REGISTRATION RIGHTS AGREEMENT
dated as of
November 3, 1997
between
COMPOST AMERICA HOLDING COMPANY, INC.
and
WASTECO VENTURES LIMITED
TABLE OF CONTENTS
Page
ARTICLE 1 DEFINITIONS........................................................ 1
1.1 Definitions................................................ 1
ARTICLE 2 REGISTRATION RIGHTS............................................... 4
2.1 Securities Subject to this Agreement....................... 4
2.2 Demand Registration........................................ 4
2.3 Piggyback Registration..................................... 6
2.4 Registration Procedures.................................... 8
2.5 Preparation; Reasonable Investigation...................... 12
2.6 Certain Rights of the Holder............................... 12
2.7 Registration Expenses...................................... 12
2.8 Indemnification; Contribution.............................. 13
2.9 Participation in Underwritten Registrations................ 16
2.10 Selection of Underwriters.................................. 16
ARTICLE 3 RULE 144........................................................... 16
3.1 Rule 144 Reporting......................................... 16
ARTICLE 4 MISCELLANEOUS...................................................... 17
4.1 Entire Agreement........................................... 17
4.2 Successors and Assigns..................................... 17
4.3 Notices.................................................... 17
4.4 Headings................................................... 18
4.5 Counterparts............................................... 18
4.6 Applicable Law............................................. 18
4.7 Specific Enforcement....................................... 18
4.8 Amendment and Waivers...................................... 19
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT, dated as of November 3, 1997 (the
"Agreement"), between COMPOST AMERICA HOLDING COMPANY, INC., a New Jersey
corporation (the "Company"), and WASTECO VENTURES LIMITED, a corporation
organized under the laws of the British Virgin Islands (the "Holder").
RECITALS
--------
WHEREAS, the Company has agreed to sell to the Holder, and the Holder
has agreed to purchase from the Company, shares of Series A Preferred Stock (as
defined herein); Series C Preferred Stock (as defined herein) and shares of
Common Stock (as defined herein) of the Company, upon the terms and subject to
the conditions set forth in that certain Stock Purchase Agreement, dated as of
the date hereof (the "Stock Purchase Agreement"), by and between the Company and
Wasteco Ventures Limited;
WHEREAS, it is a condition precedent to the obligations of the Holder
under the Stock Purchase Agreement that the Company grant certain registration
rights in respect of the Restricted Securities (as defined herein); and
WHEREAS, the Company and the Holder desire to evidence such
registration rights by entering into this Agreement.
AGREEMENT
---------
The parties hereto agree as follows:
ARTICLE 1
DEFINITIONS
1.1 Definitions. The following terms, as used herein, have the following
meanings.
"Board" means the Board of Directors of the Company.
"Business Day" means any day except a Saturday, Sunday or other day on
which banks in New York are authorized by law to close.
"Closing Date" means the date on which the completion of the
transactions specified in the Stock Purchase Agreement relating to the purchase
and sale of Series A Preferred Stock and Series C Preferred Stock as
contemplated by Section 2.01 thereof shall occur.
"Commission" means the Securities and Exchange Commission.
"Common Stock" means the common stock, no par value, of the Company.
"Company Registration Statement" means the Registration Statement of
the Company relating to the registration for sale of shares of the Company's
Common Stock contemplated by Section 2.3, including the Prospectus included
therein, all amendments and supplements thereto (including post-effective
amendments) and all exhibits and material incorporated by reference therein.
"Effective Time" means the date of effectiveness of any Registration
Statement.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"NASD" means the National Association of Securities Dealers, Inc.
"Person" means an individual, corporation, partnership, association,
trust or other entity or organization, including a government or political
subdivision or an agency or instrumentality thereof.
"Series A Preferred Stock" means the Series A Preferred Stock, no par
value, of the Company.
"Series C Preferred Stock" means the Series C Preferred Stock, no par
value, of the Company.
"Prospectus" means the prospectus included in any Registration
Statement, as amended or supplemented by any prospectus supplement and by all
other amendments thereto, including post-effective amendments, and all material
incorporated by reference into such Prospectus.
The term "register" means to register under the Securities Act and
applicable state securities laws for the purpose of effecting a public sale of
securities.
"Registration Statement" means the Company Registration Statement
and/or the Shelf Registration Statement.
"Restricted Securities" means any Securities until (i) a registration
statement covering such Securities has been declared effective by the Commission
and such Securities have been disposed of pursuant to such effective
registration statement, (ii) such Securities are sold under circumstances in
which all the applicable conditions of Rule 144 (or any similar provisions then
in force) under the Securities Act are met, or such Securities may be sold
pursuant to Rule 144(k) (or any similar provision then in force) under the
Securities Act, and are freely tradable after such sale by the transferee, (iii)
such Securities are otherwise transferred, the Company has delivered a new
certificate or other evidence of ownership for such Securities not bearing a
legend restricting further transfer and such Securities mav be resold without
registration under the Securities Act, or (iv) such Securities shall have ceased
to be outstanding.
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"Securities" means the shares of Common Stock issuable bv the Company
to the Holder at the Closing Date and upon conversion of the Series C Preferred
Stock.
"Securities Act" means the Securities Act of 1933, as amended.
"Shelf Registration Statement" means the Registration Statement of the
Company relating to the shelf registration for resale of Restricted Securities
contemplated by Section 2.2 herein, including the Prospectus included therein,
all amendments and supplements thereto (including post-effective amendments) and
all exhibits and material incorporated by reference therein.
