REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT, dated as of August 10th, 1998 (this
"Agreement"), is made by and between IDM ENVIRONMENTAL CORP., a New Jersey
corporation (the "Company"), and the entity named on the signature page hereto
(the "Initial Investor").
W I T N E S S E T H:
WHEREAS, upon the terms and subject to the conditions of the Securities
Purchase Agreement, dated as of August 10th, 1998, between the Initial Investor
and the Company (the "Securities Purchase Agreement"; capitalized terms not
otherwise defined herein shall have the meanings ascribed to them in the
Securities Purchase Agreement), the Company has agreed to issue and sell to the
Initial Investor $1,500,000 liquidation preference of 6% Convertible Preferred
Stock, par value $1.00 per share, of the Company (the "Preferred Stock," which
term, as used herein shall have the meaning ascribed to it in the Securities
Purchase Agreement); and
WHEREAS, the Preferred Stock is convertible into shares of Common Stock
(the "Conversion Shares") upon the terms and subject to the conditions contained
in the Certificate of Designations; and
WHEREAS, to induce the Initial Investor to execute and deliver the
Securities Purchase Agreement, the Company has agreed to provide certain
registration rights under the Securities Act of 1933, as amended, and the rules
and regulations thereunder, or any similar successor statute (collectively, the
"Securities Act"), with respect to the Conversion Shares;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and the Initial
Investor hereby agree as follows:
1. Definitions. As used in this Agreement, the following terms shall
have the following meanings:
(a) "Investor" means the Initial Investor and any permitted transferee
or assignee who agrees to become bound by the provisions of this Agreement
in accordance with Section 9 hereof.
(b) "Potential Material Event" means any of the following: (i) the
possession by the Company of material information not ripe for disclosure
in a registration statement, which shall be evidenced by determinations in
good faith by the Board of Directors of the Company that disclosure of such
information in the registration statement would be detrimental to the
business and affairs of the Company; or (ii) any material engagement or
activity by the Company which would, in the good faith determination of the
Board of Directors of the Company, be adversely affected by disclosure in a
registration statement at such time, which determination shall be
accompanied by a good faith determination by the Board of Directors of the
Company that the registration statement would be materially misleading
absent the inclusion of such information.
(c) "Register," "Registered," and "Registration" refer to a
registration effected by preparing and filing a Registration Statement or
Statements in compliance with the Securities Act and pursuant to Rule 415
under the Securities Act or any successor rule providing for offering
securities on a continuous basis ("Rule 415"), and the declaration or
ordering of effectiveness of such Registration Statement by the United
States Securities and Exchange Commission (the "SEC").
(d) "Registrable Securities" means the Conversion Shares.
(e) "Registration Statement" means a registration statement of the
Company under the Securities Act.
2. Registration.
(a) Mandatory Registration. The Company shall prepare and file with
the SEC, as soon as possible after the Closing Date, but no later than
thirty (30) days following the Closing Date, either a Registration
Statement on Form S-3 or an amendment to any such pending Registration
Statement registering for resale by the Investor all of the Registrable
Securities, but in no event less than the aggregate number of shares into
(i) which the Preferred Stock would be convertible at the time of filing of
the Form S-3 (assuming for such purposes that all shares of Preferred Stock
had been eligible to be converted, and had been converted, into Conversion
Shares in accordance with their terms, whether or not such eligibility or
conversion had in fact occurred as of such date). The Registration
Statement or amended Registration Statement shall state that, in accordance
with Rule 416 and 457 under the Securities Act, it also covers such
indeterminate number of additional shares of Common Stock as may become
issuable upon conversion of the Preferred Stock resulting from adjustment
in the Conversion Price, or to prevent dilution resulting from stock
splits, or stock dividends. The Company will use commercially reasonable
efforts to cause such Registration Statement to be declared effective the
earlier of (a) five (5) days after notice by the SEC that it may be
declared effective, or (b) ninety (90) days after the Closing Date. If at
any time the number of shares of Common Stock into which the Preferred
Stock may be converted exceeds the aggregate number of shares of Common
Stock then registered, the Company shall, within ten (10) business days
after receipt of a written notice from any Investor, either (i) amend the
Registration Statement filed by the Company pursuant to the preceding
sentence, if such Registration Statement has not been declared effective by
the SEC at that time, to register all shares of Common Stock into which the
Preferred Stock may currently or in the future be converted, or (ii) if
such Registration Statement has been declared effective by the SEC at that
time, file with the SEC an additional Registration Statement on Form S-3,
as may be appropriate, to register the shares of Common Stock into which
the Preferred Stock may currently or in the future be converted that exceed
the aggregate number of shares of Common Stock already registered. Such
Registration Statement shall not include any shares other than the
Registrable Securities and the shares specifically listed on Exhibit 1
without the consent of the Investor.
