REGISTRATION RIGHTS AGREEMENT
dated as of
April 27, 1998
between
COMPOST AMERICA HOLDING COMPANY, INC.
and
AW COMPOST PARTNERS, LLC
TABLE OF CONTENTS
ARTICLE 1....................................................................1
DEFINITIONS............................................................1
1.1 Definitions..................................................1
ARTICLE 2....................................................................2
REGISTRATION RIGHTS....................................................2
2.1 Securities Subject to this Agreement.........................2
2.2 Demand Registration..........................................3
2.3 Piggyback Registration.......................................4
2.4 Registration Procedures......................................6
2.5 Preparation; Reasonable Investigation.......................10
2.6 Certain Rights of the Holder................................10
2.7 Registration Expenses.......................................10
2.8 Indemnification; Contribution...............................10
2.9 Participation in Underwritten Registrations.................12
2.10 Selection of Underwriters..................................13
ARTICLE 3...................................................................13
RULE 144..............................................................13
3.1 Rule 144 Reporting..........................................13
ARTICLE 4...................................................................13
MISCELLANEOUS.........................................................13
4.1 Entire Agreement............................................13
4.2 Successors and Assigns......................................13
4.3. Notices....................................................13
4.4 Headings....................................................14
4.5 Counterparts................................................14
4.6 Applicable Law..............................................14
4.7 Specific Enforcement........................................14
4.8 Amendment and Waivers.......................................14
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT, dated as of April 27, 1998 (the
"Agreement"), between COMPOST AMERICA HOLDING COMPANY, INC., a New Jersey
corporation (the "Company"), and AW COMPOST PARTNERS, LLC, a limited liability
company organized under the laws of Delaware (the "Holder").
RECITALS
WHEREAS, the Company has agreed to sell to the Holder, and the Holder has
agreed to purchase from the Company, shares of Series D Preferred Stock (as
defined herein) and shares of Common Stock (as defined herein) of the Company,
upon the terms and subject to the conditions set forth in that certain Stock
Purchase Agreement, dated as of the date hereof (the "Stock Purchase
Agreement"), by and between the Company and the Holder;
WHEREAS, it is a condition precedent to the obligations of the Holder
under the Stock Purchase Agreement that the Company grant certain registration
rights in respect of the Restricted Securities (as defined herein); and
WHEREAS, the Company and the Holder desire to evidence such registration
rights by entering into this Agreement.
AGREEMENT
The parties hereto agree as follows:
ARTICLE 1
DEFINITIONS
1.1 Definitions. The following terms, as used herein, have the following
meanings.
"Board" means the Board of Directors of the Company.
"Business Day" means any day except a Saturday, Sunday or other day on
which banks in New York are authorized by law to close.
"Closing Date" means the date on which the completion of the transactions
specified in the Stock Purchase Agreement relating to the purchase and sale of
Series D Preferred Stock as contemplated by Section 2.01 thereof shall occur.
"Commission" means the Securities and Exchange Commission.
"Common Stock" means the common stock, no par value, of the Company.
"Company Registration Statement" means the Registration Statement of the
Company relating to the registration for sale of shares of the Company's Common
Stock contemplated by Section 2.3, including the Prospectus included therein,
all amendments and supplements thereto (including post-effective amendments) and
all exhibits and material incorporated by reference therein.
"Effective Time" means the date of effectiveness of any Registration
Statement.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
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"NASD" means the National Association of Securities Dealers, Inc.
"Person" means an individual, corporation, partnership, association, trust
or other entity or organization, including a government or political subdivision
or an agency or instrumentality thereof.
"Series D Preferred Stock" means the Series D Preferred Stock, no par
value, of the Company.
"Prospectus" means the prospectus included in any Registration Statement,
as amended or supplemented by any prospectus supplement and by all other
amendments thereto, including post-effective amendments, and all material
incorporated by reference into such Prospectus.
The term "register" means to register under the Securities Act and
applicable state securities laws for the purpose of effecting a public sale of
securities.
"Registration Statement" means the Company Registration Statement and/or
the Shelf Registration Statement.
"Restricted Securities" means any Securities until (i) a registration
statement covering such Securities has been declared effective by the Commission
and such Securities have been disposed of pursuant to such effective
registration statement, (ii) such Securities are sold under circumstances in
which all the applicable conditions of Rule 144 (or any similar provisions then
in force) under the Securities Act are met, or such Securities may be sold
pursuant to Rule 144(k) (or any similar provision then in force) under the
Securities Act, and are freely tradable after such sale by the transferee, (iii)
such Securities are otherwise transferred, the Company has delivered a new
certificate or other evidence of ownership for such Securities not bearing a
legend restricting further transfer and such Securities may be resold without
registration under the Securities Act, or (iv) such Securities shall have ceased
to be outstanding.
"Securities" means the shares of Common Stock issuable by the Company to
the Holder at the Closing Date and, to the extent applicable pursuant to Section
2.3(e) hereof, the shares of Preferred Stock granted piggyback registration
rights.
"Securities Act" means the Securities Act of 1933, as amended.
"Shelf Registration Statement" means the Registration Statement of the
Company relating to the shelf registration for resale of Restricted Securities
contemplated by Section 2.2 herein, including the Prospectus included therein,
all amendments and supplements thereto (including post-effective amendments) and
all exhibits and material incorporated by reference therein.
"Stock Purchase Agreement" has the meaning given to it in the recitals to
this Agreement.
As used in this Agreement, words in the singular include the plural, and
in the plural include the singular.
