SECURITIES PURCHASE AGREEMENT
EX-10.2
SECURITIES
PURCHASE AGREEMENT
THIS SECURITIES
PURCHASE AGREEMENT
(hereinafter sometimes referred to as the “Agreement”) dated as of the 8th day
December, 2005 by and between ENERTECK CORPORATION, a Delaware corporation
(the
“Company”), and BATL BIOENERGY LLC, a Delaware limited liability company
(“BATL”).
W
I T N E S S E T H:
WHEREAS,
BATL
desires to make an investment in the Company, and the Company desires to accept
the investment from BATL, pursuant to the terms and subject to the conditions
set forth herein;
NOW,
THEREFORE,
in
consideration of the premises and the mutual covenants and agreements set forth
herein, the parties hereto, intending to be legally bound, hereby agree as
follows:
ARTICLE
ONE
PURCHASE
AND SALE OF COMMON STOCK
1.1. Purchase
and Sale of Common Stock.
Upon
the terms and subject to the conditions of this Agreement, BATL hereby agrees
to
purchase from the Company, and the Company hereby agrees to issue and sell
to
BATL, for the aggregate purchase price of $3,000,000 (the “Purchase Price”), (i)
2,450,000 shares (the “BATL Shares”) of the common stock of the Company, $.001
par value (the “Common Stock”), and (ii) a warrant (the “BATL Warrant”) expiring
in five (5) years from the Closing Date (as hereinafter defined) to purchase
an
additional 1,000,000 shares of Common Stock at an exercise price of $2.00 per
share pursuant to a Warrant substantially in the form as annexed hereto as
Exhibit
A
(the
BATL Shares, the BATL Warrant and the shares of Common Stock underlying the
BATL
Warrant, are collectively referred to herein as the “BATL Securities”).
1.2. Closing.
The
closing (the “Closing”) in respect of the purchase and sale of the BATL Shares
and the BATL Warrant shall take place on or before December 15, 2005 at a time
(the “Closing Date”) and place as the parties shall agree.
1.3. Closing
Documents. At
the
Closing:
(a)
The
Company shall deliver to BATL:
(i) a
duly
executed certificate or certificates representing the BATL Shares and BATL
Warrant, registered in the name of BATL; and
(ii) a
legal
opinion of counsel to the Company, addressed to BATL in the form of Annex A
hereto; and
1
(iii) the
certificate referred to in Section 1.4(a)(ix) hereof.
(b) BATL
shall deliver to the Company:
(i) A
bank
check from a N.Y. Clearing House Member Bank payable to the order of the Company
or a wire transfer in immediately available funds to a Company bank account
as
designated by the Company, in each case in the amount of the Purchase Price;
(ii) a
duly
completed and executed Accredited Investor Questionnaire acceptable to the
Company; and
(ii) The
certificate referred to in Section 1.4(b)(iv) hereof.
1.4 Conditions
to Closing.
(a) Conditions
to Obligations of BATL.
The
obligation of BATL to purchase the BATL Shares and the BATL Warrant is subject
to the satisfaction on or prior to the Closing of the following conditions,
any
or all of which may be waived by BATL:
(i) No
order
of any governmental body shall be in effect that restrains or prohibits the
issuance of the BATL Shares or the BATL Warrant.
(ii) The
Company shall have delivered to BATL (i) certificates representing the BATL
Shares and the BATL Warrant, duly registered in the name of BATL and (ii) the
Company counsel opinion referred to in Section 1.3(a)(ii).
(iii) the
BATL
Shares and the shares underlying the BATL Warrant shall have been duly listed,
if required, for trading, on the OTC Bulletin Board;
(iv) Since
September 30, 2005, no event or series of events shall have occurred that
reasonably would be expected to have a Material Adverse Effect (as defined
in
Section 2.1.2).
(v) The
Company shall have performed, satisfied and complied in all material respects
with all covenants, agreements and conditions required by this Agreement to
be
performed, satisfied or complied with by it at or prior to the Closing
Date.
(vi) BATL
shall not have become aware of any information or other matter with respect
to
legal matters affecting the Company that is inconsistent with the financial
and
other information disclosed to BATL prior to the date hereof, in a manner that
constitutes or would reasonably be expected to have a Material Adverse Effect.
(vii) The
representations and warranties of the Company contained in this Agreement shall
be true and correct on and as of the Closing Date with the same effect as though
such representations and warranties had been made on and as of the Closing
Date;
2
(viii). On
or
prior to the Closing Date, there shall not have occurred any of the following:
(i) a suspension or material limitation in the trading of securities generally
on the New York Stock Exchange, NASDAQ or the OTC Bulletin Board; (ii) a general
moratorium on commercial banking activities in New York declared by the
applicable banking authorities; or (iii) the outbreak or escalation of
hostilities involving the United States, or the declaration by the United States
of a national emergency or war;
(ix) The
Company shall have delivered to BATL, at the Closing, a certificate dated the
Closing Date, duly executed by the chief executive officer of the Company to
the
effect that all of the foregoing conditions have been met and that BATL’s
nominee to the Board in accordance with Section 3.1.1 has been elected to the
Board.
(b) Conditions
to Obligations of the Company.
The
obligation of the Company to issue and sell the BATL Shares and the BATL Warrant
is subject to the satisfaction on or prior to the Closing of the following
conditions, any or all of which may be waived by the Company:
(i) No
order
of any governmental body shall be in effect that restrains or prohibits the
issuance of the BATL Warrant or the BATL Shares.
(ii) BATL
shall have delivered to the Company the Purchase Price.
(iii) The
representations and warranties of BATL contained in this Agreement shall be
true
and correct on and as of the Closing Date with the same effect as though such
representations and warranties had been made on and as of the Closing Date;
and
(iv) BATL
shall have delivered to the Company, at the Closing, a certificate dated the
Closing Date, duly executed by its chief executive officer or member or manager
performing similar functions, or to the effect that all of the foregoing
conditions have been met.
