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REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement") is entered into as of
July 12, 2011, by and among Environmental Solutions Worldwide Inc., a Florida
corporation having its principal executive office at 335 Connie Crescent,
Ontario, L4K 5R2 Canada (the "Company"), and the Persons listed on the signature
pages hereto (each a "Holder," and collectively, the "Holders").
WHEREAS, the Holders wish to subscribe for and purchase, and the Company,
desires to issue and sell, certain shares of the Company's Common Stock (as
defined below) pursuant to a rights offering whereby each holder of Common Stock
as of June 9, 2011 was offered one right for each share of Common Stock held by
such holder (the "Rights Offering");
WHEREAS, pursuant to an investment agreement dated as of May 10, 2011 (the
"Investment Agreement"), the Holders wish to subscribe for and purchase, and the
Company, desires to issue and sell, certain shares of the Company's Common Stock
(as defined below), on the terms and subject to the conditions set forth
therein; and
WHEREAS, in connection with their purchase of shares of Common Stock
pursuant to the Investment Agreement, the Holders wish to receive certain
registration rights related to their Common Stock, and the Company desires to
grant such rights on the terms and subject to the conditions set forth herein;
NOW, THEREFORE, the parties hereto mutually agree as follows:
ARTICLE I DEFINITIONS; CONSTRUCTION; INTERPRETATION
1.1 Definition. The following terms used herein shall have the following
meanings:
"Affiliate" means (a) with respect to any Person, any other Person directly
or indirectly controlling or controlled by or under direct or indirect common
control with such specified Person and (b) with respect to any individual, shall
also mean the spouse or child of such individual; provided, that neither the
Company nor any Person controlled by the Company shall be deemed to be an
Affiliate of any Holder.
"Agent" means the principal placement agent on an agented placement of
Registrable Securities.
"Agreement" has the meaning set forth in the Preamble.
"Black Group" means collectively Leon D. Black, Black Family 1997 Trust,
Leon D. Black Trust UAD 11/30/92 FBO Joshua Black, Leon D. Black Trust UAD
11/30/92 Benjamin Black, Leon D. Black Trust UAD 11/30/92 Alexander Black, Leon
D. Black Trust UAD 11/30/92 Victoria Black, and John J. Hannan.
"Board" means the Board of Directors of the Company.
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"Common Stock" means shares of the Company's common stock, $0.001 par value
per share, having the rights and preferences set forth in the Certificate of
Incorporation of the Company.
"Company" has the meaning set forth in the Preamble.
"Continuously Effective," with respect to a specified registration
statement, means that it shall not cease to be effective and available for
Transfers of Registrable Securities thereunder for longer than either (a) any
ten (10) consecutive business days or (b) an aggregate of fifteen (15) business
days during the period specified in the relevant provision of this Agreement, in
each case except as permitted under Section 4.2.
"Demanding Holders" has the meaning set forth in Section 2.1(a).
"Demand Registration" has the meaning set forth in Section 2.1(a).
"Exchange Act" means the Securities Exchange Act of 1934.
"Holdback" has the meaning set forth in Section 5.2.
"Holder" and "Holders" have the meanings set forth in the Preamble.
"Holder Indemnified Party" has the meaning set forth in Section 7.1.
"Indemnifying Party" has the meaning set forth in Section 7.3.
"Indemnified Party" has the meaning set forth in Section 7.3.
"Initiating Holder" has the meaning set forth in Section 2.2(a).
"Investment Agreement" means that certain Investment Agreement dated the
date hereof among the Company and the signatories thereto.
"Majority Selling Holders" means those Selling Holders whose Registrable
Securities included in such registration represent a majority of the Registrable
Securities of all Selling Holders included therein.
"Orchard Group" means collectively Orchard Investments, LLC and Richard S.
Ressler
"Person" means an individual, a partnership, a corporation, a limited
liability company, an association, a joint stock company, a trust, a joint
venture, an unincorporated organization or a governmental entity or any
department, agency or political subdivision thereof.
"Piggyback Registration" has the meaning set forth in Section 3.1.
"Register," "Registered" and "Registration" shall refer to a registration
effected by preparing and filing a registration statement or similar document in
compliance with the Securities Act, and the declaration or ordering by the SEC
of effectiveness of such registration statement or document.
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"Registrable Securities" means, subject to Section 8.1 and Section 9.1: (a)
the Shares owned by a Holder on a date of determination (whether owned on the
date hereof or acquired hereafter); (b) any shares of Common Stock or other
equity securities issuable upon the conversion or exercise of any warrant, right
or other security which is issued as a dividend or other distribution with
respect to, or in exchange by the Company generally for, or in replacement by
the Company generally of, such Shares; and (c) any securities issued in exchange
for Shares in any merger or reorganization of the Company. For purposes of this
Agreement, a Person shall be deemed to be a holder of Registrable Securities
whenever such Person has the right to acquire such Registrable Securities (upon
conversion or exercise in connection with a transfer of securities or otherwise,
but disregarding any restrictions or limitations upon the exercise of such
right), whether or not such acquisition has been effected. Notwithstanding the
foregoing, Registrable Securities shall not include any securities that have
theretofore been registered and sold pursuant to the Securities Act or that have
been sold to the public pursuant to Rule 144 or any similar rule promulgated by
the SEC pursuant to the Securities Act, and a Holder shall not be deemed to have
Registrable Securities if the sale or disposition of all of the Holder's Shares
does not require registration under the Securities Act for a sale or disposition
in a single public sale and upon the request of a Holder, the Company agrees to
remove any and all legends restricting transfer from the certificates evidencing
Shares covered by the foregoing exclusions.
"Registrable Securities then outstanding" means, with respect to a
specified determination date, the Registrable Securities owned by all Holders on
such date.
"Registration Expenses" has the meaning set forth in Section 6.1.