ARTICLE 2
REGISTRATION RIGHTS
2.1 Securities Subject to this Agreement.
(a) The Securities entitled to the benefits of this Agreement are the
Restricted Securities, but only for so long as they remain Restricted
Securities.
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(b) A Person is deemed to be a holder of Restricted Securities (each, a
"Holder") whenever such Person is the registered holder of such Restricted
Securities on the books and records of the Company or its transfer agent.
2.2 Demand Registration.
(a) Subject to the limitations set forth in this Agreement, at any time
after the date which is 90 days after the Closing Date, the Holder may request
the Company to register under the Securities Act, all or any portion (but not
less than $270,000 (based upon the offering price) of the Holder's Restricted
Securities) of its Restricted Securities for sale on terms and conditions
comparable to those normally applicable to offerings of equity securities in
similar circumstances as determined by the Company on Form S-3 or such other
form as the Company deems appropriate; provided, however, that the request for
registration must be for a Shelf Registration Statement pursuant to Rule 415
under the Securities Act. The Company shall be obligated to register Restricted
Securities pursuant to this Section 2.2(a) on two occasions only, provided,
however, that such registrations shall be counted only if (A) the corresponding
Registration Statements have become effective under the Securities Act, and (B)
the public offerings have been consummated on the terms and conditions specified
therein or if not consummated, such failure was not attributable to an action
taken by the Company. The Company shall be entitled to include in any Shelf
Registration Statement filed pursuant to this Section 2.2(a) securities of the
Company held by any other shareholder of the Company and, in an underwritten
public offering, Common Stock of the Company to be sold by the Company for its
own account so long as the inclusion of such additional securities will not
result in a decrease of the amount of Restricted Securities to be registered
pursuant to this Section 2.2(a).
(b) In connection with the Shelf Registration Statement, the Company shall
comply with all the provisions of Section 2.4 below and shall use its reasonable
efforts to effect such registration to permit the sale of the Restricted
Securities being sold in accordance with the intended method or methods of
distribution thereof (as indicated in the information furnished to the Company
pursuant to Section 2.2(c)). Subject to Section 2.2(d), the Company shall use
its best efforts to keep each such Shelf Registration Statement continuously
effective, supplemented and amended as required by the provisions of Section
2.2(d) to the extent necessary to ensure that it is available for resales of
Restricted Securities by the Holder, and to ensure that it conforms with the
requirements of this Agreement, the Securities Act and the policies, rules and
regulations of the Commission as announced from time to time, for a period of 18
months from the Effective Time or such longer period as required by Section
2.2(d) or such shorter period that will terminate when all the securities
covered by the Shelf Registration Statement have been sold pursuant to the Shelf
Registration Statement or otherwise cease to be Restricted Securities (the
"Effective Period"). Upon the occurrence of any event that would cause any Shelf
Registration Statement or the Prospectus contained therein (i) to contain a
material misstatement or omission or (ii) not to be effective and usable for
sale or resale of Restricted Securities during the period required by this
Agreement, the Company shall file promptly an appropriate amendment to such
Shelf Registration Statement or the related Prospectus or any document
incorporated therein by reference, in the case of clause (i), correcting any
such misstatement or omission, and, in the case of either clause (i) or (ii),
use its reasonable efforts to cause such amendment to be declared effective and
such Registration Statement and the related Prospectus to become usable for its
intended purpose(s) as soon as practicable thereafter.
(c) The Holder may not include any of its Restricted Securities in a Shelf
Registration Statement pursuant to this Agreement unless and until such Holder
furnishes to the Company in writing, within 30 Business Days after receipt of a
written request therefor, such information specified in Item 507 of Regulation
S-K under the Securities Act and such other information as the Company may
reasonably request for use in connection with a Shelf Registration Statement or
Prospectus or preliminary Prospectus included therein and in any application to
the NASD. The Holder agrees to furnish promptly to the Company all information
required to be disclosed in order
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to make the information previously furnished to the Company by such Holder not
materially misleading.
(d) Notwithstanding anything to the contrary contained herein, if (x) the
Board determines in good faith that the registration and distribution of
Restricted Securities (or the use of any such Shelf Registration Statement or
the Prospectus contained therein) would interfere with any proposed or pending
material corporate transaction involving the Company or any of its subsidiaries
or would require premature disclosure thereof or would require the Company to
disclose information that the Company has not otherwise made public and that the
Company reasonably determines is in the best interests of the Company not to
disclose at such time, and (y) the Company notifies the Holder in writing not
later than three days following such determination (such notice a "Blackout
Notice"), the Company may (A) postpone the filing of such Shelf Registration
Statement or (B) allow such Shelf Registration Statement to fail to be effective
and usable or elect that such Shelf Registration Statement not be usable for a
reasonable period of time, but not in excess of 30 days (a "Blackout Period");
provided, however, that the aggregate number of days included in all Blackout
Periods shall not exceed 90 during any consecutive 12 months and shall not
exceed 150 during the period specified in Section 2.2(b) of this Agreement; and
provided, further, that the Effective Period referred to in Section 2.2(b)
during which a Shelf Registration Statement is required to be effective and
usable shall be extended by the aggregate number of days during which such Shelf
Registration Statement was not effective or usable pursuant to the foregoing
provisions.
(e) Notwithstanding anything to the contrary contained herein, the Company
shall not be obligated to file a Shelf Registration Statement in respect of
Restricted Securities pursuant to this Section 2.2 if: (i) the Company has
previously filed a Shelf Registration Statement with respect to Restricted
Securities, and a period of at least 180 days has not elapsed from the date on
which the Effective Period of such Shelf Registration Statement has expired; and
(ii) the Company has previously filed a Company Registration Statement pursuant
to which Restricted Securities have been registered under Section 2.3 hereof,
and a period of at least 120 days has not elapsed from the Effective Time of
such Company Registration Statement.