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(b) Payments by the Company.
(i) If the Registration Statement covering the Registrable Securities
is not filed in proper form with the SEC on or before thirty (30) days
after the Closing Date (the "Required Filing Date"), then the Company shall
pay the Initial Investor a late filing penalty (collectively "Late Filing
Penalties"), (A) on the first day after the Required Filing Date, an amount
equal to three (3%) percent of the purchase price paid by the Initial
Investor for all Preferred Stock (purchased pursuant to the Securities
Purchase Agreement) which is then outstanding (the "Purchase Price"), and
(B) on each subsequent monthly anniversary of the Required Filing Date, if
the Registration Statement has not been filed in proper form on or before
such date, an amount equal to two (2%) percent of the Purchase Price.
(ii) If the Registration Statement covering the Registrable Securities
is not effective within the earlier of (A) five (5) days after notice by
the SEC that it may be declared effective, or (B) ninety (90) days
following the Closing Date (the "Required Effective Date"), then the
Company shall pay the Initial Investor a late effective date penalty
(collectively "Late Effective Date Penalties") (sometimes Late Filing
Penalties and Late Effective Penalties are collectively referred to as
"Late Penalties"), (I) on the first day after the Required Effective Date,
an amount equal to three (3%) percent of the Purchase Price, (II) on each
subsequent monthly anniversary of the Required Effective Date, if the
Registration Statement has not been declared effective on or before such
date, an amount equal to two (2%) percent of the Purchase Price.
(iii) By way of illustration and not in limitation of the foregoing,
assuming a Closing Date of August 3 (X) if the Registration Statement is
timely filed but is not declared effective until January 15, 1999 (assuming
for the purpose of this example that the SEC has not previously provided
notice that it may be declared effective), the aggregate Late Effective
Date Penalty will equal seven (7%) percent of the Purchase Price (3% on
November 2, the 91st day after the Closing Date, plus 2% on December 1 and
January 1), or (Y) if the Registration is filed on October 10 and is not
declared effective until November 15 (assuming for the purpose of this
example that the SEC has not previously provided notice that it may be
declared effective), the aggregate Late Filing Penalty will equal five (5%)
percent of the Purchase Price (3% on September 3, the 31st day after the
Closing Date, plus 2% on October 2), and the aggregate Late Effective Date
Penalty will equal three (3%) percent of the Purchase Price (3% on November
2, the 91st day after the Closing Date).
(iv) Additionally, if (A) the Registration Statement is not filed
within sixty (60) days from the Closing Date or (B) the Required Effective
Date is greater than one hundred fifty (150) days after the Closing Date,
or (C) the effectiveness of the Registration Statement is not maintained
during the Registration Period as hereinafter defined, Purchaser may, at
its option, require the Company to redeem the Preferred Stock in full,
within three (3) days, in cash, in accordance with Section 4(i)(y) of the
Securities Purchase Agreement.
(v) Late Penalties will be payable to the Investor by the Company in
cash or other immediately available funds on the date such Late Penalty is
incurred.
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(vi) The parties acknowledge that the damages which may be incurred by
the Investor if the Registration Statement is not filed by the Required
Filing Date or if the Registration Statement has not been declared
effective by the Required Registration Date may be difficult to ascertain.
