AGREEMENT
This Agreement is dated as of ____________________, 1996, by and among
ECOLOGY PURE AIR INTERNATIONAL, INC., a Delaware corporation (the "Company") and
the undersigned holder of securities of the Company (the "Holder").
W I T N E S S E T H:
WHEREAS, on November 17, 1995, through a series of transactions, the
Company secured the worldwide manufacturing and marketing rights (exclusive of
Canada) to the technologies and products relating to the Combustion Efficiency
Management Catalyst ("C.E.M. Catalyst") and the Company entered into a Plan of
Arrangement to acquire the company that has the Canadian marketing rights to the
C.E.M. Catalyst (collectively, the transactions and the Plan of Arrangement,
although it remains subject to completion, shall be hereinafter referred to as
the "Acquisition Transactions");
WHEREAS, the Holder was instrumental in arranging and assisting the Company
in the Acquisition Transactions and in connection therewith, has received and is
entitled to receive certain shares of the Company's Common Stock ("Restricted
Stock") upon exercise of the Common Stock Purchase Warrants ("Warrants");
WHEREAS, in consideration for the return of the Warrants to the Company,
the Company has agreed to use its best efforts to register for resale the shares
of Restricted Stock as set forth herein; and
WHEREAS, in connection with the registration of the Restricted Stock the
Holder has agreed to certain "lock-up" provisions as set froth below in
connection with the resale of the Restricted Stock, as set forth herein.
NOW, THEREFORE, the parties hereto agree as follows:
1. DEFINITIONS.
(a) "Agreement" shall mean this Agreement between the Company and the
Holder.
(b) "Company" shall mean Ecology Pure Air International, Inc.
(c) "Holder" shall mean the Holder of Warrants who has received or has
the right to receive, shares of the Company's Common Stock directly and upon
exercise of the Warrants.
(d) "Restricted Stock" shall mean the Common Stock of the Company that
has been or may be issued to the Holder directly or upon exercise of the
Warrants.
(e) "Securities Act" shall mean the Securities Act of 1933, as
amended, or any similar or successor federal statute, and the rules and
regulations of the SEC thereunder, all as the same shall be in effect at any
relevant time.
(f) "SEC" shall mean the United States Securities and Exchange
Commission.
2. MANDATORY REGISTRATION RIGHTS.
(a) During the first quarter of calendar year 1997, but in no event
later than March 31, 1997, the Company agrees to use its best efforts to file a
registration statement with the SEC for the purpose of registering for resale
the Restricted Stock. Resale of the Restricted Stock, however, shall be subject
to the limitations set forth in Paragraph 3 below.
(b) The Company's obligation in Subparagraph 2(a) above shall extend
only to the inclusion of the shares of Restricted Stock in a registration
statement, and not as to the determination of the manner of disposition. Nothing
contained within this Agreement shall be deemed to be an assurance as to the
liquidity of the Restricted Stock.
3. LOCK-UP OF RESTRICTED STOCK.
(a) Without the prior written consent of the Company, the Holder
hereby agrees that it will not in an open market or public transaction, directly
or indirectly, offer, sell, offer to sell, contract to sell, pledge, grant any
option to purchase or otherwise sell or dispose (or announce any offer, sale,
offer of sale, contract of sale, pledge, grant of any option to purchase or
other sale or disposition) (collectively, "Dispose") of any shares of Restricted
Stock for a period commencing upon the execution of this Agreement and ending
May 31, 1997 thereafter ("Lock-Up Period").
(b) For the period commencing June 1, 1997 and ending May 31, 1998
("Disposal Period"), the Holder shall be allowed to Dispose of such shares of
Restricted Stock in an amount equal to 50,000 shares for each of the succeeding
months during the Disposal Period. For purposes of disposition, the shares of
Restricted Stock the Holder is allowed to Dispose of shall accumulate during the
Disposal Period, such that, should less than the maximum number of Restricted
Stock be sold during any month during the Disposal Period, the unsold permitted
number of Restricted Stock will carry forward to the next succeeding month
during the Disposal Period. Additionally, if the registration statement filed
pursuant to Paragraph 2 has not been declared effective upon commencement of the
Disposal Period, then Holder's rights to Dispose of the Restricted Stock during
the Disposal Period shall accumulate until such time as the registration
Statement is declared effective by the SEC.
(c) Upon the termination of the Disposal Period, Holder shall have no
restrictions upon disposition of any shares of Restricted Stock then held by
Holder that are registered in the registration statement filed pursuant to
Paragraph 2 herein.