"Stock Purchase Agreement" has the meaning given to it in the recitals
to this Agreement.
As used in this Agreement, words in the singular include the plural,
and in the plural include the singular.
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ARTICLE 2
REGISTRATION RIGHTS
2.1 Securities Subject to this Agreement.
(a) The Securities entitled to the benefits of this Agreement are the
Restricted Securities, but only for so long as they remain Restricted
Securities.
(b) A Person is deemed to be a holder of Restricted Securities (each, a
"Holder") whenever such Person is the registered holder of such Restricted
Securities on the books and records of the Company or its transfer agent.
2.2 Demand Registration.
(a) Subject to the limitations set forth in this Agreement, at any time
after the date which is 90 days after the Closing Date, the Holder may request
the Company to register under the Securities Act, all or any portion (but not
less than $2.0 million of the Holder's Restricted Securities) of its Restricted
Securities for sale on terms and conditions comparable to those normally
applicable to offerings of equity securities in similar circumstances as
determined by the Company on Form S-3 or such other form as the Company deems
appropriate; provided, however, that the request for registration must be for a
Shelf Registration Statement pursuant to Rule 415 under the Securities Act. The
Company shall be obligated to register Restricted Securities pursuant to this
Section 2.2(a) on two occasions only, provided, however, that such registrations
shall be counted only if (A) the corresponding Registration Statements have
become effective under the Securities Act, and (B) the public offerings have
been consummated on the terms and conditions specified therein or if not
consummated, such failure was not attributable to an action taken by the
Company. The Company shall be entitled to include in any Shelf Registration
Statement filed pursuant to this Section 2.2(a) securities of the Company held
by any other shareholder of the Company and, in an underwritten public offering,
Common Stock of the Company to be sold by the Company for its own account so
long as the inclusion of such additional securities will not result in a
decrease of the amount of Restricted Securities to be registered pursuant to
this Section 2.2(a).
(b) In connection with the Shelf Registration Statement, the Company
shall comply with all the provisions of Section 2.4 below and shall use its
reasonable efforts to effect such registration to permit the sale of the
Restricted Securities being sold in accordance with the intended method or
methods of distribution thereof (as indicated in the information furnished to
the Company pursuant to Section 2.2(c)). Subject to Section 2.2(d), the Company
shall use its best efforts to keep each such Shelf Registration Statement
continuously effective, supplemented and amended as required by the provisions
of Section 2.2(d) to the extent necessary to ensure that it is available for
resales of Restricted Securities by the Holder, and to ensure that it
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conforms with the requirements of this Agreement, the Securities Act and the
policies, rules and regulations of the Commission as announced from time to
time, for a period of 18 months from the Effective Time or such longer period as
required by Section 2.2(d) or such shorter period that will terminate when all
the securities covered by the Shelf Registration Statement have been sold
pursuant to the Shelf Registration Statement or otherwise cease to be Restricted
Securities (the "Effective Period"). Upon the occurrence of any event that would
cause any Shelf Registration Statement or the Prospectus contained therein (i)
to contain a material misstatement or omission or (ii) not to be effective and
usable for sale or resale of Restricted Securities during the period required by
this Agreement, the Company shall file promptly an appropriate amendment to
such Shelf Registration Statement or the related Prospectus or any document
incorporated therein by reference, in the case of clause (i), correcting any
such misstatement or omission, and, in the case of either clause (i) or (ii),
use its reasonable efforts to cause such amendment to be declared effective and
such Registration Statement and the related Prospectus to become usable for its
intended purpose(s) as soon as practicable thereafter.
(c) The Holder may not include any of its Restricted Securities in a
Shelf Registration Statement pursuant to this Agreement unless and until such
Holder furnishes to the Company in writing, within 30 Business Days after
receipt of a written request therefor, such information specified in Item 507 of
Regulation S-K under the Securities Act and such other information as the
Company may reasonably request for use in connection with a Shelf Registration
Statement or Prospectus or preliminary Prospectus included therein and in any
application to the NASD. The Holder agrees to furnish promptly to the Company
all information required to be disclosed in order to make the information
previously furnished to the Company by such Holder not materially misleading.
(d) Notwithstanding anything to the contrary contained herein, if (x)
the Board determines in good faith that the registration and distribution of
Restricted Securities (or the use of any such Shelf Registration Statement or
the Prospectus contained therein) would interfere with any proposed or pending
material corporate transaction involving the Company or any of its subsidiaries
or would require premature disclosure thereof or would require the Company to
disclose information that the Company has not otherwise made public and that the
Company reasonably determines is in the best interests of the Company not to
disclose at such time, and (y) the Company notifies the Holder in writing not
later than three days following such determination (such notice a "Blackout
Notice"), the Company may (A) postpone the filing of such Shelf Registration
Statement or (B) allow such Shelf Registration Statement to fail to be effective
and usable or elect that such Shelf Registration Statement not be usable for a
reasonable period of time, but not in excess of 30 days (a "Blackout Period");
provided, however, that the aggregate number of days included in all Blackout
Periods shall not exceed 90 during any consecutive 12 months and shall not
exceed 150 during the period specified in Section 2.2(b) of this Agreement; and
provided, further, that the Effective Period referred to in Section 2.2(b)
during which a Shelf Registration Statement is required to be effective and
usable shall be extended by the aggregate number of days during which such Shelf
Registration Statement was not effective or usable pursuant to the foregoing
provisions.
