EXHIBIT 99.2
INVESTOR RIGHTS AGREEMENT
THIS INVESTOR RIGHTS AGREEMENT (this "Agreement") is entered into as of
June 18, 2008, by and between Environmental Service Professionals, Inc., a
Nevada corporation (the "Company"), and International Media Fund (IMF), a
Delaware corporation (the "Investor") and purchaser of units (the "Units") of
the Company's securities pursuant to a Stock Purchase Agreement dated as of June
18, 2008 (the "Purchase Agreement"), with respect to the following facts:
RECITALS
WHEREAS, pursuant to the terms of the Purchase Agreement, the Company
proposes to sell and issue shares of the Company's common stock (the "Shares")
and warrants (the "Warrants") to purchase additional shares of the Company's
common stock (the Shares and Warrants referred to collectively as the "Units")
to the Investors; and
WHEREAS, as a condition of entering into the Purchase Agreement, the
Investors have requested that the Company extend to them registration rights and
other rights as set forth below.
NOW, THEREFORE, in consideration of the mutual promises,
representations, warranties, covenants and conditions set forth in this
Agreement and in the Purchase Agreement, the parties mutually agree as follows:
SECTION 1. GENERAL
1.1 DEFINITIONS. As used in this Agreement, the following terms shall
have the following respective meanings:
(A) "AGREEMENT" has the meaning set forth in the Preamble of
this Agreement.
(B) "CLOSING" means the closing of the transactions
contemplated by the Purchase Agreement.
(C) "COMMON STOCK" means the common stock, par value $0.001
per share, of the Company.
(D) "COMPANY" has the meaning set forth in the Preamble of
this Agreement.
(E) "EFFECTIVENESS DATE" means, with respect to the
Registration Statement required to be filed hereunder, the earlier of (a) one
hundred eighty (180) days following the Closing or two hundred ten (210) days
following the Closing in the event of a full review of the Registration
Statement by the SEC, and (b) the fifth trading day following the date on which
the Company is notified by the SEC that the Registration Statement will not be
reviewed or is no longer subject to further review and comments.
(F) "EXCHANGE ACT" means the Securities Exchange Act of 1934,
as amended.
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(G) "FINAL PROSPECTUS" has the meaning set forth in Section
2.5(d) of this Agreement.
(H) "FORM SB-2" means such form under the Securities Act as in
effect on the date hereof or any successor registration form under the
Securities Act subsequently adopted by the SEC which permits inclusion or
incorporation of substantial information by reference to other documents filed
by the Company with the SEC.
(I) "HOLDER" means any person owning of record or having the
right to acquire Registrable Securities.
(J) "INVESTOR" has the meaning set forth in the Preamble of
this Agreement.
(K) "PURCHASE AGREEMENT" has the meaning set forth in the
Preamble of this Agreement.
(L) "REGISTER," "REGISTERED," and "REGISTRATION" refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act, and the declaration or ordering of
effectiveness of such registration statement or document.
(M) "REGISTRABLE SECURITIES" means (i) the 70% of the Shares;
(ii) all shares of Common Stock of the Company issuable upon the exercise of the
Warrants; and (iii) any Common Stock of the Company issued as (or issuable upon
the conversion or exercise of any warrant, right or other security which is
issued as) a dividend or other distribution with respect to, or in exchange for
or in replacement of, 70% of the Shares or any of the Warrants. Notwithstanding
the foregoing, Registrable Securities shall not include any securities sold by a
person to the public pursuant to an effective registration statement or Rule 144
or sold in a private transaction in which the transferor's rights under Section
2 of this Agreement are not assigned.
(N) "REGISTRABLE SECURITIES THEN OUTSTANDING" shall be the
number of shares determined by calculating the total number of shares of the
Company's Common Stock that are Registrable Securities and either (i) are then
issued and outstanding or (ii) are issuable pursuant to then exercisable or
convertible securities.
(O) "REGISTRATION EXPENSES" shall mean all expenses incurred
by the Company in complying with Sections 2 hereof, including, without
limitation, all registration and filing fees, printing expenses, fees and
disbursements of counsel for the Company, blue sky fees and expenses and the
expense of any special audits incident to or required by any such registration
(but excluding the compensation of regular employees of the Company which shall
be paid in any event by the Company).
