AGREEMENT
AGREEMENT (the "Agreement") dated as of July 1, 1996 by and among Leak-X
Environmental Corporation, a Delaware corporation (the "Company") with an
address at 000 Xxxx Xxxxxx Xxxxxx, Xxxx Xxxxxxx, Xxxxxxxxxxxx, Xxxx X. Xxxxxx,
with an address at 00 Xxxxxxxx Xxxxx, Xxxxxxxxx, Xxx Xxxx ("XX Xxxxxx")and
Xxxxxxx X. Xxxxxx, Xx., with an address at 00 Xxxxxxxxxx, Xxxxxxxxx, Xxx Xxxx
("XX Xxxxxx")(XX Xxxxxx and XX Xxxxxx are hereinafter collectively referred to
as the "Holders").
W I T N E S S E T H:
WHEREAS, XX Xxxxxx owns 1,937,710 shares of the Company's Common Stock,
$.001 par value (the "Common Stock") and 900,444 shares of the Company's
Series A Preferred Stock (the "Preferred Stock") which may be converted into
800,395 shares of Common Stock;
WHEREAS XX Xxxxxx owns 2,058,210 shares of Common Stock and 788,444
shares of Preferred Stock which may be converted into 700,839 shares of Common
Stock (the Common Stock currently held by the Holders or which may be obtained
upon conversion of the Preferred Stock is hereinafter referred to as the
"Registrable Securities");
WHEREAS, the Holders have agreed to convert their Preferred Stock into
Common Stock and to provide the Company with a right of first refusal with
respect to future sales of Common Stock now owned by the Holders or hereafter
acquired upon conversion of the Preferred Stock; and
WHEREAS, the Company and the Holders desire that certain terms and
provisions be applicable to the registration of the Registrable Securities
held by the Holders.
NOW, THEREFORE, in consideration of the covenants and agreements set
forth herein, and for other good and valuable consideration, the adequacy and
receipt of which are hereby acknowledged, the parties hereby agree as follows:
Section 1. Piggyback Registration Rights. The Company covenants
and agrees with the Holders of the Registrable Securities that if, at any time
within the 30 month period commencing from the date hereof, and ending
December 31, 1998, it proposes to file with the Securities and Exchange
Commission (the "SEC") a Registration Statement ( a "Registration Statement")
under the Securities Act of 1933, as amended (the "Act"), with respect to the
sale of any class of security (other than pursuant to a Registration Statement
on Forms S-4 or S-8 or any successor form or other than a post-effective
amendment to a Registration Statement that relates to the Company's publicly
traded warrants), in a primary registration on behalf of the Company and/or in
a secondary registration on behalf of holders of the Company's securities and
the registration form to be used may be used for registration of the
Registrable Securities, the Company will give prompt written notice (which, in
the case of a Registration Statement pursuant to the exercise of registration
rights, shall be within ten (10) business days after the Company's receipt of
notice of such exercise and, in any event, shall be at least twenty (20) days
prior to such filing) to the Holders of Registrable Securities at the
addresses appearing on the records of the Company of its intention to file a
Registration Statement, and will offer to include in such Registration
Statement, all or any portion of the Registrable Securities. The offer to
include the Registrable Securities is limited by subparagraphs (a) and (b) of
this Section 1. In any event, the maximum number of Registrable Securities
which shall be registered shall not exceed that number for which the Company
has received written requests for inclusion therein within fifteen (15) days
after the giving of notice by the Company. The Company will use its best
efforts, through its officers, directors, auditors and counsel in all matters
necessary or advisable, to cause to become effective such Registration
Statement as promptly as practicable. In that regard, the Company makes no
representations or warranties as to its ability to have the Registration
Statement declared effective. All registrations requested pursuant to this
Section 1 are referred to herein as "Piggyback Registrations." All Piggyback
Registrations pursuant to this Section 1 will be made solely at the Company's
expense, exclusive of any sales commissions incurred from the sale of the
Common Stock and any attorneys' fees incurred by the Holders resulting from
the hiring of their own attorneys, if any Registrable Securities are sold. In
the event the Company is advised by the staff of the SEC, Nasdaq, or any
self-regulatory or state securities agency that the inclusion of the
Registrable Securities will prevent, preclude or materially delay the
effectiveness of a Registration Statement filed, the Company, in good faith,
may amend such Registration Statement to exclude the Registrable Securities
without otherwise affecting the Holders rights to any other Registration
Statement herein.
