REGISTRATION RIGHTS AGREEMENT
THIS
REGISTRATION RIGHTS AGREEMENT (the “Agreement”)
is
made and entered into as of 25th day of February, 2008 by and
between
Entech Environmental Technologies, Inc., a
corporation organized and existing under the laws of the State of Florida (the
“Company”),
and
Xxxxxx Partners L.P., a Delaware limited partnership (hereinafter referred
to as
the “Investor”).
Unless defined otherwise, capitalized terms herein shall have the identical
meaning as in the Preferred Stock Purchase Agreement dated as of the date hereof
by and between the Company and the Investor (the “Preferred
Stock Purchase Agreement”.)
PRELIMINARY
STATEMENT
WHEREAS,
pursuant to the Preferred Stock Purchase Agreement, =as part of the
consideration, Investor shall receive Series B Preferred Stock and Warrants,
which upon conversion and exercise, in accordance with the terms of the
Preferred Stock Purchase Agreement, entitle the Investor to receive shares
of
Common Stock of the Company (the “Warrant Shares”); and
WHEREAS,
the
ability of the Investors to sell their Warrant Shares is subject to certain
restrictions under the 1933 Act; and
WHEREAS,
as a
condition to the Preferred Stock Purchase Agreement, the Company has agreed
to
provide the Investor with a mechanism that will permit such Investor, to sell
its Shares of Common Stock in the future.
NOW,
THEREFORE,
in
consideration of the premises and of the mutual covenants and agreements, and
subject to the terms and conditions herein contained, the parties hereto hereby
agree as follows:
ARTICLE
I
INCORPORATION
BY REFERENCE, SUPERSEDER
| 1.1 |
Incorporation
by Reference.
The foregoing recitals and the Exhibits attached hereto and referred
to
herein, are hereby acknowledged to be true and accurate, and are
incorporated herein by this
reference.
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| 1.2 |
Superseder.
This Agreement, to the extent that it is inconsistent with any other
instrument or understanding among the parties governing the affairs
of the
Company, shall supersede such instrument or understanding to the
fullest
extent permitted by law. A copy of this Agreement shall be filed
at the
Company’s principal office.
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1.3
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Definitions.
All terms defined in the Purchase Agreement and used in this Agreement
shall have the same meanings in this Agreement as in the Purchase
Agreement. As used in this Agreement the following terms shall have
the
meanings hereinafter set forth.
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a)
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“Excusable
Reason”
means (i) the occurrence of negotiations with respect to a material
agreement prior to either the announcement of the execution of the
agreement or the termination of the negotiations with respect to
such
proposed agreement or (ii) other similar material corporate events
to
which the Company is a party or expects to be a party if, in the
reasonable judgment of the Company, disclosure of the negotiations
or
other event would be adverse to the best interests of the Company
provided
that the Company is continuing to treat such negotiations as confidential
and provided further that the period during which the Company is
precluded
from filing the registration statement (or suspended the use of an
effective registration statement) as a result thereof has not exceeded
fifteen (15) trading days in the aggregate, and provided further
that the
Company shall not be permitted to avoid filing a registration statement
(or to suspend the use of an effective registration statement) for
an
Excusable Reason more than twice in any one-year period. An Excusable
Reason shall also include Acts of God and closure of the
SEC.
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b)
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“Filing
Date”
shall mean (i) with respect to the Initial Registration Statement,
the
30th
calendar day following the Closing Date; provided, however, that,
if in
the opinion of the counsel to the Company that the Company’s audited
financials for the fiscal year 2007 are required to be included in
the
initial Registration Statement based on the applicable SEC rules,
then the
Filing Date shall be delayed to the earliest date when the Company’s
audited financials for the fiscal year 2007 shall become available;
provided further, that in no event shall the Filing Date be later
than
March 30, 2008, and (ii) with respect to any Subsequent Registration
Statements, the later of (a) ninety (90) days after the Company receives
a
demand for registration of additional Registrable Securities or (b)
thirty
days following the earliest practical date on which the Company is
permitted by SEC Guidance to file such additional Registration Statement
related to the Registrable Securities (which is at least 180 days
from the
effective date of the Initial Registration Statement.) If any Filing
Date
or Required Effectiveness Date occurs on a date which is either (x)
a
Saturday, Sunday or day on which banks in the State of New York are
authorized or required to be closed on all or part of the normal
business
day or (y) the SEC is closed for all or a portion of the business
day, the
Filing Date or Required Effective Date, as the case may be, shall
the next
day which is not a day described in clauses (x) or
(y).
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c)
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“Registration
Expenses”
shall mean all expenses incident to the Company’s performance of or
compliance with its obligations under this Agreement, including,
without
limitation, all registration, filing, listing, stock exchange and
NASD
fees, all fees and expenses of complying with state securities or
blue sky
laws (including fees, disbursements and other charges of counsel
for the
underwriters only in connection with blue sky filings), all word
processing, duplicating and printing expenses, messenger and delivery
expenses, the fees, disbursements and other charges of counsel for
the
Company and of its independent public accountants, including the
expenses
incurred in connection with “cold comfort” letters required by or incident
to such performance and compliance, any fees and disbursements of
underwriters customarily paid by the issuer of securities, but excluding
from the definition of Registration Expenses underwriting discounts
and
brokerage commissions and applicable transfer taxes, if any, or legal
and
other expenses incurred by any sellers, which discounts, commissions,
transfer taxes and legal and other expenses shall be borne by the
seller
or sellers of Registrable Securities in all
cases.
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2
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d)
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“Registration
Statement”
shall mean the registration statement required to be filed pursuant
to
Section 2.2 of this Agreement hereunder and any additional registration
statements contemplated by Section 2.3, including (in each case)
the
Prospectus, amendments and supplements to such registration statement
or
Prospectus, including pre- and post-effective amendments, all exhibits
thereto, and all material incorporated by reference or deemed to
be
incorporated by reference in such registration
statement.