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(e) Notwithstanding anything to the contrary contained herein, the
Company shall not be obligated to file a Shelf Registration Statement in respect
of Restricted Securities pursuant to this Section 2.2 if: (i) the Company has
previously filed a Shelf Registration Statement with respect to Restricted
Securities, and a period of at least 180 days has not elapsed from the date on
which the Effective Period of such Shelf Registration Statement has expired; and
(ii) the Company has previously filed a Company Registration Statement pursuant
to which Restricted Securities have been registered under Section 2.3 hereof,
and a period of at least 120 days has not elapsed from the Effective Time of
such Company Registration Statement.
2.3 Piggyback Registration.
(a) At any time that the Company proposes to file a Company
Registration Statement, either for its own account or for the account of a
stockholder or stockholders, the Company shall give the Holder written notice of
its intention to do so and of the intended method of sale (the "Registration
Notice") within a reasonable time prior to the anticipated filing date of the
Company Registration Statement effecting such registration (but in no event less
than 30 days before the anticipated filing date). The Holder may request
inclusion of any Restricted Securities in such Company Registration Statement by
delivering to the Company, within 30 Business Days after receipt of the
Registration Notice, a written notice (the "Piggyback Notice") stating the
number of Restricted Securities proposed to be included and that such shares are
to be included in any underwriting only on the same terms and conditions as the
shares of Common Stock otherwise being sold through underwriters under such
Company Registration Statement. The Company shall use its best efforts to cause
all Restricted Securities specified in the Piggyback Notice to be included in
the Company Registration Statement and any related offering, all to the extent
requisite to permit the sale by the Holder of such Restricted Securities in
accordance with the method of sale applicable to the other shares of Common
Stock included in such Company Registration Statement; provided, however, that
if, at any time after giving Registration Notice and prior to the Effective Time
of the Company Registration Statement filed in connection with such
registration, the Company shall determine for any reason not to register or to
delay registration of such securities, the Company may, at its election, give
written notice of such determination to the Holder and, thereupon:
(i) in the case of a determination not to register, shall be
relieved of its obligation to register any Restricted Securities in
connection with such registration (but not from its obligation to pay
the Registration Expenses in connection therewith), and
(ii) in the case of a delay in registering, shall be permitted to
delay registering any Restricted Securities for the same period as the
delay in registering such other securities.
(b) The Company's obligation to include Restricted Securities in
a Company Registration Statement pursuant to Section 2.3(a) shall be subject
to the following limitations:
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(i) The Company shall not be obligated to include any Restricted
Securities in a registration statement filed on Form X-0, Xxxx X-0 or
such other similar successor forms then in effect under the Securities
Act.
(ii) If a Company Registration Statement involves an underwritten
offering and the managing underwriter advises the Company in writing
that, in its opinion, the number of securities requested to be
included in such Registration Statement exceeds the number which can
be sold in such offering without adversely affecting the offering, the
Company will include in such Registration Statement the number of such
Securities which the Company is so advised can be sold in such
offering without adversely affecting the offering, determined as
follows:
(A) first, the securities proposed by
the Company to be sold for it own account, and
(B) second, any Restricted Securities
requested to be included in such registration and any
other securities of the Company pro rata among the
holders thereof requesting such registration on the
basis of the number of shares of such securities
requested to be included by such holders.
(iii) The Company shall not be obligated to effect any
registration for the account of the Holder on a Company Registration
Statement with respect to less than $2.0 million of the Holder's
Restricted Securities, subject to the provisions of Subsection (ii) of
this Section 2.3(b).
(iv) The Company shall not be obligated to effect any
registration for the account of the Holder on a Company Registration
Statement if, prior to the filing date of such Company Registration
Statement, (A) the Holder has requested registration of its Restricted
Securities on a Shelf Registration Statement pursuant to Section 2.2
hereof, (B) the corresponding Shelf Registration Statement has become
effective under the Securities Act, and (C) the public offering has
been consummated on the terms and conditions specified therein or if
not consummated, such failure was not attributable to an action taken
by the Company.
(c) The Holder may not include any of its Restricted Securities in a
Company Registration Statement pursuant to this Agreement unless and until such
Holder furnishes to the Company in writing, within 30 Business Days after
receipt of a written request therefor, such information specified in Item 507 of
Regulation S-K under the Securities Act and such other information as the
Company may reasonably request for use in connection with the Registration
Statement or Prospectus or preliminary Prospectus included therein and in any
application to the NASD. The Holder agrees to furnish promptly to the Company
all information required to be
7
disclosed in order to make all information previously furnished to the Company
by such Holder not materially misleading.
(d) The Company represents and confirms that, except as provided in
that certain Registration Rights Agreement dated as of November 3, 1997 between
the Company and Xxxxxx X. Xxxxx (the "Xxxxx Registration Rights Agreement"), it
has granted no piggyback registration rights to any holder of Common Stock prior
to the date hereof. The Company covenants not to grant any such piggyback
registration rights which would permit any holder of Common Stock to have
piggyback registration rights prior to, or, except for the Xxxxx Registration
Rights Agreement, on a party with, those of the Holder.