(a) Priority on Primary Registrations. If a Piggyback Registration
includes an underwritten primary registration on behalf of the Company and if
the underwriter(s) for the offering being registered by the Company shall
determine in good faith and advise the Company in writing that in its/their
opinion the number of Registrable Securities requested to be included in such
registration exceeds the number that can be sold in such offering without
materially adversely affecting the distribution of such securities by the
Company, then the Company will promptly furnish the Holders of the Registrable
Securities with a copy of such letter, and the Company will include in such
registration first, the securities that the Company proposes to sell and
second, the Registrable Securities requested to be included in such
registration, apportioned pro rata among the Holders of Registrable
Securities, with the securities of the holders of other securities requesting
registration.
(b) Priority on Secondary Registrations. If a Piggyback
Registration consists only of an underwritten secondary registration on behalf
of stockholders of securities of the Company, and the underwriter(s) for the
offering being registered by the Company advise the Company in writing that in
its/their opinion the number of Registrable Securities requested to be
included in such registration exceeds the number which can be sold in such
offering without materially adversely affecting the distribution of such
securities by the Company then the Company will promptly furnish the Holders
of the Registrable Securities with a copy of such letter and, the Company will
include in such registration first, the securities requested to be included
therein by the persons requesting such registration and second, the
Registrable Securities requested to be included in such registration above,
pro rata, among the Holders of Registrable Securities on the basis of the
number of shares requested to be included by each such stockholder, with other
securities requested to be included in such registration.
Notwithstanding the foregoing, if any such underwriter shall
determine in good faith and advise the Company in writing that the
distribution of the Registrable Securities requested to be included in the
registration concurrently with the securities being registered by the Company
would materially adversely affect the distribution of such securities by the
Company, then the Holders of such Registrable Securities shall delay their
offering and sale for such period ending on the earliest of (i) 90 days
following the effective date of the Company's registration statement, (ii) the
day upon which the underwriting syndicate, if any, for such offering shall
have been disbanded or, (iii) such date as the Company, managing underwriter
and Holders of Registrable Securities shall otherwise agree. In the event of
such delay, the Company shall file such supplements, post-effective amendments
and take any such other steps as may be necessary to permit such Holders to
make their proposed offering and sale for a period of ninety (90) days
immediately following the end of such period of delay. If any party
disapproves of the terms of any such underwriting, it may elect to withdraw
therefrom by written notice to the Company, the underwriter, and the Holders.
Notwithstanding the foregoing, the Company shall not be required to file a
Registration Statement to include Registrable Securities pursuant to this
Section 1 if an opinion of independent counsel, reasonably satisfactory to
counsel for the Company and counsel for the Holders, shall have been delivered
to counsel for the Company, stating that all of the Registrable Securities
proposed to be disposed of may be transferred pursuant to the provisions of
Rule 144 under the Act.
Section 2. Other Registration Rights. In addition to the rights above
provided, the Company will cooperate with the Holders of the Registrable
Securities in preparing and signing any Registration Statement, in addition to
the Registration Statements discussed above, required in order to sell or
transfer the Registrable Securities and will supply all information required
therefor, but such additional Registration Statement shall be at the Holders'
cost and expense; provided, however, that if the Company elects to register
and qualify additional shares of Common Stock, the cost and expenses of such
Registration Statement will be pro rated, between the Company and the Holders
of the Registrable Securities according to the aggregate sales price of the
securities being registered.
