ECO2 PLASTICS, INC. SECURITIES SUBSCRIPTION AGREEMENT June 4, 2008
EXHIBIT
4.5
ECO2
PLASTICS, INC.
June 4,
2008
This
Securities Subscription Agreement (the “Agreement”)
is made as of June 4, 2008 (the “Effective
Date”), by and among ECO2 PLASTICS, INC., a Delaware corporation (the
“Company”),
and each of those persons and entities, severally and not jointly, listed as a
Purchaser on the Schedule of Purchasers attached as Schedule I
hereto. Such persons and entities are hereinafter
collectively referred to herein as “Purchasers”
and each individually as a “Purchaser.”
AGREEMENT
In
consideration of the mutual covenants contained in this Agreement, and for other
good and valuable consideration, the receipt of which is hereby acknowledged,
the Company and each Purchaser (severally and not jointly) hereby agree as
follows:
1. The
Securities. Subject to the terms and conditions herein
contained, the Company proposes to issue and sell to the Purchasers the
following shares (the “Shares”)
of preferred stock: (a) 336,240,039 shares of its Series B-1
Convertible Preferred Stock (the “Series B-1
Stock”) and (b) up to 140,000,000 shares of its Series B-2
Convertible Preferred Stock (the “Series B-2
Stock” and, together with the Series B-1 Stock, the “Series B
Stock”), which shall each be convertible into shares (the “Conversion
Shares”) of the
Company’s Common Stock (the “Common
Stock”) in
accordance with the formula set forth in the Series B Certificate of
Designations further described below. The rights, preferences and
privileges of the Series B-1 Stock and Series B-2 Stock are as set forth in
the Certificate of Designations of Series B-1 and Series B-2 Preferred
Stock as filed with the Secretary of State of the State of Delaware (the “Series B
Certificate of Designations”) in the form attached hereto as Exhibit
A-1. The Shares are sometimes herein referred to as the “Securities.” This Agreement,
the Series B Certificate of Designations and the Investor Rights Agreement, in
the form attached hereto as Exhibit B (the “Investor Rights
Agreement”), are sometimes herein collectively referred to as the “Transaction
Documents.”
The
Securities will be offered and sold to the Purchasers without such offers and
sales being registered under the Securities Act of 1933, as amended (together
with the rules and regulations of the Securities and Exchange Commission (the
“SEC”)
promulgated thereunder, the “Securities
Act”), in reliance on exemptions therefrom.
In
connection with the sale of the Securities, the Company has made available
(including electronically via the SEC's XXXXX system) to Purchasers its periodic
and current reports, forms, schedules, proxy statements and other documents
(including exhibits and all other information incorporated by reference) filed
with the SEC under the Securities Exchange Act of 1934, as amended (the “Exchange
Act”). These reports, forms, schedules, statements, documents,
filings and amendments, are collectively referred to as the “SEC
Documents.” All references
in this Agreement to financial statements and schedules and other information
which is “contained,” “included” or “stated” in the SEC Documents (or other
references of like import) shall be deemed to mean and include all such
financial statements and schedules, documents, exhibits and other information
which is incorporated by reference in the SEC Documents.
2. Representations and
Warranties of the Company. Except as set forth in the SEC
Documents and on the Disclosure Schedule attached hereto and made a part hereof
(the “Disclosure
Schedule”), the Company represents and warrants to and agrees with
Purchasers as follows:
(a) Except as
set forth in Section 2(a) of the Disclosure Schedule, the Company has filed in a
timely manner all documents that the Company was required to file with the SEC
under the Exchange Act since becoming subject to the requirements of the
Exchange Act. The SEC Documents as of their respective dates did not
and will not as of the Closing Date (as defined below) (after giving effect to
any updated disclosures therein), contain any untrue statement of a material
fact or omit to state a material fact necessary to make the statements therein,
in the light of the circumstances under which they were made, not
misleading. The SEC Documents and the documents incorporated or
deemed to be incorporated by reference therein, at the time they were filed or
hereafter are filed with the SEC, complied and will comply, at the time of
filing, in all material respects with the requirements of the Securities Act
and/or the Exchange Act, as the case may be, as applicable.
(b) The
Company has no subsidiaries. The Company has been duly
incorporated and is
validly existing in good standing as a corporation under the laws of its
jurisdiction of incorporation, with the requisite corporate power and authority
to own its properties and conduct its business as now conducted as described in
the SEC Documents and is duly qualified to do business as a foreign corporation
in good standing in all other jurisdictions where the ownership or leasing of
its properties or the conduct of its business requires such qualification,
except where the failure to be so qualified would not, individually or in the
aggregate, have a material adverse effect on the business, condition (financial
or other), earnings, management, properties, prospects or results of operations
of the Company (any such event, a “Material Adverse
Effect”); the Company does not own directly or indirectly any of the
capital stock or other equity or long-term debt securities of or have any equity
interest in any other individual, corporation, partnership, limited liability
company, joint venture, trust or unincorporated organization or a government or
agency or political subdivision thereof (a “Person”);
all of the outstanding shares of capital stock of the Company have been duly
authorized and validly issued, are fully paid and non-assessable, have been
issued in compliance with all federal and state securities laws, and were not
issued in violation of or subject to any preemptive or other rights to subscribe
for or purchase securities, and are owned free and clear of all liens,
encumbrances, equities, and restrictions on transferability (other than those
imposed by the Securities Act and the state securities or “Blue Sky” laws);
except as set forth in Section 2(b) of the Disclosure Schedule, no options,
warrants or other rights to purchase from the Company, agreements or other
obligations of the Company to issue or other rights to convert any obligation
into, or exchange any securities for, shares of capital stock of or ownership
interests in the Company are outstanding; and there is no agreement,
understanding or arrangement between the Company and any of its stockholders or
any other Person relating to the ownership or disposition of any capital stock
of the Company or the election of directors of the Company or the governance of
the Company’s affairs, and, if any, such agreements, understandings and
arrangements will not be breached or violated as a result of the execution and
delivery of, or the consummation of the transactions contemplated by, the
Transaction Documents; there are no bonds, debentures, notes or other
indebtedness having general voting rights (or convertible into securities having
such rights) (“Voting
Debt”) of the Company issued and outstanding; except as set forth in
Section 2(b) of the Disclosure Schedule, there are no existing options,
warrants, calls, subscriptions or other rights, agreements, arrangements or
commitments of any character, relating to the issued or unissued capital stock
of the Company, obligating the Company to issue, transfer, sell, redeem,
purchase, repurchase or otherwise acquire or cause to be issued, transferred,
sold, redeemed, purchased, repurchased or otherwise acquired any capital stock
or Voting Debt of, or other equity interest in, the Company or securities or
rights convertible into or exchangeable for such shares or equity interests or
obligations of the Company to grant, extend or enter into any such option,
warrant, call, subscription or other right, agreement, arrangement or
commitment; the issuance of the Shares or the Conversion Shares, or the Warrants
described in Section 4(h) hereof will not give rise to any preemptive rights or
rights of first refusal on behalf of any Person or result in the triggering of
any anti-dilution or other similar right; except as set forth in Section 2(b) of
the Disclosure Schedule, there are no agreements or arrangements under which the
Company is obligated to register the sale of any of their securities under the
Securities Act; there are no securities, agreements, documents or instruments
containing anti-dilution provisions that will be triggered by the issuance of
the Shares, the Conversion Shares and the Warrants; the Company has made
available to Purchasers a true, correct and complete copy of its certificate of
incorporation and bylaws, each as amended and as in effect on the date
hereof.
(c) The
authorized capital stock of the Company (immediately prior to the Closing Date)
consists of 1,000,000,000 shares of Common Stock and 500,000,000 shares of
preferred stock, par value $.001 per share (the “Preferred
Stock”), and 152,843,414 shares of Preferred Stock have been designated
as the Series A Convertible Preferred Stock (the “Series A
Preferred Stock”), 336,240,039 shares of Preferred Stock have been
designated as Series B-1 Stock, and 10,916,547 shares of Preferred Stock have
been designated as Series B-2 Stock. The Certificates of Designations
(as defined below) setting forth the rights, preferences and privileges of such
Preferred Stock have been filed with the Secretary of State of the State of
Delaware, and are effective as of the Closing Date. The issued and
outstanding capital stock of the Company, as of immediately prior to the Closing
Date and as of the Closing Date, is as set forth in Section 2(c) of the
Disclosure Schedule attached hereto (the “Company
Capitalization”) (other than for subsequent issuances, if any, pursuant
to employee benefit plans described in the SEC Documents or upon exercise of
outstanding options, warrants and other convertible securities described in the
SEC Documents).
(d) The
Company has the requisite corporate power and authority to execute, deliver and
perform its obligations under the Transaction Documents. Each of the
Transaction Documents has been duly and validly authorized by the Company and,
when executed and delivered by the Company, will constitute a valid and legally
binding agreement of the Company, enforceable against the Company in accordance
with its terms except as the enforcement thereof may be limited by
(A) bankruptcy, insolvency, reorganization, fraudulent conveyance,
moratorium or other similar laws now or hereafter in effect relating to or
affecting creditors’ rights generally or (B) general principles of equity
and the discretion of the court before which any proceeding therefore may be
brought (regardless of whether such enforcement is considered in a proceeding at
law or in equity).