2.4 Registration Procedures. In connection with any Registration
Statement and any Prospectus required by this Agreement to permit the sale or
resale of Restricted Securities, the Company shall:
(a) prepare and file with the Commission such amendments and
post-effective amendments to such Registration Statement as may be necessary to
keep such Registration Statement effective (i) if such Registration Statement is
a Company Registration Statement, until the earlier of such time as all of such
securities have been disposed of in accordance with the intended methods of
disposition by the seller or sellers thereof set forth in such Company
Registration Statement or (ii) if such Registration Statement is a Shelf
Registration Statement, for the applicable period set forth in Section 2.2(b)
herein; cause the Prospectus to be supplemented by any required Prospectus
supplement, and as so supplemented to be filed pursuant to Rule 424 under the
Securities Act, and to comply fully with the applicable provisions of Rules 424
and 430A, as applicable, under the Securities Act in a timely manner; and comply
with the provisions of the Securities Act with respect to the disposition of all
securities covered by such Registration Statement during the applicable period
in accordance with the intended method or methods of distribution by the sellers
thereof set forth in such Registration Statement or supplement or the
Prospectus;
(b) promptly (and in respect of events covered by clause (i) hereof, on
the same day as the Company shall receive notice of effectiveness) advise the
Holder and, if requested by such Persons, to confirm such advice in writing, (i)
when the Prospectus or any Prospectus supplement or post-effective amendment has
been filed, and when the same has become effective, (ii) of any request by the
Commission for post-effective amendments to such Registration Statement or
post-effective amendments to such Registration Statement or post-effective
amendments or supplements to the Prospectus or for additional information
relating thereto, (iii) of the issuance by the Commission of any stop order
suspending the effectiveness of any such Registration Statement under the
Securities Act or of the suspension by any state securities commission of the
qualification of the Restricted Securities for offering or sale in any
jurisdiction, or the initiation of any proceeding for any of the preceding
purposes, and (iv) of the existence of any fact or the happening of any event
that makes any statement of a material fact made in any such Registration
Statement, the related Prospectus, any amendment or
8
supplement thereto, or any document incorporated by reference therein untrue, or
that requires the making of any additions to or changes in any such Registration
Statement or the related Prospectus in order to make the statements therein not
misleading. If at any time the Commission shall issue any stop order suspending
the effectiveness of such Registration Statement, or any state securities
commission or other regulatory authority shall issue an order suspending the
qualification or exemption from qualification of the Restricted Securities under
state securities or Blue Sky laws, the Company shall use its reasonable efforts
to obtain the withdrawal or lifting of such order at the earliest possible time;
(c) promptly furnish to the Holder, and each underwriter, if any,
without charge, at least one conformed copy of any Registration Statement, as
first filed with the Commission, and of each amendment thereto, including all
documents incorporated by reference therein and all exhibits (including exhibits
incorporated therein by reference) and such other documents as such Holder may
reasonably request;
(d) deliver to the Holder, and each underwriter, if any, without
charge, as many copies of the Prospectus (including each preliminary prospectus)
and any amendment or supplement thereto as such person reasonably may request.
(e) enter into such customary agreements and take all such other
reasonable action in connection therewith (including those reasonably requested
by the Holder or the underwriter(s), if any) required in order to expedite or
facilitate the disposition of such Restricted Securities pursuant to such
Registration Statement, including, but not limited to, dispositions pursuant to
an underwritten registration, and in such connection:
(i) make such representations and warranties to the Holder and
underwriter(s), if any, in form, substance and scope as are
customarily made by issuers to underwriters in underwritten offerings
(whether or not sales of securities pursuant to such Registration
Statement are to be to an underwriter(s)) and confirm the same if and
when requested;
(ii) obtain opinions of counsel to the Company addressed to the
Holder and underwriter(s), if any, covering the matters customarily
covered in opinions requested in underwritten offerings (whether or
not sales of securities pursuant to such Registration Statement are to
be made to an underwriter(s)) and dated the Effective Time of any
Registration Statement (and, in the case of any underwritten sale of
securities pursuant to such Registration Statement, each closing date
of sales to the underwriter(s) pursuant thereto);
(iii) use reasonable efforts to obtain comfort letters dated the
Effective Time of any Registration Statement (and, in the case of any
underwritten sale of securities pursuant to such Registration
Statement, each closing date of sales to the underwriter(s) pursuant
thereto) from the independent certified public accountants of the
Company addressed to the Holder and underwriter, if any, such letters
to be in customary form and covering matters of the type customarily
covered in comfort letters in connection with
9
underwritten offerings (whether or not sales of securities
pursuant to such Registration Statement are to be made to an
underwriter(s));
(iv) provide for the indemnification provisions and procedures of
Section 2.6 hereof with respect to the Holder and the underwriter(s),
if any, and;
(v) deliver such documents and certificates as may be reasonably
requested by the Holder or the underwriters), if any, and which are
customarily delivered in underwritten offerings (whether or not sales
of securities pursuant to such Registration Statement are to be made
to an underwriter(s), with such documents and certificates to be dated
the Effective Time of any Registration Statement.
