Exhibit 10.1
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SECURITIES PURCHASE AGREEMENT
DATED AS OF APRIL 28, 2005
BY AND AMONG
WORLD WASTE TECHNOLOGIES, INC.,
TRELLUS OFFSHORE FUND LIMITED,
TRELLUS PARTNERS, LP,
TRELLUS PARTNERS II, LP,
AND
THE OTHER INVESTORS NAMED HEREIN
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TABLE OF CONTENTS
Page
ARTICLE I: AUTHORIZATION AND SALE OF THE SECURITIES......................................................1
1.1 Authorization of Issuance and Sale of the Securities..........................................1
1.2 Sale and Issuance.............................................................................1
1.3 The Initial Closing...........................................................................1
1.4 Additional Closing............................................................................2
1.5 Use of Proceeds...............................................................................2
ARTICLE II: THE CLOSINGS..................................................................................3
2.1 Deliveries at Each Closing....................................................................3
ARTICLE III: REPRESENTATIONS AND WARRANTIES OF THE COMPANY.................................................4
3.1 Subsidiaries; Organization; Good Standing; Qualification and Power............................4
3.2 Authorization.................................................................................5
3.3 Non-contravention.............................................................................5
3.4 Capitalization of the Company.................................................................6
3.5 Financial Statements and Liabilities..........................................................6
3.6 Legal Compliance..............................................................................7
3.7 Litigation....................................................................................7
3.8 Environment, Safety and Permits...............................................................8
3.9 Offering Exemption............................................................................9
3.10 Ownership of Purchased Securities.............................................................9
3.11 Securities Filings...........................................................................10
3.12 Transactions With Affiliates And Employees...................................................10
3.13 Internal Accounting Controls.................................................................10
3.14 Listing And Maintenance Requirements.........................................................11
3.15 No Integrated Offering.......................................................................11
3.16 No Investment Company........................................................................11
3.17 Insurance....................................................................................11
3.18 Labor Relations..............................................................................12
3.19 Taxes........................................................................................12
3.20 No Brokers...................................................................................13
3.21 Reliance.....................................................................................14
3.22 Employee Benefits............................................................................14
ARTICLE IV: REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS.............................................15
4.1 Authority....................................................................................15
4.2 Experience...................................................................................15
4.3 Investment...................................................................................15
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ARTICLE V: ADDITIONAL AGREEMENTS........................................................................16
5.1 Survival of Representations, Warranties and Agreements.......................................16
5.2 Transaction Expenses and Taxes...............................................................16
5.3 Corporate Governance.........................................................................16
5.4 Securities Laws..............................................................................17
5.5 Reporting Matters............................................................................18
5.6 USRPHC.......................................................................................18
5.7 Restriction on Use of Proceeds...............................................................19
5.8 Restrictive Covenants........................................................................19
ARTICLE VI: PRE-EMPTIVE RIGHTS...........................................................................20
ARTICLE VII: MISCELLANEOUS................................................................................21
7.1 No Third Party Beneficiaries.................................................................21
7.2 Entire Agreement.............................................................................21
7.3 Successors and Assigns.......................................................................22
7.4 Counterparts.................................................................................22
7.5 Notices......................................................................................22
7.6 Governing Law................................................................................23
7.7 Submission to Jurisdiction; Waivers..........................................................23
7.8 Waiver of Jury Trial.........................................................................24
7.9 Amendments and Waivers; Purchasers Consent...................................................24
7.10 Certain Definitions..........................................................................24
7.11 Incorporation of Schedules and Exhibits......................................................29
7.12 Construction.................................................................................29
7.13 Interpretation...............................................................................29
7.14 Remedies.....................................................................................29
7.15 Severability.................................................................................30
7.16 Delivery by Facsimile........................................................................30
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Schedules
DISCLOSURE SCHEDULE
Exhibits
Exhibit A - Allocation Schedule
Exhibit B - Form of Warrant
Exhibit C - Form of Registration Rights Agreement
Exhibit D - Certificate of Determination
Exhibit E - Form of Legal Opinion
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THIS SECURITIES PURCHASE AGREEMENT (this "Agreement"), dated as of April
28, 2005, by and among World Waste Technologies, Inc., a California corporation
(the "Company"), Trellus Offshore Fund Limited, a Cayman Islands corporation,
Trellus Partners, LP, a Delaware limited partnership, and Trellus Partners II,
LP, a Delaware limited partnership (collectively, "Trellus") and each of the
purchasers, if any, set forth on the Allocation Schedule attached hereto as
Exhibit A (together with Trellus, the "Purchasers").
WHEREAS, subject to the terms and conditions set forth in this Agreement,
the Company desires to sell to the Purchasers, and the Purchasers desire to
purchase from the Company, up to 6,000,000 shares of the Company's 8% Series A
Cumulative Redeemable Convertible Participating Preferred Stock (the "Series A
Preferred Stock"), together with common stock purchase warrants.
NOW, THEREFORE, in consideration of the mutual promises herein made and
the representations, warranties, and covenants herein contained, and for other
good and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, the parties, intending to be legally bound, agree as follows:
ARTICLE I:
AUTHORIZATION AND
SALE OF THE SECURITIES
1.1 Authorization of Issuance and Sale of the Securities.
Subject to the terms and conditions hereof, the Company has authorized (i)
the issuance and sale of up to 6,000,000 shares of Series A Preferred Stock and
warrants to acquire up to 600,000 shares of Common Stock (the "Warrants"), at
the Closings (as defined herein), for an aggregate purchase price of $15.0
million, and (ii) the issuance of shares of the Company's Common Stock upon
conversion of such shares of Series A Preferred Stock and exercise of the
Warrants (the "Underlying Shares").
1.2 Sale and Issuance. Subject to the terms and conditions hereof, at the
Initial Closing (as defined below), each Purchaser severally and not jointly,
agrees to purchase, and the Company agrees to sell and issue to such Purchaser,
that number of shares of Series A Preferred Stock (the "Initial Purchased
Shares") and warrants (the "Initial Warrants" and, together with the Initial
Purchased Shares, the "Initial Purchased Securities"), as set forth opposite
such Purchaser's name on Exhibit A attached hereto.
1.3 The Initial Closing.
(a) Simultaneously with the execution and delivery of this
Agreement, the initial closing hereunder (the "Initial Closing") with respect to
the issuance, sale and delivery of the Initial Purchased Securities shall take
place (the date on which the Initial Closing occurs, the "Initial Closing
Date").
(b) At the Initial Closing, on the terms and subject to the
conditions contained herein, (i) the Company shall issue, sell and deliver to
the Purchasers, and the Purchasers shall purchase from the Company, all of the
Initial Purchased Securities free and clear of any liens, claims, charges and
encumbrances whatsoever and with no restrictions on the voting rights thereof
and other incidents of record and beneficial ownership pertaining thereto, and
(ii) the Purchasers shall deliver to the Company, by wire transfer of
immediately available funds to an account designated by the Company, the
aggregate purchase price (the "Purchase Price") for such Initial Purchased
Securities in the individual amounts set forth on the Allocation Schedule
attached hereto as Exhibit A.
1.4 Additional Closing. If the full number of the authorized shares of
Series A Preferred Stock and Warrants is not sold at the Initial Closing, one
additional closing (the "Additional Closing", and the Additional Closing and the
Initial Closing being referred to as a "Closing") may occur on any day on or
prior to May 9, 2005 (or such later date as agreed to in writing by the Company
and the Purchasers) for the sale of up to the balance of the authorized but
unissued Series A Preferred Stock and Warrants to such persons as the Company
may determine, so long as the sale of such securities at the Additional Closing
is effected pursuant to the terms of this Agreement and at a price per share
paid in cash, no less than the per share Purchase Price. The Additional Closing
shall be effected in the manner set forth in Section 1.3. Any individual or
entity purchasing securities at the Additional Closing (each, an "Additional
Purchaser," and collectively "Additional Purchasers") shall execute a signature
page to this Agreement and the Company shall update Exhibit A hereto to include
each such Additional Purchaser, at which time each such Additional Purchasers
shall be deemed to be a "Purchaser" hereunder for purposes of this Agreement and
all other agreements contemplated hereby, and a "Holder" under the Rights
Agreement (as defined in Section 2.1). At the Additional Closing, (i) the
Company will deliver to the Additional Purchasers the various certificates,
instruments and documents referred to in Section 2.1(a) hereof, (ii) the
Additional Purchasers will deliver to the Company the various certificates,
instruments and documents referred to in Section 2.1(b) below, and (iii) the
Company shall deliver to each Additional Purchaser a share certificate and
Warrant registered in such Additional Purchaser's name representing the shares
of Series A Preferred Stock and Warrants that such Additional Purchaser is to
receive from the Company at the Additional Closing to be set forth opposite such
Additional Purchaser's name on the updated Exhibit A hereto, against payment of
the purchase price therefor by check or wire transfer to an account designated
by the Company or other means acceptable to the Company. The Initial Purchased
Securities and the securities, if any, purchased at the Additional Closing, are
referred to herein as the "Purchased Securities."
1.5 Use of Proceeds.
The Company will use the net proceeds of the Purchased Securities
purchased by the Purchasers pursuant to this Agreement for the construction and
operation by its wholly owned subsidiary, World Waste of Anaheim, Inc., Plant
Number One located at 0000 Xxxxxxxx Xxxxxx, Xxxxxxx, Xxxxxxxxxx, for the
repayment of principal and interest on a $750,000 promissory note in favor of
Trellus Management, LLC (the "Trellus Note"), and for working capital and,
subject to the approval of the holders of a majority of the shares of Series A
Preferred Stock, for the site identification, planning, permitting and designing
of an additional plant (the "Additional Expenditures"); provided, however, that
the Company may use up to $750,000 of the net proceeds from the Purchased
Securities for Additional Expenditures without the approval of the holders of
the shares of Series A Preferred Stock.
