Agreement" shall have the meaning set forth in the Preamble.
"Applicable Backstop Allocation" shall have the meaning set forth in
Section 1.2(b).
"Backstop Commitment" shall have the meaning set forth in Section 1.2(a).
"Backstopped Amount" shall mean the number of shares of Common Stock, if
any, by which (i) twenty nine million one hundred sixty six thousand six hundred
sixty seven (29,166,667) exceeds (ii) the number of shares of Registered Common
Stock subscribed for and purchased pursuant to the Registered Rights.
"Board" means the board of directors of the Company.
"Bridge Note Documents" means (a) one or more Subordinated Note
Subscription Agreements, dated on or about February 17, 2011 and April 27, 2011,
by and between the Company and each Investor and (b) the 10% unsecured
subordinated promissory notes issued by the Company to the Investors pursuant
thereto.
"Bridge Notes" means the 10% unsecured subordinated promissory notes
issued by the Company to the Investors pursuant to the Bridge Note Documents.
"Business Day" means any day other than a Saturday, Sunday or one on which
banks are authorized to close in New York, New York.
"Capital Stock" means any and all shares, interests, rights to purchase,
warrants, options, participations or other equivalents of or interests in
(however designated) stock or equity securities issued by the Company.
"Closing" shall have the meaning set forth in Section 1.2(c).
"Closing Date" shall have the meaning set forth in Section 1.2(c).
13
"Code" means the United States Internal Revenue Code of 1986, as amended.
"Common Stock" means the common stock, par value $0.001 per share, of the
Company.
"Company" shall have the meaning set forth in the Preamble.
"Company Contract" means any Contract to which the Company or any of its
Subsidiaries is a party or by which any of them is otherwise bound.
"Contract" means any contracts, agreements, licenses, notes, bonds,
mortgages, indentures, commitments, leases or other instruments or obligations,
whether written or oral.
"Exchange Act" shall have the meaning set forth in Section 3.5.
"FBCA" means the Florida Business Corporation Act, as amended.
"GAAP" means United States generally accepted accounting principles.
"Governmental Entity" means any domestic or foreign governmental or
regulatory authority, agency, commission, body, court or other legislative,
executive or judicial governmental entity.
"Investor" shall have the meaning set forth in the Preamble.
"Investor Acquired Shares" shall have the meaning set forth in Section
2.1(d).
"Law" means any federal, state, local or foreign law, statute or
ordinance, common law, or any rule, regulation, judgment, order, writ,
injunction, decree, arbitration award, license or permit of any Governmental
Entity.
"Material Adverse Effect" shall have the meaning set forth in Section 3.1.
"Option Allocation" shall have the meaning set forth in Section 1.2(b).
"Option Amount" shall mean the number of shares of Common Stock, if any,
by which (i)(A) forty two million four hundred forty thousand nine hundred seven
(42,440,907) minus (B) the number of shares of Registered Common Stock
subscribed for and purchased pursuant to the Registered Rights exceeds (iii)
twenty nine million one hundred sixty six thousand six hundred sixty seven
(29,166,667).
"Orchard Investors" shall have the meaning set forth in the Recitals.
"Person" means any individual, corporation (including not-for-profit),
general or limited partnership, limited liability company, joint venture,
estate, trust, association, organization, Governmental Entity or other entity of
any kind or nature.
14
"Previously Disclosed" means (i) information set forth in or incorporated
in the Company's Annual Report on Form 10-K for the fiscal year ended December
31, 2010 or its other reports and forms filed with the SEC under Sections 13(a),
14(a) or 15(d) of the Exchange Act on or after January 1, 2011 (except for risks
and forward looking information set forth or incorporated in the section "Risk
Factors" in the Form 10-K or in any forward looking statement disclaimers or
similar statements that are similarly non-specific and are predictive or forward
looking in nature) and (ii) the information set forth in the Schedules
corresponding to the provision of this Agreement to which such information
relates (provided that any disclosure with respect to a particular paragraph or
section of this Agreement or the Schedules shall be deemed to be disclosed for
other paragraphs and sections of the Agreement and the Schedules to the extent
that the relevance of such disclosure would be reasonably apparent to a reader
of such disclosure).
"Prospectus" shall have the meaning set forth in Section 1.1(a).
"Purchase Option" shall have the meaning set forth in Section 1.2(a).
"Record Date" means the date as of which each holder of Common Stock shall
be offered one Right for each share of Common Stock held as of such date, which
date shall be selected by the Board in accordance with the FBCA.
"Registered Common Stock" means Common Stock issued in the Rights Offering
to Persons other than the Investors.
"Registered Rights" means Rights issued in the Rights Offering to Persons
other than the Investors.
"Registration Effective Date" shall have the meaning set forth in Section
1.1(a).
"Registration Rights Agreement" shall have the meaning set forth in
Section 5.3(e).
"Registration Statement" shall have the meaning set forth in Section
1.1(a).
"Representatives" means, with respect to a Person, such Person's
directors, officers, investment bankers, attorneys, accountants and other
advisors or representatives.
"Requisite Regulatory Approvals" shall have the meaning set forth in
Section 5.1(a).
"Right" means one non-transferable right to subscribe for such number of
shares of Common Stock at the Rights Subscription Price by entitling the holders
thereof, in the aggregate, to subscribe for sixty six million six hundred sixty
six thousand six hundred sixty seven (66,666,667) shares of Common Stock.
"Rights Offering" shall have the meaning set forth in Section 1.1(a).
"Rights Subscription Price" means a price per share equal to $0.12.
"Schedules" means the disclosure schedules delivered by the Company to the
Investors concurrently with the execution of this Agreement.
15
"SEC" means the Securities and Exchange Commission.
"SEC Reports" shall have the meaning set forth in Section 3.2.
"Securities Act" means the Securities Act of 1933, as amended.
"Shortfall Amount" shall have the meaning set forth in Section 2.1(a).
"Special Additional Subscription Offer" shall have the meaning set forth
in Section 2.1(b).
"Subscription Notice" shall have the meaning set forth in Section 1.2(b).
"Subscription Period" shall have the meaning set forth in Section 1.1(a).
"Subsidiary" means any Person (whether or not incorporated) that the
Company directly or indirectly owns or in respect of which the Company has the
power to vote or control 50% or more of any class or series of capital shares or
other equity interests of such Person.
SECTION 7.2. SURVIVAL. Each of the representations and warranties in this
Agreement (or any certificate delivered pursuant hereto) shall survive the
execution and delivery of this Agreement and the Closing but only for a period
of twelve (12) months following the Closing Date.
SECTION 7.3. INDEMNIFICATION.
(a) Notwithstanding anything in this Agreement to the contrary, from and
after the date hereof the Company agrees to indemnify, defend and hold harmless
the Investors and their Affiliates and each of their respective officers,
directors, partners, employees, agents and Representatives (the "Indemnified
Parties" and each, an "Indemnified Party"), to the fullest extent lawful, from
and against any and all actions, suits, claims, proceedings, costs, losses,
liabilities, damages, expenses (including reasonable and documented fees of
counsel), amounts paid in settlement and other costs (collectively, "Losses")
arising out of or relating to (1) the Company's breach of any representation or
warranty set forth in Article III of this Agreement, (2) the Rights Offering or
(3) claims, suits or proceedings challenging the authorization, execution,
delivery, performance or termination of the Rights Offering, this Agreement, the
Registration Rights Agreement (and any certificates or documents delivered
herenunder) and/or any of the transactions contemplated hereby or thereby (other
than any such Losses attributable to the acts, errors or omissions on the part
of the Investors in violation of this Agreement). The Company agrees that it
will not, without the Indemnified Party's prior written consent, settle or
compromise any claim or consent to entry of any judgment in respect thereof in
any pending or threatened action, suit, claim or proceeding in respect of which
indemnification has been sought hereunder unless such settlement or compromise
includes an unconditional release of such Indemnified Party from all liability
arising out of such action, suit, claim or proceeding.