The parties agree that the Late Penalties represent a reasonable estimate
on the part of the parties, as of the date of this Agreement, of the amount
of such damages. The payment of the Late Penalties to the Investor shall
not limit the Investor's other rights and remedies hereunder or under any
other document entered into in connection herewith.
(vii) Notwithstanding the foregoing, the amounts payable by the
Company pursuant to this provision shall not be payable to the extent any
delay in the effectiveness of the Registration Statement occurs because of
an act of, or a failure to act or to act timely by the Initial Investor or
its counsel if the Company timely forwards to counsel any required
documents or in the event all of the Registrable Securities may be sold
pursuant to Rule 144 or another available exemption under the Act.
3. Obligations of the Company. In connection with the registration of
the Registrable Securities, the Company shall do each of the following.
(a) Prepare promptly, and file with the SEC by the Required Filing
Date, a Registration Statement with respect to not less than the number of
Registrable Securities provided in Section 2(a) above, and thereafter use
commercially reasonable efforts to cause each Registration Statement
relating to Registrable Securities to become effective by the Required
Effective Date and keep the Registration Statement effective at all times
until the earliest (the "Registration Period") of (i) the date that is two
(2) years after the Closing Date, (ii) the date when the Investors may sell
all Registrable Securities under Rule 144 or (iii) the date the Investors
no longer own any of the Registrable Securities, which Registration
Statement (including any amendments or supplements thereto and prospectuses
contained therein) shall not contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances in
which they were made, not misleading;
(b) Prepare and file with the SEC such amendments (including
post-effective amendments) and supplements to the Registration Statement
and the prospectus used in connection with the Registration Statement as
may be necessary to keep the Registration effective at all times during the
Registration Period, and, during the Registration Period, comply with the
provisions of the Securities Act with respect to the disposition of all
Registrable Securities of the Company covered by the Registration Statement
until such time as all of such Registrable Securities have been disposed of
in accordance with the intended methods of disposition by the seller or
sellers thereof as set forth in the Registration Statement;
(c) The Company shall permit a single firm of counsel designated by
the Initial Investors to review the Registration Statement and all
amendments and supplements thereto a reasonable period of time (but not
less than three (3) business days) prior to their filing with the SEC, and
not file any document in a form to which such counsel reasonably objects.
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(d) Notify the Holders of Registrable Securities to be sold, their
counsel and any managing underwriters immediately (and, in the case of
(i)(A) below, not less than five (5) days prior to such filing) and (if
requested by any such Person) confirm such notice in writing no later than
one (1) Business Day following the day (i)(A) when a Prospectus or any
Prospectus supplement or post-effective amendment to the Registration
Statement is proposed to be filed; (B) whenever the SEC notifies the
Company whether there will be a "review" of such Registration Statement;
(C) whenever the Company receives (or representatives of the Company
receive on its behalf) any oral or written comments from the SEC in respect
of a Registration Statement (copies or, in the case of oral comments,
summaries of such comments shall be promptly furnished by the Company to
the Holders); and (D) with respect to the Registration Statement or any
post-effective amendment, when the same has become effective; (ii) of any
request by the SEC or any other Federal or state governmental authority for
amendments or supplements to the Registration Statement or Prospectus or
for additional information; (iii) of the issuance by the SEC of any stop
order suspending the effectiveness of the Registration Statement covering
any or all of the Registrable Securities or the initiation of any
Proceedings for that purpose; (iv) if at any time any of the
representations or warranties of the Company contained in any agreement
(including any underwriting agreement) contemplated hereby ceases to be
true and correct in all material respects; (v) of the receipt by the
Company of any notification with respect to the suspension of the
qualification or exemption from qualification of any of the Registrable
Securities for sale in any jurisdiction, or the initiation or threatening
of any Proceeding for such purpose; and (vi) of the occurrence of any event
that to the best knowledge of the Company makes any statement made in the
Registration Statement or Prospectus or any document incorporated or deemed
to be incorporated therein by reference untrue in any material respect or
that requires any revisions to the Registration Statement, Prospectus or
other documents so that, in the case of the Registration Statement or the
Prospectus, as the case may be, it will not contain any untrue statement of
a material fact or omit to state any 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. In addition, the
Company shall furnish the Holders with copies of all intended written
responses to the comments contemplated in clause (C) of this Section 3(d)
not later than one (1) Business Day in advance of the filing of such
responses with the SEC so that the Holders shall have the opportunity to
comment thereon.