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e)
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“Required
Effective Date”
shall mean the first to occur of (i) 150 days following the Closing
Date
with respect to the Initial Registration Statement or 120 days following
the Filing Date with respect to a Subsequent Registration Statement;
provided, however, if the Filing Date is delayed because the Company’s
audited financials for the fiscal year 2007 are required to be included
in
the initial Registration Statement based on the applicable SEC rules,
then
the Required Effective Date shall be 120 days following the Filing
Date;
(ii) ten (10) days following the receipt of a “No Review” or similar
letter from the SEC or (iii) the third (3rd) business day following
the
day the Company receives notice from the SEC that the SEC has determined
that the Registration Statement eligible to be declared effective
without
further comments by the SEC; provided,
however,
that in no event shall the Required Effective Date of a Subsequent
Registration Statement be earlier than the earliest date on which,
based
on SEC Guidance, the SEC will declare effective such Registration
Statement.
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f)
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“Rule
144”
means Rule 144 promulgated by the Commission pursuant to the Securities
Act, as such Rule may be amended or interpreted from time to time,
or any
similar rule or regulation hereafter adopted by the Commission having
substantially the same purpose and effect as such
Rule.
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g)
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“Rule
415”
means Rule 415 promulgated by the Commission pursuant to the Securities
Act, as such Rule may be amended or interpreted from time to time,
or any
similar rule or regulation hereafter adopted by the Commission having
substantially the same purpose and effect as such
Rule.
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h)
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“Rule
424”
means Rule 424 promulgated by the Commission pursuant to the Securities
Act, as such Rule may be amended or interpreted from time to time,
or any
similar rule or regulation hereafter adopted by the Commission having
substantially the same purpose and effect as such
Rule.
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i)
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“SEC
Guidance”
means (i) any publicly-available written or oral guidance, comments,
requirements or requests of the Commission staff and (ii) the Securities
Act.
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3
ARTICLE
II
DEMAND
REGISTRATION RIGHTS
2.1 Registrable
Securities.
Means
and includes the Shares of the Company underlying the Preferred Stock and
Warrants issued pursuant to the Preferred Stock Purchase Agreement; provided,
however, that such registrable securities shall not include any shares issued
or
issuable as liquidated damages pursuant to the Preferred Stock Purchase
Agreement, this Agreement or the Warrants (the “Registrable
Securities”).
As to
any particular Registrable Securities, such securities will cease to be
Registrable Securities when (a) they have been effectively registered under
the
1933 Act and disposed of in accordance with the registration statement covering
them, (b) they are or may be freely traded without registration pursuant to
Rule
144 under the 1933 Act (or any similar provisions that are then in effect),
or
(c) they have been otherwise transferred and new certificates for them not
bearing a restrictive legend have been issued by the Company and the Company
shall not have “stop transfer” instructions against them. “Shares”
shall
mean, collectively, the shares of Common Stock of the Company issuable upon
conversion of the Preferred Stock and those shares of Common Stock of the
Company issuable to the Investor upon exercise of the Warrants; provided,
however, that Shares shall not include any shares issued or issuable as
liquidated damages pursuant to the Preferred Stock Purchase Agreement, this
Agreement or the Warrants.
2.2 Registration
of Registrable Securities.
The
Company shall prepare and file on the Filing Date an initial registration
statement (the “Initial
Registration Statement”)
covering the resale of such number of shares of the Registrable Securities
permitted by the SEC as determined by the Company and the Investor pursuant
to
the then current SEC Guidance relating to Rule 415. . The Company shall use
its
commercially reasonable best efforts to cause the Registration Statement to
be
declared effective by the SEC on the Required Effectiveness Date. Nothing
contained herein shall be deemed to limit the number of Registrable Securities
to be registered by the Company hereunder. As a result, should the Registration
Statement not relate to the maximum number of Registrable Securities acquired
by
(or potentially acquirable by) the holders of the Shares of the Company issued
to the Investor pursuant to the Preferred Stock Purchase Agreement, the Company
shall be required to promptly file a separate registration statement (utilizing
Rule 462 promulgated under the 1933 Act, where applicable) relating to such
Registrable Securities which then remain unregistered (the “Subsequent
Registration Statement”)
and
shall use its commercially reasonable best efforts to cause the Subsequent
Registration Statement to be declared effective by the SEC on the applicable
Required Effective Date. The provisions of this Agreement shall relate to any
such separate registration statement as if it were an amendment to the
Registration Statement.
2.3 Demand
Registration.
Subject
to the limitations of Section 2.2, at any time and from time to time, the
Investor may request the registration under the 1933 Act of all or part of
the
Registrable Shares then outstanding (a “Demand
Registration”).
Subject to the conditions of Section 3, the Company shall use its commercially
reasonable best efforts to file such registration statement under the 1933
Act
as promptly as practicable after the date any such request is received by the
Company and to cause such registration statement to be declared effective.
The
Company shall notify the Investor promptly when any such registration statement
has been declared effective. If more than eighty percent (80%) of the Shares
issuable under the Preferred Stock Purchase Agreement have been registered
or
sold, this provision shall expire.
4
2.4 Registration
Statement Form.
Registrations under Section 2.2 and Section 2.3 shall be on the appropriate
registration form of the SEC as shall permit the disposition of such Registrable
Securities in accordance with the intended method or methods of disposition
specified in the Registration Statement; provided, however, such intended method
of disposition shall not include an underwritten offering of the Registrable
Securities.
2.5 Expenses.
The
Company will pay all Registration expenses in connection with any registration
required by under Sections 2.2 and Section 2.3 herein.
2.6 Effective
Registration Statement.
A
registration requested pursuant to Sections 2.2 and Section 2.3 shall not be
deemed to have been effected (i) unless a registration statement with respect
thereto has become effective within the time period specified herein, provided
that a registration which does not become effective after the Company filed
a
registration statement with respect thereto solely by reason of the refusal
to
proceed of any holder of Registrable Securities (other than a refusal to proceed
based upon the advice of counsel in the form of a letter signed by such counsel
and provided to the Company relating to a disclosure matter unrelated to such
holder) shall be deemed to have been effected by the Company unless the holders
of the Registrable Securities shall have elected to pay all Registration
Expenses in connection with such registration, (ii) if, after it has become
effective, such registration becomes subject to any stop order, injunction
or
other order or extraordinary requirement of the SEC or other governmental agency
or court for any reason or (iii) if, after it has become effective, such
registration ceases to be effective for more than the allowable Black-Out
Periods (as defined herein).