16
(b) The obligations of the Company under this Section 7.3 shall survive
the Closing or termination of this Agreement or the Registration Rights
Agreement and the transfer or redemption of any Investor Acquired Shares. The
agreements contained in this Section 7.3 shall be in addition to any other
rights of the Indemnified Party against the Company or others, under this
Agreement or the Registration Rights Agreement, at law or in equity.
SECTION 7.4. LEGENDS. Each Investor agrees with the Company that each
Investor Acquired Share shall contain a legend substantially to the following
effect:
THESE SHARES HAVE BEEN ACQUIRED FOR INVESTMENT PURPOSES ONLY AND HAVE NOT BEEN
REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933 (AS AMENDED, THE
"SECURITIES ACT") OR UNDER ANY APPLICABLE STATE SECURITIES LAWS. THESE SHARES
MAY NOT BE SOLD, TRANSFERRED, ASSIGNED, PLEDGED, OR HYPOTHECATED, ABSENT AN
EFFECTIVE REGISTRATION UNDER THE SECURITIES ACT OR ANY APPLICABLE STATE
SECURITIES LAWS, OR UNLESS THE PROPOSED TRANSFER MAY BE EFFECTED WITHOUT
REGISTRATION OR QUALIFICATION UNDER THE SECURITIES ACT AND APPLICABLE STATE
SECURITIES LAWS.
SECTION 7.5. NOTICES. All notices and other communications required or
permitted to be given under this Agreement shall be in writing and shall be
deemed to have been duly given (a) on the date of delivery, if delivered
personally or by facsimile, upon confirmation of receipt or (b) on the first
Business Day following the date of dispatch if delivered by a recognized
next-day courier services, to the parties to this Agreement at the following
address or to such other address either party to this Agreement shall specify by
notice to the other party:
If to the Company:
Environmental Solutions Worldwide, Inc.
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇ ▇▇▇
Attention: Chief Executive Officer
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
With a copy to (which shall not constitute notice):
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Facsimile: 212-750-8297
If to an Investor, to his address set forth in the records of the Company,
With a copy to (which shall not constitute notice):
▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP
▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
17
SECTION 7.6. FURTHER ASSURANCES. Each party hereto shall do and perform or
cause to be done and performed all further acts and shall execute and deliver
all other agreements, certificates, instruments and documents as any other party
hereto reasonably may request in order to carry out the intent and accomplish
the purposes of this Agreement and the consummation of the transactions
contemplated hereby.
SECTION 7.7. AMENDMENTS AND WAIVERS. Any provision of this Agreement may
be amended or waived if, but only if, such amendment or waiver is in writing and
is duly executed and delivered by the Company and the Investors. No failure or
delay by any party in exercising any right, power or privilege hereunder shall
operate as a waiver thereof nor shall any single or partial exercise thereof
preclude any other or further exercise thereof or the exercise of any other
right, power or privilege. The rights and remedies herein provided shall be
cumulative and not exclusive of any rights or remedies provided by Law.
SECTION 7.8. FEES AND EXPENSES. Without limiting the Company's obligations
under Section 1.1(e), any expenses of the Investors reasonably incurred in
connection with the transactions contemplated under this Agreement, including,
without limitation, any and all advisory, legal, filing and other fees incurred
in connection therewith, whether incurred prior to or after the date hereof,
shall in each case be paid by the Company. The Company's obligation under this
Section 7.8 shall not be duplicative of any similar obligations set forth in the
Bridge Note Documents.
SECTION 7.9. SUCCESSORS AND ASSIGNS. The provisions of this Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns. This Agreement shall not be assignable by
operation of law or otherwise, provided that, the Investors shall be permitted,
to assign this Agreement to any of their respective Affiliates, provided that
(i) such assignee shall execute an agreement for the benefit of the Company in
form and substance reasonably satisfactory to the Company, pursuant to which
such proposed assignee agrees to be bound by the terms and conditions of this
Agreement and (ii) that no such assignment shall relieve any Investor of its
obligations hereunder. Without limiting the foregoing, none of the rights of any
Investor hereunder shall be assigned to, or enforceable by, any Person to whom
an Investor may transfer capital stock of the Company (other than a transfer to
such Investor's Affiliates to the extent permitted in accordance with the terms
of this Agreement).
SECTION 7.10. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO
THE CHOICE OF LAW RULES OF SUCH STATE, EXCEPT FOR MATTERS ARISING UNDER THE
SECURITIES ACT OR THE EXCHANGE ACT WHICH MATTERS SHALL BE CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH SUCH LAWS.
18
SECTION 7.11. JURISDICTION. The parties hereto agree that any suit, action
or proceeding seeking to enforce any provision of, or based on any matter
arising out of or in connection with, this Agreement or the transactions
contemplated hereby may only be brought in the United States District Court for
the Southern District of New York or any New York State court sitting in the
County of New York, and each of the parties hereby consents to the jurisdiction
of such courts (and of the appropriate appellate courts therefrom) in any such
suit, action or proceeding and irrevocably waives, to the fullest extent
permitted by Law, any objection which it may now or hereafter have to the laying
of the venue of any such suit, action or proceeding in any such court or that
any such suit, action or proceeding which is brought in any such court has been
brought in an inconvenient forum. Process in any such suit, action or proceeding
may be served on any party anywhere in the world, whether within or without the
jurisdiction of any such court.
SECTION 7.12. WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO HEREBY
IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING
ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY.
SECTION 7.13. ENTIRE AGREEMENT. This Agreement and the Registration Rights
Agreement, together with any certificates delivered hereunder, constitutes the
entire agreement between the parties with respect to the subject matter of this
Agreement and supersedes all prior agreements and understandings, both oral and
written, between the parties and/or their affiliates with respect to the subject
matter of this Agreement.
SECTION 7.14. EFFECT OF HEADINGS AND TABLE OF CONTENTS. The Article and
Section headings herein and the Table of Contents are for convenience only and
shall not affect the construction hereof.
SECTION 7.15. SEVERABILITY. If one or more provisions of this Agreement
are held to be unenforceable under applicable Law, such provision shall be
deemed to be excluded from this Agreement and the balance of this Agreement
shall be interpreted as if such provision were so excluded and shall be enforced
in accordance with its terms to the maximum extent permitted by Law.
SECTION 7.16. COUNTERPARTS; NO THIRD PARTY BENEFICIARIES. This Agreement
may be signed in any number of counterparts, each of which shall be an original,
with the same effect as if the signatures were upon the same instrument. Except
to the extent contemplated by Section 7.3, no provision of this Agreement shall
confer upon any Person other than the parties hereto any rights or remedies
hereunder.
19
SECTION 7.17. SPECIFIC PERFORMANCE. The transactions contemplated by this
Agreement are unique. Accordingly, each of the Company and the Investors
acknowledge and agree that, in addition to all other remedies to which it may be
entitled, each of the parties hereto is entitled to seek a decree of specific
performance, provided that such party is not in material default hereunder. The
Company and the Investors agree that, if for any reason a party shall have
failed to perform its obligations under this Agreement, then the party seeking
to enforce this Agreement against such nonperforming party shall be entitled to
specific performance and injunctive and other equitable relief, and the parties
further agree to waive any requirement for the securing or posting of any bond
in connection with the obtaining of any such injunctive or other equitable
relief. This provision is without prejudice to any other rights that any party
may have against another party for any failure to perform its obligations under
this Agreement, including the right to seek damages for a breach of any
provision of this Agreement, and all rights, powers and remedies available (at
law or in equity) to a party in respect hereof by the other party shall be
cumulative and not alternative or exclusive, and the exercise or beginning of
the exercise of any thereof by a party shall not preclude the simultaneous or
later exercise of any other rights, powers or remedies by such party.
[Remainder of page intentionally left blank]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the day and year
first above written.
THE COMPANY:
ENVIRONMENTAL SOLUTIONS WORLDWIDE, INC.