(e) Furnish to each Investor whose Registrable Securities are included
in the Registration Statement and its legal counsel identified to the
Company, (i) promptly after the same is prepared and publicly distributed,
filed with the SEC, or received by the Company, one (1) copy of the
Registration Statement, each preliminary Prospectus (as defined in the
Securities Act) and Prospectus, and each amendment or supplement thereto,
and (ii) such number of copies of a Prospectus, and all amendments and
supplements thereto and such other documents, as such Investor may
reasonably request in order to facilitate the disposition of the
Registrable Securities owned by such Investor;
(f) As promptly as practicable after becoming aware of such event,
notify each Investor of the happening of any event of which the Company has
knowledge, as a result of which the Prospectus included in the Registration
Statement, as then in effect, includes an untrue statement of a material
fact or omits 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, and use its best efforts
promptly to prepare a supplement or amendment to the Registration Statement
or other appropriate filing with the SEC to correct such untrue statement
or omission, and deliver a number of copies of such supplement or amendment
to each Investor as such Investor may reasonably request;
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(g) As promptly as practicable after becoming aware of such event,
notify each Investor who holds Registrable Securities being sold (or, in
the event of an underwritten offering, the managing underwriters) of the
issuance by the SEC of any notice of effectiveness or any stop order or
other suspension of the effectiveness of the Registration Statement at the
earliest possible time;
(h) Notwithstanding the foregoing, if at any time or from time to time
after the date of effectiveness of the Registration Statement, the Company
notifies the Investors in writing of the existence of a Potential Material
Event, the Investors shall not offer or sell any Registrable Securities, or
engage in any other transaction involving or relating to the Registrable
Securities, from the time of the giving of notice with respect to a
Potential Material Event until such Investor receives written notice from
the Company that such Potential Material Event either has been disclosed to
the public or no longer constitutes a Potential Material Event; provided,
however, that the Company may not so suspend the right to such holders of
Registrable Securities for more than two ten (10) day periods in the
aggregate during any 12-month period ("Suspension Period") with at least a
ten (10) business day interval between such periods, during the periods the
Registration Statement is required to be in effect;
(i) Maintain NASDAQ/National Market authorization and quotation for
such Registrable Securities and, without limiting the generality of the
foregoing, to arrange for at least two market makers to register with the
National Association of Securities Dealers, Inc. ("NASD") as such with
respect to such Registrable Securities;
(j) Provide a transfer agent and registrar, which may be a single
entity, for the Registrable Securities not later than the effective date of
the Registration Statement;
(k) Cooperate with the Investors who hold Registrable Securities (or,
subject to receipt by the Company of appropriate notice and documentation,
as may be required by the Securities Purchase Agreement, the Certificate of
Designations or this Agreement, securities convertible into Registrable
Securities) being offered to facilitate the timely preparation and delivery
of certificates for the Registrable Securities to be offered pursuant to
the Registration Statement and enable such certificates for the Registrable
Securities to be in such denominations or amounts as the case may be, as
the Investors may reasonably request, and, within three (3) business days
after a Registration Statement which includes Registrable Securities is
ordered effective by the SEC, the Company shall deliver, and shall cause
legal counsel selected by the Company to deliver, to the transfer agent for
the Registrable Securities (with copies to the Investors whose Registrable
Securities or securities convertible into Registrable Securities are
included in such Registration Statement) an appropriate instruction and
opinion of such counsel; provided, however, that nothing in this
subparagraph (j) shall be deemed to waive any of the provisions regarding
the conditions or method of conversion of Preferred Stock into Registrable
Securities; and
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(l) Take all other reasonable actions necessary to expedite and
facilitate disposition by the Investor of the Registrable Securities
pursuant to the Registration Statement.