ARTICLE
TWO
REPRESENTATIONS
AND WARRANTIES
2.1 Representations
and Warranties of the Company.
The
Company hereby represents and warrants to BATL as follows:
2.1.1 Authorization
of Agreement and Securities.
The
execution, delivery and performance by the Company of this Agreement, the
Registration Rights Agreement (as defined in Section 2.1.11) and the BATL
Warrant (the “Transaction Documents”) have been duly authorized by all necessary
corporate action of the Company, and this Agreement constitutes the valid and
binding obligations of the Company enforceable against it in accordance with
its
terms, except as may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting the enforcement of creditors’ rights
generally and subject to general principles to equity (regardless of whether
such enforceability is considered in a proceeding at law or in equity). The
Company has available a sufficient number of authorized and unissued shares
of
Common Stock as may be necessary to issue the BATL Shares hereunder and to
effect the exercise of the BATL Warrants. The Company understands and
acknowledges the potentially dilutive effect to the Common Stock of the issuance
of shares of Common Stock upon the exercise of the BATL Warrants. The Company
further acknowledges that its obligation to issue shares of Common Stock upon
exercise of the Warrants is absolute and unconditional regardless of the
dilutive effect that such issuance may have on the ownership interests of other
stockholders of the Company and notwithstanding the commencement of any case
under 11 U.S.C. § 101 et seq. (the “Bankruptcy Code”).
3
2.1.2 Organization,
Standing and Qualification of the Company and the Company
Subsidiaries.
The
Company is a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware. Schedule 2.1.2 lists all Subsidiaries
(as hereinafter defined) of the Company and their respective jurisdictions
of
formation (collectively the “Company Subsidiaries” and each a “Company
Subsidiary”). Each Company Subsidiary is duly organized, validly existing and in
good standing under the laws of the jurisdiction listed next to such Company
Subsidiary on Schedule 2.1.2. The Company has the full corporate power and
authority to execute, deliver and perform this Agreement and all other
Transaction Documents. In addition, each of the Company and each Company
Subsidiary has full corporate power and authority to carry on its business
as
now conducted and to own, lease, and operate its properties as now done. Each
of
the Company and each Company Subsidiary is qualified to do business and is
in
good standing in each jurisdiction in which the nature of the business conducted
by it or the properties owned or leased by it requires qualification, except
where the failure to be so qualified would not have a material adverse effect
on
the business, assets, properties, operations, results of operations, condition
(financial or otherwise) or prospects of the Company (“Material Adverse
Effect”). There are no outstanding securities or rights convertible into or
exchangeable for shares of any capital stock of any Company Subsidiary and
there
are no contracts by which any Company Subsidiary is bound to issue additional
shares of capital stock. All of the shares of capital stock of the Subsidiary
are duly and validly authorized, fully paid and non-assessable and are owned
by
the Company free and clear of any lien with respect thereto.
For
purposes herein, “Subsidiary” shall mean any entity more than 50% of the shares
of the voting stock, voting interests, membership interests or partnership
interests of which are owned or controlled, or the ability to select or elect
more than 50% of the directors or similar managers is held, directly or
indirectly, by the Company or one or more of its Subsidiaries or by the Company
and one or more of its Subsidiaries.
2.1.3 Consents
of Third Parties.
The
execution, delivery and performance by the Company of the Transaction Documents
will not (i) violate or conflict with the certificate of incorporation or
by-laws of the Company or any of the Company Subsidiaries, (ii) conflict with,
or result in the breach or termination, amendment, cancellation or acceleration
or right to increase the obligations or otherwise modify the terms of, or
constitute a default under, any lease, agreement, commitment or other
instrument, or any order, judgment or decree, to which the Company or any of
the
Company Subsidiaries is a party or by which the Company, any Company Subsidiary
or any of their properties is bound, (iii) constitute a violation of any law
applicable to the Company or any Company Subsidiary or (iv) result in the
creation of any lien upon any other properties or assets of the Company or
any
Company Subsidiary. No consent, approval or authorization of, or designation,
declaration or filing with, any governmental authority or third party
(including, without limitation, any shareholder of the Company), is required
on
the part of the Company in connection with the execution, delivery and
performance of this Agreement. Without limiting the foregoing, no vote or
consent of the Company’s shareholders is required in order for the Company to
issue the BATL Shares and/or the BATL Warrant and perform its obligations
hereunder and to continue to list its shares for trading on the OTC Bulletin
Board.
4
2.1.4 Litigation.
There
are no judicial or administrative actions, proceedings or investigations pending
or, to the knowledge of the Company, threatened that question the validity
of
this Agreement or any action taken or to be taken by the Company in connection
with this Agreement. To the knowledge of the Company, except as set forth in
Schedule 2.1.4, there is no litigation, arbitration, proceeding or governmental
investigation pending or, to the knowledge of the Company, threatened, or any
order, injunction or decree outstanding, against or relating or the Company
or
any Company Subsidiary which, if adversely determined, would have a Material
Adverse Effect. To the knowledge of the Company, there is no existing state
of
facts that would give rise to any such litigation that, if adversely determined,
could reasonably be expected to have a Material Adverse Effect upon the Company
or the Subsidiary or any Company Subsidiary.
2.1.5 Compliance
with Laws.
Neither
the Company nor any Company Subsidiary is in violation of any applicable law,
regulation, ordinance, or any other applicable requirement of any governmental
body or court, which violations in the aggregate could reasonably be expected
to
have a Material Adverse Effect upon the Company or any Company Subsidiary and
no
notice has been received by the Company or any Company Subsidiary alleging
any
such violation that has not been cured or otherwise resolved and the cure or
resolution of which would not result in any material monetary obligation or
material limitation on the lawful conduct of the business of the Company or
any
Company Subsidiary as conducted on the date hereof. Neither the Company nor
any
Company Subsidiary has received any written notice of violation or alleged
material violation of any such law or order by any governmental body in any
material respect that has not been resolved, or received written notice of
investigation by any governmental body which could reasonably have a Material
Adverse Effect. The Company possesses all permits, approvals, authorizations,
licenses, certificates and consents from all public and governmental authorities
which are necessary to conduct its business as currently conducted, the lack
of
which would materially and adversely affect the business or financial condition
of the Company. The Company is not in default in any respect under any such
franchises, permits, licenses or similar authorizations.