By: /S/ ▇▇▇▇▇▇▇ ▇▇▇▇
-----------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇
Title: Chief Financial Officer
THE INVESTORS:
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇
-----------------
▇▇▇▇ ▇. ▇▇▇▇▇
BLACK FAMILY 1997 TRUST
By: /S/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Trustee
▇▇▇▇ ▇. ▇▇▇▇▇ TRUST UAD 11/30/92
FBO ▇▇▇▇▇▇ ▇▇▇▇▇
By: /S/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Trustee
▇▇▇▇ ▇. ▇▇▇▇▇ TRUST UAD 11/30/92
▇▇▇▇▇▇▇▇ ▇▇▇▇▇
By: /S/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Trustee
21
▇▇▇▇ ▇. ▇▇▇▇▇ TRUST UAD 11/30/92
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
By: /S/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Trustee
▇▇▇▇ ▇. ▇▇▇▇▇ TRUST UAD 11/30/92
▇▇▇▇▇▇▇▇ ▇▇▇▇▇
By: /S/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Trustee
/S/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇
ORCHARD INVESTMENTS, LLC
By: Orchard Capital Corporation, its Manager
By: /S/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
----------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: President
/S/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
----------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
22
ANNEX A
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement") is entered into as
of [____________], 2011, by and among Environmental Solutions Worldwide Inc.,
a Florida corporation having its principal executive office at ▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇ ▇▇▇▇▇▇ (the "Company"), and the Persons listed on the
signature pages hereto (each a "Holder," and collectively, the "Holders").
WHEREAS, the Holders wish to subscribe for and purchase, and the Company,
desires to issue and sell, certain shares of the Company's Common Stock (as
defined below) pursuant to a rights offering whereby each holder of Common Stock
as of [_____________], 2011 shall be offered one right for each share of Common
Stock held by such holder (the "Rights Offering");
WHEREAS, pursuant to an investment agreement dated as of May [__________],
2011 (the "Investment Agreement"), the Holders wish to subscribe for
and purchase, and the Company, desires to issue and sell, certain shares of the
Company's Common Stock (as defined below), on the terms and subject to the
conditions set forth therein; and
WHEREAS, in connection with their purchase of shares of Common Stock
pursuant to the Investment Agreement, the Holders wish to receive certain
registration rights related to their Common Stock, and the Company desires to
grant such rights on the terms and subject to the conditions set forth herein;
NOW, THEREFORE, the parties hereto mutually agree as follows:
ARTICLE I
DEFINITIONS; CONSTRUCTION; INTERPRETATION
SECTION 1.1. Definition. The following terms used herein shall have the
following meanings:
"Affiliate" means (a) with respect to any Person, any other Person
directly or indirectly controlling or controlled by or under direct or indirect
common control with such specified Person and (b) with respect to any
individual, shall also mean the spouse or child of such individual; provided,
that neither the Company nor any Person controlled by the Company shall be
deemed to be an Affiliate of any Holder.
"Agent" means the principal placement agent on an agented placement of
Registrable Securities.
"Agreement" has the meaning set forth in the Preamble.
23
"Black Group" means collectively ▇▇▇▇ ▇. ▇▇▇▇▇, Black Family 1997 Trust,
▇▇▇▇ ▇. ▇▇▇▇▇ Trust UAD 11/30/92 FBO ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇. ▇▇▇▇▇ Trust UAD
11/30/92 ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇. ▇▇▇▇▇ Trust UAD 11/30/92 ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇
▇. ▇▇▇▇▇ Trust UAD 11/30/92 ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, and ▇▇▇▇ ▇. ▇▇▇▇▇▇.
"Board" means the Board of Directors of the Company.
"Common Stock" means shares of the Company's common stock, $0.001 par
value per share, having the rights and preferences set forth in the Certificate
of Incorporation of the Company.
"Company" has the meaning set forth in the Preamble.
"Continuously Effective," with respect to a specified registration
statement, means that it shall not cease to be effective and available for
Transfers of Registrable Securities thereunder for longer than either (a) any
ten (10) consecutive business days or (b) an aggregate of fifteen (15) business
days during the period specified in the relevant provision of this Agreement, in
each case except as permitted under Section 4.2.
"Demanding Holders" has the meaning set forth in Section 2.1(a).
"Demand Registration" has the meaning set forth in Section 2.1(a).
"Exchange Act" means the Securities Exchange Act of 1934.
"Holdback" has the meaning set forth in Section 5.2.
"Holder" and "Holders" have the meanings set forth in the Preamble.
"Holder Indemnified Party" has the meaning set forth in Section 7.1.
"Indemnifying Party" has the meaning set forth in Section 7.3.
"Indemnified Party" has the meaning set forth in Section 7.3.
"Initiating Holder" has the meaning set forth in Section 2.2(a).
"Investment Agreement" means that certain Investment Agreement dated the
date hereof among the Company and the signatories thereto.
"Majority Selling Holders" means those Selling Holders whose Registrable
Securities included in such registration represent a majority of the Registrable
Securities of all Selling Holders included therein.
"Orchard Group" means collectively Orchard Investments, LLC and ▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇
"Person" means an individual, a partnership, a corporation, a limited
liability company, an association, a joint stock company, a trust, a joint
venture, an unincorporated organization or a governmental entity or any
department, agency or political subdivision thereof.
"Piggyback Registration" has the meaning set forth in Section 3.1.
24
"Register," "Registered" and "Registration" shall refer to a registration
effected by preparing and filing a registration statement or similar document in
compliance with the Securities Act, and the declaration or ordering by the SEC
of effectiveness of such registration statement or document.
"Registrable Securities" means, subject to Section 8.1 and Section 9.1:
(a) the Shares owned by a Holder on a date of determination (whether owned on
the date hereof or acquired hereafter); (b) any shares of Common Stock or other
equity securities issuable upon the conversion or exercise of any warrant, right
or other security which is issued as a dividend or other distribution with
respect to, or in exchange by the Company generally for, or in replacement by
the Company generally of, such Shares; and (c) any securities issued in exchange
for Shares in any merger or reorganization of the Company. For purposes of this
Agreement, a Person shall be deemed to be a holder of Registrable Securities
whenever such Person has the right to acquire such Registrable Securities (upon
conversion or exercise in connection with a transfer of securities or otherwise,
but disregarding any restrictions or limitations upon the exercise of such
right), whether or not such acquisition has been effected. Notwithstanding the
foregoing, Registrable Securities shall not include any securities that have
theretofore been registered and sold pursuant to the Securities Act or that have
been sold to the public pursuant to Rule 144 or any similar rule promulgated by
the SEC pursuant to the Securities Act, and a Holder shall not be deemed to have
Registrable Securities if the sale or disposition of all of the Holder's Shares
does not require registration under the Securities Act for a sale or disposition
in a single public sale and upon the request of a Holder, the Company agrees to
remove any and all legends restricting transfer from the certificates evidencing
Shares covered by the foregoing exclusions.
"Registrable Securities then outstanding" means, with respect to a
specified determination date, the Registrable Securities owned by all Holders on
such date.
"Registration Expenses" has the meaning set forth in Section 6.1.
"SEC" means the U.S. Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933.
"Selling Holders" means, with respect to a specified registration pursuant
to this Agreement, Holders whose Registrable Securities are included in such
registration.
"Shares" means the shares of Common Stock.
"Shelf Registration" has the meaning set forth in Section 2.2(a).
"Transfer" means any sale, transfer, assignment, pledge, mortgage,
exchange, hypothecation, grant of a security interest or other direct or
indirect disposition or encumbrance of an interest (whether with or without
consideration, whether voluntarily or involuntarily or by operation of law) or
the acts thereof. The terms "Transferee," "Transferor," "Transferred," and other
forms of the word "Transfer" shall have the correlative meanings.
25
"Underwriters' Representative" means the managing underwriter or, in the
case of a co-managed underwriting, the managing underwriter designated as the
Underwriters' Representative by the co-managers.
"Violation" has the meaning set forth in Section 7.1.