4. Obligations of the Investors. In connection with the registration
of the Registrable Securities, the Investors shall have the following
obligations:
(a) It shall be a condition precedent to the obligations of the
Company to complete the Registration pursuant to this Agreement with
respect to the Registrable Securities of a particular Investor that such
Investor shall furnish to the Company such information regarding itself,
the Registrable Securities held by it, and the intended method of
disposition of the Registrable Securities held by it, as shall be
reasonably required to effect the Registration of such Registrable
Securities and shall execute such documents in connection with such
Registration as the Company may reasonably request. At least five (5) days
prior to the first anticipated filing date of the Registration Statement,
the Company shall notify each Investor of the information the Company
requires from each such Investor (the "Requested Information") if such
Investor elects to have any of such Investor's Registrable Securities
included in the Registration Statement. If at least two (2) business days
prior to the filing date the Company has not received the Requested
Information from an Investor (a "Non-Responsive Investor"), then the
Company may file the Registration Statement without including Registrable
Securities of such Non-Responsive Investor;
(b) Each Investor, by such Investor's acceptance of the Registrable
Securities, agrees to cooperate with the Company as reasonably requested by
the Company in connection with the preparation and filing of the
Registration Statement hereunder, unless such Investor has notified the
Company in writing of such Investor's election to exclude all of such
Investor's Registrable Securities from the Registration Statement; and
(c) Each Investor agrees that, upon receipt of any notice from the
Company of the happening of any event of the kind described in Section 3(e)
or 3(f), above, such Investor will immediately discontinue disposition of
Registrable Securities pursuant to the Registration Statement covering such
Registrable Securities until such Investor's receipt of the copies of the
supplemented or amended Prospectus contemplated by Section 3(e) or 3(f)
and, if so directed by the Company, such Investor shall deliver to the
Company (at the expense of the Company) or destroy (and deliver to the
Company a certificate of destruction) all copies in such Investor's
possession, of the Prospectus covering such Registrable Securities current
at the time of receipt of such notice.
5. Expenses of Registration. (a) All reasonable expenses (other than
underwriting discounts and commissions of, and fees of counsel for, the
Investor) incurred in connection with Registrations, filings or
qualifications pursuant to Section 3, including, without limitation, all
Registration, listing, and qualifications fees, printers and accounting
fees, the fees and disbursements of counsel for the Company, shall be borne
by the Company.
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(b) Neither the Company nor any of its subsidiaries has, as of the
date hereof, nor shall the Company nor any of its subsidiaries, on or after
the date of this Agreement, enter into any agreement with respect to its
securities that conflicts with the rights granted to the Investors in this
Agreement or otherwise conflicts with the provisions hereof. Except as and
to the extent specifically disclosed in any of its filings with the SEC,
neither the Company nor any of its subsidiaries has previously entered into
any agreement granting any Registration rights with respect to any of its
securities to any Person. Without limiting the generality of the foregoing,
without the written consent of the Investors holding a majority of the then
outstanding Registrable Securities, the Company shall not grant to any
person the right to request the Company to register any securities of the
Company under the Securities Act unless the rights so granted are subject
in all respects to the prior rights in full of the Investors set forth
herein, and are not otherwise in conflict or inconsistent with the
provisions of this Agreement.