2.3 Piggyback Registration.
(a) At any time that the Company proposes to file a Company Registration
Statement, either for its own account or for the account of a stockholder or
stockholders, the Company shall give the Holder written notice of its intention
to do so and of the intended method of sale (the "Registration Notice") within a
reasonable time prior to the anticipated filing date of the Company Registration
Statement effecting such registration (but in no event less than 30 days before
the anticipated filing date). The Holder may request inclusion of any Restricted
Securities in such Company Registration Statement by delivering to the Company,
within 10 Business Days after receipt of the Registration Notice, a written
notice (the "Piggyback Notice") stating the number of Restricted Securities
proposed to be included and that such shares are to be included in any
underwriting only on the same terms and conditions as the shares of Common Stock
otherwise being sold through underwriters under such Company Registration
Statement. The Company shall use its best efforts to cause all Restricted
Securities specified in the Piggyback Notice to be included in the Company
Registration Statement and any related offering, all to the extent requisite to
permit the sale by the Holder of such Restricted Securities in accordance with
the method of sale applicable to the other shares of Common Stock included in
such Company Registration Statement; provided, however, that if, at any time
after giving Registration Notice and prior to the Effective Time of the Company
Registration Statement filed in connection with such registration, the Company
shall determine for any reason not to register or to delay registration of such
securities, the Company may, at its election, give written notice of such
determination to the Holder and, thereupon:
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(i) in the case of a determination not to register, shall be
relieved of its obligation to register any Restricted Securities in
connection with such registration (but not from its obligation to pay the
Registration Expenses in connection therewith), and
(ii) in the case of a delay in registering, shall be permitted to
delay registering any Restricted Securities for the same period as the
delay in registering such other securities.
(b) The Company's obligation to include Restricted Securities in a Company
Registration Statement pursuant to Section 2.3(a) shall be subject to the
following limitations:
(i) The Company shall not be obligated to include any Restricted
Securities in a registration statement filed on Form X-0, Xxxx X-0 or such
other similar successor forms then in effect under the Securities Act.
(ii) If a Company Registration Statement involves an underwritten
offering and the managing underwriter advises the Company in writing that,
in its opinion, the number of securities requested to be included in such
Registration Statement exceeds the number which can be sold in such
offering without adversely affecting the offering, the Company will
include in such Registration Statement the number of such Securities which
the Company is so advised can be sold in such offering without adversely
affecting the offering, determined as follows:
(A) first, the securities proposed by the Company to be sold
for it own account, and
(B) second, any Restricted Securities requested to be included
in such registration and any other securities of the Company pro
rata among the holders thereof requesting such registration on the
basis of the number of shares of such securities requested to be
included by such holders.
(iii) The Company shall not be obligated to effect any registration
for the account of the Holder on a Company Registration Statement with
respect to less than $270,000 of the Holder's Restricted Securities,
subject to the provisions of Subsection (ii) of this Section 2.3(b).
(iv) The Company shall not be obligated to effect any registration
for the account of the Holder on a Company Registration Statement if,
prior to the filing date of such Company Registration Statement, (A) the
Holder has requested registration of its Restricted Securities on a Shelf
Registration Statement pursuant to Section 2.2 hereof, (B) the
corresponding Shelf Registration Statement has become effective under the
Securities Act, and (C) the public offering has been consummated on the
terms and conditions specified therein or if not consummated, such failure
was not attributable to an action taken by the Company.
(c) The Holder may not include any of its Restricted Securities in a
Company Registration Statement pursuant to this Agreement unless and until such
Holder furnishes to the Company in writing, within 10 Business Days after
receipt of a written request therefor, such information specified in Item 507 of
Regulation S-K under the Securities Act and such other information as the
Company may reasonably request for use in connection with the Registration
Statement or Prospectus or preliminary Prospectus included therein and in any
application to the NASD. The Holder agrees to furnish promptly to the Company
all information required to be disclosed in order to make all information
previously furnished to the Company by such Holder not materially misleading.
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(d) The Company covenants not to grant any piggyback registration rights
which would permit any holder of Common Stock to have piggyback registration
rights prior to those of the Holder.
(e) This subsection (e) shall apply solely to piggyback rights for holders
of the Series D Preferred Stock. Except as specified in this subjection, holders
of the Series D Preferred Stock shall have no registration rights pursuant to
this Agreement.
If, in the case, of any offering of Series D Preferred Stock or any
offering of the Company's outstanding Preferred Stock Series A, Preferred Stock
Series B or Preferred Stock Series C (together, as defined in the Stock Purchase
Agreement, with the Series D Preferred Stock, referred to hereinafter as the
"Preferred Stock"), or securities convertible into Preferred Stock, within ten
days after the Holder has been made aware by the Company of its intention to
effect a registration of any of the Preferred Stock (otherwise than pursuant to
an employee benefit plan or filing on Form S-8), the Holder may request and the
Company shall honor the Holder's request that any Preferred Stock in the Company
owned by the Holder be included in the registration statement.
Notwithstanding the foregoing, if an underwriter consents to the inclusion
in the registration statement of less than all Preferred Stock proposed to be
offered by selling shareholders, including the Holder, then the amount of shares
to be sold for the account of each selling shareholder shall be reduced
proportionately in the ratio by which the amount each selling shareholder
proposes to sell bears to the total amount of shares which the underwriter will
permit to be sold for the account of all selling shareholders.
