REGISTRATION RIGHTS AGREEMENT
AGREEMENT dated as of the [ ] day of March, 2010, between the person
whose name appears below (the "INVESTOR"), and Environmental Solutions Worldwide
Inc., a Florida corporation having its principal executive office at 000 Xxxxxx
Xxxxxxxx, Xxxxxxx, X0X 0X0 Xxxxxx (the "COMPANY").
WHEREAS, the Company has issued and sold certain Debentures convertible
into shares of Common Stock of the Company, par value $0.001 (the "COMMON
STOCK"), pursuant to a Securities Subscription Agreement, dated as of March [ ],
2010 (the "SUBSCRIPTION AGREEMENT"), between the Investor and the Company.
WHEREAS, the Company desires to grant to the Investor the registration
rights set forth herein with respect to the shares of Common Stock issuable upon
conversion of the Debentures
NOW, THEREFORE, the parties hereto mutually agree as follows:
1. REGISTRABLE SECURITIES. As used herein the term "REGISTRABLE SECURITY" means
any shares of Common Stock (i) issued or issuable in connection with the
conversion, of any Debentures issued to the Investor pursuant to the
Subscription Agreement dated March [ ], 2010; PROVIDED, HOWEVER, that with
respect to any particular Registrable Security, such security shall cease to be
a Registrable Security when, as of the date of determination, (i) it has been
effectively registered under the Securities Act of 1933, as amended (the
"SECURITIES ACT"), and disposed of pursuant thereto, or (ii) registration under
the Securities Act is no longer required by the Investor for the distribution or
disposition of all of the Registrable Securities beneficially owned by the
Investor. The term "REGISTRABLE SECURITIES" means any and/or all of the
securities falling within the foregoing definition of a "Registrable Security."
2. REGISTRATION. The Company covenants and agrees:
(a) To use its best efforts to file a registration statement (a "REGISTRATION
STATEMENT") with the Securities and Exchange Commission (the "COMMISSION")
within 180 days of the closing date of the transactions contemplated by the
Subscription Agreement in order to register the resale of the Registrable
Securities under the Securities Act. Once effective, the Company will be
required to maintain the effectiveness of the Registration Statement until the
earlier of (i) the date that all of the Registrable Securities have been sold,
or (ii) the date that the Company receives an opinion of counsel to the Investor
that all of the Registrable Securities may be freely distributed, sold or
otherwise disposed of without registration under the Securities Act pursuant to
Rule 144 (or any similar provision then in force) promulgated under the
Securities Act.
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(b) If, after the effective date of this Agreement (but
without any obligation to do so) and until such time as the Registerable
Securities may be sold without registration pursuant to Rule 144 of the
Securities Act , the Company proposes to register (including for this purpose a
registration effected by the Company for persons other than the Investor) any of
its securities under the Securities Act in connection with the public offering
of such securities (other than a registration with respect to an employee
benefit plan), the Company shall, each such time, promptly give the Investor
written notice of such registration. Upon the written request of the Investor
given within twenty (20) business days after delivery of such written notice by
the Company to Investor, the Company shall, subject to the provisions hereof,
use its reasonable efforts to cause to be registered under the Securities Act
all of the Registrable Securities that the Investor has requested to be
registered. If an Investor decides not to include all of its Registrable
Securities in any registration statement thereafter filed by the Company, such
Investor shall nevertheless continue to have the right to include any
Registrable Securities in any subsequent registration statement or registration
statements as may be filed by the Company with respect to offerings of its
securities, all upon the terms and conditions set forth herein.
3. COVENANTS OF THE COMPANY WITH RESPECT TO REGISTRATION.
The Company covenants and agrees as follows:
(a) In connection with any registration filed pursuant hereto, the Company shall
use its best efforts to cause the Registration Statement to become effective as
promptly as possible. Following the effective date of a Registration Statement,
the Company shall, upon the request of the Investor, forthwith supply such
reasonable number of copies of the Registration Statement (including, without
limitation, the exhibits and schedules thereto), preliminary prospectus and
prospectus meeting the requirements of the Securities Act (including, without
limitation, any and all amendments or supplements thereto), and other documents
necessary or incidental to the public offering of the Registrable Securities, as
shall be reasonably requested by the Investor to permit the Investor to sell,
distribute or otherwise dispose of the Investor's Registrable Securities. The
obligations of the Company hereunder with respect to the Investor's beneficially
owned Registrable Securities are subject to the Investor's furnishing to the
Company such appropriate information concerning the Investor, the Investor's
Registrable Securities and the terms of the Investor's offering of such
Registrable Securities as the Company may reasonably request in writing.