6. Indemnification. In the event any Registrable Securities are
included in a Registration Statement under this Agreement:
(a) To the extent permitted by law, the Company will indemnify and
hold harmless each Investor who holds such Registrable Securities, the
directors, if any, of such Investor, the officers, if any, of such
Investor, each person, if any, who controls any Investor within the meaning
of the Securities Act or the Securities Exchange Act of 1934, as amended
(the "Exchange Act") (each, an "Indemnified Person" or "Indemnified
Party"), against any losses, claims, damages, liabilities or expenses
(joint or several) incurred (collectively, "Claims") to which any of them
may become subject under the Securities Act, the Exchange Act or otherwise,
insofar as such Claims (or actions or proceedings, whether commenced or
threatened, in respect thereof) arise out of or are based upon any of the
following statements, omissions or violations in the Registration
Statement, or any post-effective amendment thereof, or any Prospectus
included therein: (i) any untrue statement or alleged untrue statement of a
material fact contained in the Registration Statement or any post-effective
amendment thereof or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein not misleading, (ii) any untrue statement or alleged
untrue statement of a material fact contained in the final Prospectus (as
amended or supplemented, if the Company files any amendment thereof or
supplement thereto with the SEC) or the omission or alleged omission to
state therein any material fact necessary to make the statements made
therein, in light of the circumstances under which the statements therein
were made, not misleading or (iii) any violation or alleged violation by
the Company of the Securities Act, the Exchange Act, any state securities
law or any rule or regulation under the Securities Act, the Exchange Act or
any state securities law (the matters in the foregoing clauses (i) through
(iii) being, collectively, "Violations"). Subject to clause (b) of this
Section 6, the Company shall reimburse the Investors, promptly as such
expenses are incurred and are due and payable, for any legal fees or other
reasonable expenses incurred by them in connection with investigating or
defending any such Claim. Notwithstanding anything to the contrary
contained herein, the indemnification agreement contained in this Section
6(a) shall not (I) apply to a Claim arising out of or based upon a
Violation which occurs in reliance upon and in conformity with information
furnished in writing to the Company by or on behalf of any Indemnified
Person expressly for use in connection with the preparation of the
Registration Statement or any such amendment thereof or supplement thereto,
if such prospectus was timely made available by the Company pursuant to
Section 3(c) hereof; (II) be available to the extent such Claim is based on
a failure of the Investor to deliver or cause to be delivered the
prospectus made available by the Company; or (III) apply to amounts paid in
settlement of any Claim if such settlement is effected without the prior
written consent of the Company, which consent shall not be unreasonably
withheld. Each Investor will indemnify the Company and its officers,
directors and agents against any claims arising out of or based upon a
Violation which occurs in reliance upon and in conformity with information
furnished in writing to the Company, by or on behalf of such Investor,
expressly for use in connection with the preparation of the Registration
Statement, subject to such limitations and conditions as are applicable to
the Indemnification provided by the Company to this Section 6. Such
indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of the Indemnified Person and shall
survive the transfer of the Registrable Securities by the Investors
pursuant to Section 9.
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(b) Promptly after receipt by an Indemnified Person or Indemnified
Party under this Section 6 of notice of the commencement of any action
(including any governmental action), such Indemnified Person or Indemnified
Party shall, if a Claim in respect thereof is to be made against the
Company under this Section 6, deliver to the Company a written notice of
the commencement thereof and the Company shall have the right to
participate in, and, to the extent the Company so desires, jointly with any
other person similarly noticed, to assume control of the defense thereof
with counsel mutually satisfactory to the Company and the Indemnified
Person or the Indemnified Party, as the case may be. In case any such
action is brought against any Indemnified Person or Indemnified Party, and
it notifies the Company of the commencement thereof, the Company will be
entitled to participate in, and, to the extent that it may wish, jointly
with any other person similarly notified, assume the defense thereof,
subject to the provisions herein stated and after notice from the Company
to such Indemnified Person or Indemnified Party of its election so to
assume the defense thereof, the Company will not be liable to such
Indemnified Person or Indemnified Party under this Section 6 for any legal
or other reasonable out-of-pocket expenses subsequently incurred by such
Indemnified Person or Indemnified Party in connection with the defense
thereof other than reasonable costs of investigation, unless the Company
shall not pursue the action of its final conclusion. The Indemnified Person
or Indemnified Party shall have the right to employ separate counsel in any
such action and to participate in the defense thereof, but the fees and
reasonable out-of-pocket expenses of such counsel shall not be at the
expense of the Company if the Company has assumed the defense of the action
with counsel reasonably satisfactory to the Indemnified Person or
Indemnified Party. The failure to deliver written notice to the Company
within a reasonable time of the commencement of any such action shall not
relieve the Company of any liability to the Indemnified Person or
Indemnified Party under this Section 6, except to the extent that the
Company is prejudiced in its ability to defend such action. The
indemnification required by this Section 6 shall be made by periodic
payments of the amount thereof during the course of the investigation or
defense, as such expense, loss, damage or liability is incurred and is due
and payable.