(e) The
Shares have been duly authorized and, when issued upon payment thereof in
accordance with this Agreement, will have been validly issued, fully paid and
non-assessable. The Conversion Shares issuable have been duly
authorized and validly reserved for issuance, and when issued upon conversion of
the Shares in accordance with the terms of the Series B Certificate of
Designations, will have been validly issued, fully paid and
non-assessable. The Common Stock of the Company conforms to the
description thereof contained in the SEC Documents. No stockholder of
the Company or other Person has any preemptive, co-sale rights, rights of first
refusal or any other similar rights with respect to the Warrants, the Shares or
the Common Stock.
(f) No
consent, approval, order or authorization of, license, registration,
qualification, exemption or filing with any court or governmental agency or body
or third party is required for the performance of the Transaction Documents by
the Company or for the consummation by the Company of the transactions
contemplated thereby, or the application of the proceeds of the issuance of the
Securities as described in this Agreement, except for such consents, approvals,
authorizations, licenses, qualifications, exemptions or orders (i) as have
been obtained on or prior to the Closing Date, or (ii) as are not required
to be obtained on or prior to the Closing Date that will be obtained when
required, including without limitation the filing of one or more Registration
Statements and all amendments thereto with the SEC as contemplated by the
Investor Rights Agreement.
(g) All
consents, approvals and waivers from the holders of the Prior Securities (as
defined below), that are required for the performance of the Transaction
Documents by the Company or for the consummation by the Company of the
transactions contemplated thereby, or the application of the proceeds of the
issuance of the Securities as described in this Agreement, has been obtained on
or prior to the Closing Date and is set forth in Section 2(g) of the Disclosure
Schedule.
(h) The
Company is not (i) in violation of its certificate of incorporation or
bylaws (or similar organizational document), (ii) in breach or violation of
any statute, judgment, decree, order, rule or regulation applicable to it or any
of its properties or assets, or (iii) in default (nor has any event
occurred which with notice or passage of time, or both, would constitute a
default) in the performance or observance of any obligation, agreement, covenant
or condition contained in any contract, indenture, mortgage, deed of trust, loan
agreement, note, lease, license, franchise agreement, permit, certificate or
agreement or instrument to which it is a party or to which it is
subject.
(i) The
execution, delivery and performance by the Company of the Transaction Documents
and the consummation by the Company of the transactions contemplated thereby and
the fulfillment of the terms thereof will not (a) violate, conflict with or
constitute or result in a breach of or a default under (or an event that, with
notice or lapse of time, or both, would constitute a breach of or a default
under) any of (i) the terms or provisions of any contract, indenture,
mortgage, deed of trust, loan agreement, note, lease, license, franchise
agreement, permit, certificate or agreement or instrument to which the Company
is a party or to which any of its properties or assets are subject,
(ii) the certificate of incorporation, the Certificates of Designations or
bylaws of the Company (or similar organizational document) or (iii) any
statute, judgment, decree, order, rule or regulation of any court or
governmental agency or other body applicable to the Company or any of its
properties or assets or (b) result in the imposition of any lien upon or
with respect to any of the properties or assets now owned or hereafter acquired
by the Company; with respect to (a)(i), (a)(iii) and (b) only, which violation,
conflict, breach, default or lien would, individually or in the aggregate, have
a Material Adverse Effect.
(j) The
audited financial statements included in the SEC Documents present fairly the
financial position, results of operations, cash flows and changes in
shareholders’ equity of the Company, at the dates and for the periods to which
they relate and have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis; the interim un-audited
financial statements included in the SEC Documents present fairly the financial
position, results of operations and cash flows of the Company, at the dates and
for the periods to which they relate subject to year-end audit adjustments and
have been prepared in accordance with generally accepted accounting principles
applied on a consistent basis with the audited financial statements included
therein; the selected financial and statistical data included in the SEC
Documents present fairly the information shown therein and have been prepared
and compiled on a basis consistent with the audited financial statements
included therein, except as otherwise stated therein; and each of the auditors
previously engaged by the Company or to be engaged in the future by the Company
is an independent certified public accountant as required by the Securities
Act. Except as set forth in Section 2(j) of the Disclosure Schedule
and the SEC Documents, since the date of the latest interim un-audited balance
sheet of the Company included in the SEC Documents, (i) there has been no
material change in total liabilities of the Company and (ii) there have
been no liabilities incurred outside of the ordinary course of
business. Except as set forth in the SEC Documents, immediately after
the Closing Date, the Company will not have any indebtedness, except
indebtedness incurred in the ordinary course of business and consistent with
past practices.
(k) There is
not pending or, to the knowledge of the Company, threatened, any action, suit,
proceeding, inquiry or investigation, governmental or otherwise, to which the
Company is a party, or to which its properties or assets are subject, before or
brought by any court, arbitrator or governmental agency or body, that, if
determined adversely to the Company, would, individually or in the aggregate,
have a Material Adverse Effect or that seeks to restrain, enjoin, prevent the
consummation of or otherwise challenge the issuance or sale of the Securities to
be sold hereunder or the application of the proceeds therefrom or the other
transactions described in the SEC Documents. The Company is not a party to or
subject to the provisions of any injunction, judgment, decree or order of any
court, regulatory body, administrative agency or other governmental agency or
body.
(l) Intellectual
Property.
(i) General. Section
2(l)(i) of the Disclosure Schedule sets forth with respect to the Company
Intellectual Property Rights: (A) for each patent and patent application, the
patent number or application serial number for each jurisdiction in which the
patent or application has been filed, the date filed or issued and the present
status thereof; (B) for each registered trademark, trade name or service xxxx,
the application serial number or registration number for each applicable
country, province and/or state and the class of goods covered; (C) for each URL
or domain name, the registration date, any renewal date and name of registry;
and (D) for each registered copyrighted work, the number and date of
registration for each by country, province and/or state in which a copyright
application has been registered. In addition, true and correct copies
of all applications filed and registrations (including all pending applications
and application related documents) related to the Intellectual Property Rights
listed on Section 2(l)(i) of the Disclosure Schedule have been provided or made
available to Purchasers.
(ii) Sufficiency. The
Intellectual Property Rights and Technology owned or licensed by the Company
constitute all Intellectual Property Rights and Technology necessary for the
conduct of the Company’s business as presently conducted, including the design,
manufacture, license and sale of all products currently under development or in
production.
(iii) Royalties
and Licenses. Except pursuant to the licenses listed in Section
2(l)(iii) of the Disclosure Schedule, the Company has no obligation to
compensate or account to any person for the use of any of the Intellectual
Property Rights or Technology used by the Company in the conduct of the
business. Section 2(l)(iii) of the Disclosure Schedule sets forth all
third party components, whether hardware, firmware or software, that are
incorporated in or provided by the Company with its products, or that are
otherwise necessary for the manufacture of the Company’s
products. Section 2(l)(iii) of the Disclosure Schedule lists
all in-licenses of the Intellectual Property Rights and Technology applicable to
the Company’s products, other than standard, off-the-shelf software commercially
available on standard terms from third-party vendors.
(iv) Ownership. The
Company (A) owns all right, title and interest in and to the Company
Intellectual Property Rights and Company Technology, including the Intellectual
Property Rights and Technology listed in Section 2(l)(iv) of the Disclosure
Schedule, free and clear of any liens, claims or encumbrances and (B) has a
valid and enforceable right or license to use all other Intellectual Property
Rights and Technology used in the conduct of the business, and all such licensed
Intellectual Property Rights and rights to use Technology will not cease to be
valid and enforceable rights of the Company by reason of the execution, delivery
and performance of this Agreement or the consummation of the transactions
contemplated hereby. Without limiting the foregoing, the Company
Intellectual Property Rights and Company Technology have been: (1) developed by
employees of the Company within the scope of their employment and who have
assigned their rights to the Company pursuant to enforceable written agreements;
(2) developed by independent contractors or agents who have assigned their
rights to the Company pursuant to enforceable written agreements or (3)
otherwise acquired by the Company from a third party who has assigned all the
Intellectual Property Rights and ownership of all Technology it has developed on
the Company’s behalf to the Company.
(v) Absence
of Claims; Non-infringement. No claim or legal proceeding has been
instituted or is pending against the Company, or, to the knowledge of the
Company, is threatened, that challenges the right of the Company with respect to
the use or ownership of the Company Intellectual Property Rights or Company
Technology. Without limiting the foregoing, no interference,
opposition, reissue, reexamination, legal proceeding or other proceeding is or
has been pending or, to the best of the Company’s knowledge, threatened, in
which the scope, validity or enforceability of any of the Company Intellectual
Property Rights is being, has been or could reasonably be expected to be
contested or challenged. The Company’s past and present use of the
Company Intellectual Property Rights or Company Technology does not infringe
upon, misappropriate, breach or otherwise conflict with the rights of any other
Person anywhere in the world. The Company has not received any notice
alleging, and otherwise has no knowledge of (A) the invalidity of, or any
limitation on the Company’s right to use, any of the Company Intellectual
Property Rights or Company Technology or of (B) the alleged infringement,
misappropriation or breach of any Intellectual Property Rights of others by the
Company. The Company Intellectual Property Rights and Company
Technology are not subject to any judgment, decree, order, writ, award,
injunction or determination of an arbitrator, court or other governmental
authority affecting the rights of the Company with respect
thereto. To the knowledge of the Company, no person has interfered
with, infringed upon or misappropriated any of the Company Intellectual Property
Rights, or is currently doing so.