2.7 Plan
Of Distribution.
The
Company hereby agrees that the Registration Statement shall include a plan
of
distribution section reasonably acceptable to the Investor; provided, however,
such plan of distribution section shall be modified by the Company so as to
not
provide for the disposition of the Registrable Securities on the basis of an
underwritten offering.
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2.8 Liquidated
Damages.
If,
by
the applicable Filing Date, the Company does not file a Registration Statement
pursuant to the requirements of Section 2.2 herein, or if a Registration
Statement filed pursuant to Section 2.2 herein is not declared effective by
the
applicable Required Effective Date, or if the Registrable Securities are
registered pursuant to an effective Registration Statement and such Registration
Statement or other Registration Statement(s) demanded by Investor including
the
Registrable Securities is not effective in the period from the Required
Effective Date through two (2) years following the date hereof, other than
for
an Excusable Reason (any such failure or breach being referred hereafter as
an
“Event”), the Company shall, for each such day that an Event shall exist, pay an
amount in cash as liquidated damages, not as penalty, to the Investors (pro
rata
based on the percentage of Series B Preferred Stock owned by the Investors
at
the time such liquidated damages shall have incurred) equal to fourteen percent
(14%) of the Purchase Price payable monthly based on the number of days such
Event exists; provided,
however,
that in
no event shall the amount of liquidated damages payable at any time and from
time to time to the Investors pursuant to this Agreement, the Warrant and the
Preferred Stock Purchase Agreement exceed an aggregate of eighteen percent
(18%)
of the amount of the Purchase Price; and provided,
further,
that
notwithstanding the foregoing, in the event the SEC does not permit all of
the
Registrable Securities to be included in a Registration Statement because of
its
application of Rule 415, no liquidated damages shall be payable pursuant to
this
Section by the Company with respect to any Registrable Securities that the
Company was not permitted to include on such Registration Statement and provided
further, that notwithstanding the foregoing, no liquidated damages shall be
payable with respect to the occurrence of an Event for any Shares issued or
issuable upon exercise of the Warrants. Any liquidated damages incurred by
the
Company pursuant to this Section 2.8 shall become due and payable on third
business day following the last day of the month in which such liquidated
damages are incurred. If, pursuant to this Section 2.8, cash liquidated damages
are incurred and payable by the Company and the Company shall have failed to
pay
the Investors within 15 days following the last day of the month in which such
cash liquidated damages shall have become payable and due, then, at the election
of the Investors, shares of Series B Preferred Stock are to be delivered as
liquidating damages to the Investors pro rata based on the percentage that
the
number of Series B Preferred Stock beneficially owned by such Investor bears
to
the total number of Series B Preferred Stock outstanding at the time when the
cash liquidated damages are due. The number of shares due will be calculated
in
accordance with Section 6.27 of the Preferred Stock Purchase Agreement.(b)
Notwithstanding the provisions of Section 2.8(a):
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(i)
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In
the event that the Company shall fail to file the Registration Statement
by the Filing Date but the Registration Statement shall have been
declared
effective by the Required Effectiveness Date, then no liquidated
damages
shall be payable with respect to the failure to file by the Filing
Date.
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(ii)
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In
no event shall the Company be required to pay any liquidated damages
in
the event that the failure to file or be declared effective on the
requisite dates results in whole or in part from either (a) the failure
of
the Investor to provide information relating to the Investor and
its
proposed method of sale or any other information concerning the Investor
that is required to be included in the Registration
Statement
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(c)
The
parties agree that the only damages payable for a violation of the terms of
this
Agreement with respect to which liquidated damages are expressly provided shall
be such liquidated damages. Nothing shall preclude the Investor from pursuing
or
obtaining specific performance or other equitable relief with respect to this
Agreement.
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(d)
The
parties hereto agree that the liquidated damages provided for in this Section
2.8 constitute a reasonable estimate of the damages that may be incurred by
the
Investor by reason of the failure of the Registration Statement(s) to be filed
or declared effective in accordance with the provisions hereof.
(e)
Notwithstanding anything to the contrary contained in this Agreement, the
obligation of the Company under this Agreement terminates when the holder of
shares of Registrable Securities no longer holds more than [ten percent (10%)]
of its shares of Registrable Securities.
ARTICLE
III
INCIDENTAL
REGISTRATION RIGHTS
3.1 Right
To Include (“Piggy-Back”) Registrable Securities.
Provided that the Registrable Securities have not been registered, if at any
time after the date hereof but before the third anniversary of the date hereof,
the Company proposes to register any of its securities under the 1933 Act (other
than by a registration in connection with an acquisition in a manner which
would
not permit registration of Registrable Securities for sale to the public, on
Form S-8, or any successor form thereto, on Form S-4, or any successor form
thereto and other than pursuant to Section 2), on an underwritten basis (either
best-efforts or firm-commitment), then, the Company will each such time give
prompt written notice to all holders of Registrable Securities of its intention
to do so and of such holders of Registrable Securities’ rights under this
Section 3.1. Upon the written request of any such holders of Registrable
Securities made within ten (10) days after the receipt of any such notice (which
request shall specify the Registrable Securities intended to be disposed of
by
such holders of Registrable Securities and the intended method of disposition
thereof), the Company will, subject to the terms of this Agreement, use its
commercially reasonable best efforts to effect the registration under the 1933
Act of the Registrable Securities, to the extent requisite to permit the
disposition (in accordance with the intended methods thereof as aforesaid)
of
such Registrable Securities so to be registered, by inclusion of such
Registrable Securities in the registration statement which covers the securities
which the Company proposes to register, provided that if, at any time after
written notice of its intention to register any securities and prior to the
effective date of the registration statement filed in connection with such
registration, the Company shall determine for any reason either not to register
or to delay registration of such securities, the Company may, at its election,
give written notice of such determination to each holders of Registrable
Securities and, thereupon, (i) in the case of a determination not to register,
shall be relieved of this obligation to register any Registrable Securities
in
connection with such registration (but not from its obligation to pay the
Registration Expenses in connection therewith), without prejudice, however,
to
the rights of any holder or holders of Registrable Securities entitled to do
so
to request that such registration be effected as a registration under Section
2,
and (ii) in the case of a determination to delay registering, shall be permitted
to delay registering any Registrable Securities, for the same period as the
delay in registering such other securities. No registration effected under
this
Section 3.1 shall relieve the Company of its obligation to effect any
registration upon request under Section 2. The Company will pay all Registration
Expenses in connection with each registration of Registrable Securities
requested pursuant to this Section 3.1. The right provided the Holders of the
Registrable Securities pursuant to this Section shall be exercisable at their
sole discretion and will in no way limit any of the Company’s obligations to pay
the Securities according to their terms.