2.1.6 Compliance
with Securities Laws; Disclosure.
The
Company’s Common Stock is registered under Section 12 of the Securities Exchange
Act of 1934, as amended (the “Exchange Act”). Since January 8, 2003, the Company
has made all of the filings (the “SEC Filings”) required to be made under the
Securities Act of 1933, as amended (the “Securities Act”), the Exchange Act, and
all rules and regulations in effect thereunder, and no such filing contains
any
untrue statement of a material fact or omits to state a material fact necessary
to make the statements made, not misleading. As of their respective dates,
the
SEC Filings, including the financial statements contained therein, complied
in
all material respects with all of the statutes and published rules and
regulations enforced or promulgated by the regulatory authority with which
the
SEC Filings were filed, and, except to the extent the information in any SEC
Filing has been revised or superseded by a later filed SEC Filing, did not
and
do not as of the date hereof contain any untrue statement of a material fact
or
omit to state any material fact required to be stated therein or necessary
in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading. The financial statements of the Company
included in the SEC Filings comply in all material respects with applicable
accounting requirements and the rules and regulations of the SEC with respect
thereto as in effect at the time of filing. Such financial statements have
been
prepared in accordance with GAAP, except as may be otherwise specified in such
financial statements or the notes thereto, and fairly present in all material
respects the financial position of the Company and its consolidated subsidiaries
as of and for the dates thereof and the results of operations and cash flows
for
the periods then ended, subject, in the case of unaudited statements, to normal,
year-end audit adjustments. Except as disclosed in the SEC Filings, or as
otherwise disclosed in writing to BATL, since September 30, 2005 there has
been
no development that has any reasonable likelihood of having a Material Adverse
Effect or resulting in a Material Adverse Effect upon the Company or the
Subsidiary.
5
2.1.7 Disclosure.
The SEC
filings and the representations and warranties of the Company contained in
this
Agreement, when taken as a whole, contain no untrue statement of a material
fact
concerning the Company or omit to state any material fact required to be stated
therein or necessary in order to make the statements contained therein, in
light
of the circumstances under which they were made, not misleading, as of their
respective dates. There is no fact known to the Company that has had, or could
reasonably be expected to have, a Material Adverse Effect and that has not
been
disclosed herein or in such other documents and statements furnished to BATL
for
use in connection with the transaction contemplated hereby.
2.1.8. Capitalization.
Schedule 2.1.8 sets forth, in each case as of the date hereof, (i) the
authorized capitalization of the Company, the number of shares of each class
issued and outstanding and the number of shares reserved for issuance in
connection with the Company’s stock option plans, and (ii) all options,
warrants, convertible securities, rights to subscribe to, calls, contracts,
undertakings, arrangements and commitments to issue which may result in the
issuance of stock of the Company. All of the issued and outstanding shares
of
the Company’s capital stock have been duly and validly authorized and issued and
are fully paid and non-assessable and are not subject to any preemptive rights.
No securities of the Company are entitled to preemptive or similar rights,
and
no person has any right of first refusal, preemptive right, right of
participation, or any similar right to participate in the transaction
contemplated by this Agreement or any other Transaction Document.
2.1.9 No
General Solicitation.
None of
the Company or any of its “affiliates” (as defined in Rule 501(b) of Regulation
D under the Securities Act (“Regulation D”)), has, directly or through an agent,
engaged in any form of general solicitation or general advertising in connection
with the offering of the BATL Shares and BATL Warrant (as those terms are used
in Regulation D) under the Securities Act or in any manner involving a public
offering within the meaning of Section 4(2) of the Securities Act; and the
Company has not entered into any contractual arrangement with respect to the
distribution of the BATL Shares or BATL Warrant except for this Agreement,
and
the Company will not enter into any such arrangement.
2.1.10. No
Default.
Except
as disclosed in the SEC Filings, the Company is not in default in the payment
or
performance of any of its contracts, agreements or other obligations, except
where such default would not have a Material Adverse Effect.
2.1.11. Registration
of Shares.
Except
as contemplated under the Registration Rights Agreement to be entered into
between BATL and the Company on the date hereof (the “Registration
Rights Agreement”)
and
except as set forth in Schedule 2.1.11, the Company has not entered into any
agreement to register its debt or equity securities under the Securities
Act.
2.1.12
Private
Placement.
Assuming the accuracy of the representations and warranties of BATL contained
in
Section 2.3 and its compliance with the agreements set forth therein, no
registration under the Securities Act is required for the offer and sale of
the
BATL Shares and BATL Warrant by the Company to BATL or as contemplated hereby.
2.1.13
Taxes.
To the
knowledge of the Company, there have been properly completed and filed all
material tax returns required to be filed by the Company or any Company
Subsidiary on or prior to the date hereof. All such tax returns are true,
correct and complete in all material respects. All taxes of the Company or
any
Company Subsidiary due and payable have been timely paid, except where the
failure to pay such taxes or the delay thereof would not reasonably be expected
to have a Material Adverse Effect. The most recent audited financial statements
of the Company contained in the SEC Filings reflect an adequate accrual in
accordance with GAAP for all material taxes payable by the Company and any
Company Subsidiaries for all taxable periods and portions thereof through the
date of such financial statements.
2.1.14
Investment
Company.
The
Company is not, and is not an affiliate of, an “investment company” within the
meaning of the Investment Company Act of 1940, as amended.