In connection with any offering of Preferred Stock registered pursuant to
this subsection, the Company (i) shall furnish to the Holder such number of
copies of any prospectus (including any preliminary prospectus, or supplement)
as it may reasonably request in order to effect the offering and sale of the
Preferred Stock to be offered and sold, but only while the Company shall be
required under the provisions hereof to cause the registration statement to
remain current, which shall be for not more than six months, and (ii) shall take
such action as shall be necessary to qualify the shares covered by such
registration statement under such blue sky or other state securities laws for
offer and sale as the Holder shall reasonably request; provided, however, that
the Company shall not be obligated to qualify as a foreign corporation to do
business under the laws of any jurisdiction in which it shall not be then
qualified or to file any general consent to service of process in any
jurisdiction in which such a consent has not been previously filed. If requested
by the Company, in connection with a piggyback sale of the Preferred Stock
covered hereunder, the Holder shall enter into an underwriting agreement with a
managing underwriting or underwriters selected by the Company and shall enter
into an agreement with the Company containing representations, warranties,
indemnities and agreements then customarily included by an issuer or selling
shareholder in underwriting agreements with respect to secondary distributions.
In connection with any offering of Preferred Stock registered pursuant to this
subsection, the Company shall (y) furnish to the underwriters, at the Company's
expense, unlegended certificates representing ownership of the shares being sold
in such denominations as requested and (z) instruct any transfer agent and
registrar of the shares to release any stop transfer order with respect to
shares included in any registration becoming effective pursuant to hereto. The
Company shall use its best efforts to keep such registration statement current
for a period of six months. The Company shall in all events pay all expenses,
fees and disbursements of any counsel, accountants and other consultants
representing the Company in connection therewith, as well as all underwriting
discounts and commissions in connection with the sales of the Preferred Stock of
the Holder. The Holder shall pay all expenses, fees and disbursements of any
counsel, accountants and other consultants representing the Holder in connection
with said sale.
2.4 Registration Procedures. In connection with any Registration Statement and
any Prospectus required by this Agreement to permit the sale or resale of
Restricted Securities, the Company shall:
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(a) prepare and file with the Commission such amendments and
post-effective amendments to such Registration Statement as may be necessary to
keep such Registration Statement effective (i) if such Registration Statement is
a Company Registration Statement, until the earlier of such time as all of such
securities have been disposed of in accordance with the intended methods of
disposition by the seller or sellers thereof set forth in such Company
Registration Statement or (ii) if such Registration Statement is a Shelf
Registration Statement, for the applicable period set forth in Section 2.2(b)
herein; cause the Prospectus to be supplemented by any required Prospectus
supplement, and as so supplemented to be filed pursuant to Rule 424 under the
Securities Act, and to comply fully with the applicable provisions of Rules 424
and 430A, as applicable, under the Securities Act in a timely manner; and comply
with the provisions of the Securities Act with respect to the disposition of all
securities covered by such Registration Statement during the applicable period
in accordance with the intended method or methods of distribution by the sellers
thereof set forth in such Registration Statement or supplement or the
Prospectus;
(b) promptly (and in respect of events covered by clause (i) hereof, on
the same day as the Company shall receive notice of effectiveness) advise the
Holder and, if requested by such Persons, to confirm such advice in writing, (i)
when the Prospectus or any Prospectus supplement or post-effective amendment has
been filed, and when the same has become effective, (ii) of any request by the
Commission for post-effective amendments to such Registration Statement or
post-effective amendments to such Registration Statement or post-effective
amendments or supplements to the Prospectus or for additional information
relating thereto, (iii) of the issuance by the Commission of any stop order
suspending the effectiveness of any such Registration Statement under the
Securities Act or of the suspension by any state securities commission of the
qualification of the Restricted Securities for offering or sale in any
jurisdiction, or the initiation of any proceeding for any of the preceding
purposes, and (iv) of the existence of any fact or the happening of any event
that makes any statement of a material fact made in any such Registration
Statement, the related Prospectus, any amendment or supplement thereto, or any
document incorporated by reference therein untrue, or that requires the making
of any additions to or changes in any such Registration Statement or the related
Prospectus in order to make the statements therein not misleading. If at any
time the Commission shall issue any stop order suspending the effectiveness of
such Registration Statement, or any state securities commission or other
regulatory authority shall issue an order suspending the qualification or
exemption from qualification of the Restricted Securities under state securities
or Blue Sky laws, the Company shall use its reasonable efforts to obtain the
withdrawal or lifting of such order at the earliest possible time;
(c) promptly furnish to the Holder, and each underwriter, if any, without
charge, at least one conformed copy of any Registration Statement, as first
filed with the Commission, and of each amendment thereto, including all
documents incorporated by reference therein and all exhibits (including exhibits
incorporated therein by reference) and such other documents as such Holder may
reasonably request;
(d) deliver to the Holder, and each underwriter, if any, without charge,
as many copies of the Prospectus (including each preliminary prospectus) and any
amendment or supplement thereto as such person reasonably may request.