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(b) The Company shall provide the Investor, any underwriter participating in any
disposition pursuant to a Registration Statement, and any attorney, accountant
or other agent retained by the Investor or underwriter (each, an "INSPECTOR"
and, collectively, the "INSPECTORS"), the opportunity to review and comment
(including reviewing and commenting on relevant documents and agreements) in the
preparation of such Registration Statement, each prospectus included therein or
filed with the Commission and each amendment or supplement thereto.
(c) For a reasonable period prior to the filing of any Registration Statement
pursuant to this Agreement, the Company shall make available for inspection at
the Company's offices and copying by the Inspectors such financial and other
information and books and records, pertinent corporate documents and properties
of the Company and its subsidiaries and cause the officers, directors,
employees, counsel and independent certified public accountants of the Company
and its subsidiaries to respond to such inquiries and to supply all information
reasonably requested by any such Inspector in connection with such Registration
Statement, as shall be reasonably necessary, in the judgment of the respective
counsel, to conduct a reasonable investigation within the meaning of the
Securities Act.
(d) The Company shall promptly notify in writing the Investor, the sales or
placement agent, if any, therefor and the managing underwriter of the securities
being sold, (i) when such Registration Statement or the prospectus included
therein or any prospectus amendment or supplement or post-effective amendment
has been filed, and, with respect to any such Registration Statement or any
post-effective amendment, when the same has become effective, (ii) when the
Commission notifies the Company whether there will be a "review" of such
Registration Statement, (iii) of any comments (oral or written) by the
Commission and by the blue sky or securities commissioner or regulator of any
state with respect thereto or (iv) of any request by the Commission for any
amendments or supplements to such Registration Statement or the prospectus or
for additional information.
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(e) The Company shall promptly notify in writing the Investor, the sales or
placement agent, if any, therefor and the managing underwriter of the securities
being sold pursuant to any Registration Statement at any time when a prospectus
relating thereto is required to be delivered under the Securities Act upon
discovery that, or upon the happening of any event as a result of which, any
prospectus included in such Registration Statement (or amendment or supplement
thereto) contains an untrue statement of a material fact or omits to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading in light of the circumstances under which they were made,
and the Company shall promptly prepare a supplement or amendment to such
prospectus and file it with the Commission promptly following notice of the
occurrence of such event to the Investor, the sales or placement agent and the
managing underwriter so that after delivery of such prospectus, as so amended or
supplemented, to the purchasers of such Registrable Securities, such prospectus,
as so amended or supplemented, shall not contain an untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein not misleading in light of the
circumstances under which they were made.
(f) The Company shall promptly notify in writing the Investor, the sales or
placement agent, if any, therefor and the managing underwriter of the securities
being sold of the issuance by the Commission of (i) any stop order issued or
threatened to be issued by the Commission or (ii) any notification with respect
to the suspension of the qualification or exemption from qualification of any of
the Registrable Securities for sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose and the Company agrees to use its
commercially reasonable efforts to (x) prevent the issuance of any such stop
order, and in the event of such issuance, to obtain the withdrawal of any such
stop order and (y) obtain the withdrawal of any order suspending or preventing
the use of any related prospectus or suspending the qualification of any
Registrable Securities included in such Registration Statement for sale in any
jurisdiction at the earliest practicable date.
(g) The Company shall prepare and file with the Commission such amendments,
including post-effective amendments to each Registration Statement as may be
necessary to keep such Registration Statement continuously effective for the
applicable time period required hereunder and, if applicable, file any
Registration Statements pursuant to Rule 462(b) (or any similar provision then
in force) under the Securities Act; cause the related prospectus to be
supplemented by any required prospectus supplement, and as so supplemented to be
filed pursuant to Rule 424 (or any similar provisions then in force) promulgated
under the Securities Act; and comply with the provisions of the Securities Act
and the Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT"), with
respect to the disposition of all securities covered by such Registration
Statement during such period in accordance with the intended methods of
disposition by the sellers thereof set forth in such Registration Statement as
so amended or in such prospectus as so supplemented. If the Investor so
requests, the Company shall accelerate effectiveness of the Registration
Statement from the Commission and any post-effective amendments thereto, if any
are filed. If the Company wishes to further amend the Registration Statement
prior to requesting acceleration, it shall have five (5) days to so amend prior
to requesting acceleration.