The actions required by clauses (i) through (v) above shall be done at
each closing under such undenwiting or similar agreement, as and to the extent
required thereunder, and if at any time the representations and warranties of
the Company contemplated in clause (i) above cease to be true and correct, the
Company shall so advise the underwriter(s), if any, and the Holder promptly,
and, if requested by such Person, shall confirm such advice in writing;
(f) prior to any public offering of Restricted Securities, cooperate
with the Holder, the underwriter(s), if any, and their respective counsel in
connection with the registration and qualification of the Restricted Securities
under the securities or Blue Sky laws of such U.S. jurisdictions as the Holder
or underwriter(s), if any, may reasonably request in writing by the time any
Registration Statement is declared effective by the Commission, and do any and
all other acts or filings necessary or advisable to enable disposition in such
U.S. jurisdictions of the Restricted Securities covered by any Registration
Statement and to file such consents to service of process or other documents as
may be necessary in order to effect such registration or qualification;
provided, however, that the Company shall not be required to register or qualify
as a foreign corporation in any jurisdiction where it is not then so qualified
or as a dealer in securities in any jurisdiction where it would not otherwise be
required to register or qualify but for this Section 2.4, or to take any action
that would subject it to the service of process in suits or to taxation, in any
jurisdiction where it is not then so subject;
(g) in connection with any sale of Restricted Securities that will
result in such securities no longer being Restricted Securities, cooperate with
the Holder and the underwriter(s), if any, to facilitate the timely preparation
and delivery of certificates representing Restricted Securities to be sold and
not bearing any restrictive legends; and enable such Restricted Securities to be
in such denominations and registered in such names as the Holder or the
underwriter(s), if any, may request at least two (2) Business Days prior to any
sale of Restricted Securities made by such underwriters;
(h) use its reasonable efforts to cause the disposition of the
Restricted Securities covered by any Registration Statement to be registered
with or approved by such other U.S. governmental agencies or authorities as may
be necessary to enable the seller or sellers thereof
10
or the underwriter(s), if any, to consummate the disposition of such
Restricted Securities, subject to the proviso contained in Section 2.4(f);
(i) if any fact or event contemplated by Section 2.4(b) shall exist or
have occurred, prepare a supplement or post-effective amendment to any
Registration Statement or related Prospectus or any document incorporated
therein by reference or file any other required document so that, as thereafter
delivered to the purchasers of Restricted Securities, the Prospectus will not
contain an untrue statement of a material fact or omit to state any material
fact necessary to make the statement therein not misleading;
(j) cooperate and assist in the performance of any due diligence
investigation by any underwriter (including any "qualified independent
underwriter") that is required to be retained in accordance with the rules and
regulations of the NASD, and use its reasonable efforts to cause any
Registration Statement to become effective and approved by such U.S.
governmental agencies or authorities as may be necessary to enable the Holder to
consummate the disposition of such Restricted Securities;
(k) otherwise use its reasonable efforts to comply with all applicable
rules and regulations of the Commission, and make generally available to its
security holders with regard to such Registration Statement, as soon as
practicable, a consolidated earnings statement meeting the requirements of Rule
158 (which need not be audited) for the twelve-month period (i) commencing at
the end of any fiscal quarter in which Restricted Securities are sold to the
underwriter in a firm or best efforts underwritten offering or (ii) if not sold
to an underwriter in such an offering, beginning with the first month of the
Company's first fiscal quarter commencing after the effective date of any
Registration Statement;
(l) provide a CUSIP number for all Restricted Securities not later than
the Effective Time of any Registration Statement;
(m) use its best efforts to qualify for inclusion, not later than the
Effective Time of such Registration Statement, all Restricted Securities covered
by such Registration Statement on the OTC Bulletin Board of the NASD, or any
other trading market on which the Common Stock of the Company is then admitted
for trading, and
(n) provide promptly to Holder upon request each document filed with
the Commission pursuant to the requirements of Section 12 and Section 14 of the
Exchange Act.
The Holder agrees by acquisition of a Restricted Security that, upon
receipt of any notice from the Company of the existence of any fact of the kind
described in Section 2.4(b)(iv) or the commencement of a Blackout Period, such
Holder will forthwith discontinue disposition of Restricted Securities pursuant
to any Registration Statement until such Holder's receipt of the copies of the
supplemented or amended Prospectus contemplated by Section 2.4(i), or until it
is advised in writing, in accordance with the notice provisions of Section 4.3
herein (the "Advice"), by the Company that the use of the Prospectus may be
resumed, and has received
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copies of any additional or supplemental filings that are incorporated by
reference in the Prospectus. If so directed by the Company, the Holder will
deliver to the Company all copies, other than permanent file copies, then in
such Holder's possession, of the Prospectus covering such Restricted Securities
that was current at the time of receipt of such notice. In the event the Company
shall give any such notice, the time period regarding the effectiveness of the
Shelf Registration Statement set forth in Section 2.2(b) shall be extended by
the number of days during the period from and including the date of the giving
of such notice pursuant to Section 2.4(b)(iv) or the commencement of a Blackout
Period to and including the date when the Holder shall have received the copies
of the supplemented or amended Prospectus contemplated by Section 2.4(i) or
shall have received (in accordance with the notice provisions of Section 4.3)
the Advice.
2.5 Preparation; Reasonable Investigation. In connection with preparation and
filing of each Registration Statement under the Securities Act, the Company will
give the Holder, its underwriter, if any, and their respective counsel and
accountants, the opportunity to participate in the preparation of such
Registration Statement, each prospectus included therein or filed with the
Commission, and each amendment thereof or supplement thereto, and will give each
to them access to its books and records and such opportunities to discuss the
business, finances and accounts of the Company and its subsidiaries with its
officers, directors and the independent public accountants who have certified
its financial statements as shall be necessary, in the reasonable opinion of the
Holder and such underwriters' respective counsel, to conduct a reasonable
investigation within the meaning of the Securities Act.