2.1.15 Listing
of Shares.
The
Common Stock is listed and traded on the OTC Bulletin Board (“OTC”), and the
Company is not aware of any pending or contemplated action or proceeding of
any
kind to suspend the trading of the Common Stock. The Company is not in violation
of any listing requirements of the OTC.
2.1.16. Internal
Controls.
Except
as otherwise disclosed in the SEC Filings, the Company maintains a system of
internal accounting controls in accordance with applicable federal securities
laws sufficient to provide reasonable assurances that (i) transactions are
executed in accordance with management’s general or specific authorization; (ii)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles and
to
maintain accountability for assets; (iii) access to assets is permitted only
in
accordance with management’s general or specific authorization; and (iv) the
recorded accountability for assets is compared with existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
6
2.1.17 Insurance.
The
Company maintains property and casualty, general liability, workers'
compensation, environmental hazard, personal injury and other similar types
of
insurance with financially sound and reputable insurers that is adequate and
consistent with industry standards and the Company's historical claims
experience. The Company has not received notice from, and has no knowledge
of
any threat by, any insurer (that has issued any insurance policy to the Company)
that such insurer intends to deny coverage under or cancel, discontinue or
not
renew any insurance policy presently in force.
2.1.18
Environmental Matters.
1. The
operations of the Company are, to its knowledge, in material compliance with
all
applicable Environmental Laws and all permits issued pursuant to Environmental
Laws or otherwise;
2.
to its
knowledge, the Company has obtained or applied for all material permits required
under all applicable Environmental Laws necessary to operate its
business;
3.
the
Company is not the subject of any outstanding written order of or agreement
with
any governmental authority or person respecting (i) Environmental Laws, (ii)
Remedial Action or (iii) any Release or threatened Release of Hazardous
Materials;
4.
the
Company has not received, any written communication alleging that it may be
in
violation of any Environmental Law or any permit issued pursuant to any
Environmental Law, or may have any liability under any Environmental
Law;
5.
the
Company does not have any current contingent liability in connection with any
Release of any Hazardous Materials into the indoor or outdoor environment
(whether on-site or off-site); and
6.
to the
Company's knowledge, there are no investigations of the business, operations,
or
currently or previously owned, operated or leased property of the Company
pending or threatened which could lead to the imposition of any liability
pursuant to any Environmental Law that would have a Material Adverse
Effect;
For
purposes of this Section 2.1.18:
"Environmental
Law" means any foreign, federal, state or local statute, regulation, ordinance,
or rule of common law as now or hereafter in effect in any way relating to
the
protection of human health and safety or the environment including, without
limitation, the Comprehensive Environmental Response, Compensation and Liability
Act (42 U.S.C. ' 9601 et seq.), the Hazardous Materials Transportation Act
(49
U.S.C. App. ' 1801 et seq.), the Resource Conservation and Recovery Act (42
U.S.C. ' 6901 et seq.), the Clean Water Act (33 U.S.C. ' 1251 et seq.), the
Clean Air Act (42 U.S.C. ' 7401 et seq.), the Toxic Substances Control Act
(15
U.S.C. ' 2601 et seq.), the Federal Insecticide, Fungicide, and Rodenticide
Act
(7 U.S.C. ' 136 et seq.), and the Occupational Safety and Health Act (29 U.S.C.
' 651 et seq.), and the regulations promulgated pursuant thereto.
7
"Hazardous
Material" means any substance, material or waste which is regulated by the
United States, Canada or any of its provinces, or any state or local
governmental authority including, without limitation, petroleum and its
by-products, asbestos, and any material or substance which is defined as a
"hazardous waste," "hazardous substance," "hazardous material," "restricted
hazardous waste," "industrial waste," "solid waste," "contaminant," "pollutant,"
"toxic waste" or toxic substance" under any provision of any Environmental
Law;
"Release"
means any release, spill, filtration, emission, leaking, pumping, injection,
deposit, disposal, discharge, dispersal, or leaching into the indoor or outdoor
environment, or into or out of any property;
"Remedial
Action" means all actions to (x) clean up, remove, treat or in any other way
address any Hazardous Material; (y) prevent the Release of any Hazardous
Material so it does not endanger or threaten to endanger public health or
welfare or the indoor or outdoor environment; or (z) perform pre-remedial
studies and investigations or post-remedial monitoring and care.
2.1.19 Proprietary
Rights.
The
Company owns or possesses adequate and enforceable rights to use all patents,
patent applications, trademarks, trademark applications, trade names, service
marks, copyrights, copyright applications, licenses, know-how (including trade
secrets and other unpatented and/or unpatentable proprietary or confidential
information, systems or procedures) and other similar rights and proprietary
knowledge (collectively, "Intangibles") necessary for the conduct of its
business as now being conducted, except those the absence of which would not
have a Material Adverse Effect. To the best of the Company's knowledge, the
Company is not infringing upon or in conflict with any right of any other person
with respect to any Intangibles. No claims have been asserted by any person
to
the ownership or use of any Intangibles that would have a Material Adverse
Effect on the Company and the Company has no knowledge of any basis for such
claim.
2.1.20 Customers
and Suppliers.
The
Company has not received any notice or has any reason to believe that any
Company customer has ceased, or will cease, to use the proceeds, equipment,
goods or services of the Company, or has substantially reduced or will
substantially reduce, the use of such products, equipment, goods or services
at
any time which would have a Material Adverse Effect. The Company has no reason
to believe that any of its suppliers will not sell raw materials, supplies,
merchandise and other goods to the Company on the same terms and conditions
as
those used in its current sales to the Company, subject only to general and
customary price increases.
2.2 Representations
and Warranties of BATL.
BATL
hereby represents and warrants to the Company as follows:
2.2.1 Authorization
of Agreement.