"SEC" means the U.S. Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933.
"Selling Holders" means, with respect to a specified registration pursuant
to this Agreement, Holders whose Registrable Securities are included in such
registration.
"Shares" means the shares of Common Stock.
"Shelf Registration" has the meaning set forth in Section 2.2(a).
"Transfer" means any sale, transfer, assignment, pledge, mortgage,
exchange, hypothecation, grant of a security interest or other direct or
indirect disposition or encumbrance of an interest (whether with or without
consideration, whether voluntarily or involuntarily or by operation of law) or
the acts thereof. The terms "Transferee," "Transferor," "Transferred," and other
forms of the word "Transfer" shall have the correlative meanings.
"Underwriters' Representative" means the managing underwriter or, in the
case of a co-managed underwriting, the managing underwriter designated as the
Underwriters' Representative by the co-managers.
"Violation" has the meaning set forth in Section 7.1.
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1.2 Construction and Interpretation. For purposes of this Agreement, except
as otherwise expressly provided herein or unless the context otherwise requires:
(a) words using the singular or plural number also include the plural or
singular number, respectively, and the use of any gender herein shall be deemed
to include the other gender; (b) references herein to "Articles," "Sections,"
"subsections" and other subdivisions without reference to a document are to the
specified Articles, Sections, subsections and other subdivisions of this
Agreement; (c) a reference to a subsection without further reference to a
Section is a reference to such subsection as contained in the same Section in
which the reference appears, and this rule shall also apply to other
subdivisions within a Section or subsection; (d) the words "herein," "hereof,"
"hereunder," "hereby" and other words of similar import refer to this Agreement
as a whole and not to any particular provision; (e) the words "include,"
"includes" and "including" are deemed to be followed by the phrase "without
limitation;" (f) references to a Person are also references to its successors in
interest (by means of merger, consolidation or sale of all or substantially all
the assets of such Person or otherwise, as the case may be) and permitted
assigns; (g) references to Registrable Securities "owned" by a Holder shall
include Registrable Securities beneficially owned by such Person and
beneficially owned by such Person's Affiliates; (h) references to a document are
to it as amended, waived and otherwise modified from time to time and references
to laws, statutes or regulations mean such laws, statutes or regulations as the
same may be amended from time to time; and (i) capitalized terms used herein and
not otherwise defined have the meanings ascribed to them in the Investment
Agreement. Descriptive headings are for convenience of reference only and do not
constitute a part of this Agreement.
ARTICLE II
DEMAND REGISTRATION
2.1 Periodic Registration.
(a) At any time after the closing of the Investment Agreement if either the
Black Group or the Orchard Group shall make a written request to the Company
(the "Demanding Holders"), the Company, subject to Section 2.4, shall cause
there to be filed with the SEC a registration statement meeting the requirements
of the Securities Act (a "Demand Registration"), and each Demanding Holder shall
be entitled to have included therein (subject to Section 3.2) all or such number
of such Demanding Holder's Registrable Securities, as the Demanding Holder shall
request in writing. Any request made pursuant to this Section 2.1 shall be
addressed to the attention of the Company's Chief Executive Officer, and shall
specify the number of Registrable Securities to be registered, the intended
methods of disposition thereof and that the request is for a Demand Registration
pursuant to this Section 2.1(a).
(b) The Company shall be entitled to postpone for up to sixty (60) days the
filing of any Demand Registration statement otherwise required to be prepared
and filed pursuant to this Section 2.1, if the Board determines, in its good
faith reasonable judgment (with the concurrence of the Underwriters'
Representative, if any, who shall be subject to confidentiality restrictions
regarding such information), that such registration and the Transfer of
Registrable Securities contemplated thereby would materially interfere with, or
require premature disclosure of, any financing, acquisition or reorganization or
any other material event involving the Company or any of its wholly-owned
subsidiaries and the Company promptly gives the Demanding Holders notice of such
determination; provided, however, that the Company shall not have postponed
pursuant to this Section 2.1(b) the filing of any other Demand Registration
statement otherwise required to be prepared and filed pursuant to this Section
2.1 during the twelve (12) month period ended on the date of the relevant
request pursuant to Section 2.1(a).
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(c) Whenever the Company shall have received a demand to effect the
registration of any Registrable Securities pursuant to Section 2.1(a), the
Company shall promptly give written notice of such proposed registration to all
Holders. Any Holder of Registrable Securities may, within twenty (20) days after
receipt of such notice, request in writing that all of such Holder's Registrable
Securities, or any portion thereof designated by such Holder, be included in the
Demand Registration. Each such Holder shall also be deemed a Demanding Holder.
2.2 Shelf Registration.
(a) If the Company is eligible to file a Registration Statement on Form
S-3, each Holder that shall make a written request to the Company (the
"Initiating Holder") shall be entitled to have all or any number of such
Initiating Holder's Registrable Securities included in a registration with the
SEC in accordance with the Securities Act for an offering on a delayed or
continuous basis pursuant to Rule 415 under the Securities Act (including, if
the Company is a well known seasoned issuer, as defined by Rule 405 under the
Securities Act, an automatic shelf registration with the SEC) on Form S-3 (a
"Shelf Registration"). Any request made pursuant to this Section 2.2 shall be
addressed to the attention of the Company's Chief Executive Officer, and shall
specify the number of Registrable Securities to be registered, the intended
methods of disposition thereof and that the request is for a Shelf Registration
pursuant to this Section 2.2.
(b) Whenever the Company shall have received a request to effect the
registration of any Registrable Shares from an Initiating Holder, the Company
shall promptly give written notice of such proposed Shelf Registration to all
Holders. Any Holder of Registrable Shares may, within twenty (20) days after
receipt of such notice, request in writing that all of such Holder's Registrable
Shares, or any portion thereof designated by such Holder, be included in the
Shelf Registration. Each such Holder shall also be deemed an Initiating Holder.