2.6 Certain Rights of the Holder. The Company will not file any registration
statement under the Securities Act which refers to the Holder by name or
otherwise without the prior approval of such Holder, which consent shall not be
unreasonably withheld or delayed.
2.7 Registration Expenses.
(a) All expenses incident to the Company's performance of or compliance
with this Agreement will be borne by the Company, regardless of whether a
Registration Statement becomes effective, including without limitation: (i) all
registration and filing fees and expenses (including filings made with the NASD
and reasonable counsel fees in connection therewith); (ii) all reasonable fees
and expenses of compliance with federal securities and state Blue Sky or
securities laws (including all reasonable fees and expenses of one counsel to
the underwriter(s) in any underwriting) in connection with compliance with state
Blue Sky or securities laws for up to 10 states; (iii) all expenses of printing,
messenger and delivery services and telephone calls; (iv) all fees and
disbursements of counsel for the Company; and (v) all fees and disbursements of
independent certified public accountants of the Company (including the expenses
of any special audit and comfort letters required by or incident to such
performance), but excluding from this paragraph, fees and expenses of counsel to
the underwriter(s), if any, unless otherwise set forth herein.
(b) Notwithstanding the foregoing, the Company will not be responsible
for any underwriting discounts, commissions or fees attributable to the sale of
Restricted Securities or
12
any legal fees or disbursements (other than any such fees or disbursements
relating to Blue Sky compliance or otherwise as set for the under Section
2.7(a)) incurred by any underwriter(s) in any underwritten offering if the
underwriter(s) participates in such underwritten offering at the request of the
Holder, or any transfer taxes that may be imposed in connection with a sale or
transfer of Restricted Securities.
(c) The Company shall, in any event, bear its internal expenses
(including, without limitation, all salaries and expenses of its officers and
employees performing legal or accounting duties), the expenses of any annual
audit and the fees and expenses of any Person, including special experts,
retained by the Company.
2.8 Indemnification; Contribution.
(a) The Company agrees to indemnify and hold harmless (i) the Holder,
(ii) each other Person who participates as an underwriter in the offering or
sale of such securities, (iii) each person, if any, who controls (within the
meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act)
the Holder or underwriter (any of the persons referred to in this clause (iii)
being hereinafter referred to as a "controlling person") and (iv) the respective
officers, directors, partners, employees, representatives and agents of the
Holder or underwriter or any controlling person (any person referred to in
clause (i), (ii), (iii) or (iv) may hereinafter be referred to as an
"indemnified Person"), to the fullest extent lawful, from and against any and
all losses, claims, damages, liabilities, judgments or expenses, joint or
several (or actions or proceedings, whether commenced or threatened, in respect
thereof) (collectively, "Claims"), to which such indemnified Person may become
subject under either Section 15 of the Securities Act or Section 20 of the
Exchange Act or otherwise, insofar as such Claims arise out of or are based
upon, or are caused by any untrue statement or alleged untrue statement of a
material fact contained in any Registration Statement or Prospectus (or any
amendment or supplement thereto), or 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 a violation by the Company of the
Securities Act or any state securities law, or any rule or regulation
promulgated under the Securities Act or any state securities law, or any other
law applicable to the Company relating to any such registration or
qualification, except insofar as such losses, claims, damages, liabilities,
judgments or expenses of any such indemnified Person; (x) are caused by any such
untrue statement or omission or alleged untrue statement or omission that is
based upon information relating to such indemnified Person furnished in writing
to the Company by or on behalf of any of such indemnified Person expressly for
use therein; (y) with respect to the preliminary Prospectus, result from the
fact that the Holder sold Securities to a person to whom there was not sent or
given, at or prior to the written confirmation of such sale, a copy of the
Prospectus, as amended or supplemented, if the Company shall have previously
furnished copies thereof to the Holder in accordance with this Agreement and
said Prospectus, as amended or supplemented, would have corrected such untrue
statement or omission; or (z) as a result of the use by an indemnified Person of
any Prospectus when, upon receipt of a Blackout Notice or a notice from the
Company of the existence of any fact of the kind described in Section
2.4(b)(iv), the indemnified Person or the Holder was not permitted to do so.
Such indemnity shall remain
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in full force and effect regardless of any investigation made by or on behalf of
any indemnified Person and shall survive the transfer of such securities by such
Holder.