The
execution, delivery and performance by BATL of this Agreement has been duly
authorized by all necessary action of BATL, and this Agreement constitutes
the
valid and binding obligation of BATL enforceable against it in accordance with
its terms, except as may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting the enforcement of creditors’ rights
generally and subject to general principles to equity (regardless of whether
such enforceability is considered in a proceeding at law or in equity).
2.2.2 Organization
of BATL.
BATL is
a limited liability company duly organized, validly existing and in good
standing under the laws of the State of Delaware, and has the full power and
authority to execute, deliver and perform this Agreement.
2.2.3 Consents
of Third Parties.
The
execution, delivery and performance by BATL of its obligations under this
Agreement will not (i) violate or conflict with the articles of organization
or
operating agreement of BATL, (ii) conflict with, or result in the breach or
termination of, or constitute a default under, any lease, agreement, commitment
or other instrument, or any order judgment or decree, to which BATL is a party
or by which BATL or any of its properties is bound, or (iii) constitute a
violation of any law applicable to BATL. No consent, approval or authorization
of, or designation, declaration or filing with, any governmental authority
or
third part is required on the party of BATL in connection with the execution,
delivery and performance of this Agreement.
2.2.4 Litigation.
There
are no judicial or administrative actions, litigations, arbitrations,
proceedings or investigations pending or threatened that question the validity
of this Agreement or any action taken or to be taken by BATL in connection
with
this Agreement.
8
2.3 Investment
Representations of BATL.
BATL
hereby represents and warrants to the Company as follows:
(a) The
BATL
is an “accredited investor” as defined by Rule 501 under the Securities Act, and
BATL is capable of evaluating the merits and risks of BATL’s investment in the
Company and has the capacity to protect BATL’s own interests.
(b) BATL
understands that except as provided for in the Registration Rights Agreement,
the BATL Shares and the shares underlying the BATL Warrant, have not been,
and
will not be, registered under the Securities Act or the securities laws of
any
state by reason of a specific exemption from the registration provisions of
the
Securities Act and the applicable state securities laws, the availability of
which depends upon, among other things, the bona fide nature of the investment
intent and the accuracy of BATL’s representations as expressed
herein.
(c) BATL
acknowledges and understands that the BATL Shares and BATL Warrant are being
purchased for investment purposes and not with a view to distribution or resale,
nor with the intention of selling, transferring or otherwise disposing of all
or
any part of the BATL Securities for any particular price, or at any particular
time, or upon the happening of any particular event or circumstances, except
selling, transferring, or disposing the BATL Securities made in full compliance
with all applicable provisions of the Securities Act, the rules and regulations
promulgated by the Securities and Exchange Commission (“SEC”) thereunder, and
applicable state securities laws.
(d) BATL
acknowledges that the BATL Securities must be held indefinitely unless
subsequently registered under the Securities Act or unless an exemption from
such registration is available. BATL is aware of the provisions of Rule 144
promulgated under the Securities Act which permit limited resale of securities
purchased in a private placement subject to the satisfaction of certain
conditions, including, among other things, the existence of a public market
for
the securities, the availability of certain current public information about
the
Company, the resale occurring not less than one year after a party has purchased
and paid for the security to be sold, the sale being effected through a
“broker’s transaction” or in transactions directly with a “market maker” and the
number of securities being sold during any three-month period not exceeding
specified limitations.
(e) In
determining whether to make this investment, BATL has relied solely on the
SEC
Filings and the representations and warranties made by the Company pursuant
to
this Agreement. BATL understands that no person has been authorized to give
any
information or to make any representations which were not furnished pursuant
to
this paragraph and BATL has not relied on any other representations or
information.
(f) To
the
extent BATL deems necessary, BATL has reviewed with BATL’s own tax advisors the
federal, state and local tax consequences of this investment and the
transactions contemplated by this Agreement. BATL relies solely on such advisors
and not on any statements or representations of the Company or any of its
agents. BATL understands that BATL (and not the Company) shall be responsible
for BATL’s own tax liability that may arise as a result of this investment or
the transactions contemplated by this Agreement.
(g) BATL
acknowledges that the BATL Securities are speculative and involve a high degree
of risk and that BATL can bear the economic risk of the purchase of the BATL
Securities, including a total loss of its investment.
(h) BATL
recognizes that no federal, state or foreign agency has recommended or endorsed
the purchase of the BATL Securities.
(i) BATL
is
aware that the BATL Shares and BATL Warrant are and will be, when issued,
“restricted securities” as that term is defined in Rule 144 of the general rules
and regulations under the Securities Act.
(j) (A)
BATL
understands that any and all certificates representing the BATL Shares and
BATL
Warrant and any and all securities issued in replacement thereof or in exchange
therefor shall bear the following legend, or one substantially similar thereto,
which BATL has read and understands:
9
“The
securities represented by this certificate have not been registered under the
Securities Act of 1933. The securities have been acquired for investment and
may
not be sold, transferred or assigned in the absence of an effective registration
statement for these securities under the Securities Act of 1933 or an opinion
of
the Company’s counsel that registration is not required under said
Act.”
(B) The
legend endorsed on the certificate pursuant to Section 2.3(j)(A) hereof shall
be
removed and the Company shall issue a certificate without such portion of the
legend to the holder thereof at such time as the securities evidenced thereby
cease to be restricted securities upon the earliest to occur of (i) a
registration statement with respect to the sale of such securities shall have
become effective under the Securities Act and such securities shall have been
disposed of in accordance with such registration statement, (ii) the securities
shall have been sold to the public pursuant to Rule 144 (or any successor
provision) under the Securities Act, and (iii) such securities may be sold
by
the holder without restriction or registration under Rule 144(k) under the
Securities Act (or any successor provision).
(k) Because
of the restrictions imposed on resale, BATL understands that until such time
as
the BATL Securities have been registered under the Securities Act or BATL
demonstrates to the reasonable satisfaction of the Company that such
registration shall no longer be required, the Company shall have the right
to
note stop-transfer instructions in its stock transfer records, and BATL has
been
informed of the Company’s intention to do so.