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(h) The Company shall pay all costs, fees and expenses in connection with all
Registration Statements filed pursuant to Section 2 hereof including, without
limitation, the Company's legal and accounting fees, printing expenses, and blue
sky fees and expenses; PROVIDED, HOWEVER, that the Investor shall be solely
responsible for the fees of any counsel retained by the Investor in connection
with such registration and any transfer taxes or underwriting discounts,
commissions or fees applicable to the Registrable Securities sold by the
Investor pursuant thereto.
(i) The Company will take all necessary action which may be required in
qualifying or registering the Registrable Securities included in a Registration
Statement for offering and sale under the securities or blue sky laws of such
states as are reasonably requested by the Investors of such securities;
PROVIDED, that the Company shall not be obligated to qualify as a foreign
corporation to do business under the laws of any such jurisdiction.
(j) The Company shall cooperate with the Investor to facilitate the timely
preparation and delivery of certificates representing the securities to be sold
pursuant to the Registration Statement free of any restrictive legends and in
such denominations and registered in such names as the Investor may request a
reasonable period of time prior to sales of the securities pursuant to such
Registration Statement.
(k) The Company agrees generally to cooperate with the Investor in effecting
compliant resale of the Registrable Securities, including comfort and other
customary broker agreements and documentations and certificates.
4. ADDITIONAL TERMS.
(a) To the extent permitted by law, the Company will indemnify and hold harmless
the Investor, its agents, trustees and beneficiaries, partners or officers,
directors and shareholders of the Investor, legal counsel and accountants for
the Investor, and each person who controls the Investor within the meaning of
the Securities Act or the Exchange Act, against any losses, claims, damages or
liabilities (joint or several) to which they may become subject under the
Securities Act, the Exchange Act, any state securities laws or other laws,
insofar as such losses, claims, damages, or liabilities (or actions in respect
thereof) arise out of or are based upon any of the following statements,
omissions or violations (collectively a "VIOLATION"): (i) any untrue statement
or alleged untrue statement of a material fact contained in such Registration
Statement, including any preliminary prospectus or final prospectus contained
therein or any amendments or supplements thereto, (ii) the omission or alleged
omission to state therein a material fact required to be stated therein, or
necessary to make the statements therein not misleading, or (iii) any Violation
or alleged Violation by the Company of the Securities Act, the Exchange Act, any
state securities laws or other laws or any rule or regulation promulgated under
the Securities Act, the Exchange Act or any state securities laws; and the
Company will reimburse the indemnified party under this Section 4(a), for any
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reasonable legal or other expenses reasonably incurred by it in connection with
investigating or defending any such loss, claim, damage, liability or action;
PROVIDED, HOWEVER, that the indemnity described herein shall not apply any loss,
claim, damage, liability or action to the extent that it arises out of or is
based upon a Violation that occurs in reliance upon and in conformity with
written information furnished by the Investor (or any agent of the Investor)
expressly for use in connection with such registration by the Investor; PROVIDED
FURTHER, HOWEVER, that the foregoing indemnity agreement with respect to any
preliminary prospectus shall not inure to the benefit of the Investor, from whom
the person asserting any such losses, claims, damages or liabilities purchased
shares in the offering, if a copy of the prospectus (as then amended or
supplemented if the Company shall have furnished any amendments or supplements
thereto) was not sent or given by or on behalf of such Investor to such person,
if required by law so to have been delivered, at or prior to the written
confirmation of the sale of the shares to such person, and if the prospectus (as
so amended or supplemented) would have cured the defect giving rise to such
loss, claim, damage or liability.
(b) To the extent permitted by law, the Investor will severally, and not
jointly, indemnify and hold harmless the Company, each of its directors, each of
its officers who has signed the registration statement, each person, if any, who
controls the Company within the meaning of the Securities Act or the Exchange
Act and legal counsel and accountants for the Company, against any losses,
claims, damages or liabilities to which any of the foregoing persons may become
subject, under the Securities Act, the Exchange Act or any state securities
laws, insofar as such losses, claims, damages or liabilities (or actions in
respect thereto) arise out of or are based upon any Violation, in each case to
the extent (and only to the extent) that such Violation occurs in reliance upon
and in conformity with written information specifically furnished by the
Investor expressly for use in connection with such registration which consists
solely of the information specified in Section 4(d); and the Investor will
reimburse any person intended to be indemnified pursuant to the foregoing, for
any legal or other expenses reasonably incurred by such person in connection
with investigating or defending any such loss, claim, damage, liability or
action; PROVIDED, HOWEVER, that the indemnity obligation of the Investor
hereunder shall not in any event exceed the net proceeds received by the
Investor from the offering giving rise to such liability.