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ARTICLE II:
THE CLOSINGS
2.1 Deliveries at Each Closing.
(a) As a condition to each Purchaser's obligation to purchase its
respective portion of the Purchased Securities, at each Closing all
representations and warranties set forth in Article III shall be true and
correct in each case, as of the date of this Agreement (other than those that by
their terms are to be true and correct as of a specified date, in which case,
such representations and warranties shall be true and correct as of such date),
and the Company shall deliver to each Purchaser:
(i) a stock certificate registered in the name of such
Purchaser, representing the Purchased Shares being purchased by such Purchaser
pursuant to Section 1.3(b);
(ii) a Warrant Certificate in the form attached hereto as
Exhibit B in the name of such Purchaser representing the Warrants being
purchased by such Purchaser pursuant to Section 1.3(b);
(iii) a counterpart of the Registration Rights Agreement, in
the form attached hereto as Exhibit C (the "Rights Agreement"), duly executed by
the Company and the other shareholders of the Company party thereto;
(iv) evidence, satisfactory to such Purchaser, of the filing
of the Certificate of Determination, in the form attached hereto as Exhibit D,
with the Secretary of State of the State of California;
(v) a certificate of the Secretary of the Company dated as of
such Closing Date, certifying: (A) the Company's Amended and Restated Articles
of Incorporation, Certificate of Determination and Bylaws, as in effect on the
date hereof, as true and complete and attaching certified copies of same; (B) as
to the incumbency and genuineness of the specimen signatures of each officer of
the Company executing any of the Documents; (C) the resolutions of the Board
authorizing the execution, delivery and performance of the Documents and the
consummation of the transactions contemplated thereby, as true and complete and
attaching copies of same (including but not limited to the issuance of the
Purchased Shares, the Warrants and the Underlying Shares); and (D) that all
consents, approvals and other actions of, and notices and filings with, all
entities and persons as may be necessary or required with respect to the
execution of the parties of the transactions contemplated thereby, have been
obtained or made;
(vi) a good standing certificate, as of a date not more than
ten (10) days prior to such Closing Date, issued by the Secretary of State of
the State of California and such other jurisdictions in which the Company and
its Subsidiaries may be duly organized or qualified;
(vii) executed employment agreements and
inventions/confidentiality agreements for each of Xxxxx Xxxxxxxx, Xxxxxx X.
Xxxxxxx, Xxxx Xxxxxxxx and Xxxxx Xxxx, in form and substance reasonably
satisfactory to the Purchasers;
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(viii) director resignation letters from each of Xxxxx
Xxxxxxxx and Xxxx Xxxxxxxx (such resignations not to take effect until
immediately prior to the election or appointment of the directors to be
nominated by the holders of the Series A Preferred Stock as provided for in
Section 5.3);
(ix) a legal opinion of Xxxx & Xxxxx substantially in the form
attached hereto as Exhibit D; and
(x) such other documents as the Purchasers may reasonably
request.
(b) As a condition to the Company's obligation to sell the Purchased
Securities to each Purchaser, at each Closing all representations and warranties
set forth in Article IV shall be true and correct in all material respects, in
each case, as of the date of this Agreement, and each Purchaser shall deliver to
the Company:
(i) the Purchase Price for the Purchased Securities being
purchased by such Purchaser pursuant to Section 1.3(b);
(ii) a counterpart of the Rights Agreement, duly executed by
such Purchaser; and
(iii) a duly executed Form W-9 or W-8, as appropriate.
ARTICLE III:
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth on the Disclosure Schedule attached hereto, or as
disclosed in any of the SEC Reports, the Company represents and warrants to the
Purchasers as of the date hereof and as of each Closing Date as follows:
3.1 Subsidiaries; Organization; Good Standing; Qualification and Power.
(a) The Company has the subsidiaries (each a "Subsidiary") as set
forth in the SEC Reports (as defined below). The Company owns, directly or
indirectly, all of the capital stock of each Subsidiary, free and clear of any
liens, and all of the issued and outstanding shares of capital stock of each
Subsidiary are duly authorized, validly issued, fully paid, non-assessable and
free of preemptive and similar rights to subscribe for or purchase securities.
(b) The Company and each Subsidiary is duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation or organization (as applicable), has all requisite power to own,
lease and operate its Assets and to carry on its business as presently being
conducted, and is qualified to do business and in good standing in every
jurisdiction in which the failure to so qualify or be in good standing would
have a Material Adverse Effect.
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3.2 Authorization.
(a) The Company has all requisite power and authority to execute and
deliver each Document and any and all instruments necessary or appropriate in
order to effectuate fully the terms and conditions of each Document and all
related transactions and to perform its obligations under each Document. Each
Document has been duly authorized by all necessary action (corporate,
shareholder or otherwise) on the part of the Company, and no further action is
required by the Company in connection therewith, and each Document has been duly
executed and delivered by the Company, and constitutes the valid and legally
binding obligation of the Company, enforceable in accordance with its terms and
conditions, except as enforceability thereof may be limited by any applicable
bankruptcy, reorganization, insolvency or other Laws affecting creditors' rights
generally or by general principles of equity.
(b) The authorization, issuance, sale and delivery of the Purchased
Securities and the Underlying Shares and the execution and delivery of the
Documents and the performance by the Company of its obligations thereunder have
each been authorized by all requisite action (corporate, shareholder or
otherwise), and no further action is required by the Company in connection
therewith.
3.3 Non-contravention.
The execution, delivery and performance by the Company of the
Documents, the consummation of the transactions contemplated thereby and
compliance with the provisions thereof, including the issuance, sale and
delivery of the Purchased Securities and upon conversion or exercise thereof,
the issuance of the Underlying Shares, have not and shall not, (a) violate any
Law to which any Assets of the Company or any Subsidiary is subject, (b) violate
any provision of the Company's Amended and Restated Articles of Incorporation
and/or Bylaws or of a Subsidiary's certificate or articles of incorporation,
bylaws or other organizational documents, (c) conflict with, result in a breach
of, constitute a default under, result in the acceleration of, create in any
party the right to accelerate, terminate, modify or cancel, or require any
notice under any contract, decree, judgment or order to which the Company or a
Subsidiary is a party or by which any of the Assets of the Company or a
Subsidiary is bound, or (d) result in the imposition of any Lien upon any of the
Assets of the Company or Subsidiary, except in the case of clause (c) or (d) as
would not have a Material Adverse Effect. To the Company's knowledge, neither
the Company nor any of its Subsidiaries is in violation of its Articles of
Incorporation, By-laws or other organizational documents and neither the Company
nor any of its Subsidiaries is in default (and no event has occurred which with
notice or lapse of time or both could put the Company or any of its Subsidiaries
in default) under, and neither the Company nor any of its Subsidiaries has taken
any action or failed to take any action that would give to others any rights of
termination, amendment, acceleration or cancellation of, any agreement,
indenture or instrument to which the Company or any of its Subsidiaries is a
party or by which any Assets of the Company or any of its Subsidiaries is bound
or affected, except for possible defaults as would not, individually or in the
aggregate, have a Material Adverse Effect. To the Company's knowledge, the
businesses of the Company and its Subsidiaries are not being conducted, and
shall not be conducted so long as a Purchaser owns any of the Purchased
Securities, in violation of any law, rule or regulation of any Governmental
Entity, except as would not have a Material Adverse Effect. Other than as
specifically contemplated by this Agreement and as required by the Securities
Act and any state securities laws, the Company has not been nor is required to
give any notice to, make any filing with, or obtain any authorization, consent
or approval of any Governmental Entity, self regulatory organization, stock
market or any other Person for the valid authorization, issuance and delivery of
the Purchased Securities and Underlying Shares or the authorization, execution
and delivery of the Documents.
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3.4 Capitalization of the Company.
(a) Immediately upon consummation of the Initial Closing, the
authorized capital stock of the Company shall consist of:
(i) 100,000,000 shares of Common Stock, of which 24,413,692
shares will be issued and outstanding, 9,100,000 shares of which will have been
reserved for issuance upon conversion in full of the Purchased Shares (including
shares of Series A Preferred Stock issuable as dividends thereon) and 600,000
shares of which will have been reserved for issuance upon exercise in full of
the Warrants; and
(ii) 10,000,000 shares of Preferred Stock, 9.1 million of
which shares will be designated Series A Preferred Stock.
(b) Except as contemplated by the Documents, there are, and
immediately after consummation of each Closing there will be, no (i) outstanding
warrants, options, calls, agreements, convertible securities, exchangeable
securities or other commitments or instruments pursuant to which the Company is
or may become obligated to issue or sell any shares of its capital stock or
other securities, or (ii) preemptive right, right of first refusal or similar
rights, of any character whatsoever, to purchase or otherwise acquire shares of
the capital stock or other securities of the Company pursuant to any provision
of Law, the Company's Bylaws or equivalent document or any contract to which the
Company or, to the Company's knowledge, any shareholder of the Company thereof
is a party; and, except as contemplated by the Documents, there is, and,
immediately after the consummation of the Closing there will be, no Lien (such
as a right of first refusal, right of first offer, proxy, voting trust, voting
agreement, etc.) with respect to the sale or voting of shares of capital or
securities of the Company (whether outstanding or issuable).
(c) All shares of the capital stock and other securities issued by
the Company (i) have been duly authorized and validly issued, (ii) are fully
paid and nonassessable and (iii) have been issued in transactions in accordance
with applicable Laws governing the sale and purchase of securities and any
preemptive rights and rights of first refusal.
3.5 Financial Statements and Liabilities.
(a) As of their respective dates, the financial statements of the
Company included in the SEC Reports complied as to form in all material respects
with applicable accounting requirements and the published rules and regulations
of the SEC with respect thereto. Such financial statements have been prepared in
accordance with United States generally accepted accounting principles,
consistently applied, during the periods involved (except (i) as may be
otherwise indicated in such financial statements or the notes thereto, or (ii)
in the case of unaudited interim statements, to the extent they may not include
footnotes or may be condensed or summary statements) and fairly present in all
material respects the consolidated financial position of the Company and its
consolidated Subsidiaries as of the dates thereof and the consolidated results
of their operations and cash flows for the periods then ended (subject, in the
case of unaudited statements, to normal year-end audit adjustments).
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(b) The Company and its Subsidiaries have no liability or
obligation, absolute or contingent (individually or in the aggregate),
including, without limitation, any tax liability due and payable, which is not
reflected on the Balance Sheet, other than (i) liabilities and obligations that
would not be required to be included since the date of the Balance Sheet
reflected on financial statements prepared in accordance with GAAP, which,
individually or in the aggregate, are not material to the financial condition or
operating results of the Company, or (ii) legal and fundraising costs incurred
in connection with the transactions contemplated hereby, or (iii) liabilities
that may have arisen in the ordinary course of the Company's business consistent
with past practice, which, individually or in the aggregate, are not material to
the financial condition or operating results of the Company.