(e) enter into such customary agreements and take all such other
reasonable action in connection therewith (including those reasonably requested
by the Holder or the underwriter(s), if any) required in order to expedite or
facilitate the disposition of such Restricted Securities pursuant to such
Registration Statement, including, but not limited to, dispositions pursuant to
an underwritten registration, and in such connection:
(i) make such representations and warranties to the Holder and
underwriter(s), if any, in form, substance and scope as are customarily
made by issuers to underwriters in underwritten offerings (whether or not
sales of securities pursuant to such Registration Statement are to be to
an underwriter(s)) and confirm the same if and when requested;
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(ii) obtain opinions of counsel to the Company addressed to the
Holder and underwriter(s), if any, covering the matters customarily
covered in opinions requested in underwritten offerings (whether or not
sales of securities pursuant to such Registration Statement are to be made
to an underwriter(s)) and dated the Effective Time of any Registration
Statement (and, in the case of any underwritten sale of securities
pursuant to such Registration Statement, each closing date of sales to the
underwriter(s) pursuant thereto);
(iii) use reasonable efforts to obtain comfort letters dated the
Effective Time of any Registration Statement (and, in the case of any
underwritten sale of securities pursuant to such Registration Statement,
each closing date of sales to the underwriter(s) pursuant thereto) from
the independent certified public accountants of the Company addressed to
the Holder and underwriter, if any, such letters to be in customary form
and covering matters of the type customarily covered in comfort letters in
connection with underwritten offerings (whether or not sales of securities
pursuant to such Registration Statement are to be made to an
underwriter(s));
(iv) provide for the indemnification provisions and procedures of
Section 2.6 hereof with respect to the Holder and the underwriter(s), if
any, and;
(v) deliver such documents and certificates as may be reasonably
requested by the Holder or the underwriter(s), if any, and which are
customarily delivered in underwritten offerings (whether or not sales of
securities pursuant to such Registration Statement are to be made to an
underwriter(s), with such documents and certificates to be dated the
Effective Time of any Registration Statement.
The actions required by clauses (i) through (v) above shall be done at
each closing under such underwriting or similar agreement, as and to the extent
required thereunder, and if at any time the representations and warranties of
the Company contemplated in clause (i) above cease to be true and correct, the
Company shall so advise the underwriter(s), if any, and the Holder promptly,
and, if requested by such Person, shall confirm such advice in writing;
(f) prior to any public offering of Restricted Securities, cooperate with
the Holder, the underwriter(s), if any, and their respective counsel in
connection with the registration and qualification of the Restricted Securities
under the securities or Blue Sky laws of such U.S. jurisdictions as the Holder
or underwriter(s), if any, may reasonably request in writing by the time any
Registration Statement is declared effective by the Commission, and do any and
all other acts or filings necessary or advisable to enable disposition in such
U.S. jurisdictions of the Restricted Securities covered by any Registration
Statement and to file such consents to service of process or other documents as
may be necessary in order to effect such registration or qualification;
provided, however, that the Company shall not be required to register or qualify
as a foreign corporation in any jurisdiction where it is not then so qualified
or as a dealer in securities in any jurisdiction where it would not otherwise be
required to register or qualify but for this Section 2.4, or to take any action
that would subject it to the service of process in suits or to taxation, in any
jurisdiction where it is not then so subject;
(g) in connection with any sale of Restricted Securities that will result
in such securities no longer being Restricted Securities, cooperate with the
Holder and the underwriter(s), if any, to facilitate the timely preparation and
delivery of certificates representing Restricted Securities to be sold and not
bearing any restrictive legends; and enable such Restricted Securities to be in
such denominations and registered in such names as the Holder or the
underwriter(s), if any, may request at least two (2) Business Days prior to any
sale of Restricted Securities made by such underwriters;
(h) use its reasonable efforts to cause the disposition of the Restricted
Securities covered by any Registration Statement to be registered with or
approved by such other U.S.
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governmental agencies or authorities as may be necessary to enable the seller or
sellers thereof or the underwriter(s), if any, to consummate the disposition of
such Restricted Securities, subject to the proviso contained in Section 2.4(f);
(i) if any fact or event contemplated by Section 2.4(b) shall exist or
have occurred, prepare a supplement or post-effective amendment to any
Registration Statement or related Prospectus or any document incorporated
therein by reference or file any other required document so that, as thereafter
delivered to the purchasers of Restricted Securities, the Prospectus will not
contain an untrue statement of a material fact or omit to state any material
fact necessary to make the statement therein not misleading;
(j) cooperate and assist in the performance of any due diligence
investigation by any underwriter (including any "qualified independent
underwriter") that is required to be retained in accordance with the rules and
regulations of the NASD, and use its reasonable efforts to cause any
Registration Statement to become effective and approved by such U.S.
governmental agencies or authorities as may be necessary to enable the Holder to
consummate the disposition of such Restricted Securities;
(k) otherwise use its reasonable efforts to comply with all applicable
rules and regulations of the Commission, and make generally available to its
security holders with regard to such Registration Statement, as soon as
practicable, a consolidated earnings statement meeting the requirements of Rule
158 (which need not be audited) for the twelve-month period (i) commencing at
the end of any fiscal quarter in which Restricted Securities are sold to the
underwriter in a firm or best efforts underwritten offering or (ii) if not sold
to an underwriter in such an offering, beginning with the first month of the
Company's first fiscal quarter commencing after the effective date of any
Registration Statement;
(l) provide a CUSIP number for all Restricted Securities not later than
the Effective Time of any Registration Statement;
(m) use its best efforts to qualify for inclusion, not later than the
Effective Time of such Registration Statement, all Restricted Securities covered
by such Registration Statement on the OTC Bulletin Board of the NASD, or any
other trading market on which the Common Stock of the Company is then admitted
for trading, and
(n) provide promptly to Holder upon request each document filed with the
Commission pursuant to the requirements of Section 12 and Section 14 of the
Exchange Act.