7
3.2 Priority
In Incidental Registrations.
In case
of an underwritten public offering, if the managing underwriter of the
underwritten offering contemplated by this Section 3 shall inform the Company
and holders of the Registrable Securities requesting such registration by letter
of its belief that the inclusion of such Registrable Securities would materially
adversely affect the offering contemplated in such registration statement,
then
the Company will include in such registration, to the extent of the number
which
the Company is so advised that the inclusion of which would not materially
adversely affect the offering contemplated in such registration statement (i)
first securities proposed by the Company to be sold for its own account, and
(ii) second Registrable Securities and (iii) securities of other selling
security holders requested to be included in such registration.
ARTICLE
IV
REGISTRATION
PROCEDURES
4.1 Registration
Procedures.
If and
whenever the Company is required to effect the registration of any Registrable
Securities under the 1933 Act as provided in Section 2.2 and, as applicable,
2.3, the Company shall, as expeditiously as possible:
(i) prepare
and file with the SEC the Registration Statement, or amendments thereto, to
effect such registration (including such audited financial statements as may
be
required by the 1933 Act or the rules and regulations promulgated thereunder)
and thereafter use its commercially reasonable best efforts to cause such
registration statement to be declared effective by the SEC, as soon as
practicable, but in any event no later than the Required Effectiveness Date
(with respect to a registration pursuant to Section 2.2); provided, however,
that before filing such registration statement or any amendments thereto, the
Company will furnish to the counsel selected by the holders of Registrable
Securities which are to be included in such registration, copies of all such
documents proposed to be filed;
(ii) with
respect to any registration statement pursuant to Section 2.2 or Section 2.3,
prepare and file with the SEC such amendments and supplements to such
registration statement and the prospectus used in connection therewith as may
be
necessary to keep such registration statement effective and to comply with
the
provisions of the 1933 Act with respect to the disposition of all Registrable
Securities covered by such registration statement until the earlier to occur
of
thirty six (36) months after the date of this Agreement (subject to the right
of
the Company to suspend the effectiveness thereof for Excusable Reason (each
a
“Black-Out
Period”))
or
such time as all of the securities which are the subject of such registration
statement cease to be Registrable Securities (such period, in each case, the
“Registration
Maintenance Period”).
The
Company must notify the Investor within twenty four (24) hours prior to any
Black-Out Period;
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(iii) furnish
to each holder of Registrable Securities covered by such registration statement
such number of conformed copies of such registration statement and of each
such
amendment and supplement thereto (in each case including all exhibits), such
number of copies of the prospectus contained in such registration statement
(including each preliminary prospectus and any summary prospectus) and any
other
prospectus filed under Rule 424 under the 1933 Act, in conformity with the
requirements of the 1933 Act, and such other documents, as such holder of
Registrable Securities and underwriter, if any, may reasonably request in order
to facilitate the public sale or other disposition of the Registrable Securities
owned by such holder of Registrable Securities;
(iv) use
its
commercially reasonable best efforts to register or qualify all Registrable
Securities and other securities covered by such registration statement under
such other U.S. federal or state securities laws or U.S. state blue sky laws
as
any U.S. holder of Registrable Securities thereof shall reasonably request,
to
keep such registrations or qualifications in effect for so long as such
registration statement remains in effect, and take any other action which may
be
reasonably necessary to enable such holder of Registrable Securities to
consummate the disposition in such jurisdictions with the U.S. of the securities
owned by such holder of Registrable Securities, except that the Company shall
not for any such purpose be required to qualify generally to do business as
a
foreign corporation in any jurisdiction wherein it would not but for the
requirements of this subdivision (iv) be obligated to be so qualified or to
consent to general service of process in any such jurisdiction;
(v) use
its
commercially reasonable best efforts to cause all Registrable Securities covered
by such registration statement to be registered with or approved by such other
governmental agencies or authorities as may be necessary to enable the U.S.