(d) If the Holder conveys the Restricted Stock to another party, i.e
in a private transaction(s), then Holder shall require the acquiror of the
conveyed shares in said private
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transaction(s) to adhere to the provisions and terms of this Agreement as if
such acquiror were an original party to this Agreement.
4. RETURN OF WARRANTS.
In consideration for the registration rights granted pursuant to
Paragraph 2 herein, Holder hereby agreed to waive any and all rights to, and
return to the Company, the Warrants received in connection with the Acquisition
Transactions. Holder shall execute any and all documentation as may be required
by the Company to evidence the return of such Warrants to the Company.
5. INDEMNIFICATION.
The Company has agreed to indemnify and hold harmless each Holder from
and against any and all losses, claims, damages and liabilities caused by any
untrue statement or alleged untrue statement of a material fact contained in any
registration statement or prospectus relating to the Restricted Stock, except
insofar as such losses, claims, damages or liabilities are caused by any such
untrue statement or are otherwise based upon information furnished to the
Company by such Holder or on such Holder's behalf for use therein; provided,
however, that the foregoing indemnity agreement with respect to such prospectus
shall not inure to the benefit of such Holder from whom the person asserting any
such loss, claim, damage or liability purchased the Restricted Stock if it is
determined that it was the responsibility of such Holder to provide such person
with a current copy of the prospectus and such current copy of the prospectus
would have cured the defect giving rise to such loss, claim, damage or
liability.
6. REGISTRATION PROCEDURES.
If and whenever the Company effects the registration of any of the
Restricted Stock pursuant to Paragraph 2 under the Securities Act, the Company
will use its best efforts to:
(a) Prepare and file with the SEC a registration statement with
respect to such securities and use its best efforts to cause such registration
statement to become and remain effective for the period of the distribution
contemplated thereby or as required under the Securities Act.
(b) Prepare and file with the SEC such amendments and supplements to
such registration statement and the prospectus used in connection therewith as
may be necessary to keep such registration statement effective for the period
specified in Subparagraph 6(a) above and as necessary to comply with the
provisions of the Securities Act with respect to the disposition of all
Restricted Stock covered by such registration statement in accordance with the
sellers' intended method of disposition set forth in such registration statement
for such period.
(c) Furnish to each seller and to each underwriter such number of
copies of the registration statement and the prospectus included therein
(including each preliminary prospectus), as such persons may reasonably request
in order to facilitate the public sale or other disposition of the Restricted
Stock covered by such registration statement.
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(d) Use its best efforts to register or qualify the Restricted Stock
covered by such registration statement under the securities or blue sky laws of
such jurisdictions as the sellers, or, in the case of an underwritten public
offering, the managing underwriter shall reasonably request; provided, however,
that the Company shall not for any such purpose be required to qualify generally
to transact business as a foreign corporation in any jurisdiction where it is
not so qualified or to consent to general service of process in any such
jurisdiction.
(e) Immediately notify each seller under such registration statement
and each underwriter, at any time when a prospectus relating thereto is required
to be delivered under the Securities Act, of the happening of any event as a
result of which the prospectus contained in such registration statement, as then
in effect, includes an untrue statement of a material fact or omits to state any
material fact required or necessary to be stated therein in order to make the
statements contained therein not misleading in light of the circumstances then
existing.
(f) Make available for inspection by each seller, any underwriter
participating in any disposition pursuant to such registration statement, and
any attorney, accountant or other agent retained by any such seller or
underwriter, all financial and other records, pertinent corporate documents and
properties of the Company, and cause the Company's officers, directors and
employees to supply all information reasonably requested by any such seller,
underwriter, attorney, accountant or agent in connection with such registration
statement.
(g) For purposes of Subparagraphs 6(a) and 6(b) above, the period of
distribution of Restricted Stock shall be deemed to extend for nine months (120
days in the case of registration on Form S-3) or such earlier date as (A) in an
underwritten public offering, each underwriter has completed the distribution of
all securities purchased by it; and (B) in any other registration, all shares of
Restricted Stock covered thereby shall have been sold.
(h) If the Common Stock of the Company is listed on any securities
exchange or automated quotation system, the Company shall list (with the listing
application being made at the time of the filing of such registration statement
or as soon thereafter as is reasonably practicable) the Restricted Stock covered
by such registration statement on such exchange or automated quotation system.