(c) Subsequent to the date of the financial statements, none of the
Company and any of its Subsidiaries has made or changed any election, changed an
annual accounting period, adopted or changed any accounting method, filed any
amended Tax Return, entered into any closing agreement, settled any Tax claim or
assessment, surrendered any right to claim a refund of Taxes, consented to any
extension or waiver of the limitations period applicable to any Tax claim or
assessment or taken any other similar action relating to the filing of any Tax
Return or the payment of any Tax.
3.6 Legal Compliance.
The Company and its Subsidiaries have complied in all Material respects
with, all applicable Laws, Orders and permits, and no Proceeding is pending or,
to the Company's knowledge, threatened, alleging any failure to so comply.
3.7 Litigation.
(a) Except as disclosed in the SEC Reports or as would not have a
Material Adverse Effect, individually or in the aggregate, there is no
Proceeding pending or, to the Company's knowledge, threatened by or against, or
affecting the Assets of, the Company (or any of its predecessors) or the
Subsidiaries, and the Company and the Subsidiaries are not bound by any Order.
No Proceeding pending or threatened by or against, or affecting the Assets of,
the Company (or any of its predecessors) or the Subsidiaries will or could
reasonably be expected to result in a Material Adverse Change.
(b) Neither the Company nor any Subsidiary, nor, to the knowledge of
the Company, any director or officer thereof who has served as such since August
24, 2004, is or has been the subject of any Proceeding involving a claim of
violation of or liability under federal or state securities laws or a claim of
breach of fiduciary duty. To the knowledge of the Company, there is not pending
or contemplated, any investigation by the Commission involving the Company or
any current or former director or officer of the Company. Since August 24, 2004,
the Commission has not issued any stop order or other order suspending the
effectiveness of any registration statement filed by the Company or any
Subsidiary under the Exchange Act or the Securities Act.
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3.8 Environment, Safety and Permits.
(a) The Company and each of its Subsidiaries is in possession of all
franchises, grants, authorizations, licenses, permits, easements, variances,
exemptions, consents, certificates, approvals and orders necessary to own, lease
and operate its properties and to carry on its business as it is now being
conducted (collectively, the "Company Permits"), and there is no action pending
or, to the knowledge of the Company, threatened regarding suspension or
cancellation of any of the Company Permits, except in each case as would not,
individually or in the aggregate, have a Material Adverse Effect. Neither the
Company nor any of its Subsidiaries is in conflict with, or in default or
violation of, any of the Company Permits, except for any such conflicts,
defaults or violations which, individually or in the aggregate, would not have a
Material Adverse Effect. Since August 24, 2004, neither the Company nor any of
its Subsidiaries has received any notification with respect to possible
conflicts, defaults or violations of applicable laws, except for notices
relating to possible conflicts, defaults or violations, which conflicts,
defaults or violations would not have a Material Adverse Effect.
(b) Except as disclosed in Schedule 3.8 or as would not,
individually or in the aggregate, have a Material Adverse Effect:
(i) The Company and its Subsidiaries hold and formerly held,
and are and have been, in compliance with, all Environmental Permits;
(ii) The Company and its Subsidiaries are, and have been in
compliance with all applicable Environmental Laws;
(iii) Neither the Company nor any of its Subsidiaries has
received any Environmental Claim, and the Company is not aware, after due
inquiry, of any threatened Environmental Claim or of any circumstances,
conditions or events that could reasonably be expected to give rise to an
Environmental Claim against the Company or any of the Subsidiaries;
(iv) There are no (1) underground storage tanks, (2)
polychlorinated biphenyls, (3) asbestos or asbestos-containing materials, (4)
urea-formaldehyde insulation, (5) sumps, (6) surface impoundments, (7)
landfills, (8) sewers or septic systems or (9) Hazardous Substances present at
any facility currently or formerly owned, leased, operated or otherwise used by
the Company and/or any of the Subsidiaries that could reasonably be expected to
give rise to liability of any of the Company or its Subsidiaries under any
Environmental Laws;
(v) There are no past (including, without limitation, with
respect to assets or businesses formerly owned, leased or operated by the
Company or any Subsidiary) or present actions, activities, events, conditions or
circumstances, including without limitation the release, threatened release,
emission, discharge generation, treatment, storage or disposal of Hazardous
Substances, that could reasonably be expected to give rise to liability of the
Company or any Subsidiary under any Environmental Laws or any contract or
agreement;
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(vi) No modification, revocation, reissuance, alteration,
transfer, or amendment of the Company's or any Subsidiary's Environmental
Permits, or any review by, or approval of, any third party of such Environmental
Permits is required in connection with the execution or delivery of this
Agreement or the consummation of the transactions contemplated hereby or the
continuation of the business of the Company or any Subsidiary following such
consummation;
(vii) Hazardous Substances have not been generated,
transported, treated, stored, disposed of, released or threatened to be released
at, on, from or under any of the properties or facilities currently or formerly
owned, leased or otherwise used, including without limitation for receipt of the
Company's or any Subsidiary's wastes, by the Company or any Subsidiary, in
violation of or in a manner or to a location that could reasonably be expected
to give rise to liability under any Environmental Laws;
(viii) Neither the Company nor any Subsidiary has
contractually assumed any liabilities or obligations under any Environmental
Laws;
(ix) The Company and each of the Subsidiaries have accrued or
otherwise provided, in accordance with and as required by GAAP, for all damages,
liabilities, penalties or costs that they may incur in connection with any claim
pending or threatened against them, or any requirement that is or may be
applicable to them, under any Environmental Laws, and such accrual or other
provisions is reflected in the Company's most recent financial statements.
3.9 Offering Exemption.
Based in part upon and assuming the accuracy of the representations of the
Purchasers in Article IV, the offering, sale and issuance of the Purchased
Securities have been, are, and will be, exempt from registration under the
Securities Act, and such offering, sale and issuance is, and the issuance of the
Underlying Shares upon conversion of the Purchased Securities or exercise of the
Warrants, as the case may be, will be exempt from registration under applicable
state securities and "blue sky" laws. The Company has made or will make all
requisite filings and has taken or will take all action necessary to be taken to
comply with such state securities or "blue sky" laws.
3.10 Ownership of Purchased Securities.
Upon issuance and delivery of the Purchased Securities (and the Underlying
Shares upon conversion or exercise thereof) to each Purchaser pursuant to this
Agreement in consideration of the Purchasers' payments therefor, the Purchased
Securities and Underlying Shares will be duly and validly issued, fully paid and
non-assessable, free and clear of all Liens and encumbrances or restrictions on
transfer, other than (i) restrictions on transfer set forth herein or in the
Documents, and (ii) any liens, charges or encumbrances created by a Purchaser.
The delivery of the Purchased Securities to each Purchaser at each Closing and
the delivery of the Underlying Shares upon conversion or exercise of the
Purchased Securities will transfer good and valid title to, and beneficial
ownership of, the Purchased Securities and the Underlying Shares, other than as
a result of any encumbrances, Liens and claims described in clauses (i) and (ii)
of the preceding sentence. The issuance and sale of the Purchased Securities
pursuant hereto (and the issuance of the Underlying Shares upon the conversion
or exercise thereof) will not give rise to any preemptive rights or rights of
first refusal that have not been complied with or waived.
9
3.11 Securities Filings.
Since August 24, 2004, the Company has filed with the Securities and
Exchange Commission (the "Commission") all documents (the "SEC Reports")
required to be filed by it under the Securities Exchange Act of 1934 as amended
(the "Exchange Act"). Each such SEC Report, at the time of its filing, was in
compliance with the requirements of its respective form as in effect on the date
such document was filed and neither the SEC Reports, nor the financial
statements (and the notes thereto) included therein, contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, except to the extent
superseded by an SEC Report filed subsequently and prior to the date hereof.
3.12 Transactions With Affiliates And Employees.
Except as set forth in the SEC Reports, none of the officers or directors
of the Company and, to the knowledge of the Company, none of the employees of
the Company is presently a party to any transaction with the Company or any
Subsidiary (other than for services as employees, officers and directors),
including any contract, agreement or other arrangement providing for the
furnishing of services to or by, providing for rental of real or personal
property to or from, or otherwise requiring payments to or from any officer,
director or such employee or, to the knowledge of the Company, any entity in
which any officer, director, or any such employee has a substantial interest or
is an officer, director, trustee or partner, in each case in excess of $60,000
other than (a) for payment of salary or consulting fees for services rendered,
(b) reimbursement for expenses incurred on behalf of the Company and (c) for
other employee benefits, including stock option agreements under any stock
option plan of the Company.
3.13 Internal Accounting Controls.
The Company has established disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the Company and designed such
disclosure controls and procedures to ensure that material information relating
to the Company, including its Subsidiaries, is made known to the certifying
officers by others within those entities, particularly during the period in
which the Company's Form 10-KSB or 10-QSB, as the case may be, is being
prepared. The Company's certifying officers have evaluated the effectiveness of
the Company's disclosure controls and procedures as of a date within 90 days
prior to the filing date of the most recently filed periodic report under the
Exchange Act (such date, the "Evaluation Date"). The Company presented in its
most recently filed Form 10-KSB or Form 10-QSB the conclusions of the certifying
officers about the effectiveness of the disclosure controls and procedures based
on their evaluations as of the Evaluation Date. Since the Evaluation Date, there
have been no significant changes in the Company's internal controls (as such
term is defined in Item 307(b) of Regulation S-K under the Exchange Act). There
has been no disclosure to the Company's Board, Audit Committee or independent
auditors of any significant deficiencies or material weakness in the design or
operation of interim controls over financial reporting requiring corrective
action, any fraud that involves management or other employees who have a
significant role in the Company's or any Subsidiary's internal controls, any
material complaints or claims made relating to the Company's or any Subsidiary's
internal accounting controls, and any report by any attorney representing the
Company or any of its Subsidiaries of a material violation of Law or similar
matters (provided that the foregoing representations shall be limited to the
knowledge of the Company with respect to any of the foregoing that may have
occurred prior to August 24, 2004).
10
3.14 Listing And Maintenance Requirements.
(a) The Company's Common Stock is registered pursuant to Section
12(g) of the Exchange Act, and the Company has taken no action designed to, or
which to its knowledge is likely to have the effect of, terminating the
registration of the Common Stock under the Exchange Act nor has the Company
received any notification that the Commission is contemplating terminating such
registration.