(c) There shall not be any limit on the number of Shelf Registrations that
a Holder may request with respect to its Registrable Securities.
(d) If the Company shall have complied with its obligations under this
Agreement, a right to demand a registration pursuant to this Section 2.2 shall
be deemed to have been satisfied upon the effective date of a Shelf
Registration, provided no stop order or similar order, or proceedings for such
an order, is thereafter entered or initiated.
2.3 Registration. Following receipt of a request for a Demand Registration
or a Shelf Registration, the Company shall, subject, in the case of a Demand
Registration, to Section 2.4:
(a) File the registration statement with the SEC as promptly as
practicable, and in any event within 45 days after the date such request is
given by the Demanding Holders, in the case of a Demand Registration, or 30 days
after the date such request is given by the Initiating Holder in the case of a
Shelf Registration, and shall use the Company's reasonable best efforts to have
the registration declared effective under the Securities Act as soon as
reasonably practicable, in each instance giving due regard to the need to
prepare current financial statements, conduct due diligence and complete other
actions that are reasonably necessary to effect a registered public offering.
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(b) Use the Company's reasonable best efforts to keep the relevant
registration statement Continuously Effective (x) if a Demand Registration, for
up to 90 days or until such earlier date as of which all the Registrable
Securities under the Demand Registration statement shall have been disposed of
in the manner described in the Registration Statement, and (y) if a Shelf
Registration, for three years. Notwithstanding the foregoing, if for any reason
the effectiveness of a registration pursuant to this Article II is suspended or,
in the case of a Demand Registration, postponed as permitted by Section 2.1(b),
the foregoing period shall be extended by the aggregate number of days of such
suspension or postponement.
2.4 Number of Demand Registration Statements. The Company shall be
obligated to effect no more than two (2) Demand Registrations for each of the
Black Group and Orchard Group. For purposes of the preceding sentence,
registration shall not be deemed to have been effected: (a) unless a
registration statement with respect thereto has become effective; (b) if, after
such registration statement has become effective, such registration or the
related offer, sale or distribution of Registrable Securities thereunder is
interfered with by any stop order, injunction or other order or requirement of
the SEC or other governmental agency or court for any reason not attributable to
the Selling Holders and such interference is not thereafter eliminated; or (c)
if the conditions to closing specified in the underwriting agreement, if any,
entered into in connection with such registration are not satisfied or waived,
other than by reason of a failure on the part of the Selling Holders. If the
Company shall have complied with its obligations under this Agreement, a right
to demand a registration pursuant to Section 2.1 shall be deemed to have been
satisfied upon the earlier of (x) the date as of which all of the Registrable
Securities included therein shall have been disposed of pursuant to the
registration statement, and (y) the date as of which such registration statement
shall have been Continuously Effective for a period of 90 days, provided no stop
order or similar order, or proceedings for such an order, is thereafter entered
or initiated.
2.5 Form of Registration Statement. A registration pursuant to this Article
II shall be on (a) such appropriate registration form of the SEC as shall be
selected by the Company and be reasonably acceptable to the Majority Selling
Holders, in the case of a Demand Registration, or Form S-3, in the case of a
Shelf Registration and (b) permit the disposition of the Registrable Securities
in accordance with the intended method or methods of disposition specified in
the request pursuant to Section 2.1(a) or Section 2.2(a), respectively.
2.6 Underwriters. If any registration pursuant to Article II involves an
underwritten offering (whether on a "firm", "best efforts" or "all reasonable
efforts" basis or otherwise), or an agented offering, the Majority Selling
Holders, or, in the case of a Shelf Registration, the Initiating Holder, shall
have the right to select the underwriter or underwriters and manager or managers
to administer such underwritten offering or the placement agent or agents for
such agented offering.
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ARTICLE III
PIGGYBACK REGISTRATION
3.1 Registration. If at any time the Company proposes to register
securities under the Securities Act in connection with the public offering for
its account on Form S-1 or S-3 (or any replacement or successor forms), the
Company shall promptly give each Holder of Registrable Securities written notice
of such registration (a "Piggyback Registration"). Upon the written request of
each Holder given within 20 days following the date of such notice, the Company
shall cause to be included in such registration statement and use its reasonable
best efforts to cause to be registered under the Securities Act all the
Registrable Securities that each such Holder shall have requested to be
registered. The Company shall have the right to withdraw or cease to prepare or
file any registration statement for any offering referred to in this Article III
without any obligation or liability to any Holder.
3.2 Limitation on Number of Shares. If the Underwriters' Representative or
Agent shall advise the Company in writing (with a copy to each Selling Holder)
that, in its opinion, the amount of Registrable Securities requested to be
included in such registration would materially adversely affect such offering,
or the timing thereof, then the Company will include in such registration, to
the extent of the amount and class which the Company is so advised can be sold
without such material adverse effect in such offering: first, all securities
proposed to be sold by the Company for its own account; second, the Registrable
Securities requested to be included in such registration by all Holders pursuant
to this Article III, pro rata based on the estimated gross proceeds from the
sale thereof; and third all other securities requested to be included in such
registration.
3.3 Number of Piggyback Registrations. Each Holder shall be entitled to
have its Registrable Securities included in an unlimited number of Piggyback
Registrations pursuant to this Article III.
3.4 Company Lockup. If the Company has previously filed a registration
statement with respect to Registrable Securities pursuant to Article II or
pursuant to this Article III, and if such previous registration has not been
withdrawn or abandoned, the Company will not file or cause to be effected any
other registration of any of its equity securities or securities convertible or
exchangeable into or exercisable for its equity securities under the Securities
Act (except on Form S-4, Form S-8 or any successor form), whether on its own
behalf or at the request of any holder or holders of such securities, until a
period of 90 days has elapsed from the effective date of such a previous
registration or as otherwise determined by the Underwriter's Representative.