holder of Registrable Securities thereof to consummate the disposition of such
Registrable Securities;
(vi) furnish
to each holder of Registrable Securities who requests, a signed counterpart,
addressed to such holder of Registrable Securities, and the underwriters, if
any, of an opinion of counsel for the Company, dated the effective date of
such
registration statement (or, if such registration includes an underwritten public
offering, an opinion dated the date of the closing under the underwriting
agreement), reasonably satisfactory in form and substance to such holder of
Registrable Securities), such opinion to be in the form filed as Exhibit 5
to
the Registration Statement, and
(vii) notify
the Investor and its counsel promptly and confirm such advice in writing
promptly after the Company has knowledge thereof:
(a) when
the
Registration Statement, the prospectus or any prospectus supplement related
thereto or post-effective amendment to the Registration Statement has been
filed, and, with respect to the Registration Statement or any post-effective
amendment thereto, when the same has become effective;
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(b) of
any
request by the SEC for amendments or supplements to the Registration Statement
or the prospectus or for additional information;
(c) of
the
issuance by the SEC of any stop order suspending the effectiveness of the
Registration Statement or the initiation of any proceedings by any Person for
that purpose; and
(d) of
the
receipt by the Company of any notification with respect to the suspension of
the
qualification of any Registrable Securities for sale under the securities or
blue sky laws of any jurisdiction or the initiation or threat of any proceeding
for such purpose;
(viii) notify
each holder of Registrable Securities covered by such registration statement,
at
any time when a prospectus relating thereto is required to be delivered under
the 1933 Act, upon discovery that, or upon the happening of any event as a
result of which, the prospectus included in such registration statement, as
then
in effect, includes an untrue statement of a material fact or omits to state
any
material facts required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances then existing, and
at
the request of any such holder of Registrable Securities promptly prepare and
furnish to such holder of Registrable Securities a reasonable number of copies
of a supplement to or an amendment of such prospectus as may be necessary so
that, as thereafter delivered to the purchasers of such securities, such
prospectus shall not include an untrue statement of a material fact or omit
to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances then
existing; use its best efforts to obtain the withdrawal of any order suspending
the effectiveness of the Registration Statement at the earliest possible
moment;
(ix) otherwise
use its commercially reasonable best efforts to comply with all applicable
rules
and regulations of the SEC, and make available to its security holders, as
soon
as reasonably practicable, an earnings statement covering the period of at
least
twelve months, but not more than eighteen months, beginning with the first
full
calendar month after the effective date of such registration statement, which
earnings statement shall satisfy the provisions of Section 11(a) of the 1933
Act
and Rule 158 thereunder;
(x) enter
into such agreements and take such other actions as the Investors shall
reasonably request in writing (at the expense of the requesting or benefiting
Investors) in order to expedite or facilitate the disposition of such
Registrable Securities; and
(xi) use
its
commercially reasonable best efforts to list all Registrable Securities covered
by such registration statement on any securities exchange on which any of the
Registrable Securities are then listed.
4.2
The
Company may require each holder of Registrable Securities as to which any
registration is being effected to furnish the Company such information regarding
such holder of Registrable Securities and the distribution of such securities
as
the Company may from time to time reasonably request in writing. In this
connection, the Investor shall
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(a)
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furnish
the information as to any shares of Common Stock or other securities
of
the Company owned by the holder, the holder’s proposed plan of
distribution, any relationship between the holder and the Company
and any
other information which the Company reasonably requests in connection
with
the preparation of the registration statement and update such information
immediately upon the occurrence of any events or condition which
make the
information concerning the holder inaccurate in any material
respect;
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(b)
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not
sell any Registrable Securities pursuant to the registration statement
except in the manner set forth in the Registration
Statement;
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(c)
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comply
with the prospectus delivery requirements and the provisions of Regulation
M of the SEC pursuant to the 1933 Act to the extent that such regulation
is applicable to the holder;
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(d)
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not
sell or otherwise transfer or distribute any Registrable Securities
if the
holder possesses any material nonpublic information concerning the
Company.
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4.3 The
Company will not file any registration statement pursuant to Section 2.2 or
Section 2.3, or amendment thereto or any prospectus or any supplement thereto
to
which the Investors shall reasonably object, provided that the Company may
file
such documents in a form required by law or upon the advice of its
counsel.
4.4 The
Company represents and warrants to each holder of Registrable Securities that
it
has obtained all necessary waivers, consents and authorizations necessary to
execute this Agreement and consummate the transactions contemplated hereby
other
than such waivers, consents and/or authorizations specifically contemplated
by
the Preferred Stock Purchase Agreement.
4.5 Each
holder of Registrable Securities agrees that, upon receipt of any notice from
the Company of the occurrence of any event of the kind described in subdivision
(viii) of Section 4.1, such Holder will forthwith discontinue such holder of
Registrable Securities’ disposition of Registrable Securities pursuant to the
Registration Statement relating to such Registrable Securities until such holder
of Registrable Securities’ receipt of the copies of the supplemented or amended
prospectus contemplated by subdivision (viii) of Section 4.1 and, if so directed
by the Company, will deliver to the Company (at the Company’s expense) all
copies, other than permanent file copies, then in such Holder’s possession of
the prospectus relating to such Registrable Securities current at the time
of
receipt of such notice.
11
ARTICLE
V
UNDERWRITTEN
OFFERINGS
5.1 Incidental
Underwritten Offerings.
If the
Company at any time proposes to register any of its securities under the 1933
Act as contemplated by Section 3.1 and such securities are to be distributed
by
or through one or more underwriters, the Company will, if requested by any
holder of Registrable Securities as provided in Section 3.1 and subject to
the
provisions of Section 3.2, use its commercially reasonable best efforts to
arrange for such underwriters to include all the Registrable Securities to
be
offered and sold by such holder among the securities to be distributed by such
underwriters. In no event shall any Investor be deemed an underwriter for
purposes of this Agreement. This Article V shall not apply to any Registrable
Securities theretofore registered pursuant to Article II of this
Agreement.
5.2 Participation
In Underwritten Offerings.
No
holder of Registrable Securities may participate in any underwritten offering
under Section 3.1 unless such holder of Registrable Securities (i) agrees to
sell such Person’s securities on the basis provided in any underwriting
arrangements approved, subject to the terms and conditions hereof, by the
holders of a majority of Registrable Securities to be included in such
underwritten offering and (ii) completes and executes all questionnaires,
indemnities, underwriting agreements and other documents (other than powers
of
attorney) required under the terms of such underwriting arrangements.
Notwithstanding the foregoing, no underwriting agreement (or other agreement
in
connection with such offering) shall require any holder of Registrable
Securities to make a representation or warranty to or agreements with the
Company or the underwriters other than representations and warranties contained
in a writing furnished by such holder of Registrable Securities expressly for
use in the related registration statement or representations, warranties or
agreements regarding such holder of Registrable Securities, such holder’s
Registrable Securities and such holder’s intended method of distribution and any
other representation required by law.
5.3 Preparation;
Reasonable Investigation.