(l) BATL
acknowledges that it has such knowledge and experience in financial and business
matters that it is capable of evaluating the merits and risks of an investment
in the BATL Securities and of making an informed investment
decision.
10
ARTICLE
THREE
COVENANTS
3.1 Covenants
of the Company.
On and
after the Closing Date, the Company shall comply with each of the following
provisions, any of which may be waived in whole or in part by the written
consent of BATL only to the extent expressly stated thereon.
3.1.1
Election
of Directors.
From
and after the Closing Date, for so long as BATL shall beneficially own (as
determined under Section 13(d) of the Exchange Act and the rules and regulations
promulgated thereunder) in excess of 10% of the outstanding shares of the common
stock of the Company, BATL shall be entitled to nominate one director to the
Board of Directors of the Company. The Company shall take all steps necessary
to
cause such nominee to be elected to the Board effective as of the Closing Date
and re-elected, as applicable, to the Board at each election of the Board of
Directors. In the event of the resignation or inability to serve of any such
nominee, the vacancy thus created shall be filled by a nominee by BATL. If
BATL
shall at any time decline to nominate a director, a representative of BATL
shall
be entitled to attend all meetings of the Board and to be heard thereat, but
not
to vote (provided such representative shall agree in a writing reasonably
satisfactory in form and substance to the Company to protect proprietary or
confidential information of the Company). The failure for any reason by the
Company to provide BATL with the right to place a director on the Board shall
constitute a material breach of this Agreement.
3.1.2 Chief
Executive Officer.
Xxxxxx
Xxxxx shall agree, in form reasonably satisfactory to BATL, to remain as Chief
Executive Officer of the Company for a period of two years from the Closing
Date
on terms and conditions comparable to those under which he presently serves
as
CEO.
3.1.3 Application
of Proceeds.
The
proceeds of the Purchase Price shall be used by the Company as follows: (i)
$1,000,000 to complete the purchase of RubyCat Technologies, provided such
transaction is consummated; (ii) no more than $340,000 to repay certain
outstanding debt of the Company and the Subsidiary; and (iii) the balance for
working capital purposes. No commission, whether in cash or shares of stock
of
the Company, shall be paid or issued to any party in connection with the
transaction contemplated by this Agreement and the Purchase Price paid by BATL.
BATL is hereby granted the irrevocable, unconditional right (the “Put Option”),
exercisable on one occasion only for a period of ninety (90) days following
the
earlier to occur of (i) the termination of any definitive agreement or letter
of
intent in respect of the RubyCat Transaction (as defined below) and (ii) if
the
Ruby Cat Transaction shall not yet have been consummated, ninety (90) days
following the Closing Date (the earlier to occur of such events described in
(i)
and (ii), a “Triggering Event”), to sell to the Company up to 816,667 shares of
Common Stock at a per share purchase price of $1.2245. BATL shall exercise
such
right by delivering a notice (the “Put Notice”) to the Company in accordance
with Section 5.5 hereof specifying the number of shares BATL wished to sell
to
the Company and wire instructions to be used by the Company to transfer the
requisite funds for the purchase of such shares. The Company shall have ten
(10)
business days from the date it receives such notice to pay for the number of
shares specified in the notice. Contemporaneously with the receipt of such
funds, BATL shall deliver certificates for the shares specified in the notice
to
the Company for cancellation. In the event that at the time of such sale BATL
does not hold a certificate for the exact number of shares specified in the
notice, BATL shall deliver to the Company a certificate or certificate(s) for
more than the number of shares specified in the notice and the Company shall
promptly issue to BATL a certificate representing the shares delivered by BATL
in excess of the number of shares specified in the exercise notice. For the
avoidance of doubt, in the event BATL shall fail to provide the Company with
the
Put Notice within ninety (90) days following written notice from the Company
notifying BATL that a Triggering Event has occurred, BATL shall have no further
rights hereunder to exercise the Put Option.
“RubyCat
Transaction” means the proposed acquisition by the Company of Ruby Cat
Technology, LLC, as disclosed in that certain Report on 8-K filed by the Company
with the SEC on October 24, 2005.
3.1.4 Additional
Financings.
For
such period of time commencing with the Closing Date and ending at the earlier
of (i) twenty-four (24) months from the Closing Date, or (ii) the date BATL
ceases to beneficially own (as determined under Section 13(d) of the Exchange
Act and the rules and regulations promulgated thereunder) in excess of 10%
of
the outstanding shares of the capital stock of the Company, the Company will
not, and will cause the Subsidiary not to, effect any equity or debt issuance
or
sale without the prior written consent of BATL other than (i) as a result of
the
exercise or conversion of any currently outstanding security pursuant to its
current terms, (ii) other issuances which are contemplated as set forth in
Schedule 2.1.8 under the heading “Other existing rights which may result in the
issuance of stock of the Company”,
(iii) up
to 250,000 shares for services rendered, and (iv) up to an additional 700,000
shares underlying options granted pursuant to a stock option plan providing
for
an exercise price that is no less than the fair market value of a share of
Common Stock at the time of grant.
3.1.5. Filings.
The
Company undertakes and agrees that it will make all required filings in
connection with the sale of the BATL Shares and BATL Warrant to BATL as required
by United States laws and regulations, or by any domestic securities exchange
or
trading market, and if applicable, the filing of a notice on Form D (at such
time and in such manner as required by the Rules and Regulations of the
Commission), and to provide copies thereof to BATL promptly after such filing
or
filings.
3.1.6. Reporting
Status.
So long
as BATL beneficially owns any of the BATL Securities, the Company shall timely
file all reports required to be filed with the SEC pursuant to Section 13 or
15(d) of the Exchange Act and shall not terminate its status as an issuer
required to file reports under the Exchange Act even if the Exchange Act or
the
rules and regulations thereunder would permit such termination.