ARTICLE IV
REGISTRATION PROCEDURES
4.1 Procedures. Whenever required under Article II or Article III to effect
the registration of any Registrable Securities, the Company shall, as
expeditiously as practicable:
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(a) Prepare and file with the SEC a registration statement with respect to
such Registrable Securities and use the Company's reasonable best efforts to
cause such registration statement to become effective; provided, however, that
before filing a registration statement or prospectus or any amendments or
supplements thereto, including documents incorporated by reference after the
initial filing of the registration statement and prior to effectiveness thereof,
the Company shall furnish to counsel for the Selling Holders copies of all such
documents in the form substantially as proposed to be filed with the SEC at
least five (5) business days prior to filing for review and comment by such
counsel, which opportunity to comment shall include an absolute right to control
or contest disclosure if the applicable Selling Holder reasonably believes that
it may be subject to controlling person liability under applicable securities
laws with respect thereto.
(b) Prepare and file with the SEC such amendments and supplements to such
registration statement and the prospectus used in connection with such
registration statement as may be necessary to comply with the provisions of the
Securities Act and rules thereunder with respect to the disposition of all
securities covered by such registration statement. If the registration is for an
underwritten offering, the Company shall amend the registration statement or
supplement the prospectus whenever required by the terms of the underwriting
agreement entered into pursuant to Section 4.1(e). Subject to Rule 415 under the
Securities Act, if the registration statement is a Shelf Registration, the
Company shall amend the registration statement or supplement the prospectus so
that it will remain current and in compliance with the requirements of the
Securities Act for three years after its effective date, and if during such
period any event or development occurs as a result of which the registration
statement or prospectus contains a misstatement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading, the Company shall promptly notify each
Selling Holder, amend the registration statement or supplement the prospectus so
that each will thereafter comply with the Securities Act and furnish to each
Selling Holder of Registrable Shares such amended or supplemented prospectus,
which each such Holder shall thereafter use in the Transfer of Registrable
Shares covered by such registration statement. Pending such amendment or
supplement, each such Holder shall cease making offers or Transfers of
Registrable Shares pursuant to the prior prospectus. In the event that any
Registrable Securities included in a registration statement subject to, or
required by, this Agreement remain unsold at the end of the period during which
the Company is obligated to use its best efforts to maintain the effectiveness
of such registration statement, the Company may file a post-effective amendment
to the registration statement for the purpose of removing such Securities from
registered status.
(c) Furnish to each Selling Holder of Registrable Securities, without
charge, such numbers of copies of the registration statement, any pre-effective
or post-effective amendment thereto, the prospectus, including each preliminary
prospectus and any amendments or supplements thereto, in each case in conformity
with the requirements of the Securities Act and the rules thereunder, and such
other related documents as any such Selling Holder may reasonably request in
order to facilitate the disposition of Registrable Securities owned by such
Selling Holder.
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(d) Use the Company's reasonable best efforts (i) to register and qualify
the securities covered by such registration statement under such other
securities or blue sky laws of such states or jurisdictions and (ii) to obtain
the withdrawal of any order suspending the effectiveness of a registration
statement, or the lifting of any suspension of the qualification (or exemption
from qualification) of the offer and Transfer of any of the Registrable
Securities in any jurisdiction, at the earliest possible moment.
(e) In the event of any underwritten or agented offering, enter into and
perform the Company's obligations under an underwriting or agency agreement
(including indemnification and contribution obligations of underwriters or
agents), in usual and customary form, with the managing underwriter or
underwriters of or agents for such offering. The Company shall also cooperate
with the Majority Selling Holders or, in the case of a Shelf Registration, the
Initiating Holder, and the Underwriters' Representative or Agent for such
offering in the marketing of the Registrable Shares, including making available
the Company's officers, accountants, counsel, premises, books and records for
such purpose.
(f) Promptly notify each Selling Holder of any stop order issued or
threatened to be issued by the SEC in connection therewith (and take all
reasonable actions required to prevent the entry of such stop order or to remove
it if entered).
(g) Make generally available to the Company's security holders copies of
all periodic reports, proxy statements, other information referred to in Section
8.1 and an earnings statement satisfying the provisions of Section 11(a) of the
Securities Act no later than 90 days following the end of the 12-month period
beginning with the first month of the Company's first fiscal quarter commencing
after the effective date of each registration statement filed pursuant to this
Agreement.
(h) Make available for inspection by any Selling Holder, any underwriter
participating in such offering and the representatives of such Selling Holder
and Underwriter, all financial and other information as shall be reasonably
requested by them, and provide the Selling Holder, any underwriter participating
in such offering and the representatives of such Selling Holder and Underwriter
the opportunity to discuss the business affairs of the Company with its
principal executives and independent public accountants who have certified the
audited financial statements included in such registration statement, in each
case as necessary to enable them to exercise their due diligence responsibility
under the Securities Act; provided, however, that information that the Company
determines, in good faith, to be confidential and that the Company advises such
Person in writing, is confidential, shall not be disclosed unless either such
Person signs a confidentiality agreement reasonably satisfactory to the Company
or the related Selling Holder of Registrable Securities agrees to be responsible
for such Person's breach of confidentiality on terms reasonably satisfactory to
the Company.
(i) Use the Company's reasonable best efforts to obtain a so-called
"comfort letter" from its independent public accountants, and legal opinions of
counsel to the Company addressed to the Selling Holders, in customary form and
covering such matters of the type customarily covered by such letters, and in a
form that shall be reasonably satisfactory to Majority Selling Holders or, in
the case of a Shelf Registration, the Initiating Holder. The Company shall
furnish to each Selling Holder a signed counterpart of any such comfort letter
or legal opinion. Delivery of any such opinion or comfort letter shall be
subject to the recipient furnishing such written representations or
acknowledgements as are customarily provided by selling shareholders who receive
such comfort letters or opinions.