In
connection with the preparation and filing of each registration statement under
the 1933 Act pursuant to this Agreement, the Company will give the holders
of
Registrable Securities registered under such registration statement, and their
respective counsel and accountants, the opportunity to participate in the
preparation of such registration statement, each prospectus included therein
or
filed with the SEC, and each amendment thereof or supplement thereto, and will
give each of them such access to its books and records and such opportunities
to
discuss the business of the Company with its officers and the independent public
accountants who have certified its financial statements as shall be necessary,
in the reasonable opinion of such holders’ and such underwriters’ respective
counsel, to conduct a reasonable investigation within the meaning of the 1933
Act.
12
ARTICLE
VI
INDEMNIFICATION
6.1 Indemnification
by the Company.
In the
event of any registration of any Registrable Securities of the Company under
the
1933 Act, the Company will, and hereby does agree to indemnify and hold harmless
the holder of any Registrable Securities covered by such registration statement,
its directors and officers, and each other Person, if any, who controls such
holder or any such underwriter within the meaning of the 1933 Act against any
losses, claims, damages or liabilities, joint or several, to which such holder
or any such director or officer or underwriter or controlling person may become
subject under the 1933 Act or otherwise, insofar as such losses, claims, damages
or liabilities (or actions or proceedings, whether commenced or threatened,
in
respect thereof) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in any registration statement
under which such securities were registered under the 1933 Act, any preliminary
prospectus, final prospectus or summary prospectus contained therein, or any
amendment or supplement thereto, or any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make
the
statements therein not misleading, and the Company will reimburse such holder
and each such director, officer and controlling person for any legal or any
other expenses reasonably incurred by them in connection with investigating
or
defending any such loss, claim, liability, action or proceeding, provided that
the Company shall not be liable in any such case to the extent that any such
loss, claim, damage, liability, (or action or proceeding in respect thereof)
or
expense arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission made in such registration statement,
any such preliminary prospectus, final prospectus, summary prospectus, amendment
or supplement in reliance upon and in conformity with written information
furnished to the Company by such holder stating that it is for use in the
preparation thereof and, provided further that the Company shall not be liable
to any Person who participates as an underwriter in the offering or sale of
Registrable Securities or to any other Person, if any, who controls such
underwriter within the meaning of the 1933 Act, in any such case to the extent
that any such loss, claim, damage, liability (or action or proceeding in respect
thereof) or expense arises out of such Person’s failure to send or give a copy
of the final prospectus, as the same may be then supplemented or amended, within
the time required by the 1933 Act to the Person asserting the existence of
an
untrue statement or alleged untrue statement or omission or alleged omission
at
or prior to the written confirmation of the sale of Registrable Securities
to
such Person if such statement or omission was corrected in such final prospectus
or an amendment or supplement thereto. Such indemnity shall remain in full
force
and effect regardless of any investigation made by or on behalf of such holder
or any such director, officer, underwriter or controlling person and shall
survive the transfer of such securities by such holder.
13
6.2 Indemnification
by the Investor.
The
Company may require, as a condition to including any Registrable Securities
in
any registration statement filed pursuant to this Agreement, that the Company
shall have received an undertaking satisfactory to it from the prospective
holder of such Registrable Securities, and the Investor hereby agrees to
indemnify and hold harmless (in the same manner and to the same extent as set
forth in Section 6.1) the Company, each director of the Company, each officer
of
the Company, each representative or agent of the Company, and each other Person,
if any, who controls the Company within the meaning of the 1933 Act, with
respect to any statement or alleged statement in or omission or alleged omission
from such registration statement, any preliminary prospectus, final prospectus
or summary prospectus contained therein, or any amendment or supplement thereto,
if such statement or alleged statement or omission or alleged omission was
made
in reliance upon or in conformity with written information furnished to the
Company by such holder of Registrable Securities specifically stating that
it is
for use in the preparation of such registration statement, preliminary
prospectus, final prospectus, summary prospectus, amendment or supplement.
Any
such indemnity shall remain in full force and effect, regardless of any
investigation made by or on behalf of the Company or any such director, officer
or controlling person and shall survive the transfer of such securities by
such
Investor. The indemnification by the Investors shall be limited to
$50,000.
6.3 Notices
Of Claims, Etc.
Promptly after receipt by an indemnified party of notice of the commencement
of
any action or proceeding involving a claim referred to in Sections 6.1 and
Section 6.2, such indemnified party will, if a claim in respect thereof is
to be
made against an indemnifying party, give written notice to the latter of the
commencement of such action, provided that the failure of any indemnified party
to give notice as provided herein shall not relieve the indemnifying party
of
its obligations under Sections 6.1 and Section 6.2, except to the extent that
the indemnifying party is actually prejudiced by such failure to give notice.
In
case any such action is brought against an indemnified party, unless in the
reasonable judgment of such indemnified party’s counsel a conflict of interest,
as hereinafter defined, between such indemnified and indemnifying parties may
exist in respect of such claim, the indemnifying party shall be entitled to
participate in and to assume the defense thereof, jointly with any other
indemnifying party similarly notified, to the extent that the indemnifying
party
may wish, with counsel reasonably satisfactory to such indemnified party, and
after notice from the indemnifying party to such indemnified party of its
election so to assume the defense thereof, the indemnifying party shall not
be
liable to such indemnified party for any legal or other expenses subsequently
incurred by the latter in connection with the defense thereof other than
reasonable costs of investigation. No indemnifying party shall, without the
consent of the indemnified party, consent to entry of any judgment or enter
into
any settlement of any such action 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, or a covenant not to xxx, in respect to such
claim or litigation. No indemnified party shall consent to entry of any judgment
or enter into any settlement of any such action the defense of which has been
assumed by an indemnifying party without the consent of such indemnifying party.
the defendants in any action covered by this Section 6.3 include both the
indemnified party and the indemnifying party and counsel for the indemnified
party shall have reasonably concluded that there may be reasonable defenses
available to it which are different from or additional to those available to
the
indemnifying party or if the interests of the indemnified party reasonably
may
be deemed to conflict with the interests of the indemnifying party
(collectively, a “conflict of interest”), the indemnified parties, as a group,
shall have the right to select one separate counsel and to assume such legal
defenses and otherwise to participate in the defense of such action, with the
reasonable expenses and fees of such separate counsel and other expenses related
to such participation to be reimbursed by the indemnifying party. Such counsel
shall be selected by the holders of a majority of the shares of Common Stock
having an indemnity claim against the Company, whether pursuant to this
Agreement or any other agreements which provide such or similar
indemnity.