SECTION 1.2. Construction and Interpretation. For purposes of this
Agreement, except as otherwise expressly provided herein or unless the context
otherwise requires: (a) words using the singular or plural number also include
the plural or singular number, respectively, and the use of any gender herein
shall be deemed to include the other gender; (b) references herein to
"Articles," "Sections," "subsections" and other subdivisions without reference
to a document are to the specified Articles, Sections, subsections and other
subdivisions of this Agreement; (c) a reference to a subsection without further
reference to a Section is a reference to such subsection as contained in the
same Section in which the reference appears, and this rule shall also apply to
other subdivisions within a Section or subsection; (d) the words "herein,"
"hereof," "hereunder," "hereby" and other words of similar import refer to this
Agreement as a whole and not to any particular provision; (e) the words
"include," "includes" and "including" are deemed to be followed by the phrase
"without limitation;" (f) references to a Person are also references to its
successors in interest (by means of merger, consolidation or sale of all or
substantially all the assets of such Person or otherwise, as the case may be)
and permitted assigns; (g) references to Registrable Securities "owned" by a
Holder shall include Registrable Securities beneficially owned by such Person
and beneficially owned by such Person's Affiliates; (h) references to a document
are to it as amended, waived and otherwise modified from time to time and
references to laws, statutes or regulations mean such laws, statutes or
regulations as the same may be amended from time to time; and (i) capitalized
terms used herein and not otherwise defined have the meanings ascribed to them
in the Investment Agreement. Descriptive headings are for convenience of
reference only and do not constitute a part of this Agreement.
ARTICLE II
DEMAND REGISTRATION
SECTION 2.1. Periodic Registration.
(a) At any time after the closing of the Investment Agreement if either
the Black Group or the Orchard Group shall make a written request to the Company
(the "Demanding Holders"), the Company, subject to Section 2.4, shall cause
there to be filed with the SEC a registration statement meeting the requirements
of the Securities Act (a "Demand Registration"), and each Demanding Holder shall
be entitled to have included therein (subject to Section 3.2) all or such number
of such Demanding Holder's Registrable Securities, as the Demanding Holder shall
request in writing. Any request made pursuant to this Section 2.1 shall be
addressed to the attention of the Company's Chief Executive Officer, and shall
specify the number of Registrable Securities to be registered, the intended
methods of disposition thereof and that the request is for a Demand Registration
pursuant to this Section 2.1(a).
26
(b) The Company shall be entitled to postpone for up to sixty (60) days
the filing of any Demand Registration statement otherwise required to be
prepared and filed pursuant to this Section 2.1, if the Board determines, in its
good faith reasonable judgment (with the concurrence of the Underwriters'
Representative, if any, who shall be subject to confidentiality restrictions
regarding such information), that such registration and the Transfer of
Registrable Securities contemplated thereby would materially interfere with, or
require premature disclosure of, any financing, acquisition or reorganization or
any other material event involving the Company or any of its wholly-owned
subsidiaries and the Company promptly gives the Demanding Holders notice of such
determination; provided, however, that the Company shall not have postponed
pursuant to this Section 2.1(b) the filing of any other Demand Registration
statement otherwise required to be prepared and filed pursuant to this Section
2.1 during the twelve (12) month period ended on the date of the relevant
request pursuant to Section 2.1(a).
(c) Whenever the Company shall have received a demand to effect the
registration of any Registrable Securities pursuant to Section 2.1(a), the
Company shall promptly give written notice of such proposed registration to all
Holders. Any Holder of Registrable Securities may, within twenty (20) days after
receipt of such notice, request in writing that all of such Holder's Registrable
Securities, or any portion thereof designated by such Holder, be included in the
Demand Registration. Each such Holder shall also be deemed a Demanding Holder.
SECTION 2.2. Shelf Registration.
(a) If the Company is eligible to file a Registration Statement on Form
S-3, each Holder that shall make a written request to the Company (the
"Initiating Holder") shall be entitled to have all or any number of such
Initiating Holder's Registrable Securities included in a registration with the
SEC in accordance with the Securities Act for an offering on a delayed or
continuous basis pursuant to Rule 415 under the Securities Act (including, if
the Company is a well known seasoned issuer, as defined by Rule 405 under the
Securities Act, an automatic shelf registration with the SEC) on Form S-3 (a
"Shelf Registration"). Any request made pursuant to this Section 2.2 shall be
addressed to the attention of the Company's Chief Executive Officer, and shall
specify the number of Registrable Securities to be registered, the intended
methods of disposition thereof and that the request is for a Shelf Registration
pursuant to this Section 2.2.
(b) Whenever the Company shall have received a request to effect the
registration of any Registrable Shares from an Initiating Holder, the Company
shall promptly give written notice of such proposed Shelf Registration to all
Holders. Any Holder of Registrable Shares may, within twenty (20) days after
receipt of such notice, request in writing that all of such Holder's Registrable
Shares, or any portion thereof designated by such Holder, be included in the
Shelf Registration. Each such Holder shall also be deemed an Initiating Holder.
(c) There shall not be any limit on the number of Shelf Registrations that
a Holder may request with respect to its Registrable Securities.
(d) If the Company shall have complied with its obligations under this
Agreement, a right to demand a registration pursuant to this Section 2.2 shall
be deemed to have been satisfied upon the effective date of a Shelf
Registration, provided no stop order or similar order, or proceedings for such
an order, is thereafter entered or initiated.
27
SECTION 2.3. Registration. Following receipt of a request for a Demand
Registration or a Shelf Registration, the Company shall, subject, in the case of
a Demand Registration, to Section 2.4:
(a) File the registration statement with the SEC as promptly as
practicable, and in any event within 45 days after the date such request is
given by the Demanding Holders, in the case of a Demand Registration, or 30 days
after the date such request is given by the Initiating Holder in the case of a
Shelf Registration, and shall use the Company's reasonable best efforts to have
the registration declared effective under the Securities Act as soon as
reasonably practicable, in each instance giving due regard to the need to
prepare current financial statements, conduct due diligence and complete other
actions that are reasonably necessary to effect a registered public offering.
(b) Use the Company's reasonable best efforts to keep the relevant
registration statement Continuously Effective (x) if a Demand Registration, for
up to 90 days or until such earlier date as of which all the Registrable
Securities under the Demand Registration statement shall have been disposed of
in the manner described in the Registration Statement, and (y) if a Shelf
Registration, for three years. Notwithstanding the foregoing, if for any reason
the effectiveness of a registration pursuant to this Article II is suspended or,
in the case of a Demand Registration, postponed as permitted by Section 2.1(b),
the foregoing period shall be extended by the aggregate number of days of such
suspension or postponement.
SECTION 2.4. Number of Demand Registration Statements. The Company shall
be obligated to effect no more than two (2) Demand Registrations for each of the
Black Group and Orchard Group. For purposes of the preceding sentence,
registration shall not be deemed to have been effected: (a) unless a
registration statement with respect thereto has become effective; (b) if, after
such registration statement has become effective, such registration or the
related offer, sale or distribution of Registrable Securities thereunder is
interfered with by any stop order, injunction or other order or requirement of
the SEC or other governmental agency or court for any reason not attributable to
the Selling Holders and such interference is not thereafter eliminated; or (c)
if the conditions to closing specified in the underwriting agreement, if any,
entered into in connection with such registration are not satisfied or waived,
other than by reason of a failure on the part of the Selling Holders. If the
Company shall have complied with its obligations under this Agreement, a right
to demand a registration pursuant to Section 2.1 shall be deemed to have been
satisfied upon the earlier of (x) the date as of which all of the Registrable
Securities included therein shall have been disposed of pursuant to the
registration statement, and (y) the date as of which such registration statement
shall have been Continuously Effective for a period of 90 days, provided no stop
order or similar order, or proceedings for such an order, is thereafter entered
or initiated.