The Holder agrees by acquisition of a Restricted Security that, upon
receipt of any notice from the Company of the existence of any fact of the kind
described in Section 2.4(b)(iv) or the commencement of a Blackout Period, such
Holder will forthwith discontinue disposition of Restricted Securities pursuant
to any Registration Statement until such Holder's receipt of the copies of the
supplemented or amended Prospectus contemplated by Section 2.4(i), or until it
is advised in writing, in accordance with the notice provisions of Section 4.3
herein (the "Advice"), by the Company that the use of the Prospectus may be
resumed, and has received copies of any additional or supplemental filings that
are incorporated by reference in the Prospectus. If so directed by the Company,
the Holder will deliver to the Company all copies, other than permanent file
copies, then in such Holder's possession, of the Prospectus covering such
Restricted Securities that was current at the time of receipt of such notice. In
the event the Company shall give any such notice, the time period regarding the
effectiveness of the Shelf Registration Statement set forth in Section 2.2(b)
shall be extended by the number of days during the period from and including the
date of the giving of such notice pursuant to Section 2.4(b)(iv) or the
commencement of a Blackout Period to and including the date when the Holder
shall have received the copies of the supplemented or amended Prospectus
contemplated by Section 2.4(i) or shall have received (in accordance with the
notice provisions of Section 4.3) the Advice.
9
2.5 Preparation; Reasonable Investigation. In connection with preparation and
filing of each Registration Statement under the Securities Act, the Company will
give the Holder, its underwriter, if any, 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
Commission, and each amendment thereof or supplement thereto, and will give each
to them access to its books and records and such opportunities to discuss the
business, finances and accounts of the Company and its subsidiaries with its
officers, directors and the independent public accountants who have certified
its financial statements as shall be necessary, in the reasonable opinion of the
Holder and such underwriters ' respective counsel, to conduct a reasonable
investigation within the meaning of the Securities Act.
2.6 Certain Rights of the Holder. The Company will not file any registration
statement under the Securities Act which refers to the Holder by name or
otherwise without the prior approval of such Holder, which consent shall not be
unreasonably withheld or delayed.
2.7 Registration Expenses.
(a) All expenses incident to the Company's performance of or compliance
with this Agreement will be borne by the Company, regardless of whether a
Registration Statement becomes effective, including without limitation: (i) all
registration and filing fees and expenses (including filings made with the NASD
and reasonable counsel fees in connection therewith); (ii) all reasonable fees
and expenses of compliance with federal securities and state Blue Sky or
securities laws (including all reasonable fees and expenses of one counsel to
the underwriter(s) in any underwriting) in connection with compliance with state
Blue Sky or securities laws for up to 10 states; (iii) all expenses of printing,
messenger and delivery services and telephone calls; (iv) all fees and
disbursements of counsel for the Company; and (v) all fees and disbursements of
independent certified public accountants of the Company (including the expenses
of any special audit and comfort letters required by or incident to such
performance), but excluding from this paragraph, fees and expenses of counsel to
the underwriter(s), if any, unless otherwise set forth herein.
(b) Notwithstanding the foregoing, the Company will not be responsible for
any underwriting discounts, commissions or fees attributable to the sale of
Restricted Securities or any legal fees or disbursements (other than any such
fees or disbursements relating to Blue Sky compliance or otherwise as set forth
under Section 2.7(a)) incurred by any underwriter(s) in any underwritten
offering if the underwriter(s) participates in such underwritten offering at the
request of the Holder, or any transfer taxes that may be imposed in connection
with a sale or transfer of Restricted Securities.
(c) The Company shall, in any event, bear its internal expenses
(including, without limitation, all salaries and expenses of its officers and
employees performing legal or accounting duties), the expenses of any annual
audit and the fees and expenses of any Person, including special experts,
retained by the Company.
2.8 Indemnification; Contribution.
(a) The Company agrees to indemnify and hold harmless (i) the Holder, (ii)
each other Person who participates as an underwriter in the offering or sale of
such securities, (iii) each person, if any, who controls (within the meaning of
Section 15 of the Securities Act or Section 20 of the Exchange Act) the Holder
or underwriter (any of the persons referred to in this clause (iii) being
hereinafter referred to as a "controlling person") and (iv) the respective
officers, directors, partners, employees, representatives and agents of the
Holder or underwriter or any controlling person (any person referred to in
clause (i), (ii), (iii) or (iv) may hereinafter be referred to as an
"indemnified Person"), to the fullest extent lawful, from and against any and
all losses, claims, damages, liabilities, judgments or expenses, joint or
several (or actions or proceedings, whether commenced or threatened, in respect
thereof) (collectively, "Claims"), to which such indemnified Person may
10
become subject under either Section 15 of the Securities Act or Section 20 of
the Exchange Act or otherwise, insofar as such Claims arise out of or are based
upon, or are caused by any untrue statement or alleged untrue statement of a
material fact contained in any Registration Statement or Prospectus (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, or a violation by the Company of the
Securities Act or any state securities law, or any rule or regulation
promulgated under the Securities Act or any state securities law, or any other
law applicable to the Company relating to any such registration or
qualification, except insofar as such losses, claims, damages, liabilities,
judgments or expenses of any such indemnified Person; (x) are caused by any such
untrue statement or omission or alleged untrue statement or omission that is
based upon information relating to such indemnified Person furnished in writing
to the Company by or on behalf of any of such indemnified Person expressly for
use therein; (y) with respect to the preliminary Prospectus, result from the
fact that the Holder sold Securities to a person to whom there was not sent or
given, at or prior to the written confirmation of such sale, a copy of the
Prospectus, as amended or supplemented, if the Company shall have previously
furnished copies thereof to the Holder in accordance with this Agreement and
said Prospectus, as amended or supplemented, would have corrected such untrue
statement or omission; or (z) as a result of the use by an indemnified Person of
any Prospectus when, upon receipt of a Blackout Notice or a notice from the
Company of the existence of any fact of the kind described in Section
2.4(b)(iv), the indemnified Person or the Holder was not permitted to do so.