7. Contribution. To the extent any indemnification by the Company is
prohibited or limited by law, the Company agrees to make the maximum
contribution with respect to any amounts for which it would otherwise be
liable under Section 6 to the fullest extent permitted by law; provided,
however, that (a) no contribution shall be made under circumstances where
the Company would not have been liable for indemnification under the fault
standards set forth in Section 6; (b) no seller of Registrable Securities
guilty of fraudulent misrepresentation (within the meaning of Section 11(f)
of the Securities Act) shall be entitled to contribution from any seller of
Registrable Securities who was not guilty of such fraudulent
misrepresentation; and (c) contribution by any seller of Registrable
Securities shall be limited in amount to the net amount of proceeds
received by such seller from the sale of such Registrable Securities.
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8. Reports under Exchange Act. With a view to making available to the
Investors the benefits of Rule 144 promulgated under the Securities Act or
any other similar rule or regulation of the SEC that may at any time permit
the Investors to sell securities of the Company to the public without
registration ("Rule 144"), the Company agrees to:
(a) make and keep public information available, as those terms are
understood and defined in Rule 144;
(b) use its best efforts to file with the SEC in a timely manner all
reports and other documents required of the Company under the Securities
Act and the Exchange Act; and
(c) furnish to each Investor so long as such Investor owns Registrable
Securities, promptly upon request, (i) a written statement by the Company
that it has complied with the reporting requirements of Rule 144, the
Securities Act and the Exchange Act, (ii) a copy of the most recent annual
or quarterly report of the Company and such other reports and documents so
filed by the Company and (iii) such other information as may be reasonably
requested to permit the Investors to sell such securities pursuant to Rule
144 without registration.
9. Assignment of the Registration Rights. The rights to have the
Company register Registrable Securities pursuant to this Agreement shall be
automatically assigned by the Investors to any transferee of the
Registrable Securities (or all or any portion of any Preferred Stock of the
Company which is convertible into such securities) permitted or allowable
by the terms of the Securities Purchase Agreement only if: (a) the Investor
agrees in writing with the transferee or assignee to assign such rights,
and a copy of such agreement is furnished to the Company within a
reasonable time after such assignment, (b) the Company is, within a
reasonable time after such transfer or assignment, furnished with written
notice of (i) the name and address of such transferee or assignee and (ii)
the securities with respect to which such registration rights are being
transferred or assigned, (c) immediately following such transfer or
assignment the further disposition of such securities by the transferee or
assignee is restricted under the Securities Act and applicable state
securities laws, and (d) at or before the time the Company received the
written notice contemplated by clause (b) of this sentence the transferee
or assignee agrees in writing with or in favor of the Company to be bound
by all of the provisions contained herein, a copy of which shall be
provided to the Company. The copies referred to in clauses (a) and (d) of
the immediately preceding sentence may be redacted to delete certain
financial and other details of the transaction between the Investor and the
transferee if the same is included in the document to be provided to the
Company. In the event of any delay in filing or effectiveness of the
Registration Statement as a result of such assignment, the Company shall
not be liable for any damages arising from such delay, or the payments set
forth in Section 2(b) hereof.
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10. Amendment of Registration Rights. Any provision of this Agreement
may be amended and the observance thereof may be waived (either generally
or in a particular instance and either retroactively or prospectively),
only with the written consent of the Company and Investors who hold an
eighty (80%) percent interest of the Registrable Securities. Any amendment
or waiver effected in accordance with this Section 10 shall be binding upon
each Investor and the Company.
11. Miscellaneous.
(a) A person or entity is deemed to be a holder of Registrable
Securities whenever such person or entity owns of record such Registrable
Securities. If the Company receives conflicting instructions, notices or
elections from two or more persons or entities with respect to the same
Registrable Securities, the Company shall act upon the basis of
instructions, notice or election received from the registered owner of such
Registrable Securities.