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(j) Provide and cause to be maintained a transfer agent and registrar for
all Registrable Securities covered by such registration statement from and after
a date not later than the effective date of such registration statement.
(k) Use all reasonable efforts to cause the Registrable Securities covered
by such registration statement (i) if the Common Stock is then listed on a
securities exchange or included for quotation in a recognized trading market, to
continue to be so listed or included for a reasonable period of time after the
offering; and (ii) to be registered with or approved by such other United States
or state governmental agencies or authorities as may be necessary by virtue of
the business and operations of the Company to enable the Selling Holders of
Registrable Securities to consummate the disposition of such Registrable
Securities.
(l) Use the Company's reasonable efforts to provide a CUSIP number for the
Registrable Securities prior to the effective date of the first registration
statement including Registrable Securities.
(m) Take such other actions as are reasonably required in order to expedite
or facilitate the disposition of Registrable Securities included in each such
registration.
4.2 Blackout. The Company may notify in writing each of the Holders that
the availability of any effective Shelf Registration is suspended for a
reasonable time, not exceeding sixty (60) days in any twelve (12)-month period,
if the Company shall determine in good faith that permitting such sales would
interfere with any material acquisition, financing or other transaction that the
Company is actively pursuing or require premature disclosure of any other
material corporate development, which disclosure would materially adversely
affect the interests of the Company. Each Holder agrees that upon receipt of any
such notice, it shall not sell any Registrable Securities pursuant to such Shelf
Registration until the earlier of (i) such time as such Holder is advised in
writing by the Company that the Shelf Registration may be used; and (ii) the
sixty (60) day suspension period referred to above expires.
ARTICLE V
HOLDERS' OBLIGATIONS.
5.1 Obligation. It shall be a condition precedent to the obligations of the
Company to take any action pursuant to this Agreement with respect to the
Registrable Securities of any Selling Holder of Registrable Securities that such
Selling Holder shall:
(a) furnish to the Company such information regarding such Selling Holder,
the number of the Registrable Securities owned by it, and the intended method of
disposition of such securities as shall be required to effect the registration
of such Selling Holder's Registrable Securities, and to cooperate with
reasonable requests from the Company in preparing such registration; and
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(b) agree to sell their Registrable Securities to the underwriters at the
same price and on substantially the same terms and conditions as the Company or
the other Persons on whose behalf the registration statement was being filed
have agreed to sell their securities, and to execute the underwriting agreement
agreed to by the Majority Selling Holders (in the case of a registration under
Article II) or the Company (in the case of a registration under Article III).
5.2 Holdback. Each Holder, if so requested by the Underwriters'
Representative or Agent in connection with an offering of any Registrable
Securities, shall not effect any public sale or distribution of shares of Common
Stock or any securities convertible into or exchangeable or exercisable for
shares of Common Stock, including a sale pursuant to Rule 144 under the
Securities Act (except as part of such underwritten or agented registration),
during the period reasonably requested by the Underwriters' Representative or
Agent, but in no event greater than 90 days (a "Holdback"). In order to enforce
the foregoing covenant, the Company shall be entitled to impose stop-transfer
instructions with respect to the Registrable Securities of each Holder until the
end of such period. Notwithstanding the foregoing, no Holder shall be subject to
more than two Holdbacks in any twelve (12)-month period.
ARTICLE VI
EXPENSES OF REGISTRATION
6.1 Demand and Shelf Registrations. With respect to each Demand
Registration and each Shelf Registration, the Company shall bear and pay all
expenses incurred in connection with any registration, filing, or qualification
of Registrable Securities with respect to such Demand Registrations or Shelf
Registrations for each Selling Holder (which right may be assigned to any Person
to whom Registrable Securities are Transferred as permitted by Article IX),
including all registration, filing and Financial Industry Regulatory Authority
fees, all fees and expenses of complying with securities or blue sky laws, all
word processing, duplicating and printing expenses, messenger and delivery
expenses, the reasonable fees and disbursements of counsel for the Company and
of the Company's independent public accountants (including the expenses of
"comfort" letters required by or incident to such performance and compliance)
and the reasonable fees and disbursements of one firm of counsel for the Selling
Holders of Registrable Securities (selected by the Demanding Holders owning a
majority of the Registrable Securities owned by Demanding Holders, or by the
Initiating Holder, as the case may be) (the "Registration Expenses"), but
excluding underwriting discounts and commissions relating to Registrable
Securities (which shall be paid on a pro rata basis by the Selling Holders).
6.2 Piggyback Registration. The Company shall bear and pay all Registration
Expenses incurred in connection with any Piggyback Registrations pursuant to
Article III for each Selling Holder (which right may be Transferred to any
Person to whom Registrable Securities are Transferred as permitted by Article
IX), but excluding underwriting discounts and commissions relating to
Registrable Securities (which shall be paid on a pro rata basis by the Selling
Holders of Registrable Securities).
6.3 Failure to Pay Expenses. Any failure of the Company to pay any
Registration Expenses as required by this Article VI shall not relieve the
Company of its obligations under this Agreement.