(vi) Licenses
to Third Parties. Section 2(l)(vi) of the Disclosure Schedule lists
all of the contracts pursuant to which any person has been granted any license
under, or otherwise has received or acquired any right (whether or not currently
exercisable) or interest in, any Company Intellectual Property Rights or Company
Technology. The Company is not bound by, and no Company Intellectual
Property Rights are subject to, any contract containing any covenant or other
provision that in any way limits or restricts the ability of the Company to use,
exploit, assert or enforce any of its Intellectual Property Rights anywhere in
the world. Without limiting the foregoing, the Company has not
granted any exclusive licenses to the Company Intellectual Property Rights or
Company Technology.
(vii) Protection
of Intellectual Property Rights. All of the registrations and pending
applications to governmental or regulatory bodies with respect to the Company
Intellectual Property Rights have been timely and duly filed, prosecution for
such applications has been attended to, all maintenance and related fees have
been paid and the Company has taken all other actions required to maintain their
validity and effectiveness. The Company has taken all steps
reasonably necessary or appropriate (including, entering into written
confidentiality and nondisclosure agreements with officers, directors,
subcontractors, employees, licensees and customers) to safeguard the Company
Intellectual Property Rights and maintain the secrecy and confidentiality of
trade secrets that are material to the Company. Without limiting the
foregoing, (A) there has been no misappropriation of any trade secrets or other
confidential Intellectual Property Rights or Technology used in connection with
the business by any person; (B) no employee, independent contractor or agent of
the Company has misappropriated any trade secrets of any other person in the
course of performance as an employee, independent contractor or agent of the
business and (C) no employee, independent contractor or agent of the Company is
in default or breach of any term of any employment agreement, nondisclosure
agreement, assignment of invention agreement or similar agreement or contract
relating in any way to the protection, ownership, development, use or transfer
of the Company Intellectual Property Rights and Company Technology.
(viii) Funding;
Certification with Standards Bodies. Except as set forth in Section 2(l)(viii)
of the Disclosure Schedule, no funding, facilities or personnel of any
governmental entity or educational institution were used, directly or
indirectly, to develop or create, in whole or in part, any of the Company
Intellectual Property Rights or Company Technology. The Company
has not made any submission or suggestion to, or otherwise participated in, and
is not subject to any agreement with, government, any standards bodies or other
entities that could obligate the Company to grant licenses to or otherwise
impair its control of Company Intellectual Property Rights.
(ix) “Intellectual
Property Rights” means all (A) United States and foreign patents and
patent applications and disclosures relating thereto (and any patents that issue
as a result of those patent applications), and any renewals, reissues,
reexaminations, extensions, continuations, continuations-in-part, divisions and
substitutions relating to any of the patents and patent applications; (B) United
States and foreign trademarks, service marks, trade dress, logos, 800 numbers,
trade names and corporate names, whether registered or unregistered, and the
goodwill associated therewith, together with any registrations and applications
for registration thereof; (C) United States and foreign copyrights and rights
under copyrights, whether registered or unregistered, including moral rights,
and any registrations and applications for registration thereof; (D) rights in
databases and data collections (including knowledge databases, customer lists
and customer databases) under the laws of the United States or any other
jurisdiction, whether registered or unregistered, and any applications for
registration therefor; (E) trade secrets and other rights in know-how and
confidential or proprietary information (including any business plans, designs,
technical data, customer data, financial information, pricing and cost
information, bills of material or other similar information); (F) URL and domain
name registrations; (G) inventions (whether or not patentable) and improvements
thereto; (H) all claims and causes of action arising out of or related to
infringement or misappropriation of any of the foregoing and (I) other
proprietary or intellectual property rights now known or hereafter recognized in
any jurisdiction.
(x) “Technology”
means tangible embodiments of the Intellectual Property Rights, whether in
electronic, written or other media, including software, technical documentation,
specifications, designs, bills of material, build instructions, test reports,
schematics, algorithms, application programming interfaces, user interfaces,
routines, formulae, databases, lab notebooks, processes, prototypes, samples,
studies or other know-how and other works of authorship.
(m) The
Company possesses all licenses, permits, certificates, consents, orders,
approvals and other authorizations from, and has made all declarations and
filings with, all federal, state, local and other governmental authorities
(including, but not limited to, those that may be required by the U.S. Food and
Drug Administration (the “FDA”)),
all self-regulatory organizations and all courts and other tribunals presently
required or necessary to own or lease, as the case may be, and to operate its
properties and to carry on its business as now or proposed to be conducted as
set forth in the SEC Documents (“Permits”),
except where the failure to obtain such Permits would not, individually or in
the aggregate, have a Material Adverse Effect. Each of such
Permits is in full force and effect, and the Company has not received any notice
of any proceeding relating to revocation or modification of any such Permit,
except where such revocation or modification would not, individually or in the
aggregate, be reasonably expected to have a Material Adverse
Effect.
(n) The
Company holds and is operating in compliance with such exceptions, permits,
licenses, franchises, authorizations and clearances of the FDA and/or any
committee thereof required, for the conduct of its business as currently
conducted (collectively, the “FDA
Permits”), and all such FDA Permits are in full force and
effect. The Company has fulfilled and performed all of its
obligations with respect to the FDA Permits, and, no event has occurred which
allows, or after notice or lapse of time would allow, revocation or termination
thereof or results in any other impairment of the rights of the holder of any
FDA Permit.
(o) The
Company: (i) is and at all times has been in material compliance with all
statutes, rules, regulations, or guidance applicable to the ownership, testing,
development, manufacture, packaging, processing, use, distribution, marketing,
labeling, promotion, sale, offer for sale, storage, import, export or disposal
of any product under development, manufactured or distributed by the Company
(“Applicable
Laws”); (ii) has not received any FDA Form 483, notice of adverse
finding, warning letter, untitled letter or other correspondence or notice from
the FDA or any other federal, state, local or foreign governmental or regulatory
authority alleging or asserting noncompliance with any Applicable Laws or any
licenses, certificates, approvals, clearances, authorizations, permits and
supplements or amendments thereto required by any such Applicable Laws (“Authorizations”);
(iii) has not received notice of any claim, action, suit, proceeding,
hearing, enforcement, investigation, arbitration or other action from the FDA or
any other federal, state, local or foreign governmental or regulatory authority
or third party alleging that any product operation or activity is in violation
of any Applicable Laws or Authorizations and has no knowledge that the FDA or
any other federal, state, local or foreign governmental or regulatory authority
or third party is considering any such claim, litigation, arbitration, action,
suit, investigation or proceeding; (iv) has not received notice that the
FDA or any other federal, state, local or foreign governmental or regulatory
authority has taken, is taking or intends to take action to limit, suspend,
modify or revoke any Authorizations and has no knowledge that the FDA or any
other federal, state, local or foreign governmental or regulatory authority is
considering such action; (v) has filed, obtained, maintained or submitted
all reports, documents, forms, notices, applications, records, claims,
submissions and supplements or amendments as required by any Applicable Laws or
Authorizations and that all such reports, documents, forms, notices,
applications, records, claims, submissions and supplements or amendments were
complete and correct on the date filed (or were corrected or supplemented by a
subsequent submission); and (vi) has not, either voluntarily or
involuntarily, initiated, conducted, or issued or caused to be initiated,
conducted or issued, any recall, market withdrawal or replacement, safety alert,
post sale warning, “dear doctor” letter, or other notice or action relating to
the alleged lack of safety or efficacy of any product or any alleged product
defect or violation and, to the Company’s knowledge, no third party has
initiated, conducted or intends to initiate any such notice or
action.
(p) (i) The
Company is not in material violation of any federal, state, local or foreign
statute, law, rule, regulation, ordinance, code, policy or rule of common law or
any judicial or administrative interpretation thereof, including any judicial or
administrative order, consent, decree or judgment, relating to pollution or
protection of human health, the environment (including, without limitation,
ambient air, surface water, groundwater, land surface or subsurface strata),
natural resources or wildlife, including, without limitation, laws and
regulations relating to the release or threatened release of chemicals,
pollutants, contaminants, wastes, toxic substances, hazardous substances,
petroleum, petroleum products or by-products, asbestos-containing materials or
mold (collectively, “Hazardous
Materials”) or to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling of, or exposure to,
Hazardous Materials (collectively, “Environmental
Laws”), including, without limitation, to the best of the Company’s
knowledge, the handling, transport, and disposal of the by-product generated by
the Company’s recycling operations, (ii) the Company has all permits,
authorizations and approvals required under any applicable Environmental Laws
for the operation of its business and facilities (“Environmental
Permits”) and is in material compliance with their requirements, (iii) no
material expenditures will be required to maintain compliance with applicable
Environmental Laws or Environmental Permits; (iv) there are no pending or
threatened administrative, regulatory or judicial actions, suits, demands,
demand letters, claims, liens, notices of noncompliance or violation,
investigation or proceedings relating to any Environmental Law against the
Company and (v) there are no events or circumstances that would reasonably be
expected to form the basis of an order for clean-up or remediation, or an
action, suit or proceeding by any private party or governmental body or agency,
against or affecting the Company relating to Hazardous Materials or
Environmental Laws, including, without limitation, the Company’s leasing of
facilities located at the Riverbank Army Ammunition Plant Superfund site (EPA
ID# CA7210020759).