(b) To the Company's knowledge, the Company is not in violation of
the listing requirements of the Over-the-Counter Bulletin Board (the "OTCBB")
and does not reasonably anticipate that the Common Stock will be delisted by the
OTCBB in the foreseeable future. The Company and its Subsidiaries are unaware of
any facts or circumstances which might give rise to any of the foregoing.
3.15 No Integrated Offering.
Neither the Company, nor, to the knowledge of the Company, any of its
affiliates, nor any Person acting on its or their behalf has, directly or
indirectly, made any offers or sales of any security or solicited any offers to
buy any security, under circumstances that would cause this offering of the
Purchased Securities to be integrated with prior offerings by the Company for
purposes of the Securities Act or any applicable shareholder approval
provisions, including, without limitation, under the rules and regulations of
any exchange or automated quotation system on which any of the securities of the
Company are listed or designated.
3.16 No Investment Company.
The Company is not, and upon the issuance and sale of the Purchased
Securities as contemplated by this Agreement will not be an "investment company"
required to be registered under the Investment Company Act of 1940 (an
"Investment Company"). The Company is not controlled by an Investment Company.
3.17 Insurance.
The Company and each of its Subsidiaries are insured by insurers of
recognized financial responsibility against such losses and risks and in such
amounts as management of the Company believes to be prudent and customary in the
businesses in which the Company and its Subsidiaries are engaged. Neither the
Company nor any such Subsidiary has any reason to believe that it will not be
able to renew its existing insurance coverage as and when such coverage expires
or to obtain similar coverage from similar insurers as may be necessary to
continue its business at a cost that would not have a Material Adverse Effect.
11
3.18 Labor Relations.
(a) No material labor dispute exists or, to the knowledge of the
Company, is imminent with respect to any of the employees of the Company or any
of its Subsidiaries or any unfair practice which, individually or in the
aggregate, would result in a Material Adverse Effect.
(b) Except as described in the Schedules, (i) there has been no work
stoppage due to labor disagreements experienced by the Company or any
Subsidiary, (ii) no written notice has been received from any Governmental
Entity of any unfair labor practice charge or complaint against the Company
pending or threatened before the National Labor Relations Board or any other
Governmental Entity with respect to the employees of the Company or any
Subsidiary and (iii) there is no labor strike, slowdown or stoppage actually
pending or, to the Company's knowledge, threatened by the employees of the
Company or any Subsidiary against or affecting the Company or any Subsidiary,
except in any such case set forth in clauses (i) through (iii) above as would
not, individually or in the aggregate, have a Material Adverse Effect.
3.19 Taxes.
(a) Since August 24, 2004, each of the Company and its Subsidiaries
has timely filed all Tax Returns that it was required to file under applicable
laws and regulations. All such Tax Returns are true, correct and complete in all
Material respects and were prepared in Material compliance with all applicable
laws and regulations. All Taxes due, owed by, or with respect to, any of the
Company and its Subsidiaries (whether or not shown or reportable on any Tax
Return) with respect to any period ending on or prior to the date of this
Agreement have been timely paid. The amount of the liability of the Company and
each of its Subsidiaries for unpaid Taxes for all periods ending on or before
the Closing Date shall not, in the aggregate, exceed the amount of the current
liability accruals for Taxes (excluding reserves for deferred Taxes) as such
accruals are reflected on the face of the Balance Sheet, as adjusted in
accordance with past custom and practice for operations and transactions in the
ordinary course of business of the Company and its Subsidiaries since the date
of the Balance Sheet. Since the date of the Balance Sheet, neither the Company
nor any of its Subsidiaries has incurred any liability for Taxes arising from
extraordinary gains or losses outside the ordinary course of business.
(b) The Company and each of its Subsidiaries has properly classified
for Tax purposes all employees, consultants, independent contractors and other
service providers, and has timely made all filings and has withheld, deposited
and paid all Taxes required to have been filed, withheld, deposited or paid in
connection with services provided by such persons or in connection with any
amounts paid or owing to any other person. To the Company's knowledge, no
deficiencies for any Tax have been assessed against the Company or any of its
Subsidiaries, none of the Company or any of its Subsidiaries has received any
notice of deficiency or proposed adjustment for any Taxes proposed, asserted or
assessed by any Taxing authority against the Company or any of its Subsidiaries,
and no Tax Return of the Company or any of its Subsidiaries has ever been
audited and, to the knowledge of the Company and its officers, directors and
employees, there is no such audit pending or contemplated. There is no Lien,
whether imposed by any federal, state, local or foreign Taxing authority or
otherwise, outstanding against the assets, properties or business of the Company
or any of its Subsidiaries, other than any Lien for current Taxes not yet due
and payable. To the Company's knowledge, no claim has been made since August 24,
2004 by any authority in a jurisdiction where the Company or any of its
Subsidiaries does not file Tax Returns that it is or may be subject to Taxation
by that jurisdiction. Neither the Company nor any of its Subsidiaries has waived
any statute of limitations in respect of Taxes or agreed to any extension of
time with respect to a Tax assessment or deficiency, since August 24, 2004.
12
(c) None of the Company and its Subsidiaries will be required to
include any item of income in, or exclude any item of deduction from, taxable
income for any taxable period (or portion thereof) ending after the Closing Date
as a result of any: (A) change in method of accounting for a taxable period
ending on or prior to the Closing Date; (B) "closing agreement" as described in
Code Section 7121 (or any corresponding or similar provision of state, local or
foreign income Tax law) executed on or prior to the Closing Date; (C)
intercompany transactions or any excess loss account described in Treasury
Regulations under Code Section 1502 (or any corresponding or similar provision
of state, local or foreign income Tax law); (D) installment sale or open
transaction disposition made on or prior to the Closing Date; (E) recapture of a
pre-Closing Tax benefit; or (F) prepaid amount received on or prior to the
Closing Date. No item of income or gain reported by the Company or any
Subsidiary of the Company for financial accounting purposes in any pre-Closing
period is required to be included in Taxable income for a post-Closing period.
(d) To the Company's knowledge, neither the Company nor any
Subsidiary of the Company has any liability for or any obligation to pay the
Taxes of any person under Treasury Regulation Section 1.1502-6 (or any similar
provision of state, local or foreign law), as a transferee or successor, by
contract, pursuant to a Tax sharing agreement, indemnification or guaranty, or
otherwise. Neither the Company nor any Subsidiary of the Company has filed a
consent under Section 341(f) of the Code concerning collapsible corporations, or
agreed to have Section 341(f)(2) of the Code apply to any disposition of an
asset owned by the Company or any of its Subsidiaries. Neither the Company nor
any of its Subsidiaries is, or during the applicable period specified in Section
897(c)(1)(A)(ii) of the Code has ever been, a United States real property
holding corporation within the meaning of Section 897(c)(2) of the Code (a
"USRPHC"). The use of the proceeds of the sale of the Purchased Securities and
any other actions by the Company or its Subsidiaries in connection with the
transactions contemplated hereby will not trigger a Determination Date (as
defined in Section 5.6 below) or cause the Company to qualify as a USRPHC. None
of the Company nor any of its Subsidiaries has engaged in any listed transaction
as set forth in written guidance or a notice issued by the Internal Revenue
Service. None of the Company nor its Subsidiaries are foreign entities or
conduct business in a foreign country.
3.20 No Brokers.
Except for Xxxxxx Xxxxxxxx Advisors, Inc. and Chadbourn Securities,
Inc., whose fees and expenses are the sole responsibility of the Company, no
broker or finder has acted directly or indirectly for the Company in connection
with this Agreement or the transactions contemplated hereby, and no broker or
finder is entitled to any brokerage or finder's fee or other commission in
respect thereof based in any way on agreements, arrangements or understandings
made by or on behalf of the Company. The Company may, however, be responsible
for the payment of fees and expenses to other finders in connection with the
Additional Closing.
13
3.21 Reliance. The Company understands and confirms that the Purchasers
will rely on the representations and covenants contained in this Agreement in
acquiring the Purchased Securities.
3.22 Employee Benefits.
(a) The Company and its ERISA Affiliates have performed in all
material respects all obligations required to be performed by them under each
Employee Plan, and each Employee Plan has been established and maintained in all
Material respects in accordance with its terms and in Material compliance with
all applicable laws, statutes, orders, rules and regulations, including but not
limited to ERISA, the Code, COBRA, and HIPAA. Any Employee Plan intended to be
qualified under Section 401(a) of the Code and each trust intended to qualify
under Section 501(a) of the Code has obtained a favorable determination,
notification, advisory and/or opinion letter, as applicable, as to its qualified
status from the IRS. For each Employee Plan that is intended to be qualified
under Section 401(a) of the Code, to the Company's knowledge, there has been no
event, condition or circumstance that has adversely affected or is likely to
adversely affect such qualified status. No "prohibited transaction," within the
meaning of Section 4975 of the Code or Sections 406 and 407 of ERISA, and not
otherwise exempt under Section 408 of ERISA, has occurred with respect to any
Employee Plan. There are no actions, suits or claims pending, or, to the
knowledge of the Company, threatened (other than routine claims for benefits)
against any Employee Plan or against the assets of any Employee Plan. There are
no audits, inquiries or proceedings pending or, to the knowledge of the Company
or any ERISA Affiliates, threatened by the IRS or DOL, or any other governmental
authority with respect to any Employee Plan. Neither the Company nor any ERISA
Affiliate is subject to any Material penalty or tax with respect to any Employee
Plan under Section 502(i) of ERISA or Sections 4975 through 4980 of the Code.
The Company and each ERISA Affiliate have timely made all contributions and
other payments required by and due under the terms of each Employee Plan.
(b) Neither the Company nor any ERISA Affiliate has ever maintained,
established, sponsored, participated in, or contributed to, any Pension Plan
which is subject to Title IV of ERISA or Section 412 of the Code or any
Multiemployer Plan.
(c) No Employee Plan or employment agreement provides, or reflects
or represents any liability to provide, retiree benefits to any person for any
reason, except as may be required by COBRA or other applicable statute, and the
Company has not represented, promised or contracted (whether in oral or written
form) to any Company Employee (either individually or to Company Employees as a
group) or any other person that such Company Employee(s) or other person would
be provided with retiree benefits, except to the extent required by statute.