11
ARTICLE VII
INDEMNIFICATION; CONTRIBUTION
7.1 Indemnification by the Company. The Company agrees to indemnify, defend
and hold harmless each Holder and each of their Affiliates and each of the
officers, employees, directors, partners, members, attorneys and agents and each
Person, if any, who controls (within the meaning of Section 15 of the Securities
Act or Section 20 of the Exchange Act) each Holder and each of their Affiliates
(each, an "Holder Indemnified Party") from and against any expenses, losses,
judgments, claims, damages or liabilities, whether joint or several, arising out
of or based upon any untrue statement (or allegedly untrue statement) of a
material fact contained in any Registration Statement under which the sale of
such Registrable Securities was registered under the Securities Act, any
preliminary prospectus, final prospectus, any "free writing prospectus," as such
term is defined in Rule 405 under the Securities Act, or summary prospectus
contained in the Registration Statement, or any amendment or supplement thereto,
or arising out of or based upon any omission (or alleged omission) to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading, or any untrue statement or alleged untrue statement of a
material fact in the information conveyed to any purchaser at the time of the
sale to such purchaser, or the omission or alleged omission to state therein a
material fact required to be stated therein, or any violation by the Company of
the Securities Act or any rule or regulation promulgated thereunder applicable
to the Company and relating to action or inaction required of the Company in
connection with any such Registration; provided, however, that the Company will
not be liable in any such case to the extent that any such expense, loss, claim,
damage or liability arises out of or is based upon any untrue statement or
allegedly untrue statement or omission or alleged omission made in such
Registration Statement, preliminary prospectus, final prospectus or summary
prospectus, or any such amendment or supplement, in reliance upon and in
conformity with information furnished to the Company, in writing, by any Holder
expressly for use therein. The Company shall promptly advance and/or reimburse
each Holder Indemnified Party, as incurred, for any legal and any other expenses
reasonably incurred by such Holder Indemnified Party in connection with
investigating and defending any such expense, loss, judgment, claim, damage,
liability or action. The Company also shall indemnify any Underwriter of the
Registrable Securities, their officers, Affiliates, directors, partners, members
and agents and each Person who controls such Underwriter on substantially the
same basis as that of the indemnification provided above in this Section 4.1.
7.2 Indemnification by the Holder. Each Holder, severally but not jointly,
will, in the event that any Registration is being effected under the Securities
Act pursuant to this Agreement of any Registrable Securities held by such
Holder, indemnify and hold harmless the Company, each of its directors and
officers and each Underwriter (if any), and each other Holder and each other
Person, if any, who controls another Holder or such Underwriter within the
meaning of the Securities Act, against any losses, claims, judgments, damages or
liabilities, whether joint or several, insofar as such losses, claims,
judgments, damages or liabilities (or actions in respect thereof) arise out of
or are based upon any untrue statement or allegedly untrue statement of a
material fact contained in any Registration Statement under which the sale of
such Registrable Securities was registered under the Securities Act, any
preliminary prospectus, final prospectus, any "free writing prospectus," as such
term is defined in Rule 405 under the Securities Act, or summary prospectus
12
contained in the Registration Statement, or any amendment or supplement thereto,
or arise out of or are based upon any omission or the alleged omission to state
a material fact required to be stated therein or necessary to make the statement
therein not misleading, if the statement or omission was made in reliance upon
and in conformity with information furnished in writing to the Company by such
Holder expressly for use therein, and shall reimburse the Company, its directors
and officers, and each other Holder or controlling Person for any legal or other
expenses reasonably incurred by any of them in connection with investigation or
defending any such loss, claim, damage, liability or action. Notwithstanding the
provisions of this Section 7.2, the Holder shall not be required to contribute
any amount in excess of the dollar amount of the net proceeds (after payment of
any underwriting fees, discounts, commissions or taxes) actually received by the
Holder from the sale of Registrable Securities which gave rise to such
indemnification obligation.
7.3 Conduct of Indemnification Proceedings. Promptly after receipt by any
Person of any notice of any loss, claim, damage or liability or any action in
respect of which indemnity may be sought pursuant to Section 7.1 or 7.2, such
Person (the "Indemnified Party") shall, if a claim in respect thereof is to be
made against any other Person for indemnification hereunder, notify such other
Person (the "Indemnifying Party") in writing of the loss, claim, judgment,
damage, liability or action (to the extent legally permissible); provided,
however, that the failure by the Indemnified Party to notify the Indemnifying
Party shall not relieve the Indemnifying Party from any liability which the
Indemnifying Party may have to such Indemnified Party hereunder, except and
solely to the extent the Indemnifying Party is actually prejudiced by such
failure. If the Indemnified Party is seeking indemnification with respect to any
claim or action brought against the Indemnified Party, then the Indemnifying
Party shall be entitled to participate in such claim or action, and, to the
extent that it wishes, jointly with all other Indemnifying Parties, to assume
control of the defense thereof with counsel satisfactory to the Indemnified
Party. After notice from the Indemnifying Party to the Indemnified Party of its
election to assume control of the defense of such claim or action, the
Indemnifying Party shall not be liable to the Indemnified Party for any legal or
other expenses subsequently incurred by the Indemnified Party in connection with
the defense thereof other than reasonable costs of investigation; provided,
however, that in any action in which both the Indemnified Party and the
Indemnifying Party are named as defendants, the Indemnified Party shall have the
right to employ separate counsel (but no more than one such separate counsel) to
represent the Indemnified Party and its controlling Persons who may be subject
to liability arising out of any claim in respect of which indemnity may be
sought by the Indemnified Party against the Indemnifying Party, with the fees
and expenses of such counsel to be paid by such Indemnifying Party if, based
upon the advice of counsel of such Indemnified Party, representation of both
parties by the same counsel would be inappropriate due to actual or potential
differing interests between them. No Indemnifying Party shall, without the prior
written consent of the Indemnified Party, consent to entry of judgment or effect
any settlement of any claim or pending or threatened proceeding in respect of
which the Indemnified Party is or could have been a party and indemnity could
have been sought hereunder by such Indemnified Party, unless such judgment or
settlement includes an unconditional release of such Indemnified Party from all
liability arising out of such claim or proceeding.