(q) Subsequent
to the respective dates as of which information is given in the SEC Documents,
(i) the Company has not incurred any material liabilities or obligations,
direct or contingent, or entered into any material transactions not in the
ordinary course of business or (ii) the Company has not purchased any of
its outstanding capital stock, or declared, paid or otherwise made any dividend
or distribution of any kind on any of its capital stock or otherwise,
(iii) there has not been any material increase in the indebtedness of the
Company, (iv) there has not occurred any event or condition, individually
or in the aggregate, that has had a Material Adverse Effect, (v) the
Company has not sustained any material loss or interference with respect to its
business or properties from fire, flood, hurricane, earthquake, accident or
other calamity, whether or not covered by insurance, or from any labor dispute
or any legal or governmental proceeding; (vi) the Company has not received any
notice from the SEC in connection with any investigation or action by the SEC
that seeks to, or could reasonably be expected to result in, the restatement by
the Company of any of its current or previously disclosed financial statements;
(vii) there has not been any material change in compensation agreement or
arrangement with any executive officer or director of the Company; (viii) there
has not been any loan or guarantees made by the Company to or for the benefit of
its employees, officer or directors or any members of their immediate families,
other than travel advances and other advances made in the ordinary course of
business and consistent with past practice; and (ix) the Company has not altered
its method of accounting or changed its auditors. The Company has not
taken any steps to seek protection pursuant to any bankruptcy law nor does the
Company have any knowledge or reason to believe that its creditors intend to
initiate involuntary bankruptcy proceedings or any actual knowledge of any fact,
which would reasonably lead a creditor to do so. Based on the
financial condition of the Company as of the Closing Date, after giving effect
to transactions contemplated hereby to occur on the Closing Date, the Company
reasonably expects to have sufficient cash on hand to pay all of its currently
foreseeable expenses for at least the next four months.
(r) There are
no material legal or governmental proceedings nor are there any material
contracts or other documents required by the Securities Act to be described in a
prospectus that are not described in the SEC Documents. The Company
is not in default under any of the contracts described in the SEC Documents, has
not received a notice or claim of any such default and does not have knowledge
of any breach of such contracts by the other party or parties thereto, except
for such defaults or breaches as would not, individually or in the aggregate,
have a Material Adverse Effect.
(s) The
Company has good and marketable title to all real property described in the SEC
Documents as being owned by it and good and marketable title to the leasehold
estate in the real property described therein as being leased by it, free and
clear of all liens, charges, encumbrances or restrictions, except, in each case,
as would not, individually or in the aggregate, have a Material Adverse
Effect. All material leases, contracts and agreements to which the
Company is a party or by which it is bound are valid and enforceable against the
Company, are, to the knowledge of the Company, valid and enforceable against the
other party or parties thereto and are in full force and effect.
(t) Except as
set forth in Section 2(t) of the Disclosure Schedule, the Company has filed all
necessary federal, state and foreign income and franchise tax returns, except
where the failure to so file such returns would not, individually or in the
aggregate, have a Material Adverse Effect, and has paid all taxes shown as due
thereon; and other than tax deficiencies which the Company is contesting in good
faith and for which adequate reserves have been provided in accordance with
generally accepted accounting principles, there is no material tax
deficiency that has been asserted against the Company.
(u) The
Company is not, and immediately after the Closing Date will not be, required to
register as an “investment company” or a company “controlled by” an “investment
company” within the meaning of the Investment Company Act of 1940, as amended
(the “Investment
Company Act”).
(v) None of
the Company or, to the knowledge of the Company, any of its directors, officers,
employees, agents or controlling persons, has taken, directly or indirectly, any
action designed, or that might reasonably be expected, to cause or result in the
stabilization or manipulation of the price of the Common Stock.
(w) None of
the Company or any of its Affiliates (as defined in Rule 501(b) of
Regulation D under the Securities Act) directly, or through any agent,
engaged in any form of general solicitation or general advertising (as those
terms are used in Regulation D under the Securities Act) in connection with
the offering of the Securities or engaged in any other conduct that would cause
such offering to be constitute a public offering within the meaning of
Section 4(2) of the Securities Act. Assuming the accuracy of the
representations and warranties of the Purchasers in Section 6 hereof, it is
not necessary in connection with the offer, sale and delivery of the Securities
to the Purchasers in the manner contemplated by this Agreement to register any
of the Securities under the Securities Act.
(x) The
transactions involving (i) the securities transactions described in the
Company’s most recently filed annual report on Form 10-KSB and (ii) the Prior
Securities of the Company, including the recapitalization, conversion and
exchange, as the case may be, of such Prior Securities as contemplated in the
Transaction Documents, were consummated in compliance with applicable federal
and state securities laws.
(y) There is
no strike, labor dispute, slowdown or work stoppage with the employees of the
Company which is pending or, to the knowledge of the Company,
threatened.
(z) The
Company maintains insurance underwritten by insurers of recognized financial
responsibility covering its properties, operations, personnel and businesses
comparable to other companies of its size and similar business, including,
without limitation, appropriate general business, environmental and directors’
and officers’ liability insurance. All such insurance is in full
force and effect.
(aa) The
Company maintains internal accounting controls which provide reasonable
assurance that (A) transactions are executed in accordance with
management’s authorization, (B) transactions are recorded as necessary to
permit preparation of its financial statements and to maintain accountability
for its assets, (C) access to its material assets is permitted only in
accordance with management’s authorization and (D) the values and amounts
reported for its material assets are compared with its existing assets at
reasonable intervals.
(bb) Except as
disclosed in the SEC Documents, the Company maintains disclosure
controls and procedures (as such term is defined in Rule 13a-15(e) of the
Exchange Act) that comply with the requirements of the Exchange Act; such
disclosure controls and procedures have been designed to ensure that material
information relating to the Company is made known to the Company’s principal
executive officer and principal financial officer by others within those
entities; and such disclosure controls and procedures are
effective.
(cc) Except as
set forth in Section 2(cc) of the Disclosure Schedule, no Person has or will
have a claim for services, either in the nature of a finder’s fee or financial
advisory fee, with respect to the offering of the Shares and the transactions
contemplated by the Transaction Documents.
(dd) The
Common Stock is traded on the National Association of Securities Dealers OTC
Bulletin Board (the “OTC Bulletin
Board”). Except as set forth in Section 2(dd) of the
Disclosure Schedule, the Company currently is not in violation of, and the
consummation of the transactions contemplated by the Transaction Documents will
not violate, any rule of the OTC Bulletin Board.
(ee) The
Company is eligible to use Form S-1 for the resale of the Conversion Shares by
Purchasers or their transferees. The Company has no reason to believe
that it is not capable of satisfying the registration or qualification
requirements (or an exemption therefrom) necessary to permit the resale of the
Conversion Shares under the securities or “blue sky” laws of any jurisdiction
within the United States.
(ff) None of
the Company, any of its affiliates, or any Person acting on their behalf has,
directly or indirectly, made any offers or sales of any security or solicited
any offers to buy any security, under circumstances that would require
registration of any of the Securities under the Securities Act or cause this
offering of the Securities to be integrated with prior offerings by the Company
for purposes of the Securities Act or any applicable stockholder approval
provisions, including without limitation, under the rules and regulations of the
OTC Bulletin Board.
(gg) The
Company and its Board of Directors have taken all necessary action, if any, to
render inapplicable any control share acquisition, business combination, poison
pill (including any distribution under a rights agreement) or other similar
anti-takeover provision under the Company’s charter documents or the laws of its
state of incorporation that is applicable to any of the Purchasers as a result
of the Purchasers and the Company fulfilling their obligations or exercising
their rights under the Transaction Documents, including, without limitation, as
a result of the Company’s issuance of the Shares and the Purchasers’ ownership
of the Shares.
(hh) The
Company has described in, or filed as an exhibit to, the SEC Documents filed
prior to the date of this Agreement all of the following types of documents,
agreements, plans or arrangements that are required by federal securities laws
to be described in, or filed as an exhibit to, the SEC
Documents: employment agreements, consulting agreements, deferred
compensation, pension or retirement agreements or arrangements (including all
“employee pension benefit plans” as defined in Section 3(2) of ERISA, bonus,
incentive or profit-sharing plans or arrangements, or labor or collective
bargaining agreements in effect by the Company) (the “ERISA
Documents”). Except for any compliance failures that,
individually or in the aggregate, are not reasonably likely to have a Material
Adverse Effect, (a) the Company is in compliance in all material respects with
all applicable laws and regulations relating to labor, employment, fair
employment practices, terms and conditions of employment, and wages and hours,
and with the terms of the ERISA Documents; and (b) each such ERISA Document is
in compliance in all material respects with all applicable requirements of
ERISA. To the Company’s knowledge, none of the Company’s employees
are obligated under any contract (including licenses, covenants or commitments
of any nature) or other agreement, or subject to any judgment, decree or order
of any court or administrative agency, that would interfere with the use of his
or her employment obligations to the Company or that would conflict with the
Company’s business as now conducted or proposed to be conducted, except for such
contracts and other agreements, judgments, decrees and orders that would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.