(b) Notices required or permitted to be given hereunder shall be in
writing and shall be deemed to be sufficiently given when personally
delivered (by hand, by courier, by telephone line facsimile transmission,
receipt confirmed, or other means) or sent by certified mail, return
receipt requested, properly addressed and with proper postage pre-paid (i)
if to the Company, IDM ENVIRONMENTAL CORP., 000 Xxxxxxxxx Xxxxxx, Xxxxx
Xxxxx, Xxx Xxxxxx 00000 ATTN: Xxxxxxx X. Xxxxxxx, Chief Financial Officer,
Telecopier No.: (000) 000-0000; (ii) if to the Initial Investor, at the
address set forth under its name in the Securities Purchase Agreement, with
a copy to Xxxxxxx Xxxxxxxxx, Esq., 0000 Xxxxxxx Xxxx Xxxx, Xxxxx 000, Xxx
Xxxxxxx, Xxxxxxxxxx, Telecopier No.: (000) 000-0000; and (iii) if to any
other Investor, at such address as such Investor shall have provided in
writing to the Company, or at such other address as each such party
furnishes by notice given in accordance with this Section 11(b), and shall
be effective, when personally delivered, upon receipt and, when so sent by
registered or certified mail, four (4) calendar days after deposit with the
United States Postal Service.
(c) Failure of any party to exercise any right or remedy under this
Agreement or otherwise, or delay by a party in exercising such right or
remedy, shall not operate as a waiver thereof.
(d) This Agreement shall be governed by and interpreted in accordance
with the laws of the State of New Jersey for contracts to be wholly
performed in such state and without giving effect to the principles thereof
regarding the conflict of laws. Each of the parties consents to the
jurisdiction of the federal courts whose districts encompass any part of
the City of New York or the state courts of the State of New York sitting
in the City of New York in connection with any dispute arising under this
Agreement and hereby waives, to the maximum extent permitted by law, any
objection, including any objection based on forum non coveniens, to the
bringing of any such proceeding in such jurisdictions.
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(e) If any provision of this Agreement shall be invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability
shall not affect the validity or enforceability of the remainder of this
Agreement or the validity or enforceability of this Agreement in any other
jurisdiction.
(f) Subject to the requirements of Section 9 hereof, this Agreement
shall inure to the benefit of and be binding upon the successors and
assigns of each of the parties hereto.
(g) All pronouns and any variations thereof refer to the masculine,
feminine or neuter, singular or plural, as the context may require.
(h) The headings in this Agreement are for convenience of reference
only and shall not limit or otherwise affect the meaning thereof.
(i) This Agreement may be executed in one or more counterparts, each
of which shall be deemed an original but all of which shall constitute one
and the same agreement. This Agreement, once executed by a party, may be
delivered to the other party hereto by telephone line facsimile
transmission of a copy of this Agreement bearing the signature of the party
so delivering this Agreement.
(j) The Company acknowledges that any failure by the Company to
perform its obligations under Section 3(a) hereof, or any delay in such
performance could result in loss to the Investors, and the Company agrees
that, in addition to any other liability the Company may have by reason of
such failure or delay, the Company shall be liable for all direct damages
caused by any such failure or delay, unless the same is the result of force
majeure. Neither party shall be liable for consequential damages.
(k) This Agreement constitutes the entire agreement among the parties
hereto with respect to the subject matter hereof. There are no
restrictions, promises, warranties or undertakings, other than those set
forth or referred to herein. This Agreement supersedes all prior agreements
and understandings among the parties hereto with respect to the subject
matter hereof. This Agreement may be amended only by an instrument in
writing signed by the party to be charged with enforcement thereof.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed by their respective officers thereunto duly authorized as of the day
and year first above written.
IDM ENVIRONMENTAL CORP.
By: /s/ Xxxx Xxxxxxxx
-----------------------------------
Xxxx X. Xxxxxxxx
Title: President
--------------------------------
THE ISOSCELES FUND LIMITED
By:
----------------------------------
Name:Intercaribbean Services (Bahamas) Ltd.
Title: Director
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