13
7.4 Contribution.
(a) If the indemnification provided for in the foregoing Sections
7.1 and 7.2 is unavailable to any Indemnified Party in respect of any loss,
claim, damage, liability or action referred to herein, then each such
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 loss, claim, damage, liability or action in such proportion as is
appropriate to reflect the relative fault of the Indemnified Parties and the
Indemnifying Parties in connection with the actions or omissions which resulted
in such loss, claim, damage, liability or action, as well as any other relevant
equitable considerations. The relative fault of any Indemnified Party and any
Indemnifying Party 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 such Indemnified Party or such Indemnifying Party and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission.
(b) The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 7.4 were determined by pro rata allocation
or by any other method of allocation which does not take account the equitable
considerations referred to in the immediately preceding Section. The amount paid
or payable by an Indemnified Party as a result of any loss, claim, damage,
liability or action referred to in the immediately preceding sentence shall be
deemed to include, subject to the limitations set forth above, any legal or
other expenses incurred by such Indemnified Party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this Section 7.4, the Holder shall not be required to contribute
any amount in excess of the dollar amount of the net proceeds (after payment of
any underwriting fees, discounts, commissions or taxes) actually received by the
Holder from the sale of Registrable Securities which gave rise to such
contribution obligation. No Person guilty of fraudulent misrepresentation
(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.
ARTICLE VIII
COVENANTS OF THE COMPANY
8.1 Covenants. The Company hereby agrees and covenants as follows:
(a) The Company shall file as and when applicable, on a timely basis, all
reports required to be filed by it under the Exchange Act. If the Company is not
required to file reports pursuant to the Exchange Act, upon the request of any
Holder of Registrable Securities, the Company shall make publicly available the
information specified in subparagraph (c)(2) of Rule 144 of the Securities Act,
and take such further action as may be reasonably required from time to time and
as may be within the reasonable control of the Company, to enable the Holders to
Transfer Registrable Securities without registration under the Securities Act
within the limitation of the exemptions provided by Rule 144 under the
Securities Act or any similar rule or regulation hereafter adopted by the
Commission.
14
(b) The Company shall not, and shall not permit its majority owned
subsidiaries to, effect any public sale or distribution of any shares of Common
Stock or any securities convertible into or exchangeable or exercisable for
shares of Common Stock, during the five (5) business days prior to, and during
the ninety (90)-day period beginning on, the commencement of a public
distribution of the Registrable Securities pursuant to any registration
statement prepared pursuant to this Agreement (other than by the Company
pursuant to such registration, if the registration is pursuant to Article III).
The Company shall not effect any registration of its securities (other than on
Form S-4, Form S-8, or any successor forms to such forms or pursuant to such
other registration rights agreements as may be approved in writing by the
Majority Selling Holders or, in the case of a Shelf Registration, the Initiating
Holder), or effect any public or private sale or distribution of any of its
securities, including a sale pursuant to Regulation D under the Securities Act,
whether on its own behalf or at the request of any holder or holders of such
securities from the date of a request for a Demand Registration pursuant to
Section 2.1 until the earlier of (x) ninety (90) days following the date as of
which all securities covered by such Demand Registration statement shall have
been Transferred, and (y) ninety (90) days following the effective date of such
Demand Registration statement, as the case may be, unless the Company shall have
previously notified in writing all Selling Holders of the Company's desire to do
so, and Selling Holders owning a majority of the Registrable Securities or the
Underwriters' Representative, if any, shall have consented thereto in writing.
(c) Any agreement entered into after the date of this Agreement pursuant to
which the Company or any of its majority owned subsidiaries issues or agrees to
issue any privately placed securities similar to any issue of the Registrable
Securities (other than (x) shares of Common Stock pursuant to a stock incentive,
stock option, stock bonus, stock purchase or other employee benefit plan of the
Company approved by its Board, and (y) securities issued to Persons in exchange
for ownership interests in any Person in connection with a business combination
in which the Company or any of its majority owned subsidiaries is a party) shall
contain a provision whereby holders of such securities agree not to effect any
public sale or distribution of any such securities during the periods described
in the first sentence of Section 8.1(b), in each case including a sale pursuant
to Rule 144 under the Securities Act (unless such Person is prevented by
applicable statute or regulation from entering into such an agreement).
(d) The Company shall not, directly or indirectly, (x) enter into any
merger, consolidation or reorganization in which the Company shall not be the
surviving corporation or (y) Transfer or agree to Transfer all or substantially
all the Company's assets, unless prior to such merger, consolidation,
reorganization or asset Transfer, the surviving corporation or the Transferee,
respectively, shall have agreed in writing to assume the obligations of the
Company under this Agreement, and for that purpose references hereunder to
"Registrable Securities" shall be deemed to include the securities which the
Holders of Registrable Securities would be entitled to receive in exchange for
Registrable Securities pursuant to any such merger, consolidation or
reorganization.
(e) The Company shall not grant to any Person (other than a Holder of
Registrable Securities) any registration rights with respect to securities of
the Company, or enter into any agreement, that would entitle the holder thereof
to have securities owned by it included in a Demand Registration or Shelf
Registration.
15
ARTICLE IX
MISCELLANEOUS
9.1 Transfer of Registration Rights. Rights with respect to Registrable
Securities may be Transferred by a Holder to any Person in connection with the
Transfer of Registrable Securities to such Person, in all cases, if (x) any such
Transferee that is not a party to this Agreement shall have executed and
delivered to the Company a properly completed agreement agreeing to be bound by
the terms hereof, and (y) the Transferor shall have delivered to the Company, no
later than fifteen (15) days following the date of the Transfer, written
notification of such Transfer setting forth the name of the Transferor, name and
address of the Transferee, and the number of Registrable Securities that shall
have been so Transferred.
9.2 Amendment, Modification and Waivers; Further Assurances.
(a) This Agreement may only be amended, modified or waived with the consent
of the Company and only if the Company shall have obtained the written consent
to such amendment, modification or waiver from each Holder.