SECTION 2.5. Form of Registration Statement. A registration pursuant to
this Article II shall be on (a) such appropriate registration form of the SEC as
shall be selected by the Company and be reasonably acceptable to the Majority
Selling Holders, in the case of a Demand Registration, or Form S-3, in the case
of a Shelf Registration and (b) permit the disposition of the Registrable
Securities in accordance with the intended method or methods of disposition
specified in the request pursuant to Section 2.1(a) or Section 2.2(a),
respectively.
28
SECTION 2.6. Underwriters. If any registration pursuant to Article II
involves an underwritten offering (whether on a "firm", "best efforts" or "all
reasonable efforts" basis or otherwise), or an agented offering, the Majority
Selling Holders, or, in the case of a Shelf Registration, the Initiating Holder,
shall have the right to select the underwriter or underwriters and manager or
managers to administer such underwritten offering or the placement agent or
agents for such agented offering.
ARTICLE III
PIGGYBACK REGISTRATION
SECTION 3.1. Registration. If at any time the Company proposes to
register securities under the Securities Act in connection with the public
offering for its account on Form S-1 or S-3 (or any replacement or successor
forms), the Company shall promptly give each Holder of Registrable Securities
written notice of such registration (a "Piggyback Registration"). Upon the
written request of each Holder given within 20 days following the date of such
notice, the Company shall cause to be included in such registration statement
and use its reasonable best efforts to cause to be registered under the
Securities Act all the Registrable Securities that each such Holder shall have
requested to be registered. The Company shall have the right to withdraw or
cease to prepare or file any registration statement for any offering referred to
in this Article III without any obligation or liability to any Holder.
SECTION 3.2. Limitation on Number of Shares. If the Underwriters'
Representative or Agent shall advise the Company in writing (with a copy to each
Selling Holder) that, in its opinion, the amount of Registrable Securities
requested to be included in such registration would materially adversely affect
such offering, or the timing thereof, then the Company will include in such
registration, to the extent of the amount and class which the Company is so
advised can be sold without such material adverse effect in such offering:
first, all securities proposed to be sold by the Company for its own account;
second, the Registrable Securities requested to be included in such registration
by all Holders pursuant to this Article III, pro rata based on the estimated
gross proceeds from the sale thereof; and third all other securities requested
to be included in such registration.
SECTION 3.3. Number of Piggyback Registrations. Each Holder shall be
entitled to have its Registrable Securities included in an unlimited number of
Piggyback Registrations pursuant to this Article III.
SECTION 3.4. Company Lockup. If the Company has previously filed a
registration statement with respect to Registrable Securities pursuant to
Article II or pursuant to this Article III, and if such previous registration
has not been withdrawn or abandoned, the Company will not file or cause to be
effected any other registration of any of its equity securities or securities
convertible or exchangeable into or exercisable for its equity securities under
the Securities Act (except on Form ▇-▇, ▇▇▇▇ ▇-▇ or any successor form), whether
on its own behalf or at the request of any holder or holders of such securities,
until a period of 90 days has elapsed from the effective date of such a previous
registration or as otherwise determined by the Underwriter's Representative.
29
ARTICLE IV
REGISTRATION PROCEDURES
SECTION 4.1. Procedures. Whenever required under Article II or Article
III to effect the registration of any Registrable Securities, the Company shall,
as expeditiously as practicable:
(a) Prepare and file with the SEC a registration statement with respect to
such Registrable Securities and use the Company's reasonable best efforts to
cause such registration statement to become effective; provided, however, that
before filing a registration statement or prospectus or any amendments or
supplements thereto, including documents incorporated by reference after the
initial filing of the registration statement and prior to effectiveness thereof,
the Company shall furnish to counsel for the Selling Holders copies of all such
documents in the form substantially as proposed to be filed with the SEC at
least five (5) business days prior to filing for review and comment by such
counsel, which opportunity to comment shall include an absolute right to control
or contest disclosure if the applicable Selling Holder reasonably believes that
it may be subject to controlling person liability under applicable securities
laws with respect thereto.
(b) Prepare and file with the SEC such amendments and supplements to such
registration statement and the prospectus used in connection with such
registration statement as may be necessary to comply with the provisions of the
Securities Act and rules thereunder with respect to the disposition of all
securities covered by such registration statement. If the registration is for an
underwritten offering, the Company shall amend the registration statement or
supplement the prospectus whenever required by the terms of the underwriting
agreement entered into pursuant to Section 4.1(e). Subject to Rule 415 under the
Securities Act, if the registration statement is a Shelf Registration, the
Company shall amend the registration statement or supplement the prospectus so
that it will remain current and in compliance with the requirements of the
Securities Act for three years after its effective date, and if during such
period any event or development occurs as a result of which the registration
statement or prospectus contains a misstatement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading, the Company shall promptly notify each
Selling Holder, amend the registration statement or supplement the prospectus so
that each will thereafter comply with the Securities Act and furnish to each
Selling Holder of Registrable Shares such amended or supplemented prospectus,
which each such Holder shall thereafter use in the Transfer of Registrable
Shares covered by such registration statement. Pending such amendment or
supplement, each such Holder shall cease making offers or Transfers of
Registrable Shares pursuant to the prior prospectus. In the event that any
Registrable Securities included in a registration statement subject to, or
required by, this Agreement remain unsold at the end of the period during which
the Company is obligated to use its best efforts to maintain the effectiveness
of such registration statement, the Company may file a post-effective amendment
to the registration statement for the purpose of removing such Securities from
registered status.
30
(c) Furnish to each Selling Holder of Registrable Securities, without
charge, such numbers of copies of the registration statement, any pre-effective
or post-effective amendment thereto, the prospectus, including each preliminary
prospectus and any amendments or supplements thereto, in each case in conformity
with the requirements of the Securities Act and the rules thereunder, and such
other related documents as any such Selling Holder may reasonably request in
order to facilitate the disposition of Registrable Securities owned by such
Selling Holder.
(d) Use the Company's reasonable best efforts (i) to register and qualify
the securities covered by such registration statement under such other
securities or blue sky laws of such states or jurisdictions and (ii) to obtain
the withdrawal of any order suspending the effectiveness of a registration
statement, or the lifting of any suspension of the qualification (or exemption
from qualification) of the offer and Transfer of any of the Registrable
Securities in any jurisdiction, at the earliest possible moment.
(e) In the event of any underwritten or agented offering, enter into and
perform the Company's obligations under an underwriting or agency agreement
(including indemnification and contribution obligations of underwriters or
agents), in usual and customary form, with the managing underwriter or
underwriters of or agents for such offering. The Company shall also cooperate
with the Majority Selling Holders or, in the case of a Shelf Registration, the
Initiating Holder, and the Underwriters' Representative or Agent for such
offering in the marketing of the Registrable Shares, including making available
the Company's officers, accountants, counsel, premises, books and records for
such purpose.
(f) Promptly notify each Selling Holder of any stop order issued or
threatened to be issued by the SEC in connection therewith (and take all
reasonable actions required to prevent the entry of such stop order or to remove
it if entered).
(g) Make generally available to the Company's security holders copies of
all periodic reports, proxy statements, other information referred to in Section
8.1 and an earnings statement satisfying the provisions of Section 11(a) of the
Securities Act no later than 90 days following the end of the 12-month period
beginning with the first month of the Company's first fiscal quarter commencing
after the effective date of each registration statement filed pursuant to this
Agreement.
(h) Make available for inspection by any Selling Holder, any underwriter
participating in such offering and the representatives of such Selling Holder
and Underwriter, all financial and other information as shall be reasonably
requested by them, and provide the Selling Holder, any underwriter participating
in such offering and the representatives of such Selling Holder and Underwriter
the opportunity to discuss the business affairs of the Company with its
principal executives and independent public accountants who have certified the
audited financial statements included in such registration statement, in each
case as necessary to enable them to exercise their due diligence responsibility
under the Securities Act; provided, however, that information that the Company
determines, in good faith, to be confidential and that the Company advises such
Person in writing, is confidential, shall not be disclosed unless either such
Person signs a confidentiality agreement reasonably satisfactory to the Company
or the related Selling Holder of Registrable Securities agrees to be responsible
for such Person's breach of confidentiality on terms reasonably satisfactory to
the Company.