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(c) Promptly after receipt by an indemnified party of notice of the commencement
of any action (including any governmental action), such indemnified party will,
if a claim in respect thereof is to be made against any indemnifying party will
deliver to the indemnifying party a written notice of the commencement thereof
and the indemnifying party shall have the right to participate in, and, to the
extent the indemnifying party so desires, jointly with any other indemnifying
party similarly noticed, to assume the defense thereof with counsel reasonably
satisfactory to each party; PROVIDED, HOWEVER, that an indemnified party
(together with all other indemnified parties that may be represented without
conflict by one counsel) shall have the right to retain one separate counsel,
with the reasonable fees and expenses to be paid by the indemnifying party, if
representation of such indemnified party by the counsel retained by the
indemnifying party would be inappropriate due to actual or potential differing
interests between such indemnified party and any other party represented by such
counsel in such proceeding. The failure to deliver written notice to the
indemnifying party within a reasonable time of the commencement of any such
action, if materially prejudicial to its ability to defend such action, shall
relieve such indemnifying party of any liability to the indemnified party, but
the omission so to deliver written notice to the indemnifying party will not
relieve it of any liability that it may have to any indemnified party otherwise
than under this paragraph. After notice from an indemnifying party to such
indemnified party of its election to assume the defense thereof, the
indemnifying party will not be liable to such indemnified party pursuant to the
provisions of this paragraph for any legal or other expense subsequently
incurred by such indemnified party in connection with the defense thereof other
than reasonable costs of investigation, unless (i) the indemnified party shall
have employed counsel in accordance with the first sentence of this paragraph or
(ii) the indemnifying party has authorized the employment of counsel for the
indemnified party at the expense of the indemnifying party. No indemnifying
party shall be liable for any settlement of any action, claim or proceeding
effected without its prior written consent; PROVIDED, HOWEVER, that the
indemnifying party shall not unreasonably withhold, delay or condition its
consent. No indemnifying party shall, without the prior written consent of the
indemnified party, consent to entry of any judgment or enter into any settlement
or other compromise which does not include as an unconditional term thereof the
giving by the claimant or plaintiff to such indemnified party of a release from
all liability in respect to such claim or litigation. Following indemnification
as provided for hereunder, the indemnifying party shall be subrogated to all
rights of the indemnified party with respect to all third parties, firms or
corporations relating to the matter for which indemnification has been made.
(d) The Investor confirms, and the Company acknowledges, that the information to
appear in the table in the section entitled "Principal and Selling Shareholders"
or equivalently named section in the Registration Statement under the headings
"Name of Beneficial Owner," "Shares Beneficially Owned Prior to Offering -
Number of Shares," "Maximum Number of Shares Offered in this Offering," or
equivalently named headings in the Registration Statement and in the footnote
related to such information pertaining to the Investor constitute the only
information concerning the Investor that will be furnished in writing to the
Company by or on behalf of the Investor for inclusion in the Registration
Statement.
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(e) If the indemnification provided for above is held by a court of competent
jurisdiction to be unavailable to an indemnified party with respect to any loss,
liability, claim, damage or expense referred to herein, then the indemnifying
party, in lieu of indemnifying such indemnified party hereunder, shall
contribute to the amount paid or payable by such indemnified party as a result
of such loss, liability, claim, damage or expense in such proportion as is
appropriate to reflect the relative fault of the indemnifying party on the one
hand and of the indemnified party on the other in connection with the statements
or omissions that resulted in such loss, liability, claim, damage or expense, as
well as any other relevant equitable considerations. The relative fault of the
indemnifying party and of the indemnified party shall be determined by reference
to, among other things, whether the untrue or alleged untrue statement of a
material fact or the omission to state a material fact relates to information
supplied by the indemnifying party or by the indemnified party and the parties'
relative intent, knowledge, access to information, and opportunity to correct or
prevent such statement or omission. 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. Notwithstanding any other provision of this
Section, the Investor shall not be required to contribute any amount in excess
of the amount by which the net proceeds received by such Investor from the sale
of the shares of the Common Stock issued upon conversion of the Debenture
pursuant to a Registration Statement exceeds the amount of damages which the
Investor has otherwise been required to pay be reason of such untrue or alleged
untrue statement or alleged omission. The obligation of the Investor obliged to
make contribution pursuant to this Section shall be several and not joint.
(f) Neither the filing of a Registration Statement by the Company pursuant to
this Agreement nor the making of any request for prospectuses by the Investor
shall impose upon the Investor any obligation to sell the Investor's
beneficially owned Registrable Securities.