3.1.7. Reservation
of Common Stock.
The
Company will at all times have authorized and reserved for the purpose of
issuance a sufficient number of shares of Common Stock to provide for the
conversion of the exercise of the BATL Warrant.
11
ARTICLE
FOUR
INDEMNIFICATION
A. Indemnification
of BATL by the Company.
The
Company hereby agrees to indemnify and hold harmless BATL, its affiliates and
their respective officers, directors, partners, shareholders, employees,
managers and members (collectively, the "Buyer Indemnitees"), from and against
any and all losses, claims, damages, judgments, penalties, liabilities and
deficiencies (collectively, "Losses"), and agrees to reimburse the Buyer
Indemnitees for all out-of-pocket expenses (including the reasonable fees and
expenses of legal counsel), in each case promptly as incurred by the Buyer
Indemnitees and to the extent arising out of or in connection with:
1.
any
misrepresentation, omission of fact or breach of any of the Company's
representations or warranties contained in this Agreement, the annexes,
schedules or exhibits hereto or any instrument, agreement or certificate entered
into or delivered by the Company pursuant to this Agreement; or
2.
any
failure by the Company to perform any of its covenants, agreements, undertakings
or obligations set forth in this Agreement, the annexes, schedules or exhibits
hereto or any instru¬ment, agreement or certificate entered into or delivered by
the Company pursuant to this Agreement.
B. Indemnification
of the Company by BATL.
BATL
hereby agrees to indemnify and hold harmless the Company, its affiliates and
their respective officers, directors, partners and members (collectively, the
"Company Indemnitees"), from and against any and all Losses, and agrees to
reimburse the Company Indemnitees for all out-of-pocket expenses (including
the
reasonable fees and expenses of legal counsel), to the extent arising out of
or
in connection with any breach of any of BATL’s representations or warranties
contained in this Agreement, the annexes, schedules or exhibits hereto or any
instrument, agreement or certificate entered into or delivered by BATL pursuant
to this Agreement.
C. Third
Party Claims.
Promptly after receipt by either party hereto seeking indemnification pursuant
to this Article 4 (an "Indemnified Party") of written notice of any
investigation, claim, proceeding or other action in respect of which
indemnification is being sought (each, a "Claim"), the Indemnified Party
promptly shall notify the party against whom indemnification pursuant to this
Article 4 is being sought (the "Indemnifying Party") of the commencement
thereof; but the omission to so notify the Indemnifying Party shall not relieve
it from any liability that it otherwise may have to the Indemnified Party,
except to the extent that the Indemnifying Party is materially prejudiced and
forfeits substantive rights and defenses by reason of such failure. In
connection with any Claim as to which both the Indemnifying Party and the
Indemnified Party are parties, the Indemnifying Party shall be entitled to
assume the defense thereof. Notwithstanding the assumption of the defense of
any
Claim by the Indemnifying Party, the Indemnified Party shall have the right
to
employ separate legal counsel and to participate in the defense of such Claim,
and the Indemnifying Party shall bear the reasonable fees, out-of-pocket costs
and expenses of such separate legal counsel to the Indemnified Party if (and
only if): (x) the Indemnifying Party shall have agreed to pay such fees,
out-of-pocket costs and expenses, (y) the Indemnified Party and the Indemnifying
Party reasonably shall have concluded that representation of the Indemnified
Party by the Indemnifying Party by the same legal counsel would not be
appropriate due to actual or, as reasonably determined by legal counsel to
the
Indemnified Party, potentially differing interests between such parties in
the
conduct of the defense of such Claim, or if there may be legal defenses
available to the Indemnified Party that are in addition to or disparate from
those available to the Indemnifying Party, or (z) the Indemnifying Party shall
have failed to employ legal counsel reasonably satisfactory to the Indemnified
Party within a reasonable period of time after notice of the commencement of
such Claim. If the Indemnified Party employs separate legal counsel in
circumstances other than as described in clauses (x), (y) or (z) above, the
fees, costs and expenses of such legal counsel shall be borne exclusively by
the
Indemnified Party. Except as provided above, the Indemnifying Party shall not,
in connection with any Claim in the same jurisdiction, be liable for the fees
and expenses of more than one firm of legal counsel for the Indemnified Party
(together with appropriate local counsel). The Indemnifying Party shall not,
without the prior written consent of the Indemnified Party (which consent shall
not unreasonably be withheld), settle or compromise any Claim or consent to
the
entry of any judgment that does not include an unconditional release of the
Indemnified Party from all liabilities with respect to such Claim or
judgment.
D. Other
Claims.
In
the
event one party hereunder should have a claim for indemnification that does
not
involve a claim or demand being asserted by a third party, the Indemnified
Party
promptly shall deliver notice of such claim to the Indemnifying Party. If the
Indemnified Party disputes the claim, such dispute shall be resolved by mutual
agreement of the Indemnified Party and the Indemnifying Party or by binding
arbitration conducted in accordance with the procedures and rules of the
American Arbitration Association. Judgment upon any award rendered by any
arbitrators may be entered in any court having competent jurisdiction
thereof.
12
ARTICLE
FIVE
MISCELLANEOUS
5.1 Modification.
This
Agreement, the Registration Rights Agreement and the BATL Warrant Certificate
set forth the entire understanding of the parties hereto with respect to the
subject matter hereof, merges and supersedes all existing agreements between
them concerning such subject matter, and may only be altered or amended by
a
written instrument duly executed by the party against whom such alteration
or
amendment is sought to be enforced.
5.2 Counterparts.
This
Agreement may be executed through the use of separate signature pages or in
any
number of counterparts, and each of such counterparts shall, for all purposes,
constitute one agreement binding on all the parties, notwithstanding that all
parties are not signatories to the same counterpart.
5.3 Binding
Effect and No Assignment.