Such indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of any indemnified Person and shall survive
the transfer of such securities by such Holder.
In case any action shall be brought or asserted against any of the
indemnified Persons with respect to which indemnity may be sought against the
Company, such indemnified Person shall promptly notify the Company and the
Company shall assume the defense thereof. Such indemnified Person shall have the
right to employ separate counsel in any such action and to participate in the
defense thereof, but the fees and expenses of such counsel shall be at the
expense of the indemnified Person unless (i) the employment of such counsel
shall have been specifically authorized in writing by the Company, (ii) the
Company shall have failed to assume the defense and employ counsel or (iii) the
named parties to any such action (including any implied parties) include both
the indemnified Person and the Company and the indemnified Person shall have
been advised in writing by its counsel that there may be one or more legal
defenses available to it which are different from or additional to those
available to the Company (in which case the Company shall not have the right to
assume the defense of such action on behalf of the indemnified Person), it being
understood, however, that the Company shall not, in connection with such action
or similar or related actions or proceedings arising out of the same general
allegations or circumstances, be liable for the reasonable fees and expenses of
more than one separate firm of attorneys (in addition to any local counsel) at
any time for all the indemnified Persons, which firm shall be (x) designated by
such indemnified Persons and (y) reasonably satisfactory to the Company. The
Company shall not be liable for any settlement of any such action or proceeding
effected without the Company's prior written consent, which consent shall not be
withheld unreasonably, and the Company agrees to indemnify and hold harmless any
indemnified Person from and against any loss, claim, damage, liability, judgment
or expense by reason of any settlement of any action effected with the written
consent of the Company. The Company shall not, without the prior written consent
of each indemnified Person, settle or compromise or consent to the entry of
judgment on or otherwise seek to terminate any pending or threatened action,
claim, litigation or proceeding in respect of which indemnification or
contribution may be sought hereunder (whether or not any indemnified Person is a
party thereto), unless such settlement, compromise, consent or termination
includes an unconditional release of each indemnified Person from all liability
arising out of such action, claim litigation or proceeding.
(b) The Holder agrees to indemnify and hold harmless the Company and its
directors, officers and any person controlling (within the meaning of Section 15
of the Securities Act or Section 20 of the Exchange Act) the Company, and the
respective officers, directors, partners, employees, representatives and agents
of each person, to the same extent as the foregoing
11
indemnity from the Company to each of the indemnified Persons, but only (i) with
respect to actions based on information relating to the Holder furnished in
writing by or on behalf of such Holder expressly for use in any Registration
Statement or Prospectus, and (ii) to the extent of the gross proceeds, if any,
received by such Holder from the sale or other disposition of its Restricted
Securities covered by such Registration Statement. In case any action or
proceeding shall be brought against the Company or its directors or officers or
any such controlling person in respect of which indemnity may be sought against
the Holder, such Holder shall have the rights and duties given the Company in
Section 2.8(a) (except that the Holder may but shall not be required to assume
the defense thereof), and the Company or its directors or officers or such
controlling person shall have the rights and duties given to the Holder by
Section 2.8(a).
(c) If the indemnification provided for in this Section 2.8 is unavailable
to an indemnified party under Section 2.7(a) or (b) (other than by reason of
exceptions provided in those Sections) in respect of any losses, claims,
damages, liabilities, judgments or expenses referred to therein, then each
applicable 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 losses, claims damages, liabilities, judgments or expenses (i) in
such proportion as is appropriate to reflect the relative benefits received by
the Company on the one hand and the Holder on the other hand from sale of
Restricted Securities or (ii) if such 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 and the Holder in connection with the statements
or omissions which resulted in such losses, claims, damages, liabilities,
judgments or expenses, as well as any other relevant equitable considerations.
The relative fault of the Company on the one hand and of the Holder on the other
shall be determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission or alleged omission
to state a material fact relates to information supplied by the Company or by
the Holder and the parties relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. The amount paid to
a party as a result of the losses, claims, damages, liabilities judgments and
expenses referred to above shall be deemed to include, subject to the
limitations set forth in the second paragraph of Section 2.8(a), any legal or
other fees or expenses reasonably incurred by such party in connection with
investigating or defending any action or claim.
The Company and the Holder agree that it would not be just and equitable
if contribution pursuant to this Section 2.8(c) were determined by pro rata
allocation or by any other method of allocation which does not take into account
the equitable considerations referred to in the immediately preceding paragraph.
Notwithstanding the provisions of this Section 2.8(c) the Holder (and its
related indemnified Persons) shall not be required to contribute, in the
aggregate, any amount in excess of the amount by which the dollar amount of
proceeds received by such Holder upon the sale of the Restricted Securities
exceeds the amount of any damages which such Holder has otherwise been required
to pay by reason of such untrue statement or omission or alleged omission. No
person guilty of fraudulent misrepresentations (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation.
The indemnity, and contribution provisions contained in this Section
2.8 are in addition to any liability which the indemnifying person may otherwise
have to the indemnified persons referred to above.
2.9 Participation in Underwritten Registrations. The Holder may not participate
in any underwritten registration hereunder unless such Holder (a) agrees to sell
such Holder's Restricted Securities on the basis provided in any underwriting
arrangements approved by the Persons entitled hereunder to approve such
arrangements and (b) completes and executes all reasonable questionnaires,
powers of attorney, indemnities, underwriting agreements, lock-up letters and
other documents required under the terms of such underwriting arrangements.