(g) The Investor, upon receipt of notice from the Company that an event has
occurred which requires a Post-Effective Amendment to the Registration Statement
or a supplement to the prospectus included therein, shall promptly discontinue
the sale of Registrable Securities until the Investor receives a copy of a
supplemented or amended prospectus from the Company, which the Company shall
provide as soon as practicable after such notice.
(h) If the Company fails to keep the Registration Statement referred to above
continuously effective during the requisite period, then the Company shall,
promptly upon the request of the Investor, use its best efforts to update the
Registration Statement or file a new registration statement covering the
Registrable Securities remaining unsold, subject to the terms and provisions
hereof.
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(i) The Investor agrees to provide the Company with any information or
undertakings reasonably requested by the Company in order for the Company to
include any appropriate information concerning the Issuer in the Registration
Statement or in order to promote compliance by the Company or the Issuers with
the Securities Act.
(j) With a view to making available to the Investor the benefits of Rule 144 and
Rule 144A promulgated under the Securities Act and other rules and regulations
of the Commission that may at any time permit the Investor to sell securities of
the Company to the public without registration, the Company covenants that it
shall use commercially reasonable efforts to (i) file in a timely manner all
reports and other documents required to be filed by it under the Securities Act
and the Exchange Act and the rules and regulations adopted by the Commission
thereunder and (ii) take such further action as the Investor may reasonably
request (including providing any information necessary to comply with Rule 144
and Rule 144A, if available with respect to resales of the Registrable
Securities under the Securities Act), at all times, all to the extent required
from time to time to enable the Investor to sell Registrable Securities without
registration under the Securities Act within the limitation of the exemptions
provided by (x) Rule 144 and Rule 144A (if available with respect to resales of
the Registrable Securities) under the Securities Act, as such rules may be
amended from time to time, or (y) any other rules or regulations now existing or
hereafter adopted by the Commission
5. GOVERNING LAW. This Agreement shall be deemed to have been made and delivered
in the State of New York and shall be governed as to validity, interpretation,
construction, effect and in all other respects by the internal substantive laws
of the State of New York, without giving effect to the choice of law rules
thereof.
6. AMENDMENT. This Agreement may only be amended by a written instrument
executed by the Company and the Investor.
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7. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement of the
parties hereto with respect to the subject matter hereof, and supersedes all
prior agreements and understandings of the parties, oral and written, with
respect to the subject matter hereof.
8. EXECUTION IN COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same document.
9. NOTICES. All notices, requests, demands and other communications hereunder
shall be in writing and shall be deemed duly given when delivered by hand or
mailed by registered or certified mail, postage prepaid, return receipt
requested, as set forth in the Securities Purchase Agreement.
10. BINDING EFFECT; BENEFITS. This Agreement shall inure to the benefit of, and
be binding upon, the parties hereto and their respective heirs, legal
representatives and successors and permitted assigns. Nothing herein contained,
express or implied, is intended to confer upon any person other than the parties
hereto and their respective heirs, legal representatives, successors, and
permitted assigns any rights or remedies under or by reason of this Agreement.
11. TRANSFER OF REGISTRATION RIGHTS. The rights of the Investor under this
agreement may be transferred or assigned in connection with a transfer of
Registrable Securities to any transferee or assignee. Notwithstanding the
foregoing, such rights may only be transferred or assigned if all of the
following additional conditions are satisfied: (a) such transfer or assignment
is effected in accordance with applicable securities laws; (b) such transferee
or assignee agrees in writing to become subject to the terms of this Agreement;
and (c) the Company is given written notice by the Investor of such transfer or
assignment, stating the name and address of the transferee or assignee and
identifying the Registrable Securities with respect to which such rights are
being transferred or assigned.
12. HEADINGS. The headings contained herein are for the sole purpose of
convenience of reference, and shall not in any way limit or affect the meaning
or interpretation of any of the terms or provisions of this Agreement.
13. SEVERABILITY. Any provision of this Agreement which is held by a
court of competent jurisdiction to be prohibited or unenforceable in any
jurisdiction(s) shall be, as to such jurisdiction(s), ineffective to the extent
of such prohibition or unenforceability without invalidating the remaining
provisions of this Agreement or affecting the validity or enforceability of such
provision in any other jurisdiction.
IN WITNESS WHEREOF, this Agreement has been executed and delivered by
the parties hereto as of the date first above written.
ENVIRONMENTAL SOLUTIONS WORLDWIDE INC.
By:____________________________________
Name: _________________________________
Its: __________________________________
INVESTOR: ____________________
By:____________________________________
Name:
Title:
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