Section 3. Certain Understandings. The Holders understand that the
Company makes no representations of any kind concerning its intent or ability
to offer or sell any of the Registrable Securities in a public offering or
otherwise and that their sole right to have the Registrable Securities
registered under the Act is contained in this Agreement. So long as there are
Registrable Securities outstanding and the Company is subject to the reporting
requirements of the Act and the Securities Exchange Act of 1934 (the "Exchange
Act"), the Company undertakes to file the reports required to be filed by it
under the Act and the Exchange Act and the rules and regulations adopted by
the SEC thereunder, and will take such further action as the Holders of the
Registrable Securities may reasonably request, all to the extent required from
time to time to enable the Holders to sell Registrable Securities without
registration under the Act within the limitation of the exemptions provided by
(i) Rule 144 under the Act, as such Rule may be amended from time to time, or
(ii) any similar rule or regulation hereafter adopted by the SEC. Upon the
request of the Holders, the Company will deliver to the Holders a written
statement as to whether it has complied with such information requirements.
Section 4. Company Obligations. In connection with the registration of
the Registrable Securities pursuant to this Agreement, the Company shall:
(a) furnish to the Holders and to the underwriter(s) thereof, if any,
such reasonable number of copies of the Registration Statement, preliminary
prospectus, final prospectus and such other documents as the Holders and
underwriters may request in order to facilitate the public offering of such
securities;
(b) use its best efforts to register or qualify the Registrable
Securities under state securities laws of the jurisdictions which the Holders
thereof may reasonably request in writing within 20 days following the
original filing of such Registration Statement, and do any and all other acts
and things which may be necessary or advisable to enable the Holders to
consummate the disposition of Registrable Securities in such jurisdictions,
except that the Company shall not be required to execute a general consent to
service of process or to qualify to do business as a foreign corporation in
any jurisdiction wherein it is not so qualified;
(c) notify the Holders of the Registrable Securities promptly when
such Registration Statement has become effective or a supplement to any
prospectus forming a part of such Registration Statement has been filed;
(d) advise the Holders of the Registrable Securities, promptly after
it shall receive notice or obtain knowledge of the issuance of any stop order
by the SEC suspending the effectiveness of such Registration Statement, or the
initiation or threatening of any proceeding for that purpose and promptly use
its best efforts to prevent the issuance of any stop order or to obtain its
withdrawal if such stop order should be issued;
(e) prepare and file with the SEC such amendments and supplements to
such Registration Statement, and the prospectus used in connection therewith
as may be necessary to keep such Registration Statement effective and to
comply with the provisions of the Act with respect to the disposition of all
Registrable Securities and other securities covered by such Registration
Statement, until the earlier of (a) such time as all of such Registrable
Securities and securities have been disposed of in accordance with the
intended methods of disposition by the Holders or any other sellers thereof
set forth in such Registration Statement, or (b) the expiration of 90 days
after such Registration Statement becomes effective;
(f) promptly notify the Holders of the Registrable Securities at any
time when a prospectus relating thereto is required to be delivered under the
Act, of the happening of any event as a result of which the prospectus
included in such registration statement, as then in effect, would include an
untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements therein not
misleading in the light of the circumstances then existing, and at the
reasonable request of the Holders of the Registrable Securities prepare and
furnish to them such number of copies of a supplement to or an amendment of
such prospectus as may be necessary so that, as thereafter delivered to the
Holders of the Registrable Securities, such prospectus shall not include an
untrue statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein not
misleading in the light of the circumstances under which they were made;
(g) in connection with the preparation and filing of the Registration
Statement registering Registrable Securities under the Act, the Company will
give the Holders of Registrable Securities and their counsel and accountants,
the opportunity to participate in the preparation of such registration
statement, each prospectus included therein or filed with the SEC, and each
amendment thereof or supplement thereto, and will give each of them such
opportunities to discuss the business of the Company with its officers and the
independent public accountants who have certified its financial statements as
shall be reasonably necessary, in the opinion of the holders of Registrable
Securities, or their counsel, to conduct a reasonable investigation within the
meaning of the Act;
(h) otherwise use all of its reasonable efforts to comply with all
applicable rules and regulations of the SEC and make available to its
securities holders, as soon as reasonably practicable, an earnings statement
covering the period of at least twelve months beginning after the effective
date of such registration statement, which earnings statement shall satisfy
the provisions of Section 11(a) of the Act; and
(i) provide and cause to be maintained a transfer agent and
registrant for such Registrable Securities from and after a date not later
than the effective date of such registration statement.