(ii) Except as
disclosed in the SEC Documents or in Section 2(ii) of the Disclosure Schedule,
no transaction has occurred: (A) between or among the Company and any of its
officers or directors, stockholders or any affiliate of any such officer or
director or stockholder; and (B) to the Company’s knowledge, between or among
any stockholders of the Company.
3. Purchase, Sale and Delivery
of the Shares.
(a) On the
basis of the representations, warranties, agreements and covenants herein
contained and subject to the terms and conditions herein set forth, the Company
agrees to issue and sell to the Purchasers, and Purchasers agree to purchase
from the Company shares of Series B-1 Stock on the Initial Closing Date, at a
per share purchase price of $0.020, as more specifically set forth on Schedule I attached
hereto.
(b) One or
more certificates in definitive form for the Shares that the Purchasers have
agreed to purchase shall be delivered by or on behalf of the Company, against
delivery by or on behalf of each of the Purchasers, of the aggregate purchase
price of the securities to be tendered pursuant to Section 3(a)
above. Payment of the purchase price for the Shares may be made by
check payable to the Company, by cancellation of indebtedness, by wire transfer
of immediately available funds made pursuant to the Company’s instructions, or
any combination of the foregoing. In the event that payment by a
Purchaser is made, in whole or in part, by cancellation or conversion of
indebtedness,
then such Purchaser shall surrender to the Company for cancellation or
conversion at the Initial Closing any evidence of such indebtedness,
or shall execute an instrument of cancellation or conversion in form and
substance acceptable to the Company. Such delivery of and payment for
the Shares shall be made at the offices of Xxxxxx &Watkins LLP, 000 Xxxxx
Xxxxx, Xxxxx Xxxx, Xxxxxxxxxx 00000, at not later than 5:00 p.m. (PDT) on
June 4, 2008 (the “Closing”),
or at such date as the Purchasers and the Company may agree upon, such time and
date of delivery against payment being herein referred to as the “Initial Closing
Date.” References herein to the “Closing
Date” shall mean the Initial Closing Date or the Second Closing Date (as
defined below), as applicable.
(c) On the
basis of the representations, warranties, agreements and covenants herein
contained and subject to the terms and conditions herein set forth, the Company
agrees to issue and sell to funds associated with Trident Capital, Inc. (such
funds being collectively referred to as “Trident
Capital”) and Xxxxxx Living Trust, dated 12-10-96 (“Xxxxxx”),
and Trident Capital and Xxxxxx (the “Subsequent
Purchasers”) have the option, at their sole discretion, to purchase from
the Company at any time on or prior to September 30, 2008 (the “Second Closing
Date”) or at such other date as the Purchasers and the Company may agree
upon, up to (in the sole discretion of Trident Capital and Xxxxxx) an aggregate
of 120,000,000 Shares and 20,000,000 Shares, respectively, of Series B-2
Stock at a price of $0.025 per Share (the “Second Purchase
Price Per Share”); provided, however, that if the
Company has not installed its new CO2 cleansing equipment and demonstrated
functionality reasonably satisfactory to the Subsequent Purchasers by
September 1, 2008, the Second Closing Date shall be extended until the
earlier of (i) 30 days after the Company notifies the Subsequent Purchasers that
such metric has been achieved and the same is confirmed by the Subsequent
Purchasers and (ii) December 31, 2008; and provided, further, that if the
Subsequent Purchasers elect to consummate the transactions contemplated to occur
on the Second Closing Date, all of the following conditions shall have been met
as of the Second Closing Date as further conditions to the obligations of the
Subsequent Purchasers to consummate the transactions contemplated to close at
the Second Closing: (i) no Event of Default (as defined below)
shall have occurred and remain uncured, (ii) there shall have been no
breach by the Company of any covenant under this Agreement, (iii) the
Subsequent Purchasers shall have received certificates, dated as of the Second
Closing Date and signed by the Chief Executive Officer and Chief Financial
Officer of the Company, to the effect of Sections 5(a) and 5(b) hereof,
(iv) the Company shall be current in all of its public filings,
(v) the Subsequent Purchasers shall have received an opinion from the
Company’s counsel with respect to the authorization of the securities to be
issued to the Subsequent Purchasers and other customary matters, and
(vi) the Company shall not, after the date of this Agreement but prior to
the Second Closing Date, have consummated or entered into any agreement to
effect a transaction that would be regarded as a liquidation, dissolution or
winding up of the affairs of the Company under the Certificates of
Designations.
(d) One or
more certificates in definitive form for the Shares that the Subsequent
Purchasers have agreed to purchase pursuant to Section 3(c) above, shall be
delivered by or on behalf of the Company, against delivery by or on behalf of
each of the Subsequent Purchasers of the Second Purchase Price Per Share by wire
transfer of immediately available funds to the account of the Company previously
designated by it in writing. Such delivery of and payment for the
Shares shall be made at the offices of Xxxxxx &Watkins LLP, 000 Xxxxx Xxxxx,
Xxxxx Xxxx, Xxxxxxxxxx 00000, at not later than 5:00 p.m. (PDT) on the Second
Closing Date.
4. Certain Covenants of the
Company. The Company covenants and agrees with each Purchaser
as follows:
(a) The
proceeds of the issuance of the Securities as described in this Agreement shall
be used to purchase new equipment for the Company’s continuous flow CO2
cleansing process and Xxx.xx pre-cleaning systems (estimated at $1,500,000),
reduce trade payables (estimated at $1,000,000 to $1,200,000), repay one short
term note of $315,000 with no attached warrants and fund operations to expected
cash flow positive in August 2008, with the remainder of the proceeds to be
available for growth initiatives approved by the Board of
Directors.
(b) None of
the Company or any of its Affiliates will sell, offer for sale or solicit offers
to buy or otherwise negotiate in respect of any “security” (as defined in the
Securities Act) that could be integrated with the sale of the Securities in a
manner which would require the registration under the Securities Act of the
Securities.
(c) The
Company will not become, at any time prior to the expiration of three years
after the Closing Date, an open-end investment company, unit investment trust,
closed-end investment company or face-amount certificate company that is or is
required to be registered under the Investment Company Act.
(d) None of
the proceeds of the Series B Stock will be used to reduce or retire any
insider note or convertible debt held by an officer or director of the Company,
except to the extent any such notes or debt are being cancelled as consideration
for purchase of Shares by a Purchaser hereunder.
(e) Subject
to Section 10 of this Agreement, the Conversion Shares will be traded on
the OTC Bulletin Board, or such market on which the Company’s shares are
subsequently listed or traded, immediately following the later of (i) their
issuance or (ii) declaration of effectiveness of the Registration Statement
by the SEC.
(f) The
Company will use its best efforts to do and perform all things required to be
done and performed by it under this Agreement and the other Transaction
Documents and to satisfy all conditions precedent on its part to the obligations
of the Purchasers to purchase and accept delivery of the
Securities.
(g) For so
long as any shares of Series B Stock are outstanding, the Company shall not
issue any debt or equity securities with rights or preferences superior to those
of the Series B Stock with respect to the distribution of assets on any
liquidation, dissolution or winding up of the Company, without the consent of a
majority of the then outstanding shares of Series B Stock.
(h) On the
Initial Closing Date, the Company agrees to issue to each of Xxxxxx and
Xxxxx-Xxxxx 1997 Trust in connection with their appointment to the Company’s
Board of Directors, a warrant, substantially in the form attached hereto as
Exhibit D,
exercisable for 10,912,964 shares of Common Stock, at an exercise price of
$0.020 per share (the “Initial
Warrants”). Promptly following the Second Closing Date, the
Company agrees to issue additional warrants (the “Second Closing
Warrants” and, together with the Initial Warrants, the “Warrants”)
exercisable for a number of shares of Common Stock such that together with the
Initial Warrants, Xxxxxx and Xxxxx-Xxxxx 1997 Trust would each hold pursuant to
such warrants (and exclusive of any shares of Preferred Stock held), 1% of the
Company’s Fully Diluted Capitalization (calculated assuming no further issuances
between the Initial Closing Date and the Second Closing Date), at an exercise
price of $0.025 per share. “Fully Diluted
Capitalization” shall mean all outstanding shares of capital stock, and
assuming the conversion of all outstanding warrants, options, notes and other
convertible securities.
(i) The
Company shall use its reasonable best efforts to obtain and keep directors’ and
officers’ liability insurance in an amount reasonably acceptable to the Lead
Investors.
(j) At the
request of holders of a majority of the then outstanding shares of Series B
Stock and Common Stock issued upon conversion thereof (voting together on an
as-converted into Common Stock basis), the Company shall use commercially
reasonable efforts to list (as soon as practicable following such request) the
Company’s Common Stock (including Common Stock issued or issuable upon
conversion of Series B Stock) on the Nasdaq National Market, provided that the
Company has met, or is in a position to meet, applicable listing
requirements.
(k) Within 45 calendar days of the Initial Closing Date, the
Company’s certificate of incorporation and the Series B Certificate of
Designations and shall have been amended to authorize an additional 130,000,000
shares of Preferred Stock, of which at least 129,083,453 shares shall be
designated Series B-2 Stock, or such amounts as may be necessary to allow for
the full amount of the shares to be issued on the Second Closing Date. The
Company agrees to take all such actions as may be necessary to effect the
foregoing amendment, including without limitation obtaining all necessary
stockholder approvals and other consents.