(b) No waiver of any terms or conditions of this Agreement shall operate as
a waiver of any other breach of such terms and conditions or any other term or
condition, nor shall any failure to enforce any provision hereof operate as a
waiver of such provision or of any other provision hereof. No written waiver
hereunder, unless it by its own terms explicitly provides to the contrary, shall
be construed to effect a continuing waiver of the provisions being waived and no
such waiver in any instance shall constitute a waiver in any other instance or
for any other purpose or impair the right of the party against whom such waiver
is claimed in all other instances or for all other purposes to require full
compliance with such provision.
(c) Each of the parties hereto shall execute all such further instruments
and documents and take all such further action as any other party hereto may
reasonably require in order to effectuate the terms and purposes of this
Agreement.
9.3 Assignment; Benefit. This Agreement and all of the provisions hereof
shall be binding upon and shall inure to the benefit of the parties hereto and
their respective heirs, assigns, executors, administrators or successors;
provided, however, that except as specifically provided herein with respect to
certain matters, neither this Agreement nor any of the rights, interests or
obligations hereunder shall be assigned or delegated by the Company without the
written consent of Holders possessing a majority in number of the Registrable
Securities outstanding on the date as of which such delegation or assignment is
to become effective; provided further that a Holder may Transfer its rights
hereunder to a successor in interest to the Registrable Securities owned by such
assignor as permitted by Section 9.1.
9.4 Governing Law. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of New York, without giving effect to any
choice of law or conflict of law rules or provisions (whether of the State of
New York or any other jurisdiction) that would cause the application of the laws
of any jurisdiction other than the State of New York.
16
9.5 Notices. All notices and requests given pursuant to this Agreement
shall be in accordance with Section 8.5 of the Investment Agreement.
9.6 Entire Agreement; Integration. Except as otherwise expressly set forth
herein, this Agreement and the Investment Agreement embody the complete
agreement and understanding among the parties hereto with respect to the subject
matter hereof and supersedes and preempts any prior understandings, agreements
or representations by or among the parties, written or oral, which may have
related to the subject matter hereof in any way.
9.7 Injunctive Relief. Each of the parties hereto acknowledges that in the
event of a breach by any of them of any material provision of this Agreement,
the aggrieved party may be without an adequate remedy at law. Each of the
parties therefore agrees that in the event of such a breach hereof the aggrieved
party may elect to institute and prosecute proceedings in any court of competent
jurisdiction to enforce specific performance or to enjoin the continuing breach
hereof. By seeking or obtaining any such relief, the aggrieved party shall not
be precluded from seeking or obtaining any other relief to which it may be
entitled.
9.8 Counterparts. This Agreement may be executed simultaneously in two or
more counterparts (including via facsimile or other electronic transmission),
any one of which need not contain the signatures of more than one party, but all
such counterparts taken together shall constitute one and the same Agreement.
9.9 Severability. Whenever possible, each provision of this Agreement shall
be interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement is held to be invalid, illegal or
unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability shall not affect
the validity, legality or enforceability of any other provision of this
Agreement in such jurisdiction, but this Agreement shall be reformed, construed
and enforced in such jurisdiction as if such invalid, illegal or unenforceable
provision had never been contained herein.
9.10 Filing. A copy of this Agreement and of all amendments thereto shall
be filed at the principal executive office of the Company with the corporate
records of the Company.
9.11 Termination. This Agreement may be terminated at any time by a written
instrument signed by all parties hereto. Unless sooner terminated in accordance
with the preceding sentence, this Agreement (other than Article VII) shall
terminate in its entirety on such date as there shall be no Registrable
Securities outstanding, provided that any shares of Common Stock previously
subject to this Agreement shall not be Registrable Securities following the sale
of any such shares in an offering registered pursuant to this Agreement.
9.12 No Third Party Beneficiaries. Except to the extent contemplated by
Article VII of this Agreement, nothing herein expressed or implied is intended
to confer upon any Person, other than the parties hereto or their respective
permitted assigns, successors, heirs and legal representatives, any rights,
remedies, obligations or liabilities under or by reason of this Agreement.
[Remainder of page intentionally left blank;
signatures on next succeeding page]
17
IN WITNESS WHEREOF, this Agreement has been executed and delivered by the
parties hereto as of the date first above written.
ENVIRONMENTAL SOLUTIONS WORLDWIDE INC.
By: /s/ Mark Yung
---------------------------------------
Name: Mark Yung
Its: Executive Chairman
THE HOLDERS:
/s/ Leon D. Black
-------------------------------------------
Leon D. Black
BLACK FAMILY 1997 TRUST
By: /s/ Barry J. Cohen
---------------------------------------
Name: Barry J. Cohen
Title: Trustee
LEON D. BLACK TRUST UAD 11/30/92
FBO JOSHUA BLACK
By: /s/ Barry J. Cohen
---------------------------------------
Name: Barry J. Cohen
Title: Trustee
LEON D. BLACK TRUST UAD 11/30/92
BENJAMIN BLACK
By: /s/ Barry J. Cohen
---------------------------------------
Name: Barry J. Cohen
Title: Trustee
18
LEON D. BLACK TRUST UAD 11/30/92
ALEXANDER BLACK
By: /s/ Barry J. Cohen
---------------------------------------
Name: Barry J. Cohen
Title: Trustee
LEON D. BLACK TRUST UAD 11/30/92
VICTORIA BLACK
By: /s/ Barry J. Cohen
---------------------------------------
Name: Barry J. Cohen
Title: Trustee
/s/ John J. Hannan
-------------------------------------------
John J. Hannan
ORCHARD INVESTMENTS, LLC
By: Orchard Capital Corporation,
its Manager
By: /s/ Richard S. Ressler
---------------------------------------
Name: Richard S. Ressler
Title: President
/s/ Richard S. Ressler
-------------------------------------------
Richard S. Ressler
1