Section 5. Expenses. The Company will bear all expenses attendant to
registering the Registrable Securities, including, without limitation, all
registration and filing fees, all listing fees, all fees and expenses of
complying with securities or blue sky laws, all word processing, duplicating
and printing expenses, messenger and delivery expenses and the fees and
disbursements of counsel for the Company and its independent public
accountants, including the expenses of "cold comfort" letters and expenses of
any special audits required by or incident to such performance and compliance,
premiums and other costs of policies of insurance against liabilities arising
out of the public offering of the Registrable Securities being registered and
any fees and disbursements of underwriters customarily paid by issuers and
sellers of securities, but excluding underwriting discounts and commissions,
if any, applicable to the sale of such securities. Furthermore, the Company
shall not be required to pay the fees and disbursements of counsel and
accountants for either Holder of Registrable Securities or other expenses
incurred by either Holder thereof that are not customarily paid by an issuer
in response to the exercise of registration rights.
Section 6. Indemnification and Contribution. The Holders understand
that indemnification and contribution provisions such as the following are
customarily included in an underwriting agreement and agree that
notwithstanding their entering into this binding agreement, they will also
enter into an agreement containing such provisions or provisions substantially
similar thereto as a condition precedent to the registration by the Company
of any of their Registrable Securities in an underwritten offering:
(a) The Company will indemnify and hold harmless each Holder of
Registrable Securities which are included in a Registration Statement pursuant
to the provisions of this Agreement and any underwriter (as defined in the
Act) for such Holder, each officer, director, employee, agent and counsel, if
any, of each such Holder and underwriter, and each person, if any, who
controls such Holder or such underwriter within the meaning of Section 15 of
the Act or Section 20(a) of the Exchange Act (each, a "person who controls" or
a "controlling person"), from and against, any and all loss, claim, damage,
liability, cost and expense (including, without limitation, reasonable legal
expenses) to which such Holder or any such underwriter, officer, director,
employee, agent, counsel or controlling person may become subject under the
Act or otherwise, insofar as such losses, claims, damages, liabilities, costs
or expenses (or actions or proceedings in respect thereof) arise out of or are
based upon any untrue statement or alleged untrue statement of any material
fact contained in such Registration Statement, any prospectus contained
therein or any amendment or supplement thereto, or arise out of or are based
upon the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statement therein, in
light of the circumstances in which they were made, not misleading; provided,
however, that the Company will not be liable in any such case to the extent
that any such loss, claim, damage, liability, cost or expense arises out of or
is based upon an untrue statement or alleged untrue statement or omission or
alleged omission so made in reliance upon and in strict conformity with
information furnished by or on behalf of such Holder, underwriter, officer,
director, employee, agent, counsel or controlling person in writing
specifically for use in the preparation thereof.
(b) Each Holder of Registrable Securities included in a registration
statement pursuant to the provisions of this Agreement will indemnify and hold
harmless the Company, any underwriter, each officer, director, employee,
agent, counsel of and each person who controls the Company or such underwriter
from and against any and all losses, damages, liabilities, costs or expenses
to which the Company or such officer, director, employee, agent, counsel or
controlling person may become subject under the Act or otherwise, insofar as
such losses, damages, liabilities, costs or expenses are caused by any untrue
statement or alleged untrue statement of any material fact contained in such
Registration Statement, any prospectus contained therein or any amendment or
supplement thereto, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances in
which they were made, not misleading, in each case to the extent, but only to
the extent, that such untrue statement or alleged untrue statement or omission
or alleged omission was so made in reliance upon and in strict conformity with
written information furnished by or on behalf of such Holder specifically for
use in the preparation thereof.