5. Conditions of the
Purchasers’ Obligations. The obligation of each Purchaser to
purchase and pay for the Securities at each Closing Date is subject to the
following conditions unless waived in writing by the Purchaser:
(a) The
representations and warranties of the Company contained in this Agreement shall
be true and correct on and as of the Closing Date. The Company shall have
complied in all material respects with all agreements and satisfied all
conditions on its part to be performed or satisfied hereunder at or prior to the
Closing Date.
(b) None of
the issuance and sale of the Securities pursuant to this Agreement or any of the
transactions contemplated by any of the other Transaction Documents shall be
enjoined (temporarily or permanently) and no restraining order or other
injunctive order shall have been issued in respect thereof; and there shall not
have been any legal action, order, decree or other administrative proceeding
instituted or, to the Company’s knowledge, threatened against the Company or
against any Purchaser relating to the issuance of the Securities or any
Purchaser’s activities in connection therewith or any other transactions
contemplated by this Agreement, the other Transaction Documents or the SEC
Documents.
(c) The
Purchasers shall have received certificates, dated the Closing Date and signed
by the Chief Executive Officer and the Chief Financial Officer of the Company,
to the effect of Sections 5(a) and (b).
(d) The
Purchasers shall have received an opinion of legal counsel to the Company, with
respect to the authorization of the Shares and other customary matters in the
form attached hereto as Exhibit C.
(e) The
$5,338,000 in principal amount of outstanding promissory notes advanced to the
Company from July 2007 to February 2008, together with accrued interest (the
“Earlier
Notes”), shall have been tendered, pursuant to that certain Securities
Subscription Agreement dated as of June 4, 2008 by and among the Company and
holders of Series A Preferred Stock, in exchange for shares of Series A
Preferred Stock having such rights, preferences and privileges as set forth in
the Certificate of Designations of Series A Preferred Stock as filed with the
Secretary of State of the State of Delaware (the “Series A
Certificate of Designations” and, together with the Series B Certificate
of Designations, the “Certificates of
Designations”) in the form attached hereto as Exhibit A-2, as more
specifically set forth in Schedule
II. All holders surrendering Earlier Notes shall have waived
any anti-dilution, participation and other rights such holders may have, if any,
in connection with the transactions contemplated hereby.
(f) The
holders of rights to receive $1,200,000 of shares of Series A Preferred Stock of
the Company pursuant to subscription agreements entered into in April 2008 and
May 2008 (the “Old Series A
Stock”), as more specifically set forth in Schedule I, shall
have waived all rights to receive such Old Series A Stock, in exchange for
60,000,000 Shares of Series B-1 Stock pursuant to this Agreement. All
Purchasers surrendering rights to Old Series A Stock shall have waived any
anti-dilution, participation and other rights such Purchasers may have, if any,
in connection with the transactions contemplated hereby.
(g) The
holders of $800,000 in principal amount of promissory notes issued in February
2008 and March 2008, together with any associated warrants (the “Recent Notes and
Warrants” and, together with the Earlier Notes, the Old Series A Stock
and any warrants issued in connection therewith, the “Prior
Securities”), as more specifically set forth in Schedule I, shall
have tendered such notes and warrants representing the Recent Notes and Warrants
in exchange for 40,000,000 Shares of Series B-1 Stock pursuant to this
Agreement. All Purchasers surrendering Recent Notes and
Warrants shall have waived any anti-dilution, participation and other rights
such Purchaser may have in connection with the transactions contemplated
hereby.
(h) The
holders of $1,200,000 in principal amount of promissory notes entered into in
May 2008 (the “Recent Promissory
Notes”), as more specifically set forth in Schedule I, shall
have tendered such promissory notes in exchange for 60,385,275 Shares of Series
B-1 Stock pursuant to this Agreement.
(i) The
Series A Certificate of Designations and the Series B Certificate of
Designations shall have been duly filed with the Secretary of State of the State
of Delaware. Prior to the Second Closing Date, the Company’s
certificate of incorporation and the Series B Certificate of Designations shall
have been amended to authorize and designate additional shares of Series B Stock
in an amount sufficient to allow for the full amount of the Series B Stock
contemplated to be issued on the Second Closing Date under Section 3(c) hereof
..
(j) As
further described in the Investor Rights Agreement, Xxxxx Xxxxx, Xxx Xxxxxx and
a representative of Trident Capital (the “Investor
Designees”) shall be elected to the Board of Directors of the Company,
with Xxx Xxxxxx as Chairman of the Board of Directors. Three existing
members of the Board of Directors shall have resigned from the Board of
Directors, leaving four prior members and the Investor Designees on the Board of
Directors. Each Investor Designee shall be entitled to serve on any
committee of the Board of Directors, subject to compliance with applicable
securities laws and the rules and regulations of the applicable exchange on
which the Company’s common stock are then quoted or traded. Each
Investor Designee shall execute a director indemnification agreement upon
election to the Board of Directors.
(k) As
further described in the Investor Rights Agreement, the Company shall have
agreed that one of the four prior members of the Board of Directors shall resign
at such time as requested by holders of a majority of the outstanding shares of
Series B Stock to permit election of a new seventh member of the Board of
Directors approved by a majority of the remainder of the Board of
Directors.
(l) The Lead
Investors shall be satisfied, in their sole discretion, with the results of
their due diligence investigation with respect to the Company.
(m) The
Company shall have received all necessary governmental and third party consents
and approvals.
(n) The
Company shall have received full subscription of at least $5,500,000 of Series
B-1 Stock to be issued at the Initial Closing pursuant to this
Agreement.
(o) The
Company shall have complied with all applicable securities laws.
(p) The
Company shall have amended its certificate of incorporation and bylaws as
necessary to give effect to the provisions set forth herein or in the
Transaction Documents.
(q) The
Company shall have executed and delivered to the Purchasers the Investor Rights
Agreement.
(r) The
Company shall have furnished to the Lead Investors a certificate from the
transfer agent of the Securities, certifying as to the outstanding securities of
the Company.
(s) On or
prior to the Closing Date, the Company shall have furnished to the Lead
Investors such additional information, certificates and documents as they may
reasonably require for the purpose of enabling them to pass upon the issuance
and sale of the Securities as contemplated herein, or to evidence the accuracy
of any of the representations or warranties, or the fulfillment of any of the
conditions, herein contained, or otherwise in connection with the transaction
contemplated hereby; and all opinions and certificates mentioned above or
elsewhere in this Agreement shall be reasonably satisfactory in form and
substance to the Lead Investors.
6. Representations and
Warranties of the Purchasers.
(a) Each
Purchaser represents and warrants to the Company that the Securities to be
acquired by it hereunder (including the Conversion Shares that it may acquire
upon conversion thereof) are being acquired for its own account for investment
and with no present intention of distributing or reselling such Securities
(including the Conversion Shares that it may acquire upon conversion thereof) or
any part thereof or interest therein in any transaction which would be in
violation of the securities laws of the United States of America or any
State. Nothing in this Agreement, however, shall prejudice or
otherwise limit a Purchaser’s right to sell or otherwise dispose of all or any
part of such Conversion Shares under an effective registration statement under
the Securities Act and in compliance with applicable state securities laws or
under an exemption from such registration.
(b) Each
Purchaser understands that the Securities (including the Conversion Shares that
it may acquire upon conversion thereof) have not been registered under the
Securities Act and may not be offered, resold, pledged or otherwise transferred
except (a) pursuant to an exemption from registration under the Securities
Act (and, if requested by the Company, based upon an opinion of counsel
acceptable to the Company) or pursuant to an effective registration statement
under the Securities Act and (b) in accordance with all applicable
securities laws of the states of the United States and other
jurisdictions.
Each
Purchaser agrees to the imprinting, so long as appropriate, of the following
legend on the Securities (including the Conversion Shares that it may acquire
upon conversion thereof):
The
shares of stock evidenced by this certificate have not been registered under the
U.S. Securities Act of 1933, as amended, and may not be offered, sold, pledged
or otherwise transferred (“transferred”) in the absence of such registration or
an applicable exemption therefrom. In the absence of such registration, such
shares may not be transferred unless, if the Company requests, the Company has
received a written opinion from counsel in form and substance satisfactory to
the Company stating that such transfer is being made in compliance with all
applicable federal and state securities laws.
Further
with regard to the Series B Stock, the following legend shall be
included:
Additional
restrictions on transfer pursuant to agreements exist and are available upon
request from the Company.
The
legend set forth above may be removed if and when the Conversion Shares are
disposed of pursuant to an effective registration statement under the Securities
Act or, in the opinion of counsel to the Company experienced in the area of
United States Federal securities laws, such legends are no longer required under
applicable requirements of the Securities Act. The Shares and the
Conversion Shares shall also bear any other legends required by applicable
Federal or state securities laws, which legends may be removed when in the
opinion of counsel to the Company experienced in the applicable securities laws,
the same are no longer required under the applicable requirements of such
securities laws. The Company agrees that it will provide each
Purchaser, upon request, with a substitute certificate, not bearing such legend
at such time as such legend is no longer applicable. Each Purchaser
agrees that, in connection with any transfer of the Conversion Shares by it
pursuant to an effective registration statement under the Securities Act, it
will comply with all prospectus delivery requirements of the Securities
Act.