31
(i) Use the Company's reasonable best efforts to obtain a so-called
"comfort letter" from its independent public accountants, and legal opinions of
counsel to the Company addressed to the Selling Holders, in customary form and
covering such matters of the type customarily covered by such letters, and in a
form that shall be reasonably satisfactory to Majority Selling Holders or, in
the case of a Shelf Registration, the Initiating Holder. The Company shall
furnish to each Selling Holder a signed counterpart of any such comfort letter
or legal opinion. Delivery of any such opinion or comfort letter shall be
subject to the recipient furnishing such written representations or
acknowledgements as are customarily provided by selling shareholders who receive
such comfort letters or opinions.
(j) Provide and cause to be maintained a transfer agent and registrar for
all Registrable Securities covered by such registration statement from and after
a date not later than the effective date of such registration statement.
(k) Use all reasonable efforts to cause the Registrable Securities covered
by such registration statement (i) if the Common Stock is then listed on a
securities exchange or included for quotation in a recognized trading market, to
continue to be so listed or included for a reasonable period of time after the
offering; and (ii) to be registered with or approved by such other United States
or state governmental agencies or authorities as may be necessary by virtue of
the business and operations of the Company to enable the Selling Holders of
Registrable Securities to consummate the disposition of such Registrable
Securities.
(l) Use the Company's reasonable efforts to provide a CUSIP number for the
Registrable Securities prior to the effective date of the first registration
statement including Registrable Securities.
(m) Take such other actions as are reasonably required in order to
expedite or facilitate the disposition of Registrable Securities included in
each such registration.
SECTION 4.2. Blackout. The Company may notify in writing each of the
Holders that the availability of any effective Shelf Registration is suspended
for a reasonable time, not exceeding sixty (60) days in any twelve (12)-month
period, if the Company shall determine in good faith that permitting such sales
would interfere with any material acquisition, financing or other transaction
that the Company is actively pursuing or require premature disclosure of any
other material corporate development, which disclosure would materially
adversely affect the interests of the Company. Each Holder agrees that upon
receipt of any such notice, it shall not sell any Registrable Securities
pursuant to such Shelf Registration until the earlier of (i) such time as such
Holder is advised in writing by the Company that the Shelf Registration may be
used; and (ii) the sixty (60) day suspension period referred to above expires.
ARTICLE V
HOLDERS' OBLIGATIONS.
SECTION 5.1. Obligation. It shall be a condition precedent to the
obligations of the Company to take any action pursuant to this Agreement with
respect to the Registrable Securities of any Selling Holder of Registrable
Securities that such Selling Holder shall:
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(a) furnish to the Company such information regarding such Selling Holder,
the number of the Registrable Securities owned by it, and the intended method of
disposition of such securities as shall be required to effect the registration
of such Selling Holder's Registrable Securities, and to cooperate with
reasonable requests from the Company in preparing such registration; and
(b) agree to sell their Registrable Securities to the underwriters at the
same price and on substantially the same terms and conditions as the Company or
the other Persons on whose behalf the registration statement was being filed
have agreed to sell their securities, and to execute the underwriting agreement
agreed to by the Majority Selling Holders (in the case of a registration under
Article II) or the Company (in the case of a registration under Article III).
SECTION 5.2. Holdback. Each Holder, if so requested by the Underwriters'
Representative or Agent in connection with an offering of any Registrable
Securities, shall not effect any public sale or distribution of shares of Common
Stock or any securities convertible into or exchangeable or exercisable for
shares of Common Stock, including a sale pursuant to Rule 144 under the
Securities Act (except as part of such underwritten or agented registration),
during the period reasonably requested by the Underwriters' Representative or
Agent, but in no event greater than 90 days (a "Holdback"). In order to enforce
the foregoing covenant, the Company shall be entitled to impose stop-transfer
instructions with respect to the Registrable Securities of each Holder until the
end of such period. Notwithstanding the foregoing, no Holder shall be subject to
more than two Holdbacks in any twelve (12)-month period.
ARTICLE VI
EXPENSES OF REGISTRATION
SECTION 6.1. Demand and Shelf Registrations. With respect to each Demand
Registration and each Shelf Registration, the Company shall bear and pay all
expenses incurred in connection with any registration, filing, or qualification
of Registrable Securities with respect to such Demand Registrations or Shelf
Registrations for each Selling Holder (which right may be assigned to any Person
to whom Registrable Securities are Transferred as permitted by Article IX),
including all registration, filing and Financial Industry Regulatory Authority
fees, all fees and expenses of complying with securities or blue sky laws, all
word processing, duplicating and printing expenses, messenger and delivery
expenses, the reasonable fees and disbursements of counsel for the Company and
of the Company's independent public accountants (including the expenses of
"comfort" letters required by or incident to such performance and compliance)
and the reasonable fees and disbursements of one firm of counsel for the Selling
Holders of Registrable Securities (selected by the Demanding Holders owning a
majority of the Registrable Securities owned by Demanding Holders, or by the
Initiating Holder, as the case may be) (the "Registration Expenses"), but
excluding underwriting discounts and commissions relating to Registrable
Securities (which shall be paid on a pro rata basis by the Selling Holders).
SECTION 6.2. Piggyback Registration. The Company shall bear and pay all
Registration Expenses incurred in connection with any Piggyback Registrations
pursuant to Article III for each Selling Holder (which right may be Transferred
to any Person to whom Registrable Securities are Transferred as permitted by
Article IX), but excluding underwriting discounts and commissions relating to
Registrable Securities (which shall be paid on a pro rata basis by the Selling
Holders of Registrable Securities).
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SECTION 6.3. Failure to Pay Expenses. Any failure of the Company to pay
any Registration Expenses as required by this Article VI shall not relieve the
Company of its obligations under this Agreement.
ARTICLE VII
INDEMNIFICATION; CONTRIBUTION
SECTION 7.1. Indemnification by the Company. The Company agrees to
indemnify, defend and hold harmless each Holder and each of their Affiliates and
each of the officers, employees, directors, partners, members, attorneys and
agents and each Person, if any, who controls (within the meaning of Section 15
of the Securities Act or Section 20 of the Exchange Act) each Holder and each of
their Affiliates (each, an "Holder Indemnified Party") from and against any
expenses, losses, judgments, claims, damages or liabilities, whether joint or
several, arising out of or based upon any untrue statement (or allegedly untrue
statement) of a material fact contained in any Registration Statement under
which the sale of such Registrable Securities was registered under the
Securities Act, any preliminary prospectus, final prospectus, any "free writing
prospectus," as such term is defined in Rule 405 under the Securities Act, or
summary prospectus contained in the Registration Statement, or any amendment or
supplement thereto, or arising out of or based upon any omission (or alleged
omission) to state a material fact required to be stated therein or necessary to
make the statements therein not misleading, or any untrue statement or alleged
untrue statement of a material fact in the information conveyed to any purchaser
at the time of the sale to such purchaser, or the omission or alleged omission
to state therein a material fact required to be stated therein, or any violation
by the Company of the Securities Act or any rule or regulation promulgated
thereunder applicable to the Company and relating to action or inaction required
of the Company in connection with any such Registration; provided, however, that
the Company will not be liable in any such case to the extent that any such
expense, loss, claim, damage or liability arises out of or is based upon any
untrue statement or allegedly untrue statement or omission or alleged omission
made in such Registration Statement, preliminary prospectus, final prospectus or
summary prospectus, or any such amendment or supplement, in reliance upon and in
conformity with information furnished to the Company, in writing, by any Holder
expressly for use therein. The Company shall promptly advance and/or reimburse
each Holder Indemnified Party, as incurred, for any legal and any other expenses
reasonably incurred by such Holder Indemnified Party in connection with
investigating and defending any such expense, loss, judgment, claim, damage,
liability or action. The Company also shall indemnify any Underwriter of the
Registrable Securities, their officers, Affiliates, directors, partners, members
and agents and each Person who controls such Underwriter on substantially the
same basis as that of the indemnification provided above in this Section 4.1.