14
6.4 Other
Indemnification.
Indemnification similar to that specified in Sections 6.1 and Section 6.2 (with
appropriate modifications) shall be given by the Company and each holder of
Registrable Securities (but only if and to the extent required pursuant to
the
terms herein) with respect to any required registration or other qualification
of securities under any Federal or state law or regulation of any governmental
authority, other than the 1933 Act.
6.5 Indemnification
Payments.
The
indemnification required by Sections 6.1 and Section 6.2 shall be made by
periodic payments of the amount thereof during the course of the investigation
or defense, as and when bills are received or expense, loss, damage or liability
is incurred.
6.6 Contribution.
If the
indemnification provided for in Sections 6.1 and Section 6.2 is unavailable
to
an indemnified party in respect of any expense, loss, claim, damage or liability
referred to therein, then each indemnifying party, in lieu of indemnifying
such
indemnified party, shall contribute to the amount paid or payable by such
indemnified party as a result of such expense, loss, claim, damage or liability
(i) in such proportion as is appropriate to reflect the relative benefits
received by the Company on the one hand and the holder of Registrable Securities
, as the case may be, on the other from the distribution of the Registrable
Securities or (ii) if the allocation provided by clause (i) above is not
permitted by applicable law, in such proportion as is appropriate to reflect
not
only the relative benefits referred to in clause (i) above but also the relative
fault of the Company on the one hand and of the holder of Registrable Securities
, as the case may be, on the other in connection with the statements or
omissions which resulted in such expense, loss, damage or liability, as well
as
any other relevant equitable considerations. The relative benefits received
by
the Company on the one hand and the holder of Registrable Securities , on the
other in connection with the distribution of the Registrable Securities shall
be
deemed to be in the same proportion as the total net proceeds received by the
Company from the initial sale of the Registrable Securities by the Company
to
the purchasers bear to the gain, if any, realized by all selling holders
participating in such offering. The relative fault of the Company on the one
hand and of the holder of Registrable Securities, on the other shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or omission to state a material fact relates
to information supplied by the Company, by the holder of Registrable Securities
and the parties’ relative intent, knowledge, access to information supplied by
the Company, by the holder of Registrable Securities and the parties’ relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission, provided that the foregoing contribution agreement
shall not inure to the benefit of any indemnified party if indemnification
would
be unavailable to such indemnified party by reason of the provisions contained
herein, and in no event shall the obligation of any indemnifying party to
contribute under this Section 6.6 exceed the amount that such indemnifying
party
would have been obligated to pay by way of indemnification if the
indemnification provided for hereunder had been available under the
circumstances.
15
The
Company and the holders of Registrable Securities agree that it would not be
just and equitable if contribution pursuant to this Section 6.6 were determined
by pro rata allocation or by any other method of allocation that does not take
account of the equitable considerations referred to in the immediately preceding
paragraph. The amount paid or payable by an indemnified party as a result of
the
losses, claims, damages and liabilities referred to in the immediately preceding
paragraph shall be deemed to include, subject to the limitations set forth
herein, any legal or other expenses reasonably incurred by such indemnified
party in connection with investigating or defending any such action or
claim.
Notwithstanding
the provisions of this Section 6.6, no holder of Registrable Securities shall
be
required to contribute any amount in excess of the amount by which, the net
proceeds received by such holder from the sale of Registrable Securities in
the
applicable Registration Statement exceeds, in any such case, the amount of
any
damages that such holder has otherwise been required to pay by reason of such
untrue or alleged untrue statement or omission. No Person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the 0000 Xxx) shall
be
entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation.
16
ARTICLE
VII
RULE
144
7.1 Rule
144.
The
Company shall use commercially reasonable best efforts to file in a timely
manner the reports required to be filed by the Company under the 1933 Act and
the 1934 Act (including but not limited to the reports under Sections 13 and
15(d) of the Exchange Act referred to in subparagraph (c) of Rule 144 adopted
by
the SEC under the 0000 Xxx) and the rules and regulations adopted by the SEC
thereunder (or, if the Company is not required to file such reports, will,
upon
the request of any holder of Registrable Securities, make publicly available
other information) and will take such further action as any holder of
Registrable Securities may reasonably request, all to the extent required from
time to time to enable such holder to sell Registrable Securities without
registration under the 1933 Act within the limitation of the exemptions provided
by (a) Rule 144 under the 1933 Act, as such Rule may be amended from time to
time, or (b) any similar rule or regulation hereafter adopted by the SEC. Upon
the request of any holder of Registrable Securities, the Company will deliver
to
such holder a written statement as to whether it has complied with the
requirements of this Section 7.1.
ARTICLE
VIII
MISCELLANEOUS
8.1 Amendments
And Waivers.
This
Agreement may be amended and the Company may take any action herein prohibited,
or omit to perform any act herein required to be performed by it, only if the
Company shall have obtained the written consent to such amendment, action or
omission to act, of the holder or holders of the sum of the fifty-one percent
(51%) or more of the shares of (i) Registrable Securities issued at such time,
plus (ii) Registrable Securities issuable upon exercise or conversion of the
Securities then constituting derivative securities (if such Securities were
not
fully exchanged or converted in full as of the date such consent if sought).
Each holder of any Registrable Securities at the time or thereafter outstanding
shall be bound by any consent authorized by this Section 8.1, whether or not
such Registrable Securities shall have been marked to indicate such
consent.
8.2 Nominees
For Beneficial Owners.