(P) "REGISTRATION STATEMENT" means the registration statements
required to be filed hereunder, including (in each case) the prospectus,
amendments and supplements to the registration statement or prospectus,
including pre- and post-effective amendments, all exhibits thereto, and all
material incorporated by reference or deemed to be incorporated by reference in
the registration statement.
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(Q) "RULE 415" means Rule 415 promulgated by the SEC pursuant
to the Securities Act, as such Rule may be amended from time to time, or any
similar rule or regulation hereafter adopted by the SEC having substantially the
same purpose and effect as such Rule.
(R) "RULE 424" means Rule 424 promulgated by the SEC pursuant
to the Securities Act, as such Rule may be amended from time to time, or any
similar rule or regulation hereafter adopted by the SEC having substantially the
same purpose and effect as such Rule.
(S) "SEC" means the Securities and Exchange Commission.
(T) "SECURITIES" has the meaning set forth in Section 4.1 of
this Agreement.
(U) "SECURITIES ACT" shall mean the Securities Act of 1933, as
amended.
(V) "SELLING EXPENSES" shall mean all underwriting discounts
and selling commissions applicable to the sale and any legal fees of counsel for
the Holders not included in the definition of "Registration Expenses."
(W) "SHARES" has the meaning set forth in the Preamble of this
Agreement.
(X) "VIOLATION" has the meaning set forth in Section 2.5(a) of
this Agreement.
SECTION 2. REGISTRATION; RESTRICTIONS ON TRANSFER
2.1 RESTRICTIONS ON TRANSFER.
(A) Each Holder agrees not to make any disposition of all or
any portion of the Shares or Registrable Securities, except in strict accordance
with Rule 144 of the Securities Act, unless and until:
(I) The Registration Statement is in effect and such
disposition is made in accordance with the Registration Statement; or
(II) (A) The transferee has agreed in writing to be
bound by the terms of this Agreement, (B) such Holder shall have notified the
Company of the proposed disposition and shall have furnished the Company with a
detailed statement of the circumstances surrounding the proposed disposition,
and (C) if reasonably requested by the Company, such Holder shall have furnished
the Company with an opinion of counsel, reasonably satisfactory to the Company,
that such disposition will not require registration of such shares under the
Securities Act.
(III) Notwithstanding the provisions of paragraphs
(i) and (ii) above, no such registration statement or opinion of counsel shall
be necessary for a transfer by a Holder to any of its affiliates; provided that
in each case the transferee will be subject to the terms of this Agreement to
the same extent as if the transferee were an original Holder hereunder.
(B) Each certificate representing Shares or Registrable
Securities shall (unless otherwise permitted by the provisions of this
Agreement) be stamped or otherwise imprinted with a legend substantially similar
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to the following (in addition to any legend required under applicable state
securities laws):
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
CERTAIN RESTRICTIONS ON SALE AND OTHER PROVISIONS AS SET FORTH
IN THE AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT, DATED
AS OF DECEMBER 10, 2007, BY AND AMONG THE COMPANY, THE
REGISTERED OWNER OF THIS CERTIFICATE AND CERTAIN OTHER
SHAREHOLDERS OF THE COMPANY, A COPY OF WHICH IS AVAILABLE FOR
INSPECTION AT THE OFFICES OF THE SECRETARY OF THE COMPANY."
(C) The Company shall be obligated to reissue promptly
unlegended certificates at the request of any holder thereof if the holder shall
have obtained an opinion of counsel (which counsel may be counsel to the
Company) reasonably acceptable to the Company to the effect that the securities
proposed to be disposed of may lawfully be so disposed of without registration,
qualification or legend.
(D) Any legend endorsed on an instrument pursuant to
applicable state securities laws and the stop-transfer instructions with respect
to such securities shall be removed upon receipt by the Company of an order of
the appropriate blue sky authority authorizing such removal.
2.2 REGISTRATION. Within sixty (60) days after the Closing, the Company
shall prepare and file with the SEC, and in accordance with the Securities Act
and all applicable regulations promulgated thereunder, a Registration Statement
covering the resale of all of the Registrable Securities. The Registration
Statement required hereunder shall be on Form SB-2 (except if the Company is not
then eligible to register for resale the Registrable Securities on Form SB-2, in
which case the Registration shall be on another appropriate form in accordance
herewith). The Company shall use all reasonable efforts to have the Registration
Statement declared effective by the SEC by the Effective Date.