(d) Neither the Company nor any of its Subsidiaries is a party to
any agreement, plan, arrangement or other contract covering any employee or
independent contractor or former employee or independent contractor that,
considered individually or considered collectively with any other such
contracts, would reasonably be expected to, give rise directly or indirectly to
the payment of any amount that would not be deductible pursuant to Section 280G
or Section 162(m) the Code (or any comparable provision of state or foreign tax
laws). All Employee Plans which are subject to Section 409A of the Code are in
Material compliance with Section 409A.
14
ARTICLE IV:
REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS
Each Purchaser, individually and not jointly, represents and warrants to
the Company as of the date hereof and as of each Closing Date, as follows:
4.1 Authority.
Such Purchaser has full power and authority to enter into and to perform
this Agreement and the Documents to which it is a party in accordance with their
terms and to consummate the transactions contemplated hereby and thereby. This
Agreement and the Documents to which it is a party have been duly executed and
delivered by such Purchaser and constitute valid and binding obligations of such
Purchaser each of which are enforceable in accordance with its respective terms
and conditions, except as the enforceability thereof may be limited by any
applicable bankruptcy, reorganization, insolvency or other laws affecting
creditor's rights generally or by general principles of equity. To such
Purchaser's knowledge, the execution and performance of the transactions
contemplated by this Agreement and the Documents and compliance with their
provisions by such Purchaser: (i) will not violate any provision of Law
applicable to such Purchaser; and (ii) will not conflict with or result in any
breach of any of the material terms, conditions or provisions of, or constitute
a default under such Purchaser's partnership agreement, certificate of formation
or operating agreement, or any indenture, lease, agreement or other instrument
to which such Purchaser is a party or by which it or any of its properties is
bound, or any decree, judgment, order, statute, rule or regulation applicable to
such Purchaser, which, in any such case would impair such Purchaser's ability to
purchase the Purchased Securities or otherwise comply with its obligations
hereunder.
4.2 Experience.
Such Purchaser is an "accredited investor" within the meaning of
Regulation D promulgated by the Commission under the Securities Act and, by
virtue of its experience in evaluating and investing in private placement
transactions of securities in companies similar to the Company, such Purchaser
is capable of evaluating the merits and risks of its investment in the Company
and has the capacity to protect its own interests. Such Purchaser has had access
to the Company's senior management and has had the opportunity to conduct such
due diligence review as it has deemed appropriate provided, however, that the
foregoing shall not alter, diminish or impair such Purchaser's right or ability
to rely upon any of the representations or warranties of the Company contained
herein.
4.3 Investment.
Such Purchaser has not been formed solely for the purpose of making this
investment (or, if it has been so formed, all of the owners of such Purchaser
are themselves accredited investors), and such Purchaser is acquiring the
Purchased Securities for investment for its own account, not as a nominee or
agent, and not with the view to, or for resale in connection with, any
distribution of any part thereof, provided, however, that by making the
representations herein, such Purchaser does not agree to hold any of the
Purchased Securities for any minimum or other specific term and reserves the
right to dispose of the Purchased Securities at any time in accordance with or
pursuant to a registration statement or otherwise in compliance with federal and
state securities laws. Such Purchaser understands that the Purchased Securities
and the Underlying Shares have not been registered under the Securities Act or
applicable state and other securities laws by reason of a specific exemption
from the registration provisions of the Securities Act and applicable state and
other securities laws, the availability of which depends upon, among other
things, the bona fide nature of the investment intent and the accuracy of such
Purchaser's representations as expressed herein.
15
ARTICLE V:
ADDITIONAL AGREEMENTS
5.1 Survival of Representations, Warranties and Agreements.
All representations and warranties contained herein shall survive the
Initial Closing for a period of 24 months (except any representations and
warranties regarding USRPHC, which shall survive for so long as Trellus Offshore
Fund Limited owns any shares of the Company's equity securities) and all
covenants and agreements contained herein shall survive until fully discharged.
All representations, warranties, covenants and agreements made herein by the
Company or in any certificate delivered at a Closing shall be deemed Material
and to have been relied upon by the Purchasers.
5.2 Transaction Expenses and Taxes.
(a) The Company and each Purchaser shall bear all of its respective
expenses in connection with the negotiation, preparation and execution of the
Documents, except that the Company shall reimburse the Purchasers for their
reasonable and documented legal fees incurred in connection herewith, up to a
maximum aggregate reimbursement of $30,000.
(b) All sales, use, transfer, stamp (including documentary stamp
taxes, if any), excise, recording, franchise and other similar taxes or
governmental charges with respect to the securities issued pursuant hereto shall
be borne by the Company.
(c) All transfer, documentary, sales, use, stamp, registration and
other such Taxes and fees (including any penalties and interest) incurred in
connection with this Agreement (including any corporate-level gains Tax
triggered by the sale of the Company's stock, and any similar tax imposed in
other states or subdivisions) shall be paid by the Company when due, and the
Company shall, at its own expense, file all necessary Tax Returns and other
documentation with respect to all such transfer, documentary, sales, use, stamp,
registration and other Taxes and fees.
5.3 Corporate Governance.
(a) As soon as practicable, the Company shall cause the Board to
nominate, recommend and solicit proxies (if necessary) for the election to the
Board of two individuals designated by the holders of the Series A Preferred
Stock to fill the Board seats to be vacated by the resignations of Xxxxx
Xxxxxxxx and Xxxx Xxxxxxxx (the "Preferred Board Seats"). Thereafter, in the
event of a vacancy in such Preferred Board Seats, or in any Board election in
which either or both Series A Preferred Stock-designated directors are up for
re-election, the Company shall cause the vacancy or vacancies to be filled with
a Series A Preferred-Stock-designated director or shall cause such Series A
Preferred Stock-designated directors to be included on the slate of directors
proposed by the Board at such election and cause the Board to recommend and
solicit proxies (if necessary) in favor of such Series A Preferred
Stock-designated director.
16
(b) With the exception of the Chief Executive Officer (the "CEO"),
no employee of the Company shall be nominated by the Board to serve as a
director.
(c) The CEO shall not serve as the Chairman of the Board (unless
otherwise authorized by the holders of a majority in interest of the Series A
Preferred Stock). As of the Closing, Xxxxxx X. Xxxxxxx will resign his position
as Chairman of the Board, but will remain as a director.
Notwithstanding any of the foregoing, the Company's obligations under this
Section 5.3 will terminate on the earliest of:
(i) The date when less than 50% of the shares of Series A Preferred Stock
sold at the Closings are outstanding; or
(ii) when the Company shall sell, convey, or otherwise dispose of all or
substantially all of its property or business or merge or consolidate with any
other corporation (other than a wholly-owned subsidiary corporation) where the
stockholders of the Company own less than fifty percent (50%) of the voting
power of the surviving entity after such merger or consolidation, provided that
this subsection (ii) shall not apply to a merger effected principally for the
purpose of changing the domicile of the Company.
5.4 Securities Laws.
(a) The Company agrees to timely file all documents required to be
filed with the Commission, specifically, a Form D (or equivalent form required
by applicable state law) with respect to the Purchased Securities if and as
required under Regulation D and applicable state securities laws.
(b) Each certificate representing the Purchased Shares and the
Underlying Shares shall bear a legend containing substantially the following
legend (in addition to any other legend required by law or applicable
agreement):
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR STATE
SECURITIES LAWS AND CANNOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED
IN THE ABSENCE OF REGISTRATION OR THE AVAILABILITY OF AN EXEMPTION
FROM OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION UNDER THE
ACT AND APPLICABLE STATE SECURITIES LAWS.
17
5.5 Reporting Matters.
The Company agrees not to report any actual or deemed non-cash dividends
with respect to the Series A Preferred Stock to the Purchasers or any
Governmental Entity on IRS Form 1099-DIV or other information return, unless
otherwise instructed to do so in writing by a Governmental Entity in connection
with a Proceeding involving the Company. The Company shall not withhold any
Taxes on any actual or deemed non-cash dividends to the Purchasers with respect
to the Series A Preferred Stock, unless otherwise instructed to do so in writing
by a Governmental Entity in connection with a Proceeding involving the Company.
The Company agrees with each of the Purchasers that for Tax purposes (i) the
issue price of the Series A Preferred Stock will be $2.358 per share of the
Series A Preferred Stock paid by the Purchasers and that the issue price for the
Warrants shall be $1.42 per share subject to the Warrants and (ii) the Series A
Preferred Stock will not be designated as debt.
5.6 USRPHC.
So long as Trellus Offshore Fund Limited owns any shares of the Company's equity
securities, the Company hereby agrees:
(a) to use commercially reasonable efforts to avoid qualifying at
any time on or after the Initial Closing as a USRPHC;
(b) to monitor, measure, and test on the following dates
(collectively the "Testing Dates"): (i) at the end of each month, (ii) on a date
at least ninety (90) days but not more than one hundred twenty (120) days prior
to each of the actual or any expected determination dates for applying the
USRPHC test specified in Section 1.897-2(c) of the Treasury Regulations (the
"Determination Dates"), and (iii) any actual Determination Dates; whether it
qualifies as a USRPHC on the Testing Date, provided that in the case of a
Testing Date described in (b)(ii) the Company shall take into account the
contemplated transactions that are anticipated to give rise to a Determination
Date described in Section 1.897-2(c)(ii), (iii) or (iv) of the Treasury
Regulations;
(c) if on any of the Testing Dates the fair market value of the
Company's "United States real property interests" (within the meaning of Section
897 of the Code and the Treasury Regulations promulgated thereunder) equal or
exceed forty percent (40%) of the fair market value of the Company's assets
described in Section 897(c)(2)(B) of the Code and the Treasury Regulations
promulgated thereunder, provided that in the case of a Testing Date described in
(b)(ii) the Company shall take into account the contemplated transactions that
are anticipated to give rise to a Determination Date described in Section
1.897-2(c)(ii), (iii) or (iv) of the Treasury Regulations, the Company will
provide the Purchasers with written notice of the results of such tests within
seven (7) days after the applicable Testing Date;
18
(d) if for any reason the Company anticipates that it is likely to
qualify or has qualified as a USRPHC at any time including on the Testing Dates,
the Company will provide written notice to the Purchasers within seven (7) days
after such determination providing information regarding the reasons the Company
anticipates such qualification or believes that it so qualifies; and
(e) provided the Company does not qualify as a USRPHC on the
applicable Testing Date, at any Purchaser's request, the Company will within
seven (7) days of such request deliver to the requesting Purchaser and to the
Internal Revenue Service notices that the Series A Preferred Stock, the
Underlying Shares, Common Stock, and Warrants, as applicable, are not "United
States real property interests" in accordance with the Treasury Regulations
under Sections 897 and 1445 of the Code.