7. EXPENSES.
(a) For the purposes of this Paragraph 7, the term "Registration
Expenses" shall mean: all expenses incurred by the Company in complying with
Paragraph 2 of this Agreement, including, without limitation, all registration
and filing fees, printing expenses, fees and disbursements of counsel and
independent public accountants for the Company (other than the expenses of any
special audit as described below), fees of the National Association of
Securities Dealers, Inc. ("NASD"), fees and expenses of listing shares of
Restricted Stock on any securities exchange or automated quotation system on
which the Company's shares are listed and fees of transfer agents and
registrars. The term "Selling Expenses" shall mean: all underwriting discounts
and selling commissions applicable to the sale of Restricted Stock, and all
accountable or non-accountable expenses paid to any underwriter in respect of
the sale of Restricted Stock.
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(b) Except as otherwise provided herein, the Company will pay all
Registration Expenses in connection with the registration statement filed
pursuant to Paragraph 2 of this Agreement. All Selling Expenses in connection
with any registration statement filed pursuant to Paragraph 2 of this Agreement
shall be borne by the participating sellers in proportion to the number of
shares sold by each, or by such persons other than the Company (except to the
extent the Company shall be a seller) as they may agree.
8. OBLIGATIONS OF HOLDER.
(a) In connection with each registration hereunder, each selling
Holder will furnish to the Company in writing such information with respect to
such seller and the securities held by such seller, and the proposed
distribution by them as shall be reasonably requested by the Company in order to
assure compliance with federal and applicable state securities laws, as a
condition precedent to including such seller's Restricted Stock in the
registration statement. Each selling Holder also shall agree to promptly notify
the Company of any changes in such information included in the registration
statement or prospectus as a result of which there is an untrue statement of
material fact or an omission to state any material fact required or necessary to
be stated therein in order to make the statements contained therein not
misleading in light of the circumstances then existing.
(b) In connection with each registration pursuant to Paragraph 2 of
this Agreement, the Holders included therein will not effect sales thereof until
notified by the Company of the effectiveness of the registration statement, and
thereafter will suspend such sales after receipt of telegraphic or written
notice from the Company to suspend sales to permit the Company to correct or
update a registration statement or prospectus. At the end of any period during
which the Company is obligated to keep a registration statement current, the
Holders included in said registration statement shall discontinue sales of
shares pursuant to such registration statement upon receipt of notice from the
Company of its intention to remove from registration the shares covered by such
registration statement which remain unsold, and such Holders shall notify the
Company of the number of shares registered which remain unsold immediately upon
receipt of such notice from the Company.
9. MISCELLANEOUS PROVISIONS.
(a) Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Delaware without regard to that
state's conflict of laws provisions.
(b) Counterparts. This Agreement may be signed in counterparts, each
of which shall be an original, with the same effect as if the signatures thereto
and hereto were upon the same instrument.
(c) Amendments and Waivers. Except as otherwise provided herein, the
provisions of this Agreement may not be amended, modified or supplemented, and
waivers or consents to departures from the provisions hereof may not be given
without the written consent of the Company and the Holders.
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(d) Notices. All communications under this Agreement shall be
sufficiently given if delivered by hand or by overnight courier or mailed by
registered or certified mail, postage prepaid, addressed,
(i) if to the Company, to:
Ecology Pure Air International, Inc.
00 Xxxxxxxxxxx Xxxxx
Xxxxx 0000
Xxx Xxxx, XX 00000
Attention: Xxxxxxxx Xxxxxx
with a copy to:
Xxxxxxx X. Xxxxx, Esquire
Xxxxxxxx Xxxxxxxxx Professional Corporation
1200 Two Xxxxx Square
00xx xxx Xxxx Xxxxxxx
Xxxxxxxxxxxx, XX 00000
or, in the case of the Holders, at such address as each such Holder shall have
furnished in writing to the Company; or at such other address as any of the
parties shall have furnished in writing to the other parties hereto.
(e) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(f) Entire Agreement; Survival; Termination. This Agreement is
intended by the parties as a final expression of their agreement and intended to
be a complete and exclusive statement of the agreement and understanding of the
parties hereto in respect of the subject matter contained herein. There are no
restrictions, promises, warranties or undertakings, other than those set forth
or referred to herein. This Agreement supersedes all prior agreements and
understandings of any kind between the parties with respect to such subject
matter, including any and all prior Registration Rights Agreements.
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IN WITNESS WHEREOF, intending to be legally bound hereby, the parties have
executed this Agreement as of the date first written above.
ECOLOGY PURE AIR INTERNATIONAL, INC.
By:_____________________________________
Xxxxxxxx Xxxxxx
Chief Executive Officer
HOLDER
By:_____________________________________
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