2.3 EXPENSES OF REGISTRATION. Except as specifically provided herein,
all Registration Expenses incurred in connection with any registration,
qualification or compliance pursuant to Section 2.2 shall be borne by the
Company. All Selling Expenses incurred in connection with any registrations
hereunder, shall be borne by the holders of the securities so registered PRO
RATA on the basis of the number of shares so registered.
2.4 OBLIGATIONS OF THE COMPANY. The Company shall, as expeditiously as
reasonably possible:
(A) Use all reasonable efforts to cause the Registration
Statement to become effective and keep the Registration Statement effective for
up to ninety (90) days or, if earlier, until the Holder or Holders have
completed the distribution related thereto (the "Effectiveness Period"). The
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Company shall not be required to file, cause to become effective or maintain the
effectiveness of any registration statement that contemplates a distribution of
securities on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act.
(B) Prepare and file with the SEC such amendments and
supplements to the Registration Statement and the prospectus used in connection
with the Registration Statement as may be necessary to comply with the
provisions of the Securities Act with respect to the disposition of all
securities covered by such registration statement for the period set forth in
Section 2.4(a) above.
(C) Furnish to the Holders such number of copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirements of the Securities Act, and such other documents as they may
reasonably request in order to facilitate the disposition of Registrable
Securities owned by them.
(D) Use its reasonable best efforts to register and qualify
the securities covered by the Registration Statement under such other securities
or Blue Sky laws of such jurisdictions as shall be reasonably requested by the
Holders; provided, HOWEVER, that the Company shall not be required in connection
therewith or as a condition thereto to qualify to do business or to file a
general consent to service of process in any such states or jurisdictions.
(F) Notify each Holder of Registrable Securities covered by
the Registration Statement at any time when a prospectus relating thereto is
required to be delivered under the Securities Act of the happening of any event
as a result of which the prospectus included in such 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 not misleading in the light of the circumstances then
existing.
2.5 INDEMNIFICATION.
(A) To the extent permitted by law, the Company will indemnify
and hold harmless each Holder, the partners, officers and directors of each
Holder, any underwriter (as defined in the Securities Act) for such Holder and
each person, if any, who controls such Holder or underwriter within the meaning
of the Securities Act or the Exchange Act, against any losses, claims, damages,
or liabilities (joint or several) to which they may become subject under the
Securities Act, the Exchange Act or other federal or state law, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon any of the following statements, omissions or violations
(collectively, a "VIOLATION") by the Company: (i) any untrue statement or
alleged untrue statement of a material fact contained in the Registration
Statement, including any preliminary prospectus or final prospectus contained
therein or any amendments or supplements thereto, (ii) any omission or alleged
omission to state therein a material fact required to be stated therein, or
necessary to make the statements therein 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 promulgated under the Securities
Act, the Exchange Act or any state securities law in connection with the
offering covered by such registration statement; and the Company will pay as
incurred to each such Holder, partner, officer, director, underwriter or
controlling person for any legal or other expenses reasonably incurred by them
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in connection with investigating or defending any such loss, claim, damage,
liability or action if it is judicially determined that there was such a
Violation; PROVIDED, HOWEVER, that the indemnity agreement contained in this
Section 2.5(a) shall not apply to amounts paid in settlement of any such loss,
claim, damage, liability or action if such settlement is effected without the
consent of the Company, which consent shall not be unreasonably withheld, nor
shall the Company be liable in any such case for any such loss, claim, damage,
liability or action to the extent that it arises out of or is based upon a
Violation which occurs in reliance upon and in conformity with information
furnished by such Holder, partner, officer, director, underwriter or controlling
person.