(c) Each
Purchaser is an “accredited investor” within the meaning of Rule 501(a) of
Regulation D under the Securities Act. None of the Purchasers learned
of the opportunity to acquire Shares or any other security issuable by the
Company through any form of general advertising or public
solicitation.
(d) Each
Purchaser represents and warrants to the Company that it has such knowledge,
sophistication and experience in business and financial matters so as to be
capable of evaluating the merits and risks of the prospective investment in the
Securities, having been represented by counsel, and has so evaluated the merits
and risks of such investment and is able to bear the economic risk of such
investment and, at the present time, is able to afford a complete loss of such
investment.
(e) Each
Purchaser represents and warrants to the Company that (i) the purchase of
the Securities to be purchased by it has been duly and properly authorized and
this Agreement has been duly executed and delivered by it or on its behalf and
constitutes the valid and legally binding obligation of the Purchaser,
enforceable against the Purchaser in accordance with its terms, subject to
bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and
similar laws of general applicability relating to or affecting creditors’ rights
generally and to general principles of equity; (ii) the purchase of the
Securities to be purchased by it does not conflict with or violate its charter,
by-laws or any law, regulation or court order applicable to it; and
(iii) the purchase of the Securities to be purchased by it does not impose
any penalty or other onerous condition on the Purchaser under or pursuant to any
applicable law or governmental regulation.
(f) Each
Purchaser represents and warrants to the Company that neither it nor any of its
directors, officers, employees, agents, partners, members, or controlling
persons has taken, or will take, directly or indirectly, any actions designed,
or that might reasonably be expected to cause or result in, the destabilization
or manipulation of the price of the Common Stock.
(g) Each
Purchaser acknowledges it or its representatives have reviewed the SEC Documents
and further acknowledges that it or its representatives have been afforded
(i) the opportunity to ask such questions as it has deemed necessary of,
and to receive answers from, representatives of the Company concerning the terms
and conditions of the offering of the Securities and the merits and risks of
investing in the Securities; (ii) access to information about the Company
and the Company’s financial condition, results of operations, business,
properties, management and prospects sufficient to enable it to evaluate its
investment in the Securities; and (iii) the opportunity to obtain such
additional information which the Company possesses or can acquire without
unreasonable effort or expense that is necessary to verify the accuracy and
completeness of the information contained in the SEC Documents.
(h) Each
Purchaser represents and warrants to the Company that it has based its
investment decision solely upon the information contained in the SEC Documents
and such other information as may have been provided to it or its
representatives by the Company in response to its inquiries, and has not based
its investment decision on any research or other report regarding the Company
prepared by any third party (“Third Party
Reports”). Each Purchaser understands and acknowledges that
(i) the Company does not endorse any Third Party Reports and (ii) its
actual results may differ materially from those projected in any Third Party
Report.
(i) Each
Purchaser understands and acknowledges that (i) any forward-looking
information included in the SEC Documents is subject to risks and uncertainties,
including those risks and uncertainties set forth in the SEC Documents; and
(ii) the Company’s actual results may differ materially from those
projected by the Company or its management in such forward-looking
information.
(j) Each
Purchaser understands and acknowledges that (i) the Securities are offered
and sold without registration under the Securities Act in a private placement
that is exempt from the registration provisions of the Securities Act and
(ii) the availability of such exemption depends in part on, and that the
Company and its counsel will rely upon, the accuracy and truthfulness of the
foregoing representations and Purchaser hereby consents to such
reliance.
(k) None of
the Purchasers is a broker or dealer registered pursuant to Section 15 of
the Exchange Act (a “registered
broker-dealer”) or is affiliated with a registered
broker-dealer. None of the Purchasers is party to any agreement for
distribution of any of the Securities.
(l) Each
Purchaser agrees to the terms and conditions of that certain Amendment Four to
the Patent License Agreement by and between Honeywell Federal Manufacturing
& Technologies, LLC and the Company (f/k/a Itec Environmental Group) dated
as of November 3, 2006.
7. Covenants of
Purchasers. Purchasers, on behalf of themselves and their affiliates
and the permitted assignee of any Conversion Shares, hereby covenant and agree
not to, directly or indirectly, offer to “short sell”, contract to “short sell”
or otherwise “short sell” any securities of the Company prior to the Closing
Date, including, without limitation, shares of Common Stock that will be
received as a result of the conversion of the Series B Stock.
8. Indemnification. The
Company agrees to indemnify and hold harmless each of Xxx Xxxxxx, Xxxxx Xxxxx,
Xxxxxx and Trident Capital (the “Lead
Investors”), any affiliates of the Lead Investors, and each Person, if
any, who controls, is controlled by or under common control with any Lead
Investor within the meaning of the Securities Act (each, an “Indemnified
Party”), against any losses, claims, actions, damages, liabilities or
expenses (collectively, “Losses”),
joint or several, to which such Indemnified Party may become subject under the
Securities Act, the Exchange Act, or any other federal or state statutory law or
regulation, or at common law or otherwise (including in settlement of any
litigation, if such settlement is effected with the written consent of the
Company), insofar as such Losses (or actions in respect thereof as contemplated
below) arise out of or are based in whole or in part on any inaccuracy in the
representations and warranties of the Company contained in this Agreement or any
failure of the Company to perform its obligations hereunder, and will reimburse
each Indemnified Party for any legal and other expenses reasonably incurred as
such expenses are incurred by such Indemnified Party in connection with
investigating, defending, settling, compromising or paying any such Loss; provided, however, that the
Company will not be liable in any such case to the extent that any such Loss
arises out of or is based upon the inaccuracy of any representations made by
such Indemnified Party herein.
9. Termination.
(a) This
Agreement may be terminated by the Lead Investors by notice to the Company given
in the event that (i) the Company shall have failed, refused or been unable
to satisfy all material conditions on its part to be performed or satisfied
hereunder on or prior to the Closing Date or (ii) if after the date of this
Agreement but prior to the Closing Date, trading in securities of the Company on
the OTC Bulletin Board shall have been suspended and the Company ceases to be
publicly traded.
(b) This
Agreement may be terminated by mutual written consent of the Company and the
Lead Investors.
10. Registration. As
further described in the Investor Rights Agreement, the Company shall
prepare and file with the SEC, upon receipt of a Demand Notice (as defined in
the Investor Rights Agreement), on or after the date that is 90 days after the
date of this Agreement, one or more registration statements as further described
in the Investor Rights Agreement (the “Registration
Statements”) to enable the resale of the Conversion Shares, together with
any shares of capital stock issued or issuable, from time to time, upon any
reclassification, share combination, share subdivision, stock split, share
dividend or similar transaction or event or otherwise as a distribution on, in
exchange for or with respect to any of the foregoing, in each case held at the
relevant time by a Purchaser.
11. Event of
Default. An “Event of
Default” means the Company’s failure to: (i) file the
Registration Statement with the SEC on or prior to the Filing Deadline, (ii)
maintain trading of the Company’s Common Stock on the OTC Bulletin Board or
other publicly traded market, or (iii) deliver to Purchasers, or
Purchasers’ broker, as directed, Common Stock that Purchasers have converted
within three (3) business days of such conversions.
12. Notices. All
communications hereunder shall be in writing and shall be hand delivered, mailed
by first-class mail, couriered by next-day air courier or by facsimile and
confirmed in writing (i) if to the Company, at the addresses set forth
below, or (ii) if to a Purchaser, to the address set forth for such party
on the signature pages hereto, with a copy to Xxxxxx &Watkins LLP, 000 Xxxxx
Xxxxx, Xxxxx Xxxx, Xxxxxxxxxx 00000, Attention: Xxxxxxx Xxxxxx,
Esq.
If to the
Company:
ECO2
Plastics, Inc.
000
Xxxxxx Xxxxxx, Xxxxx 000
Xxx
Xxxxxxxxx, Xxxxxxxxxx 00000
Attention: Chief
Executive Officer
Telephone:
000-000-0000
Facsimile: 000-000-0000
with a
copy to:
The Xxxx
Law Group, PLLC
000 Xxxxx
Xxxxxx, Xxxxx 0000
Xxxxxxx,
Xxxxxxxxxx 00000
Attn: Xxxxx
Xxxx
Telephone: 000-000-0000
Facsimile: 000-000-0000
All such
notices and communications shall be deemed to have been duly
given: (i) when delivered by hand, if personally delivered;
(ii) five business days after being deposited in the mail, postage prepaid,
if mailed certified mail, return receipt requested; (iii) one business day
after being timely delivered to a next-day air courier guaranteeing overnight
delivery; (iv) the date of transmission if sent via facsimile to the
facsimile number as set forth in this Section or the signature page hereof prior
to 5:00 pm in the time zone of the recipient on a business day, with
confirmation of successful transmission or (v) the business day following
the date of transmission if sent via facsimile at a facsimile number set forth
in this Section or on the signature page hereof after 5:00 p.m. in the time zone
of the recipient or on a date that is not a business day. Change of a
party’s address or facsimile number may be designated hereunder by giving notice
to all of the other parties hereto in accordance with this Section.
13. Survival
Clause. The respective representations, warranties, agreements
and covenants of the Company and the Purchasers set forth in this Agreement
shall survive until the first anniversary of the Closing.