In the
event that any Registrable Securities are held by a nominee for the beneficial
owner thereof, the beneficial owner thereof may, at its election, be treated
as
the holder of such Registrable Securities for purposes of any request or other
action by any holder or holders of Registrable Securities pursuant to this
Agreement or any determination of any number of percentage of shares of
Registrable Securities held by a holder or holders of Registrable Securities
contemplated by this Agreement. If the beneficial owner of any Registrable
Securities so elects, the Company may require assurances reasonably satisfactory
to it of such owner’s beneficial ownership or such Registrable
Securities.
8.3 Notices.
Except
as
otherwise provided in this Agreement, all notices, requests and other
communications to any Person provided for hereunder shall be in writing and
shall be given to such Person (a) in the case of a party hereto other than
the
Company, addressed to such party in the manner set forth in the Preferred Stock
Purchase Agreement or at such other address as such party shall have furnished
to the Company in writing, or (b) in the case of any other holder of Registrable
Securities, at the address that such holder shall have furnished to the Company
in writing, or, until any such other holder so furnishes to the Company an
address, then to and at the address of the last holder of such Registrable
Securities who has furnished an address to the Company, or (c) in the case
of
the Company, at the address set forth on the signature page hereto, to the
attention of its President, or at such other address, or to the attention of
such other officer, as the Company shall have furnished to each holder of
Registrable Securities at the time outstanding. Each such notice, request or
other communication shall be effective (i) if given by mail, 72 hours (or 7
business days if the address of the recipient is an overseas address) after
such
communication is deposited in the mail with first class postage prepaid,
addressed as aforesaid or (ii) if given by any other means (including, without
limitation, by fax or air courier), when delivered at the address specified
above, provided that any such notice, request or communication shall not be
effective until received.
17
8.4 Assignment.
This
Agreement shall be binding upon and inure to the benefit of and be enforceable
by the parties hereto. In addition, and whether or not any express assignment
shall have been made, the provisions of this Agreement which are for the benefit
of the parties hereto other than the Company shall also be for the benefit
of
and enforceable by any subsequent holder of any Registrable Securities. Each
of
the Holders of the Registrable Securities agrees, by accepting any portion
of
the Registrable Securities after the date hereof, to the provisions of this
Agreement including, without limitation, appointment of the Investors’
Representative to act on behalf of such Holder pursuant to the terms hereof
which such actions shall be made in the good faith discretion of the Investors’
Representative and be binding on all persons for all purposes.
8.5 Descriptive
Headings.
The
descriptive headings of the several sections and paragraphs of this Agreement
are inserted for reference only and shall not limit or otherwise affect the
meaning hereof.
8.6 Governing
Law.
This
Agreement shall be exclusively governed by, and construed in accordance with,
the laws of the State of New York, without giving effect to applicable
principles of conflicts of law.
8.7 Jurisdiction.
If any
action is brought among the parties with respect to this Agreement or otherwise,
by way of a claim or counterclaim, the parties agree that in any such action,
and on all issues, the parties irrevocably waive their right to a trial by
jury.
Exclusive jurisdiction and venue for any such action shall be the State or
Federal Courts serving the State of New York. In the event suit or action is
brought by any party under this Agreement to enforce any of its terms, or in
any
appeal therefrom, it is agreed that the prevailing party shall be entitled
to
reasonable attorneys fees to be fixed by the arbitrator, trial court, and/or
appellate court.
8.8 Entire
Agreement.
This
Agreement embodies the entire agreement and understanding between the Company
and each other party hereto relating to the subject matter hereof and supercedes
all prior agreements and understandings relating to such subject
matter.
18
8.9 Severability.
If any
provision of this Agreement, or the application of such provisions to any Person
or circumstance, shall be held invalid, the remainder of this Agreement, or
the
application of such provision to Persons or circumstances other than those
to
which it is held invalid, shall not be affected thereby.
8.10 Binding
Effect.
All the
terms and provisions of this Agreement whether so expressed or not, shall be
binding upon, inure to the benefit of, and be enforceable by the parties and
their respective administrators, executors, legal representatives, heirs,
successors and assignees.
8.11 Preparation
of Agreement.
This
Agreement shall not be construed more strongly against any party regardless
of
who is responsible for its preparation. The parties acknowledge each contributed
and is equally responsible for its preparation.
8.12 Failure
or Indulgence Not Waiver; Remedies Cumulative.
No
failure or delay on the part of any party hereto in the exercise of any right
hereunder shall impair such right or be construed to be a waiver of, or
acquiescence in, any breach of any representation, warranty, covenant or
agreement herein, nor shall nay single or partial exercise of any such right
preclude other or further exercise thereof or of any other right. All rights
and
remedies existing under this Agreement are cumulative to, and not exclusive
of,
any rights or remedies otherwise available.
8.13 Counterparts.
This
Agreement may be executed in one or more counterparts, and by the different
parties hereto in separate counterparts, each of which when executed shall
be
deemed to be an original, but all of which taken together shall constitute
one
and the same agreement. A facsimile transmission of this signed Agreement shall
be legal and binding on all parties hereto.
[SIGNATURES
ON FOLLOWING PAGE]
19
IN
WITNESS WHEREOF,
the
Investors and the Company have as of the date first written above executed
this
Agreement.
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ENTECH
ENVIRONMENTAL TECHNOLOGIES, INC.
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By:
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/s/
Xxxxxx X. Emas
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Name:
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Xxxxxx
X. Emas
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Title:
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Director
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INVESTORS
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XXXXXX
PARTNERS LP
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By:
Xxxxxx Capital Advisors, LLC, its General Partners
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By:
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/s/
Xxxxxx Xxxxxx Xxxxxx
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Xxxxxx
Xxxxxx Xxxxxx
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President
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000
Xxxxx Xxxxxx, 0xx Xxxxx
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Xxx
Xxxx XX 00000
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EOS
HOLDINGS LLC
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By:
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/s/
_ Xxx Xxxxxx
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Name:
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Xxx
Xxxxxx
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Title:
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President
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20