Except
as otherwise provided herein, this Agreement shall be binding upon and inure
to
the benefit of the parties and their heirs, executors, administrators,
successors, legal representatives and permitted assigns. Neither party shall
assign this Agreement or its rights and obligations under this Agreement without
the prior written consent of the other party, which consent shall not be
unreasonably withheld, delayed or conditioned.
5.4 Governing
Law and Consent To Jurisdiction.
This
Agreement shall be governed and construed under the laws of the State of New
York and, without limiting the applicability or effectiveness of the arbitration
clause herein, the parties hereto consent to the jurisdiction of the State
and
Federal courts having jurisdiction over matters arising in New York County,
New
York.
5.5 Notice.
All
notices or other communications given or made pursuant hereto shall be in
writing and shall be deemed to have been duly given or made if and when
delivered personally or by overnight courier to the parties at the following
addresses, or sent by electronic transmission, with confirmation of receipt,
to
the telecopy numbers specified below: (or at such other address or telecopy
number for the party as shall be specified by like notice):
If
to the
Company:
EnerTeck
Corporation
00000
Xxxxxxxxx Xxxxx
Xxxxx
000
Xxxxxxxx,
Xxxxx 00000
Attention:
Xxxxxx Xxxxx
Telecopier
No.: (000) 000-0000
With
a
copy to:
Danzig
Xxxx Xxxxxx Xxxxx & Xxx, LLP
00X
Xxxxxxxx Xxxx, Xxxxx 000
Xxxxxxx
Xxxx, Xxx Xxxxxx 00000
Attn:
Xxxxx X. Xxxx, Esq.
Telecopier
No.: (000) 000-0000
If
to
BATL:
BATL
BioEnergy LLC
0
Xxxxxxxx Xxxxx
Xxx,
Xxx
Xxxx 00000
Attn:
Xxxxxx Xxxxxx
Telecopier
No.: (000) 000-0000
With
a
copy to:
Xxxxxx
Xxxxxx Xxxxxxxx LLP
000
Xxxxxxx Xxxxxx
Xxx
Xxxx,
Xxx Xxxx 00000
Attention:
Elliot Press, Esq.
Telecopier
No: (000) 000-0000
13
5.6 Severability.
If any
provision of this Agreement is held to be illegal, invalid or unenforceable
under present or future laws effective during the term hereof, such provision
shall be fully severable and this Agreement shall be construed and enforced
as
if such illegal, invalid or unenforceable provision never comprised a part
hereof; and the remaining provisions hereof shall remain in full force and
effect and shall not be affected by the illegal, invalid or unenforceable
provision or by its severance hereof.
5.7 Waiver.
No
waiver by any party, whether express or implied, of any provision of this
Agreement, or of any breach or default, shall constitute a waiver of a breach
of
a similar or dissimilar provision or condition at the same time or any prior
or
subsequent time.
5.8 Opportunity
to Consult with Counsel.
Each
of
the parties hereto represents, Warrant and covenants that it has had ample
opportunity to consider entering into this Agreement and has had an opportunity
to consult with counsel regarding this Agreement prior to executing the same.
The parties further agree that any rule that provides that an ambiguity within
a
document will be interpreted against the party drafting such document shall
not
apply.
5.9 Brokers.
The
Company and the BATL represent and warrant to each other that they have not
employed or dealt with any broker in connection with any transactions
contemplated by this Agreement and shall save each other harmless from any
and
all claims at any time hereafter made for brokers’ or finders’ fees or
commissions, which claim or claims arise out of any agreement alleged to have
been made by any of them.
5.10 Headings.
The
headings in this Agreement are solely for convenience of reference and shall
be
given no effect in the construction or interpretation of this
Agreement.
5.11 Survival.
The
agreement, covenants, representations and warranties contained in this Agreement
shall survive the execution of this Agreement and the delivery of the BATL
Securities hereunder indefinitely.
5.12
Arbitration. Any
dispute, controversy or claim arising out of or relating to this Agreement
or
the breach thereof (including, any claim based upon a state or federal statute)
will be settled by arbitration, before three arbitrator(s) in accordance with
the Commercial Rules of the American Arbitration Association then in effect
and
judgment upon the award rendered by the arbitrator(s) may be entered in any
court having jurisdiction. The arbitrator(s) will be selected by the parties,
from a panel of attorney arbitrators experienced with the securities industry.
Any arbitration shall be held in New York, New York. Either party hereto may
request that any decision of the arbitrator be a reasoned decision and set
forth
the findings of fact and conclusions of law upon which the award is based.
Either party may request that the arbitrator will honor claims of privilege
recognized under applicable law and will use best efforts to protect
confidential information (including, issuing the protective order). The parties
shall share equally the costs of the arbitration and each party shall bear
its
own attorneys’ fees. Either party, before or during or after any arbitration,
may apply to a court having jurisdiction for a temporary, provisional or
permanent restraining order or injunction relief to protect its interests.
Neither party nor their representatives nor the arbitrator(s) may disclose
the
existence or results of any arbitration hereunder, without the express prior
written consent of all parties, except that either party may disclose an
arbitration award to confirm it or enforce it or to the extent required by
law.
Prior to initiation of arbitration, the aggrieved party will give the other
party written notice, in accordance with this Agreement, describing the claim
and amount as to which it intends to initiate arbitration. Any service of
process shall be served on the other party pursuant to this Agreement or as
otherwise permitted under applicable law.
[remainder
of page intentionally left blank]
14
IN
WITNESS WHEREOF,
the
parties have executed this Agreement as of the day and year first above
written.
ENERTECK
CORPORATION
By:
/s/
Xxxxxx Xxxxx
Name: Xxxxxx
Xxxxx
Title: Chief
Executive Officer
BATL
BIOENERGY LLC
By:
/s/
Xxxxxx Xxxxxx
Name: Xxxxxx
Xxxxxx
Title: President
15