In case any action shall be brought or asserted against any of the
indemnified Persons with respect to which indemnity may be sought against the
Company, such indemnified Person shall promptly notify the Company and the
Company shall assume the defense thereof. Such indemnified Person shall have the
right to employ separate counsel in any such action and to participate in the
defense thereof, but the fees and expenses of such counsel shall be at the
expense of the indemnified Person unless (i) the employment of such counsel
shall have been specifically authorized in writing by the Company, (ii) the
Company shall have failed to assume the defense and employ counsel or (iii) the
named parties to any such action (including any implied parties) include both
the indemnified Person and the Company and the indemnified Person shall have
been advised in writing by its counsel that there may be one or more legal
defenses available to it which are different from or additional to those
available to the Company (in which case the Company shall not have the right to
assume the defense of such action on behalf of the indemnified Person), it being
understood, however, that the Company shall not, in connection with such action
or similar or related actions or proceedings arising out of the same general
allegations or circumstances, be liable for the reasonable fees and expenses of
more than one separate firm of attorneys (in addition to any local counsel) at
any time for all the indemnified Persons, which firm shall be (x) designated by
such indemnified Persons and (y) reasonably satisfactory to the Company. The
Company shall not be liable for any settlement of any such action or proceeding
effected without the Company's prior written consent, which consent shall not be
withheld unreasonably, and the Company agrees to indemnify and hold harmless any
indemnified Person from and against any loss, claim, damage, liability, judgment
or expense by reason of any settlement of any action effected with the written
consent of the Company. The Company shall not, without the prior written consent
of each indemnified Person, settle or compromise or consent to the entry of
judgment on or otherwise seek to terminate any pending or threatened action,
claim, litigation or proceeding in respect of which indemnification or
contribution may be sought hereunder (whether or not any indemnified Person is a
party thereto), unless such settlement, compromise, consent or termination
includes an unconditional release of each indemnified Person from all liability
arising out of such action, claim litigation or proceeding.
(b) The Holder agrees to indemnify and hold harmless the Company and
its directors, officers and any person controlling (within the meaning of
Section 15 of the Securities Act or Section 20 of the Exchange Act) the Company,
and the respective officers, directors, partners, employees, representatives and
agents of each person, to the same extent as the foregoing indemnity from the
Company to each of the indemnified Persons, but only (i) with respect to actions
based on information relating to the Holder furnished in writing by or on behalf
of such Holder expressly for use in any Registration Statement or Prospectus,
and (ii) to the extent of the gross proceeds, if any, received by such Holder
from the sale or other disposition of its Restricted Securities covered by such
Registration Statement. In case any action or proceeding shall be brought
against the Company or its directors or officers or any such controlling person
in respect of which indemnity may be sought against the Holder, such Holder
shall have the
14
rights and duties given the Company in Section 2.8(a) (except that the Holder
may but shall not be required to assume the defense thereof), and the Company or
its directors or officers or such controlling person shall have the rights and
duties given to the Holder by Section 2.8(a).
(c) If the indemnification provided for in this Section 2.8 is
unavailable to an indemnified party under Section 2.7(a) or (b) (other than by
reason of exceptions provided in those Sections) in respect of any losses,
claims, damages, liabilities, judgments or expenses referred to therein, then
each applicable indemnifying party, in lieu of indemnifying such indemnified
party, shall contribute to the amount paid or payable by such indemnified party
as a result of such losses, claims damages, liabilities, judgments or expenses
(i) in such proportion as is appropriate to reflect the relative benefits
received by the Company on the one hand and the Holder on the other hand from
sale of Restricted Securities or (ii) if such allocation provided by clause (i)
above is not permitted by applicable law, in such proportion as is appropriate
to reflect not only the relative benefits referred to in clause (i) above but
also the relative fault of the Company and the Holder in connection with the
statements or omissions which resulted in such losses, claims, damages,
liabilities, judgments or expenses, as well as any other relevant equitable
considerations. The relative fault of the Company on the one hand and of the
Holder on the other shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Company or by the Holder and the parties relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission. The amount paid to a party as a result of the losses,
claims, damages, liabilities, judgments and expenses referred to above shall be
deemed to include, subject to the limitations set forth in the second paragraph
of Section 2.8(a), any legal or other fees or expenses reasonably incurred by
such party in connection with investigating or defending any action or claim.
The Company and the Holder agree that it would not be just and
equitable if contribution pursuant to this Section 2.8(c) were determined by pro
rata allocation or by any other method of allocation which does not take into
account the equitable considerations referred to in the immediately preceding
paragraph. Notwithstanding the provisions of this Section 2.8(c) the Holder (and
its related indemnified Persons) shall not be required to contribute, in the
aggregate, any amount in excess of the amount by which the dollar amount of
proceeds received by such Holder upon the sale of the Restricted Securities
exceeds the amount of any damages which such Holder has otherwise been required
to pay by reason of such untrue statement or omission or alleged omission. No
person guilty of fraudulent misrepresentations (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation.
The indemnity, and contribution provisions contained in this Section
2.8 are in addition to any liability which the indemnifying person may otherwise
have to the indemnified persons referred to above.
15
2.9 Participation in Underwritten Registrations. The Holder may not participate
in any underwritten registration hereunder unless such Holder (a) agrees to sell
such Holder's Restricted Securities on the basis provided in any underwriting
arrangements approved by the Persons entitled hereunder to approve such
arrangements and (b) completes and executes all reasonable questionnaires,
powers of attorney, indemnities, underwriting agreements, lock-up letters and
other documents required under the terms of such underwriting arrangements.
2.10 Selection of Underwriters. The Holder may sell its Restricted Securities in
an underwritten offering. In any such underwritten offering, the investment
banker or investment bankers and manager or managers that will administer the
offering will be selected by the Holder if such registration is pursuant to the
Shelf Registration Statement, and by the Company if such registration is
pursuant to a Company Registration Statement; provided, however, that such
investment bankers and managers must be reasonably satisfactory to the Company
or the Holder, respectively. Such investment bankers and managers are referred
to herein as the "underwriters".