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SECTION 7.2. Indemnification by the Holder. Each Holder, severally but
not jointly, will, in the event that any Registration is being effected under
the Securities Act pursuant to this Agreement of any Registrable Securities held
by such Holder, indemnify and hold harmless the Company, each of its directors
and officers and each Underwriter (if any), and each other Holder and each other
Person, if any, who controls another Holder or such Underwriter within the
meaning of the Securities Act, against any losses, claims, judgments, damages or
liabilities, whether joint or several, insofar as such losses, claims,
judgments, damages or liabilities (or actions in respect thereof) arise out of
or are based upon any untrue statement or allegedly untrue statement of a
material fact contained in any Registration Statement under which the sale of
such Registrable Securities was registered under the Securities Act, any
preliminary prospectus, final prospectus, any "free writing prospectus," as such
term is defined in Rule 405 under the Securities Act, or summary prospectus
contained in the Registration Statement, or any amendment or supplement thereto,
or arise out of or are based upon any omission or the alleged omission to state
a material fact required to be stated therein or necessary to make the statement
therein not misleading, if the statement or omission was made in reliance upon
and in conformity with information furnished in writing to the Company by such
Holder expressly for use therein, and shall reimburse the Company, its directors
and officers, and each other Holder or controlling Person for any legal or other
expenses reasonably incurred by any of them in connection with investigation or
defending any such loss, claim, damage, liability or action. Notwithstanding the
provisions of this Section 7.2, the Holder shall not be required to contribute
any amount in excess of the dollar amount of the net proceeds (after payment of
any underwriting fees, discounts, commissions or taxes) actually received by the
Holder from the sale of Registrable Securities which gave rise to such
indemnification obligation.
SECTION 7.3. Conduct of Indemnification Proceedings. Promptly after
receipt by any Person of any notice of any loss, claim, damage or liability or
any action in respect of which indemnity may be sought pursuant to Section 7.1
or 7.2, such Person (the "Indemnified Party") shall, if a claim in respect
thereof is to be made against any other Person for indemnification hereunder,
notify such other Person (the "Indemnifying Party") in writing of the loss,
claim, judgment, damage, liability or action (to the extent legally
permissible); provided, however, that the failure by the Indemnified Party to
notify the Indemnifying Party shall not relieve the Indemnifying Party from any
liability which the Indemnifying Party may have to such Indemnified Party
hereunder, except and solely to the extent the Indemnifying Party is actually
prejudiced by such failure. If the Indemnified Party is seeking indemnification
with respect to any claim or action brought against the Indemnified Party, then
the Indemnifying Party shall be entitled to participate in such claim or action,
and, to the extent that it wishes, jointly with all other Indemnifying Parties,
to assume control of the defense thereof with counsel satisfactory to the
Indemnified Party. After notice from the Indemnifying Party to the Indemnified
Party of its election to assume control of the defense of such claim or action,
the Indemnifying Party shall not be liable to the Indemnified Party for any
legal or other expenses subsequently incurred by the Indemnified Party in
connection with the defense thereof other than reasonable costs of
investigation; provided, however, that in any action in which both the
Indemnified Party and the Indemnifying Party are named as defendants, the
Indemnified Party shall have the right to employ separate counsel (but no more
than one such separate counsel) to represent the Indemnified Party and its
controlling Persons who may be subject to liability arising out of any claim in
respect of which indemnity may be sought by the Indemnified Party against the
Indemnifying Party, with the fees and expenses of such counsel to be paid by
such Indemnifying Party if, based upon the advice of counsel of such Indemnified
Party, representation of both parties by the same counsel would be inappropriate
due to actual or potential differing interests between them. No Indemnifying
35
Party shall, without the prior written consent of the Indemnified Party, consent
to entry of judgment or effect any settlement of any claim or pending or
threatened proceeding in respect of which the Indemnified Party is or could have
been a party and indemnity could have been sought hereunder by such Indemnified
Party, unless such judgment or settlement includes an unconditional release of
such Indemnified Party from all liability arising out of such claim or
proceeding.
SECTION 7.4. Contribution.
(a) If the indemnification provided for in the foregoing Sections 7.1 and
7.2 is unavailable to any Indemnified Party in respect of any loss, claim,
damage, liability or action referred to herein, then each such Indemnifying
Party, in lieu of indemnifying such Indemnified Party, shall contribute to the
amount paid or payable by such Indemnified Party as a result of such loss,
claim, damage, liability or action in such proportion as is appropriate to
reflect the relative fault of the Indemnified Parties and the Indemnifying
Parties in connection with the actions or omissions which resulted in such loss,
claim, damage, liability or action, as well as any other relevant equitable
considerations. The relative fault of any Indemnified Party and any Indemnifying
Party shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by such
Indemnified Party or such Indemnifying Party and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission.
(b) The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 7.4 were determined by pro rata allocation
or by any other method of allocation which does not take account the equitable
considerations referred to in the immediately preceding Section. The amount paid
or payable by an Indemnified Party as a result of any loss, claim, damage,
liability or action referred to in the immediately preceding sentence shall be
deemed to include, subject to the limitations set forth above, any legal or
other expenses incurred by such Indemnified Party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this Section 7.4, the Holder shall not be required to contribute
any amount in excess of the dollar amount of the net proceeds (after payment of
any underwriting fees, discounts, commissions or taxes) actually received by the
Holder from the sale of Registrable Securities which gave rise to such
contribution obligation. No Person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any Person who was not guilty of such fraudulent
misrepresentation.
ARTICLE VIII
COVENANTS OF THE COMPANY
SECTION 8.1. Covenants. The Company hereby agrees and covenants as
follows:
36
(a) The Company shall file as and when applicable, on a timely basis, all
reports required to be filed by it under the Exchange Act. If the Company is not
required to file reports pursuant to the Exchange Act, upon the request of any
Holder of Registrable Securities, the Company shall make publicly available the
information specified in subparagraph (c)(2) of Rule 144 of the Securities Act,
and take such further action as may be reasonably required from time to time and
as may be within the reasonable control of the Company, to enable the Holders to
Transfer Registrable Securities without registration under the Securities Act
within the limitation of the exemptions provided by Rule 144 under the
Securities Act or any similar rule or regulation hereafter adopted by the
Commission.
(b) The Company shall not, and shall not permit its majority owned
subsidiaries to, effect any public sale or distribution of any shares of Common
Stock or any securities convertible into or exchangeable or exercisable for
shares of Common Stock, during the five (5) business days prior to, and during
the ninety (90)-day period beginning on, the commencement of a public
distribution of the Registrable Securities pursuant to any registration
statement prepared pursuant to this Agreement (other than by the Company
pursuant to such registration, if the registration is pursuant to Article III).
The Company shall not effect any registration of its securities (other than on
Form ▇-▇, ▇▇▇▇ ▇-▇, or any successor forms to such forms or pursuant to such
other registration rights agreements as may be approved in writing by the
Majority Selling Holders or, in the case of a Shelf Registration, the Initiating
Holder), or effect any public or private sale or distribution of any of its
securities, including a sale pursuant to Regulation D under the Securities Act,
whether on its own behalf or at the request of any holder or holders of such
securities from the date of a request for a Demand Registration pursuant to
Section 2.1 until the earlier of (x) ninety (90) days following the date as of
which all securities covered by such Demand Registration statement shall have
been Transferred, and (y) ninety (90) days following the effective date of such
Demand Registration statement, as the case may be, unless the Company shall have
previously notified in writing all Selling Holders of the Company's desire to do
so, and Selling Holders owning a majority of the Registrable Securities or the
Underwriters' Representative, if any, shall have consented thereto in writing.