(B) To the extent permitted by law, each Holder will indemnify
and hold harmless the Company, each of its directors, its officers and each
person, if any, who controls the Company within the meaning of the Securities
Act, any underwriter and any other Holder selling securities under the
Registration Statement or any of such other Holder's partners, directors or
officers or any person who controls such other Holder, against any losses,
claims, damages or liabilities (joint or several) to which the Company or any
such director, officer, controlling person, underwriter or other such Holder, or
partner, director, officer or controlling person of such other Holder may become
subject under the Securities Act, the Exchange Act or other federal or state
law, insofar as such losses, claims, damages or liabilities (or actions in
respect thereto) arise out of or are based upon any Violation, in each case to
the extent (and only to the extent) that such Violation occurs in reliance upon
and in conformity with information furnished by such Holder; and each such
Holder, as the case may be, will pay as incurred any legal or other expenses
reasonably incurred by the Company or any such director, officer, controlling
person, underwriter or other Holder, or partner, officer, director or
controlling person of such other Holder in connection with investigating or
defending any such loss, claim, damage, liability or action if it is judicially
determined that there was such a Violation; PROVIDED, HOWEVER, that the
indemnity agreement contained in this Section 2.5(b) shall not apply to amounts
paid in settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of such Holder, which consent shall
not be unreasonably withheld.
(C) Promptly after receipt by an indemnified party under this
Section 2.5 of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect thereof
is to be made against any indemnifying party under this Section 2.5, deliver to
the indemnifying party a written notice of the commencement thereof and the
indemnifying party shall, jointly with any other indemnifying party similarly
noticed, assume the defense thereof; PROVIDED, HOWEVER, that an indemnified
party shall have the right to retain its own counsel, with the fees and expenses
to be paid by the indemnifying party, if representation of such indemnified
party by the counsel retained by the indemnifying party would be inappropriate
due to actual or potential differing interests between such indemnified party
and any other party represented by such counsel in such proceeding. The failure
to deliver written notice to the indemnifying party within a reasonable time of
the commencement of any such action, if materially prejudicial to its ability to
defend such action, shall relieve such indemnifying party of liability to the
indemnified party under this Section 2.5 to the extent the indemnifying party is
materially prejudiced, but the omission to deliver written notice to the
indemnifying party will not relieve it of any liability that it may have to any
indemnified party otherwise than under this Section 2.5.
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(D) DEFECT ELIMINATED IN FINAL PROSPECTUS. The indemnification
obligations of the Company and the Holders pursuant to this Section 2.5 are
subject to the condition that, insofar as they relate to any Violation made in a
preliminary prospectus but remedied in the amended prospectus on file with the
SEC at the time the Registration Statement becomes effective or the amended
prospectus filed with the SEC pursuant to Rule 424(b) (the "Final Prospectus"),
such indemnification obligations shall not inure to the benefit of any person if
a copy of the Final Prospectus was timely furnished to the indemnified party and
was not furnished to the person asserting the loss, liability, claim or damage
at or prior to the time such action is required by the Securities Act to the
extent such indemnified party was responsible for delivering the preliminary
prospectus or the Final Prospectus.
(E) If the indemnification provided for in this Section 2.5 is
held by a court of competent jurisdiction to be unavailable to an indemnified
party with respect to any losses, claims, damages or liabilities referred to
herein, the indemnifying party, in lieu of indemnifying such indemnified party
thereunder, shall to the extent permitted by applicable law contribute to the
amount paid or payable by such indemnified party as a result of such loss,
claim, damage or liability in such proportion as is appropriate to reflect the
relative fault of the indemnifying party, on the one hand, and of the
indemnified party, on the other hand, in connection with the Violation(s) that
resulted in such loss, claim, damage or liability, as well as any other relevant
equitable considerations. The relative fault of the indemnifying party and of
the indemnified party shall be determined by a court of law by reference to,
among other things, whether the untrue or alleged untrue statement of a material
fact or the omission to state a material fact relates to information supplied by
the indemnifying party or by the indemnified party and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission; PROVIDED, that in no event shall any contribution by
a Holder hereunder exceed the net proceeds from the offering received by such
Holder.
(F) The obligations of the Company and the Holders under this
Section 2.5 shall survive completion of any offering of Registrable Securities
in the Registration Statement and the termination of this Agreement. No
indemnifying party, in the defense of any such claim or litigation, shall,
except with the consent of each indemnified party, consent to entry of any
judgment or enter into any settlement which does not include as an unconditional
term thereof the giving by the claimant or plaintiff to such indemnified party
of a release from all liability in respect to such claim or litigation.