12
2.10 Selection of Underwriters. The Holder may sell its Restricted Securities in
an underwritten offering. In any such underwritten offering, the investment
banker or investment bankers and manager or managers that will administer the
offering will be selected by the Holder if such registration is pursuant to the
Shelf Registration Statement, and by the Company if such registration is
pursuant to a Company Registration Statement; provided, however, that such
investment bankers and managers must be reasonably satisfactory to the Company
or the Holder, respectively. Such investment bankers and managers are referred
to herein as the "underwriters".
ARTICLE 3
RULE 144
3.1 Rule 144 Reporting. With a view to making available the benefits of certain
rules and regulations of the Commission which may permit the sale of restricted
securities (as that term is used in Rule 144 under the Securities Act) to the
public without registration, the Company agrees to use its best efforts to:
(a) make and keep public information available as those terms are
understood and defined in Rule 144 under the Securities Act, at all times;
(b) file with the Commission in a timely manner all reports and
other documents required of the Company under the Securities Act and the
Exchange Act; and
(c) so long as the Holder owns any Restricted Securities, furnish to
the Holder forthwith upon request a written statement by the Company as to its
compliance with the reporting requirements of Rule 144 and of the Securities Act
and Exchange Act, a copy of the most recent annual or quarterly report of the
Company, and such other reports and documents so filed as the Holder may
reasonably request in availing itself of any rule or regulation of the
Commission allowing the Holder to sell any such Restricted Securities without
registration.
ARTICLE 4
MISCELLANEOUS
4.1 Entire Agreement. This Agreement, together with the Stock Purchase
Agreement, constitutes the entire agreement between the parties with respect to
the subject matter hereof and supersedes all prior agreement and understandings,
both oral and written, between the parties with respect to the subject matter
hereof.
4.2 Successors and Assigns. This Agreement shall inure to the benefit of and be
binding upon the successors and assigns of each of the parties, including
without limitation and without the need for an express assignment, subsequent
holders of Restricted Securities; provided, however, that this Agreement shall
not inure to the benefit of or be binding upon a successor or assign of the
Holder unless and to the extent such successor or assign acquired Restricted
Securities from the Holder at a time when the Holder could not transfer such
Restricted Securities pursuant to any Registration Statement or pursuant to Rule
144 under the Securities Act as contemplated by clause (ii) of the definition of
Restricted Securities.
4.3. Notices. All notices and other communications given or made pursuant hereto
or pursuant to any other agreement among the parties, unless otherwise
specified, shall be in writing and shall be deemed to have been duly given or
made if sent by telecopy (with confirmation in writing), delivered personally or
by overnight
13
courier or sent by registered or certified mail (postage prepaid, return receipt
requested) to the parties at the telecopy number, if any, or address set forth
below or at such other addresses as shall be furnished by the parties by like
notice. Notices sent by telecopier shall be effective when receipt is
acknowledged, notices delivered personally or by overnight courier shall be
effective upon receipt and notices sent by registered or certified mail shall be
effective three days after mailing:
if to the Holder: AW Compost Partners, LLC
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, XX 00000
Attention: G. Xxxxx Xxxxxxxx
Fax: (000) 000-0000
Telephone: (000) 000-0000
with copies to: Shereff, Friedman, Xxxxxxx & Xxxxxxx, LLP
000 Xxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxx X. Xxxxxxxx, Esquire
Fax: (000) 000-0000
Telephone: (000) 000-0000
if to the Company: Compost America Holding Company, Inc.
000 Xxxxx Xxxxxx
Xxxxxxxxx, Xxx Xxxxxx 00000
Fax: (000) 000-0000
Telephone: (000) 000-0000
with copies to: Xxxxxxxxx Xxxxxxx Xxxxxxx
Xxxxxx Xxxxx & Xxxxxxx, P.A.
0000 Xxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxxxxx, XX 00000
Attention: Xxxxxxxx X. Xxxxx, Esq.
Fax: (000) 000-0000
Telephone: (000) 000-0000
4.4 Headings The headings contained in this Agreement are for convenience only
and shall not affect the meaning or interpretation of this Agreement.
4.5 Counterparts. This Agreement may be executed in any number of counterparts,
each of which shall be deemed to be an original and all of which together shall
be deemed to be one and the same instrument.
4.6 Applicable Law. This Agreement shall be governed by and construed in
accordance with the laws of the state of New York, without giving effect to
choice law provisions.
4.7 Specific Enforcement. Each party hereto acknowledges that the remedies at
law of the other parties for a breach or threatened breach of this Agreement
would be inadequate, and, in recognition of this fact, any party to this
Agreement, without posting any bond, and in addition to all other remedies which
may be available, shall be entitled to obtain equitable relief in the form of
specific performance, a temporary restraining order, a temporary to permanent
injunction or any other equitable remedy which may then be available.
4.8 Amendment and Waivers. The provisions of this Agreement may not be amended,
modified or supplemented, and waivers or consents to or departures from the
provisions hereof may not be given unless the Company has obtained the unanimous
written consent of the Holders of the Restricted Securities.
14
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the day and year
first above written.
COMPOST AMERICA HOLDIING COMPANY, INC.
By: /s/ Xxxxx X. Xxxxxx
------------------------------------
Name: Xxxxx X. Xxxxxx
Title: President
AW COMPOST PARTNERS, LLC
By: /s/ G. Xxxxx Xxxxxxxx
------------------------------------
Name: G. Xxxxx Xxxxxxxx
Title: Manager
15