5.7 Restriction on Use of Proceeds. The Company agrees that it shall place
the proceeds of the sale of the Purchased Securities in a separate bank account
and shall not expend any of such proceeds unless and until that certain Amended
and Restated Technology License Agreement, dated as of June 21, 2004, between
the Company and Bio-Products International, Inc., is amended to the reasonable
satisfaction of the holders of a majority of the shares of Series A Preferred
Stock (the "Majority Holder"). In the event such amendment is not so effectuated
within 30 days of the Initial Closing, the Majority Holder shall have the right
to demand that the Company return such proceeds to the Company in exchange for
the return of the Purchased Securities, which shall forthwith be canceled by the
Company. Any such demand must be made in writing and must be received by the
Company no later than 45 days following the Initial Closing. Notwithstanding the
foregoing, (i) the Company shall have the right to expend up to $500,000 of the
proceeds in accordance with the provisions of Section 1.5 at any time following
the Initial Closing and (ii) the Company shall be permitted to repay the Trellus
Note (principal and interest) with the proceeds from the Initial Closing. If and
to the extent such proceeds are expended but the demand referred to in the
preceding sentence is subsequently received by the Company, the Company shall
only be required to return the funds that have not been so expended, and the
Purchasers shall retain the Purchased Securities to the extent that such
proceeds have been expended by the Company. Upon the amendment of the Technology
Agreement as aforementioned, or upon the 45th day following the Initial Closing
(in the event no demand for a return of the proceeds has been received by the
Company), the Company shall be free to co-mingle the proceeds with its other
funds and to expend such proceeds in accordance with Section 1.5.
5.8 Restrictive Covenants. Until the earlier to occur of (i) the
Operational Date or (ii) the date on which less than 50% of the shares of Series
A Preferred Stock sold at the Closings remain outstanding, the vote or written
consent of the holders of at least a majority of the then-outstanding shares of
Series A Preferred Stock shall be necessary for effecting, validating or
approving the following actions and the Company shall not, without such vote or
consent, take or permit to be taken any such actions:
(a) Any merger, consolidation, or binding share exchange involving
WWA, the sale of all or substantially all of the assets of WWA, or the sale or
issuance of any equity securities of WWA;
19
(b) The incurrence by WWA of any indebtedness, other than Permitted
Indebtedness;
(c) A change in the principal business conducted or proposed to be
conducted by any of the Company's subsidiaries; or
(d) Any transaction by any of the Company's subsidiaries with any
Affiliates, except for transactions the terms of which in good faith are fair
and reasonable to such subsidiary and are at least as favorable as the terms
that could be obtained by such subsidiary in a comparable transaction made on an
arm's-length basis between unaffiliated parties (as determined by the Board of
Directors of such subsidiary acting reasonably and in good faith, as evidenced
by a Board resolution).
Capitalized terms used in this Section and not otherwise defined shall
have the meanings given such terms in the Certificate of Determination.
ARTICLE VI:
PRE-EMPTIVE RIGHTS
(a) Except in the case of Excluded Securities or the issuance of
shares of Series A Preferred Stock and Warrants at the Additional Closing, the
Company shall not issue, sell or exchange, agree to issue, sell or exchange, or
reserve or set aside for issuance, sale or exchange any (i) equity security of
the Company, (ii) debt security of the Company that by its terms is convertible
into or exchangeable for any equity security of the Company or has any other
equity or equity-linked feature, (iii) security of the Company that is a
combination of a debt and equity or equity-linked security or (iv) option,
warrant or other right to subscribe for, purchase or otherwise acquire any
security of the Company specified in the foregoing clauses (i) through (iii),
unless in each case the Company shall have first offered to sell a portion of
such securities to the Purchasers (the "Offered Securities"), equal to each
Purchaser's Proportionate Percentage at a price and on such other terms and
conditions as shall have been specified by the Company in writing delivered to
the Purchasers (the "Offer"), which Offer by its terms shall remain open and
irrevocable for a period of thirty (30) days from the date it is delivered by
the Company to each Purchaser.
(b) The Company may specify in the Offer that all or a minimum
amount of the Offered Securities must be sold in such offering (to the
Purchasers and/or any third parties pursuant to (d) below), in which case any
Notice of Acceptance (as defined below) shall be deemed conditioned upon (i)
receipt of Notices of Acceptance of all or such minimum amount, as applicable,
of the Offered Securities and/or (ii) the sale of all or such minimum amount, as
applicable, of the Offered Securities pursuant to (d) below.
(c) Notice of a Purchaser intention to accept, in whole or in part,
an Offer shall be evidenced by a writing signed by such Purchaser and delivered
to the Company prior to the end of the thirty (30) day period of such Offer,
setting forth such portion of the Offered Securities that such Purchaser elects
to purchase (the "Notice of Acceptance").
(d) In the event that Notices of Acceptance are not given by the
Purchaser in respect of all of the Offered Securities, during the ten (10)
calendar day period commencing after such information is given, each
participating Purchaser shall be entitled to additionally purchase that portion
of the Offered Shares for which Purchasers were entitled to subscribe but which
were not subscribed for by the Purchasers which is equal to the product obtained
by multiplying the number of unsubscribed Offered Shares by such Purchaser's
Proportionate Percentage.
20
(e) If the Purchasers do not elect to purchase all of the Offered
Securities, the Company shall have ninety (90) days from the expiration of the
foregoing ten (10) day period to sell all or any part of the Offered Securities
as to which Notices of Acceptance have not been given by the Purchasers to any
other Person(s), but only upon terms and conditions that in all material
respects (including, without limitation, unit price and interest rates), which
shall in no case be less than 95% of the amount specified in respect thereof in
the Offer, are no more favorable to such other Person(s) and no less favorable
to the Company than those set forth in the Offer.
Upon the closing, which shall include full payment to the Company, of the
sale to such other Person(s), the Purchasers shall purchase from the Company,
and the Company shall sell to the Purchasers, the Offered Securities in respect
of which Notices of Acceptance were delivered to the Company by the Purchasers,
at the terms specified in the Offer.
(f) In each case, any Offered Securities not purchased by the
Purchasers or any other Person(s) in accordance with (d) above may not be sold
or otherwise disposed of until they are again offered to the Purchasers under
the procedures specified in (a), (c) and (d) above.
(g) In the event that all or a portion of the consideration to be
paid for any Offered Securities is other than cash, then the Offer shall provide
that the Purchasers may, in lieu of such non-cash consideration, purchase the
securities for cash, at a cash equivalent purchase price to be determined in
good faith by the Board and to be set forth in the Offer.
(h) The rights of the Purchasers under this Article VI shall not
apply to the issuance by the Company of any Excluded Securities.
(i) The provisions of this Article VI shall expire as soon as less
than a total of 50% of the shares of Series A Preferred Stock sold at the
Closings are outstanding.
ARTICLE VII:
MISCELLANEOUS
7.1 No Third Party Beneficiaries.
Except as expressly provided herein, this Agreement shall not confer any
rights or remedies upon any Person other than the parties and their respective
successors and permitted assigns, personal representatives, heirs and estates,
as the case may be.
7.2 Entire Agreement.
This Agreement and the other Documents constitute the entire agreement
among the Parties and supersede any prior understandings, agreements or
representations by or among the Parties, written or oral, that may have related
in any way to the subject matter of any Document including, without limitation,
any letter of intent dated as of or prior to the date hereof, between the
Company and the Purchasers.
21
7.3 Successors and Assigns.
This Agreement shall be binding upon and inure to the benefit of the
Parties and their respective successors and permitted assigns. No party hereto
may assign either this Agreement or any of its rights, interests, or obligations
hereunder without the prior written approval of the other parties hereto;
provided, however, that any Purchaser may assign, hypothecate or pledge any of
its rights under any of the Documents to (i) an Affiliate of such Purchaser,
(ii) any Person who shall acquire substantially all of the assets of such
Purchaser or a majority in voting power of the capital stock of such Purchaser
(whether pursuant to a merger, consolidation, stock sale or otherwise), (iii)
any lender of such Purchaser (or any agent therefore) for security purposes and
the assignment thereof by any such lender or agent to such Purchaser in
connection with the exercise by any such lender or agent of all of its rights
and remedies as a secured creditor with respect thereto, or (iv) any person to
whom such Purchaser assigns or transfers any Purchased Securities, provided such
transferee agrees in writing to be bound, with respect to the transfer of
Purchased Securities, by the provisions hereof that apply to the Purchasers.
7.4 Counterparts.
This Agreement may be executed in one or more counterparts, each of which
shall be deemed an original but all of which together shall constitute one and
the same instrument. This Agreement may be executed by facsimile.
7.5 Notices.
All notices, requests, demands, claims, and other communications hereunder
shall be in writing and shall be deemed to have been duly given if delivered
personally, telecopied, sent by nationally recognized overnight courier or
mailed by registered or certified mail (return receipt requested), postage
prepaid, to the parties at the following addresses (or at such other address for
a party as shall be specified by like notice):
If to the Company:
World Waste Technologies, Inc.
00000 Xxxxxxx Xxxxx Xxxxx
Xxxxx 000
Xxx Xxxxx, Xxxxxxxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: CFO
22
with a copy to:
Xxxx & Xxxxx Professional Corporation
0000 Xxxxxxx Xxxx Xxxx, 00xx Xxxxx
Xxx Xxxxxxx, XX 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxxxxx Xxxxxxx, Esq.
If to the Purchasers, to the addresses set forth on
the signature pages hereto.
All such notices and other communications shall be deemed to have been
given and received (i) in the case of personal delivery, on the date of such
delivery, (ii) in the case of delivery by facsimile, on the date of such
delivery, (iii) in the case of delivery by nationally recognized overnight
courier, on the third business day following dispatch and (iv) in the case of
mailing, on the seventh business day following such mailing.