ARTICLE 3
RULE 144
3.1 Rule 144 Reporting. With a view to making available the benefits of certain
rules and regulations of the Commission which may permit the sale of restricted
securities (as that term is used in Rule 144 under the Securities Act) to the
public without registration, the Company agrees to use its best efforts to:
(a) make and keep public information available as those terms are
understood and defined in Rule 144 under the Securities Act, at all times;
(b) file with the Commission in a timely manner all reports and other
documents required of the Company under the Securities Act and the Exchange Act;
and
(c) so long as the Holder owns any Restricted Securities, furnish to
the Holder forthwith upon request a written statement by the Company as to its
compliance with the reporting requirements of Rule 144 and of the Securities Act
and Exchange Act, a copy of the most recent annual or quarterly report of the
Company, and such other reports and documents so filed as the Holder may
reasonably request in availing itself of any rule or regulation of the
Commission allowing the Holder to sell any such Restricted Securities without
registration.
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ARTICLE 4
MISCELLANEOUS
4.1 Entire Agreement. This Agreement, together with the Stock Purchase
Agreement, constitutes the entire agreement between the parties with respect to
the subject matter hereof and supersedes all prior agreement and understandings,
both oral and written, between the parties with respect to the subject matter
hereof.
4.2 Successors and Assigns. Wasteco Ventures Limited expects to assign all
rights under this Agreement to a limited partnership or other entity in which it
will have a substantial interest (the "Proposed Assignee"). An assignment prior
to February 1, 1998 shall be effective without any consent by the Company upon
written notice thereof accompanied by a statement of Wasteco Ventures Limited
that it has a substantial interest in the Proposed Assignee and a statement by
the Proposed Assignee addressed to the Company that it agrees to be bound by the
terms of this Agreement. This Agreement shall inure to the benefit of and be
binding upon the successors and assigns of each of the parties, including
without limitation and without the need for an express assignment, subsequent
holders of Restricted Securities; providing, however, that this Agreement shall
not inure to the benefit of or be binding upon a successor or assign of the
Holder unless and to the extent such successor or assign acquired Restricted
Securities from the Holder at a time when the Holder could not transfer such
Restricted Securities pursuant to any Registration Statement or pursuant to Rule
144 under the Securities Act as contemplated by clause (ii) of the definition of
Restricted Securities.
4.3 Notices. All notices and other communications given or made pursuant hereto
or pursuant to any other agreement among the parties, unless otherwise
specified, shall be in writing and shall be deemed to have been duly given or
made if sent by telecopy (with confirmation in writing), delivered personally or
by overnight courier or sent by registered or certified mail (postage prepaid,
return receipt requested) to the parties at the telecopy number, if any, or
address set forth below or at such other addresses as shall be furnished by the
parties by like notice. Notices sent by telecopier shall be effective when
receipt is acknowledged, notices delivered personally or by overnight courier
shall be effective upon receipt and notices sent by registered or certified mail
shall be effective three days after mailing:
if to the Holder: Wasteco Ventures Limited
Citco Building, Xxxxxxx Xxx
X.X. Xxx 000
Xxxx Xxxx
Xxxxxxx, Xxxxxxx Xxxxxx Xxxxxxx
with copies to: Wafra Investment Advisory Group, Inc.
0 Xxxx 00xx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xx. Xxxx X. Xxxx
17
Fax: (000) 000-0000
Telephone: (000) 000-0000
-and-
Shearman & Sterling
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx Xxxxxx Field, Esq.
Fax: (000) 000-0000
Telephone: (000) 000-0000
if to the Company: Compost America Holding Company, Inc.
000 Xxxxx Xxxxxx
Xxxxxxxxx, Xxx Xxxxxx 00000
Fax: (000) 000-0000
Telephone: (000) 000-0000
with copies to: Xxxxxxxxx Traurig Xxxxxxx
Xxxxxx Xxxxx & Xxxxxxx, P.A.
0000 Xxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxxxxx, XX 00000
Attention: Xxxxxxxx X. Xxxxx, Esq.
Fax: (000) 000-0000
Telephone: (000) 000-0000
4.4 Headings. The headings contained in this Agreement are for convenience only
and shall not affect the meaning or interpretation of this Agreement.
4.5 Counterparts. This Agreement may be executed in any number of counterparts,
each of which shall be deemed to be an original and all of which together shall
be deemed to be one and the same instrument.
4.6 Applicable Law. This Agreement shall be governed by and construed in
accordance with the laws of the state of New York, without giving effect to
choice law provisions.
4.7 Specific Enforcement. Each party hereto acknowledges that the remedies at
law of the other parties for a breach or threatened breach of this Agreement
would be inadequate, and, in recognition of this fact, any party to this
Agreement, without posting any bond, and in addition to all other remedies which
may be available, shall be entitled to obtain equitable relief in the form of
specific performance, a temporary restraining order, a temporary to permanent
injunction or any other equitable remedy which may then be available.
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4.8 Amendment and Waivers. The provisions of this Agreement may not be amended,
modified or supplemented, and waivers or consents to or departures from the
provisions hereof may not be given unless the Company has obtained the unanimous
written consent of the Holders of the Restricted Securities.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the day and year
first above written.
COMPOST AMERICA HOLDIING COMPANY, INC.
By: /s/ Xxxxx X. Xxxxxx
----------------------------------------
Name:
Title
WASTECO VENTURES LIMITED
By: /s/ Xxxx X. Xxxx
----------------------------------------
Name:
Title:
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