2.6 AMENDMENT OF REGISTRATION RIGHTS. Any provision of this Section 2
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 the holders of at least a majority of the
Registrable Securities held by the Holders then outstanding. Any amendment or
waiver effected in accordance with this Section 2.6 shall be binding upon each
Holder and the Company. By acceptance of any benefits under this Section 2,
Holders of Registrable Securities hereby agree to be bound by the provisions
hereunder.
2.7 AGREEMENT TO FURNISH INFORMATION. Each Holder to provide any
information as may be reasonably requested by the Company in connection with the
Registration Statement within three (3) business days of such request.
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SECTION 3. COVENANTS OF THE COMPANY
3.1 RESERVATION OF COMMON STOCK. The Company will at all times reserve
and keep available, solely for issuance and delivery upon the exercise of the
Warrants, all Common Stock issuable from time to time upon such exercise.
SECTION 4. MISCELLANEOUS
4.1 GOVERNING LAW AND VENUE. This Agreement shall be governed by and
interpreted in accordance with the laws of the State of California, excluding
its choice of law rules. The parties consent to jurisdiction in the Federal and
state courts of California shall for all actions arising under or in connection
with this Agreement.
4.2 SUCCESSORS AND ASSIGNS. Except as otherwise expressly provided
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the permitted successors, assigns, heirs, executors, and administrators of
the parties hereto and shall inure to the benefit of and be enforceable by each
person who shall be a holder of Registrable Securities from time to time;
provided, however, that prior to the receipt by the Company of adequate written
notice of the transfer of any Registrable Securities specifying the full name
and address of the transferee, the Company may deem and treat the person listed
as the holder of such shares in its records as the absolute owner and holder of
such shares for all purposes, including the payment of dividends or any
redemption price.
4.3 ENTIRE AGREEMENT. This Agreement, the Purchase Agreement, and the
other documents delivered pursuant hereto and thereto constitute the full and
entire understanding and agreement between the parties with regard to the
subjects hereof and no party shall be liable or bound to any other in any manner
by any representations, warranties, covenants and agreements except as
specifically set forth herein and therein; PROVIDED, HOWEVER, that nothing in
this Agreement shall be deemed to terminate or supersede the provisions of any
confidentiality and nondisclosure agreements executed by the parties hereto
prior to the date hereof, which agreements shall continue in full force and
effect until terminated in accordance with their respective terms.
4.4 SEVERABILITY. In the event one or more of the provisions of this
Agreement should, for any reason, be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality, or unenforceability
shall not affect any other provisions of this Agreement, and this Agreement
shall be construed as if such invalid, illegal or unenforceable provision had
never been contained herein.
4.5 AMENDMENT AND WAIVER. Except as otherwise expressly provided, 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 the Investors
holding a majority of all securities held by the Investors (or, in the case of
an amendment or waiver of any provision of Section 2 hereof, only with the
written consent of the Company and the Holders of a majority of the Registrable
Securities then outstanding and entitled to the registration rights set forth in
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Section 2 hereof). Any amendment or waiver effected in accordance with this
Section 4.5 shall be binding upon each Investor, each Holder, each permitted
successor or assignee of such Investor or Holder and the Company.
4.6 NOTICES. All notices required or permitted hereunder shall be in
given in accordance with Section 8.3 of the Purchase Agreement.
4.7 TITLES AND SUBTITLES. The titles of the sections and subsections of
this Agreement are for convenience of reference only and are not to be
considered in construing this Agreement.
4.8 COUNTERPARTS; FACSIMILE. This Agreement may be executed in any
number of counterparts and via facsimile, each of which shall be an original,
but all of which together shall constitute one instrument.
4.10 AGGREGATION OF STOCK. All shares of Registrable Securities held or
acquired by affiliated entities or persons shall be aggregated together for the
purpose of determining the availability of any rights under this Agreement.
[Remainder of Page Intentionally Left Blank]
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IN WITNESS WHEREOF, the parties hereto have executed this INVESTOR
RIGHTS AGREEMENT as of the date first above written.
COMPANY: Environmental Service Professionals, Inc.
By:/s/Xxxxxx Xxxxxx
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Xxxxxx Xxxxxx, Chief Executive Officer
INVESTOR: International Media Fund
By:/s/Xxxxx Xxxx
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Xxxxx Xxxx, Chief Executive Officer
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