7.6 Governing Law.
THIS AGREEMENT WILL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
DOMESTIC LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO ANY CHOICE OF
LAW OR CONFLICTING PROVISION OR RULE THAT WOULD CAUSE THE LAWS OF ANY
JURISDICTION OTHER THAN THE STATE OF NEW YORK TO BE APPLIED. IN FURTHERANCE OF
THE FOREGOING, THE INTERNAL LAW OF THE STATE OF NEW YORK WILL CONTROL THE
INTERPRETATION AND CONSTRUCTION OF THIS AGREEMENT, EVEN IF UNDER SUCH
JURISDICTION'S CHOICE OF LAW OR CONFLICT OF LAW ANALYSIS, THE SUBSTANTIVE LAW OF
SOME OTHER JURISDICTION WOULD ORDINARILY APPLY.
7.7 Submission to Jurisdiction; Waivers. The Company and each Purchaser
irrevocably agrees that any legal action or proceeding with respect to this
Agreement or for recognition and enforcement of any judgment in respect hereof
brought by any other party hereto or its successors may be brought and
determined in the Supreme Court of New York for Kings County or the federal
district court in the Southern District of New York, and the Company and each
Purchaser hereby irrevocably submits with regard to any such action or
proceeding for itself and in respect to its property, generally and
unconditionally, to the nonexclusive jurisdiction of the aforesaid courts. The
Company and each Purchaser hereby irrevocably waives, and agrees not to assert,
by way of motion, as a defense, counterclaim or otherwise, in any action or
proceeding with respect to this Agreement, (a) any claim that is not personally
subject to the jurisdiction of the above-named courts for any reason other than
the failure to lawfully serve process, (b) that it or its property is exempt or
immune from jurisdiction of any such court or from any legal process commenced
in such courts (whether through service of notice, attachment prior to judgment,
attachment in aid of execution of judgment, execution of judgment or otherwise),
and (c) to the fullest extent permitted by applicable law, that (i) the suit,
action or proceeding in any such court is brought in an inconvenient forum, (ii)
the venue of such suit, action or proceeding is improper and (iii) this
Agreement, or the subject matter hereof, may not be enforced in or by such
courts.
23
7.8 Waiver of Jury Trial.
EACH OF THE PARTIES HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY
IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR ANY OTHER DOCUMENT RELATED HERETO.
7.9 Amendments and Waivers; Purchasers Consent.
No amendment of any provision of this Agreement shall be valid unless the
same shall be in writing and signed by the Company and the holders of at least a
majority of the then-outstanding Purchased Shares. No waiver by any party hereto
of any default, misrepresentation, or breach of warranty or covenant hereunder,
whether intentional or not, shall be deemed to extend to any prior or subsequent
default, misrepresentation, or breach of warranty or covenant hereunder or
affect in any way any rights arising by virtue of any prior or subsequent such
occurrence.
7.10 Certain Definitions.
"Affiliate" means, with respect to any Person, any of (a) a director,
officer or shareholder holding 5% or more of the capital stock (on a fully
diluted basis) of such Person, (b) a spouse, parent, sibling or descendant of
such Person (or a spouse, parent, sibling or descendant of any director or
officer of such Person) and (c) any other Person that, directly or indirectly
through one or more intermediaries, controls, or is controlled by, or is under
common control with, another Person. The term "control" includes, without
limitation, the possession, directly or indirectly, of the power to direct the
management and policies of a Person, whether through the ownership of voting
securities, by contract or otherwise.
"Assets" means, with respect to any Person, all of the assets, rights,
intellectual property, interests and other properties, real, personal and mixed,
tangible and intangible, of any nature whatsoever, either owned or leased by
such Person.
"Balance Sheet" means the audited consolidated balance sheet of the
Company as of December 31, 2004.
"Board" shall mean the Board of Directors of the Company.
"CERCLA" means the United States Comprehensive Environmental Response,
Compensation and Liability Act, 42 U.S.C ss. 9601 et seq., as amended.
"Certificate of Determination" means the Company's Certificate of
Determination of Rights, Preferences and Privileges of the 8% Series A
Cumulative Redeemable Convertible Preferred Stock in effect as of the Closing in
the form attached as Exhibit D hereto.
24
"COBRA" shall mean the Consolidated Omnibus Budget Reconciliation Act of
1985, as amended and as codified in Section 4980B of the Code and Section 601
et. seq. of ERISA.
"Company Employee" shall mean any current director, employee or consultant
of the Company or any ERISA Affiliate.
"Documents" means this Agreement, the Certificate of Determination, the
Warrants and the Registration Rights Agreement.
"Employee Plan" shall mean any plan, program, policy, practice, contract,
agreement or other arrangement providing for compensation, severance,
termination pay, deferred compensation, performance awards, stock or
stock-related awards, fringe benefits or other employee benefits or remuneration
of any kind, whether written, unwritten or otherwise, funded or unfunded,
including without limitation, each "employee benefit plan," within the meaning
of Section 3(3) of ERISA which is or has been, within the past six (6) years,
maintained, contributed to, or required to be contributed to, by the Company or
any ERISA Affiliate for the benefit of any Company Employee, or with respect to
which the Company or any ERISA Affiliate has or may have any liability or
obligation.
"Environment" means soil, soil gas, land surface or subsurface strata,
surface waters (including navigable waters, ocean waters, streams, ponds,
drainage basins and wetlands), groundwater, drinking water supply, stream
sediments, ambient air (including indoor air), plant and animal life and any
other environmental medium or natural resource.
"Environmental Claim" means any written or oral notice, claim, demand,
action, suit, complaint, proceeding, request for information or other
communication by any person alleging liability or potential liability (including
without limitation liability or potential liability for investigatory costs,
cleanup costs, governmental response costs, natural resource damages, property
damage, personal injury, fines or penalties) arising out of, relating to, based
on or resulting from (i) the presence, discharge, emission release or threatened
release of any Hazardous Substances at any location, whether or not owned,
leased or operated by the Company or any Subsidiary or (ii) circumstances
forming the basis of any violation or alleged violation of any Environmental Law
or Environmental Permit or (iii) otherwise relating to obligations or
liabilities under any Environmental laws.
"Environmental Law" means all laws, rules, regulations or guidelines
relating to pollution or protection of human health or the Environment,
including, without limitation, (a) laws relating to the Release or threatened
Release of Hazardous Materials or other substances into the Environment and (b)
laws relating to the identification, generation, manufacture, processing,
distribution, use, treatment, storage, disposal, recovery, transport, transfer,
refinement, production, management or other handling of Hazardous Materials or
other substances. Environmental Laws shall include, without limitation, CERCLA,
the Federal Water Pollution Control Act (33 U.S.C. ss. 1251 et seq.), RCRA, the
Safe Drinking Water Act (21 U.S.C. ss. 349, 42 U.S.C. xx.xx. 201, 300f), the
Toxic Substances Control Act (15 U.S.C. ss. 2601 et seq.), the Clean Air Act (42
U.S.C. ss. 7401 et seq.), the California Health and Safety Code (ss. 25100 et
seq., ss. 39000 et seq.) as enacted prior to the Closing Date and as in effect
on the Closing Date.
25
"Environmental Permits" means all permits, licenses, registrations and
other governmental authorizations required for each of the Company and the
Subsidiaries and the operations of each of the Company's and the Subsidiaries'
facilities and otherwise to conduct its business under Environmental Laws.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended, and the rules and regulations promulgated thereunder.
"ERISA Affiliate" shall mean each Subsidiary of the Company and any other
person or entity under common control with the Company or any of its
Subsidiaries within the meaning of Section 414(b), (c), (m) or (o) of the Code
and the regulations issued thereunder.
"Excluded Securities" means (i) shares of Common Stock issued upon
conversion or redemption of the Series A Preferred Stock or any accrued
dividends thereon; (ii) shares of Common Stock and/or options, warrants or other
Common Stock purchase rights and the Common Stock issued pursuant to such
options, warrants or other rights (as adjusted for any stock dividends,
combinations, splits, recapitalizations and the like) issued after the Issue
Date (as defined in the Certificate of Determination) to employees, officers or
directors of, or consultants or advisors to the Company or any subsidiary
pursuant to stock purchase or stock option plans or other arrangements that are
approved by the Board; (iii) shares of Common Stock or other securities of the
Company issued pursuant to a strategic partnership, joint venture or similar
transaction approved by the Board; (iv) shares of Common Stock or other
securities of the Company issued pursuant to an acquisition or merger approved
by the Board; (v) shares of Common Stock issued in a public offering; (vi)
shares of Common Stock issued pursuant to the exercise of options, warrants or
convertible securities outstanding as of the Issue Date; (vii) securities issued
to financial institutions, equipment leasing companies or lessors in connection
with any commercial credit arrangements, equipment financings or other similar
transactions, or other vendors; (viii) securities issued in connection with the
acquisition of intellectual property or other intangible rights in licensing
transactions or otherwise to existing or potential trade partners; (ix)
securities issued in connection with any stock split, recapitalization or
similar transaction; (x) securities issued as dividend or other distribution on
the Series A Preferred Stock; (xi) securities issued for an Effective Price (as
defined below) equal to or greater than $2.50 (as adjusted for any stock
dividends, combinations or splits with respect to the Company's shares); or
(xii) shares issued in any other transaction as to which the holders of a
majority of the shares of Series A Preferred Stock then outstanding shall have
agreed in writing that such shares shall be deemed to be Excluded Securities.
Notwithstanding the foregoing, only the first 250,000 shares issued in the
aggregate pursuant to subsections (iii), (iv), (v), (vii) and (viii) shall be
deemed to be "Excluded Securities." The "Effective Price" of securities issued
shall mean: the quotient determined by dividing the total number of shares of
Common Stock issued or sold into the aggregate consideration received by the
Company for such shares of Common Stock. For purposes of the foregoing, (i) if
the Company issues any convertible securities, the Company shall be deemed to
have issued at the time of the issuance of such securities the maximum number of
shares of Common Stock issuable upon exercise or conversion thereof and to have
received as consideration for the issuance of such shares an amount equal to the
total amount of consideration, if any, received by the Company for the issuance
of such convertible securities plus the minimum amount of consideration, if any,
payable to the Company upon the exercise or conversion thereof and (ii) if the
Company issues any securities for other than cash, the aggregate consideration
received by the Company with respect to such non-cash consideration shall be
computed at the fair value of the property received as determined in good faith
by the Board.
26
"GAAP" means United States Generally Accepted Accounting Principles,
consistently applied.
"Governmental Entity" means any court, administrative agency, tribunal,
department, bureau or commission or other governmental authority or
instrumentality, domestic or foreign, Federal, state or local or any arbitrator
or arbitral body.