14. Fees and
Expenses. Concurrently with the execution of this Agreement,
the Company shall pay, by wire transfer of immediately available funds to an
account or accounts designated by Xxxxxx & Xxxxxxx LLP, $215,000 for
Purchasers’ legal and other transaction expenses incurred in connection with the
preparation and negotiation of the Transaction Documents.
15. Enforcement. If
any action at law or in equity is necessary to enforce or interpret the terms of
this Agreement or the Certificates of Designations, the prevailing party or
parties shall be entitled to receive from the other party or parties reasonable
attorneys’ fees, costs and necessary disbursements in addition to any other
relief to which the prevailing party or parties may be entitled.
16. Successors and
Assigns. This Agreement shall inure to the benefit of and be
binding upon Purchasers and the Company and their respective successors and
legal representatives. Neither the Company nor any Purchaser may
assign this Agreement or any rights or obligation hereunder without the prior
written consent of the other party.
17. Amendment and
Waiver.
(a) Except as
otherwise expressly provided herein, this Agreement may be amended or modified
only upon the written consent of (i) the Company and (ii) the holders of at
least a majority of the then outstanding shares of Series B Stock, voting
together as a single class on an as-converted basis and including any Common
Stock issued upon conversion thereof; provided, however, that no
amendment of this Agreement shall materially and adversely affect the rights of
a Purchaser in a manner that materially and disproportionately discriminates
against such Purchaser in relation to the other Purchasers without such
Purchaser's written consent.
(b) Except as
otherwise expressly provided, the obligations of the Company and the rights of
the Purchasers under this Agreement may be waived only with the written consent
of (i) the Company and (ii) the holders of at least a majority of the then
outstanding shares of Series B Stock voting together as a single class on an
as-converted basis and including any Common Stock issued upon conversion
thereof; provided, however, that no
waiver of this Agreement shall materially and adversely affect the rights of a
Purchaser in a manner that materially and disproportionately discriminates
against such Purchaser in relation to the other Purchasers without such
Purchaser’s written consent.
(c) For the
purposes of determining the number of Purchasers entitled to vote or exercise
any rights hereunder, the Company shall be entitled to rely solely on the list
of record holders of its stock as maintained by or on behalf of the
Company.
18. Entire Agreement; No Third
Party Beneficiary. This Agreement, together with the other
Transaction Documents, constitutes the entire agreement among the parties hereto
and supersedes all prior agreements, understandings and arrangements, oral or
written, among the parties hereto with respect to the subject matter hereof and
thereof. Disclosure by the Company in any Schedule to this Agreement
shall be deemed applicable to all applicable provisions hereof. This
Agreement is not intended to confer upon any Person not a party hereto (or their
successors and permitted assigns) any rights or remedies hereunder, except as
provided in Section 8 hereof.
19. Severability. If
any provision of this Agreement is held to be invalid or unenforceable in any
respect, the validity and enforceability of the remaining terms and provisions
of this Agreement shall not in any way be affected or impaired
thereby.
20. APPLICABLE
LAW. THE VALIDITY AND INTERPRETATION OF THIS AGREEMENT, AND
THE TERMS AND CONDITIONS SET FORTH HEREIN SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA, WITHOUT GIVING EFFECT TO
PROVISIONS RELATING TO CONFLICTS OF LAW TO THE EXTENT THE APPLICATION OF THE
LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY. THE PARTIES
HEREBY IRREVOCABLY AND UNCONDITIONALLY AGREE THAT ACTIONS, SUITS OR PROCEEDINGS
ARISING OUT OF OR RELATING TO THIS AGREEMENT MAY BE BROUGHT ONLY IN STATE OR
FEDERAL COURTS LOCATED IN THE CITY OF SAN FRANCISCO, CALIFORNIA AND HEREBY
SUBMIT TO THE EXCLUSIVE JURISDICTION OF SUCH COURTS FOR SUCH
PURPOSE.
21. Waiver of
Conflicts. Each party to this Agreement acknowledges that
Xxxxxx & Xxxxxxx LLP (L&W),
counsel for Xxxxxxxx Xxxxxx LLC and Trident Capital, has in the past performed
and is or may now or in the future perform legal services for one or more of the
Purchasers or their affiliates in matters unrelated to the transactions
described in this Agreement (the “Financing”),
including the representation of such Purchasers or their affiliates in matters
of a similar nature to the Financing and other matters. The
applicable rules of professional conduct require that L&W inform the parties
hereunder of this representation and obtain their consent. L&W
has served as counsel to Xxxxxxxx Xxxxxx LLC and Trident Capital and has
negotiated the terms of the Financing solely on behalf of Xxxxxxxx Xxxxxx LLC
and Trident Capital. It is the belief of L&W that these terms and
conditions represent an arm’s length transaction between the Company and the
Purchasers. Each of the Purchasers has had the opportunity to be
represented by independent legal counsel regarding the terms of the
Financing. Accordingly, each party to this Agreement hereby
(i) acknowledges that it has had an opportunity to ask for and has obtained
information relevant to such representation, including disclosure of the
reasonably foreseeable adverse consequences of such representation;
(ii) acknowledges that with respect to the Financing, L&W has
represented solely Xxxxxxxx Xxxxxx LLC and Trident Capital, and not any other
Purchaser or any stockholder, director or employee of any Purchaser; and (iii)
gives its informed consent to L&W’s representation of Xxxxxxxx Xxxxxx LLC
and Trident Capital and their respective affiliates in such unrelated matters
and to L&W’s representation of Xxxxxxxx Xxxxxx LLC and Trident Capital in
connection with the Financing.
22. Tender of Prior Securities;
Release of Claims.
(a) With
respect to the Prior Securities and any other Rights (as defined below) which
are being tendered, cancelled, converted, terminated, released and/or
relinquished by certain Purchasers as partial or whole consideration for the
issuance of the Shares and the other transactions contemplated by this
Agreement, the Purchasers hereby agree and covenant to surrender and relinquish
such Prior Securities and Rights to the Company. Each Purchaser acknowledges and
agrees that when the Series B-1 Preferred Stock is issued and sold by the
Company to the Purchasers pursuant to the terms of this Agreement, such Prior
Securities and Rights shall be deemed cancelled and terminated and shall have no
further value, force or effect; and rights evidenced by the Prior Securities and
the Rights shall be forever extinguished, regardless of whether the actual
original documents evidencing the Prior Securities or Rights are surrendered to
the Company. The “Rights”
shall include, without limitation, any rights of a Purchaser pursuant to any
subscription, warrant or other agreement between such Purchaser and the Company
relating to the Prior Securities.
(b) Release
of Claims. Each Purchaser surrendering Prior Securities and
relinquishing Rights hereunder generally, irrevocably, unconditionally and
completely releases and forever discharges the Company and its respective,
officers, directors, partners, members, employees, agents, attorneys and
representatives and assigns from the Released Claims. In connection with the
issuance of the Shares, each Purchaser surrendering Prior Securities and
relinquishing Rights hereby generally, irrevocably, unconditionally and
completely waives any and all rights to receive anti-dilution protection, rights
of first refusal or participation, and registration rights to which such
Purchaser may be entitled under the Company’s certificate of incorporation, the
Prior Securities and the Rights, in connection with the issuance of the
Securities and the transactions contemplated hereunder, including any rights
related to options, warrants or any other rights to purchase shares of the
Company. Each
Purchaser has been provided with an opportunity to consult with his or her own
counsel with respect to the contents of Section 1542 of the Civil Code of
California and expressly waives the benefit thereof and any rights such
Purchaser may have thereunder. Section 1542 of the Civil Code
of the State of California provides as follows:
A GENERAL
RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO
EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM
MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH THE DEBTOR.
Each Purchaser shall also waive the
benefit of, and any rights such Purchaser may have under, any statute or common
law principle of similar effect in any jurisdiction.
“Released
Claims” shall mean each and every claim that the Purchasers may have had
in the past or may now have against the Company, and that has arisen or arises
directly or indirectly out of, or relates directly or indirectly to, any
circumstance, agreement, activity, action, omission, event or matter occurring
or existing on or prior to the Closing Date or, following the Closing, relating
to the Prior Securities and the Rights.
23. Counterparts. This
Agreement may be executed in two or more counterparts and may be delivered by
facsimile transmission, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
[signature
pages follow]
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IN WITNESS WHEREOF, the
parties hereto have caused this Agreement to be executed by their duly
authorized representatives as of the day and year first above
written.
ECO2
PLASTICS, INC.
By: Name: Xxxxxx
X. Xxxxxxxx
Title: Chief
Executive Officer
PURCHASERS:
Trident
Capital Fund-VI, L.P.
Trident
Capital Fund-VI Principals Fund, L.L.C.
Executed by the undersigned as an authorized signatory of the General Partner of
Trident Capital Fund-VI, L.P. and of the Managing Member of Trident Capital
Fund-VI Principals Fund, L.L.C.
(signature)
(print name)
|
|
Address: 000
Xxxxxxxx Xxxxxx, Xxxxx 000
|
|
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Xxxx
Xxxx, XX 00000
|
|
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Attn: Xxxxxx
X. Xxxxxx
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Chief
Administrative Officer and General Counsel
|
| Fax: x0 (000) 000-0000 |
PURCHASERS:
|
By: _________________________________
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Name: _________________________________
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|
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Title: _________________________________
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Address:
Fax: ______________________________
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E-Mail: ______________________________
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