(c) Any agreement entered into after the date of this Agreement pursuant
to which the Company or any of its majority owned subsidiaries issues or agrees
to issue any privately placed securities similar to any issue of the Registrable
Securities (other than (x) shares of Common Stock pursuant to a stock incentive,
stock option, stock bonus, stock purchase or other employee benefit plan of the
Company approved by its Board, and (y) securities issued to Persons in exchange
for ownership interests in any Person in connection with a business combination
in which the Company or any of its majority owned subsidiaries is a party) shall
contain a provision whereby holders of such securities agree not to effect any
public sale or distribution of any such securities during the periods described
in the first sentence of Section 8.1(b), in each case including a sale pursuant
to Rule 144 under the Securities Act (unless such Person is prevented by
applicable statute or regulation from entering into such an agreement).
(d) The Company shall not, directly or indirectly, (x) enter into any
merger, consolidation or reorganization in which the Company shall not be the
surviving corporation or (y) Transfer or agree to Transfer all or substantially
all the Company's assets, unless prior to such merger, consolidation,
reorganization or asset Transfer, the surviving corporation or the Transferee,
respectively, shall have agreed in writing to assume the obligations of the
Company under this Agreement, and for that purpose references hereunder to
"Registrable Securities" shall be deemed to include the securities which the
Holders of Registrable Securities would be entitled to receive in exchange for
Registrable Securities pursuant to any such merger, consolidation or
reorganization.
37
(e) The Company shall not grant to any Person (other than a Holder of
Registrable Securities) any registration rights with respect to securities of
the Company, or enter into any agreement, that would entitle the holder thereof
to have securities owned by it included in a Demand Registration or Shelf
Registration.
ARTICLE IX
MISCELLANEOUS
SECTION 9.1. Transfer of Registration Rights. Rights with respect to
Registrable Securities may be Transferred by a Holder to any Person in
connection with the Transfer of Registrable Securities to such Person, in all
cases, if (x) any such Transferee that is not a party to this Agreement shall
have executed and delivered to the Company a properly completed agreement
agreeing to be bound by the terms hereof, and (y) the Transferor shall have
delivered to the Company, no later than fifteen (15) days following the date of
the Transfer, written notification of such Transfer setting forth the name of
the Transferor, name and address of the Transferee, and the number of
Registrable Securities that shall have been so Transferred.
SECTION 9.2. Amendment, Modification and Waivers; Further Assurances.
(a) This Agreement may only be amended, modified or waived with the
consent of the Company and only if the Company shall have obtained the written
consent to such amendment, modification or waiver from each Holder.
(b) No waiver of any terms or conditions of this Agreement shall operate
as a waiver of any other breach of such terms and conditions or any other term
or condition, nor shall any failure to enforce any provision hereof operate as a
waiver of such provision or of any other provision hereof. No written waiver
hereunder, unless it by its own terms explicitly provides to the contrary, shall
be construed to effect a continuing waiver of the provisions being waived and no
such waiver in any instance shall constitute a waiver in any other instance or
for any other purpose or impair the right of the party against whom such waiver
is claimed in all other instances or for all other purposes to require full
compliance with such provision.
(c) Each of the parties hereto shall execute all such further instruments
and documents and take all such further action as any other party hereto may
reasonably require in order to effectuate the terms and purposes of this
Agreement.
SECTION 9.3. Assignment; Benefit. This Agreement and all of the
provisions hereof shall be binding upon and shall inure to the benefit of the
parties hereto and their respective heirs, assigns, executors, administrators or
successors; provided, however, that except as specifically provided herein with
respect to certain matters, neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned or delegated by the Company
without the written consent of Holders possessing a majority in number of the
Registrable Securities outstanding on the date as of which such delegation or
assignment is to become effective; provided further that a Holder may Transfer
its rights hereunder to a successor in interest to the Registrable Securities
owned by such assignor as permitted by Section 9.1.
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SECTION 9.4. Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of New York, without giving
effect to any choice of law or conflict of law rules or provisions (whether of
the State of New York or any other jurisdiction) that would cause the
application of the laws of any jurisdiction other than the State of New York.
SECTION 9.5. Notices. All notices and requests given pursuant to this
Agreement shall be in accordance with Section 8.5 of the Investment Agreement.
SECTION 9.6. Entire Agreement; Integration. Except as otherwise expressly
set forth herein, this Agreement and the Investment Agreement embody the
complete agreement and understanding among the parties hereto with respect to
the subject matter hereof and supersedes and preempts any prior understandings,
agreements or representations by or among the parties, written or oral, which
may have related to the subject matter hereof in any way.
SECTION 9.7. Injunctive Relief. Each of the parties hereto acknowledges
that in the event of a breach by any of them of any material provision of this
Agreement, the aggrieved party may be without an adequate remedy at law. Each of
the parties therefore agrees that in the event of such a breach hereof the
aggrieved party may elect to institute and prosecute proceedings in any court of
competent jurisdiction to enforce specific performance or to enjoin the
continuing breach hereof. By seeking or obtaining any such relief, the aggrieved
party shall not be precluded from seeking or obtaining any other relief to which
it may be entitled.
SECTION 9.8. Counterparts. This Agreement may be executed simultaneously
in two or more counterparts (including via facsimile or other electronic
transmission), any one of which need not contain the signatures of more than one
party, but all such counterparts taken together shall constitute one and the
same Agreement.
SECTION 9.9. Severability. Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be invalid,
illegal or unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability shall not affect
the validity, legality or enforceability of any other provision of this
Agreement in such jurisdiction, but this Agreement shall be reformed, construed
and enforced in such jurisdiction as if such invalid, illegal or unenforceable
provision had never been contained herein.
SECTION 9.10. Filing. A copy of this Agreement and of all amendments
thereto shall be filed at the principal executive office of the Company with the
corporate records of the Company.
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SECTION 9.11. Termination. This Agreement may be terminated at any time
by a written instrument signed by all parties hereto. Unless sooner terminated
in accordance with the preceding sentence, this Agreement (other than Article
VII) shall terminate in its entirety on such date as there shall be no
Registrable Securities outstanding, provided that any shares of Common Stock
previously subject to this Agreement shall not be Registrable Securities
following the sale of any such shares in an offering registered pursuant to this
Agreement.
SECTION 9.12. No Third Party Beneficiaries. Except to the extent
contemplated by Article VII of this Agreement, nothing herein expressed or
implied is intended to confer upon any Person, other than the parties hereto or
their respective permitted assigns, successors, heirs and legal representatives,
any rights, remedies, obligations or liabilities under or by reason of this
Agreement.
[Remainder of page intentionally left blank;
signatures on next succeeding page]
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IN WITNESS WHEREOF, this Agreement has been executed and delivered by the
parties hereto as of the date first above written.
ENVIRONMENTAL SOLUTIONS WORLDWIDE INC.
By:___________________________________________
Name:_________________________________________
Its:__________________________________________
THE HOLDERS:
_____________________________________________
▇▇▇▇ ▇. ▇▇▇▇▇
BLACK FAMILY 1997 TRUST
By:
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Trustee
▇▇▇▇ ▇. ▇▇▇▇▇ TRUST UAD 11/30/92
FBO ▇▇▇▇▇▇ ▇▇▇▇▇
By:
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Trustee
▇▇▇▇ ▇. ▇▇▇▇▇ TRUST UAD 11/30/92
▇▇▇▇▇▇▇▇ ▇▇▇▇▇
By:
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Trustee
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▇▇▇▇ ▇. ▇▇▇▇▇ TRUST UAD 11/30/92
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
By:
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Trustee
▇▇▇▇ ▇. ▇▇▇▇▇ TRUST UAD 11/30/92
▇▇▇▇▇▇▇▇ ▇▇▇▇▇
By:
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Trustee
____________________________________________
▇▇▇▇ ▇. ▇▇▇▇▇▇
ORCHARD INVESTMENTS, LLC
By: Orchard Capital Corporation, its Manager
By:
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: President
_____________________________________________
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
42