"Hazardous Substances" means any dangerous, toxic or hazardous pollutant,
contaminant, chemical, waste, material or substance, including those defined in
or governed by any federal, state or local law, statute, code, ordinance,
regulation, rule or other requirement, relating to such substance or otherwise
relating to the environment or human health or safety, including without
limitation any waste, material, substance, pollutant or contaminant that might
cause any injury to human health or safety or to the environmental or might
subject the Company or any of its Subsidiaries to any imposition of costs or
liability under any Environmental Law.
"HIPAA" shall mean the Health Insurance Portability and Accountability Act
of 1996, as amended.
"IRS" shall mean the United States Internal Revenue Service or any
successor thereto.
"Law" means any constitution, law, statute, treaty, rule, directive,
requirement or regulation or Order of any Governmental Entity.
"Lien" means any security interest, pledge, bailment (in the nature of a
pledge or for purposes of security), mortgage, deed of trust, the grant of a
power to confess judgment, conditional sale or title retention agreement
(including any lease in the nature thereof), charge, encumbrance, easement,
reservation, restriction, cloud, right of first refusal or first offer, option,
or other similar arrangement or interest in real or personal property.
"Material," "Material Adverse Change" and "Material Adverse Effect" shall
mean the occurrence of any single event, or any series of related events, or set
of related circumstances, which would have a material adverse effect on the
condition (financial or other), business, results of operations, cash flows,
ability to conduct business or Assets of the Company and the Subsidiaries taken
as a whole.
"Multiemployer Plan" shall mean any "Pension Plan" which is a
"multiemployer plan," as defined in Section 3(37) of ERISA.
"Orders" means judgments, writs, decrees, injunctions, orders, compliance
agreements or settlement agreements of or with any Governmental Entity or
arbitrator.
"Pension Plan" shall mean each Employee Plan that is an "employee pension
benefit plan," within the meaning of Section 3(2) of ERISA.
27
"Person" shall be construed broadly and shall include 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).
"Proceeding" means any action, suit, proceeding, complaint, charge,
hearing, inquiry or investigation before or by a Governmental Entity or an
arbitrator or arbitral body.
"Proportionate Percentage" means the pro rata percentage of the number of
shares of stock subject to purchase pursuant to Article VI that each Purchaser
shall be entitled to purchase, which pro rata percentage, as to each such
Purchaser, shall be the percentage figure which expresses the ratio, on a Common
Stock equivalent basis (assuming the prior exercise, conversion or exchange of
all equity-linked securities held by such Purchaser), between the number of
shares of stock owned by such Purchaser and the aggregate number of shares of
stock owned by all shareholders of the Company at the date of determination.
"Registration Rights Agreement" means the Registration Rights Agreement
dated as of the date hereof among the Company, the Purchasers and the other
parties thereto, in form and substance reasonably satisfactory to the Purchasers
and attached hereto as Exhibit C.
"Release" means and includes any spilling, leaking, pumping, pouring,
injecting, emitting, emptying, discharging, depositing, escaping, leaching,
migrating (including passive migration), dumping, disposing or other releasing
into the Environment or the workplace, whether intentional or unintentional and
otherwise defined in any Environmental Law.
"Tax" or "Taxes" means all federal, state, local and foreign taxes,
levies, deficiencies and other assessments and charges of whatever nature
(including income, franchise, property, sales, use, gross receipts, excise,
license, occupation, recording, value added, transfer, withholding, backup
withholding, payroll, employment, severance, stamp, occupation, premium,
windfall profits, environmental, capital stock, profits, social security,
unemployment, disability, real property, personal property, real property gains,
registration, alternative or add-on minimum and estimated taxes; workers'
compensation premiums, customs duties and other governmental charges; and other
obligations of the same nature as or of a nature similar to any of the
foregoing) imposed by any taxing authority, as well as any obligation to
contribute to the payment of taxes determined on a consolidated, combined,
unitary or similar basis with respect to the Company or any of its Subsidiaries,
including any interest, penalty (civil or criminal) or addition thereto, whether
disputed or not, as well as any expenses incurred in connection with the
determination, settlement or litigation of any such tax liability.
"Tax Return" means any federal, state, local or foreign return,
declaration, report, claim for refund, amended return, excise tax report,
declaration of estimated tax, information return or statement relating to Taxes,
and any schedule or attachment thereto, filed or maintained, or required to be
filed or maintained, in connection with the calculation, determination,
assessment or collection of any Tax, and including any amendment thereof, as
well as, where permitted or required, consolidated, combined, unitary or similar
returns for any group of entities that include the Company or any of its
Subsidiaries; and reports with respect to backup withholding and other payments
to third parties.
28
7.11 Incorporation of Schedules and Exhibits.
The Schedule and Exhibits identified in this Agreement are incorporated
herein by reference and made a part hereof.
7.12 Construction.
Where specific language is used to clarify by example a general statement
contained herein, such specific language shall not be deemed to modify, limit or
restrict in any manner the construction of the general statement to which it
relates. The language used in this Agreement shall be deemed to be the language
chosen by the parties hereto to express their mutual intent, and no rule of
strict construction shall be applied against any party.
7.13 Interpretation.
Accounting terms used but not otherwise defined herein shall have the
meanings given to them under GAAP. As used in this Agreement (including all
Schedules, Exhibits and amendments hereto), the masculine, feminine and neuter
gender and the singular or plural number shall be deemed to include the others
whenever the context so requires. References to Articles and Sections refer to
articles and sections of this Agreement. Similarly, references to Schedules and
Exhibits refer to schedules and exhibits, respectively, attached to this
Agreement. Unless the content requires otherwise, words such as "hereby,"
"herein," "hereinafter," "hereof" "hereto," "hereunder" and words of like import
refer to this Agreement. The Article and Section headings contained in this
Agreement are inserted for convenience only and shall not affect in any way the
meaning or interpretation of this Agreement.
A Person (other than an individual) will be deemed to have "knowledge" of
a particular fact or other matter if any individual who is serving, or who has
at any time served, as a director, officer, partner, executor, or trustee of
such Person (or in any similar capacity) has, or at any time had, knowledge of
such fact or other matter, except that the Company shall not be deemed to have
knowledge of a particular fact or matter solely as a result of the knowledge of
any individual who served as an officer or director of the Company prior to
August 24, 2004 but has not served as an officer or director of the Company at
any time subsequent to August 24, 2004.
7.14 Remedies.
The parties hereto shall each have and retain all other rights and
remedies existing in their favor at Law or equity, including, without
limitation, any actions for specific performance and/or injunctive or other
equitable relief (including, without limitation, the remedy of rescission) to
enforce or prevent any violations of the provisions of this Agreement. Without
limiting the generality of the foregoing, the Company hereby agrees that in the
event the Company fails to convey any number of Purchased Securities to the
Purchasers in accordance with the provisions of this Agreement or any Underlying
Shares in accordance with the terms of any Purchased Securities pursuant to
which they are issuable, the Purchasers' remedy at law may be inadequate. In
such event, the Purchasers shall have the right, in addition to all other rights
and remedies it may have, to specific performance of the obligations of the
Company to convey such number of Purchased Securities or Underlying Shares, as
the case may be.
29
7.15 Severability.
It is the desire and intent of the Parties that the provisions of this
Agreement be enforced to the fullest extent permissible under the laws and
public policies applied in each jurisdiction in which enforcement is sought.
Accordingly, if any particular provision of this Agreement shall be adjudicated
by a court of competent jurisdiction to be invalid, prohibited or unenforceable
for any reason, such provision, as to such jurisdiction, shall be ineffective,
without invalidating the remaining provisions of this Agreement or affecting the
validity or enforceability of this Agreement or affecting the validity or
enforceability of such provision in any other jurisdiction. Notwithstanding the
foregoing, if such provision could be more narrowly drawn so as not to be
invalid, prohibited or unenforceable in such jurisdiction, it shall, as to such
jurisdiction, be so narrowly drawn, without invalidating the remaining
provisions of this Agreement or affecting the validity or enforceability of such
provision in any other jurisdiction.
7.16 Delivery by Facsimile.
This Agreement and any amendments hereto, to the extent signed and
delivered by means of a facsimile machine, shall be considered to have the same
binding legal effect as if it were the original signed version thereof delivered
in person. At the request of any party hereto, each other party hereto shall
re-execute original forms and deliver them to the other party. No party hereto
shall raise the use of a facsimile machine to deliver a signature or the fact
that any signature or agreement or instrument was transmitted or communicated
through the use of a facsimile machine as a defense to the formation or
enforceability of this Agreement and each such party forever waives any such
defense.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
30
IN WITNESS WHEREOF, the parties hereto have executed this Securities
Purchase Agreement as of the date first above written.
THE COMPANY:
WORLD WASTE TECHNOLOGIES, INC.,
a California corporation
By: ____________________________________
Name: Xxxxxx X. Xxxxxxx
Title: Chief Executive Officer
31
THE PURCHASERS:
TRELLUS OFFSHORE FUND LIMITED,
a Cayman Islands corporation
By: ____________________________________
Name: __________________________________
Title: _________________________________
000 Xxxxxxx Xxxxxx
Xxx Xxxx, XX 00000
Telephone: _____________________________
Facsimile: _____________________________
Attention: Xxxx Xxxxxxxx
TRELLUS PARTNERS, LP,
a Delaware limited partnership
By: ____________________________________
Name: __________________________________
Title: _________________________________
000 Xxxxxxx Xxxxxx
Xxx Xxxx, XX 00000
Telephone: _____________________________
Facsimile: _____________________________
Attention: Xxxx Xxxxxxxx
TRELLUS PARTNERS II, LP,
a Delaware limited partnership
By: ____________________________________
Name: __________________________________
Title: _________________________________
000 Xxxxxxx Xxxxxx
Xxx Xxxx, XX 00000
Telephone: _____________________________
Facsimile: _____________________________
Attention: Xxxx Xxxxxxxx,
32
EXHIBIT A
ALLOCATION SCHEDULE
Number of Shares of
Series A Preferred Purchase Price of
Name Stock Number of Warrants Securities
------------------------------------------ ------------------------ --------------------- ----------------------
Trellus Offshore Fund Limited 2,800,000 280,000 $ 7,000,000
Trellus Partners, LP 1,120,000 112,000 $ 2,800,000
Trellus Partners II, LP 80,000 8,000 $ 200,000
-------------------------------------------------------------------
Total 4,000,000 400,000 $10,000,000
A - 1