(c) Promptly after receipt by an indemnified party of notice of the
commencement of any action involving the subject matter of the foregoing
indemnity provisions, such indemnified party will, if a claim thereof is to be
made against the indemnifying party, promptly notify the indemnifying party of
the commencement thereof; but the omission to so notify the indemnifying party
will not relieve it from any liability which it may have to any indemnified
party otherwise than hereunder. In case such action is brought against any
indemnified party and it notifies the indemnifying party of the commencement
thereof, the indemnifying party shall have the right to participate in, and,
to the extent that it may wish, jointly with any other indemnifying party
similarly notified, to assume the defense thereof, with counsel reasonably
satisfactory to such indemnified party; provided, however, if the defendants
in any action include both the indemnified party and the indemnifying party
and the indemnified party shall have reasonably concluded that there may be
legal defenses available to it and/or other indemnified parties which are
different from or in addition to those available to the indemnifying party, or
if there is a conflict of interest which would prevent counsel for the
indemnifying party from also representing the indemnified party, the
indemnified party or parties shall have the right to select separate counsel
to participate in the defense of such action on behalf of such indemnified
party or parties. After notice from the indemnifying party to such
indemnified party of its election to assume the defense thereof, the
indemnifying party will not be liable to such indemnified party pursuant to
the provisions of Sections 6(a) or (b) for any legal or other expense
subsequently incurred by such indemnified party in connection with the defense
thereof, other than reasonable costs of investigation, unless (i) the
indemnified party shall have employed counsel in accordance with the
provisions of the immediately preceding sentence, (ii) the indemnifying party
shall not have employed counsel reasonably satisfactory to the indemnified
party to represent the indemnified party within a reasonable time after notice
of the commencement of the action, or (iii) the indemnifying party has
authorized the employment of counsel for the indemnified party at the expense
of the indemnifying party.
(d) If the indemnification provided for in this Section 6 from the
indemnifying party is unavailable to an indemnified party hereunder in respect
of any losses, claims, damages or liabilities referred to therein, then the
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 or liabilities in such proportion as is
appropriate to reflect the relative fault of such indemnifying party and
indemnified parties in connection with the actions which resulted in such
losses, claims, damages or liabilities, as well as any other relevant
equitable considerations. The relative fault of such indemnifying party and
indemnified parties shall be determined by reference to, among other things,
whether any action in question, including any untrue or alleged untrue
statement of a material fact or omission or alleged omission to state a
material fact, has been made by, or relates to information supplied by, such
indemnifying party or indemnified parties and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
action; provided, however, that either Holder of Registrable Securities shall
not be required to contribute in an amount greater than the dollar amount of
the proceeds received by such Holder of Registrable Securities with respect to
the sale of any securities. The amount paid or payable by a party as a result
of the losses, claims, damages and liabilities referred to above shall be
deemed to include, subject to the limitations set forth in this Section 6(d),
any legal or other fees or expenses reasonably incurred by such party in
connection with any investigation or proceeding.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 6(d) were determined by pro rata
allocation or by any other method of allocation which does not take account of
the equitable considerations referred to in the immediately preceding
paragraph. No person guilty of a fraudulent misrepresentation (within the
meaning of Section 11(f) of the Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation.
Section 7. Conversion of Preferred Stock. The Holders hereby
immediately cause their Preferred Stock to be converted to an aggregate of
1,501,234 shares of Common Stock. In accordance with such conversion, the
Holders will tender the certificates evidencing their respective shares of
Preferred Stock to the Company within two weeks following the execution of
this Agreement. Upon receipt of such certificates, the Company shall
immediately cause 800,395 shares of Common Stock to be issued to XX Xxxxxx and
700,839 shares of Common Stock to be issued to XX Xxxxxx. The Holders hereby
irrevocably waive any and all rights to dividends to which they may have been
entitled in accordance with the terms of the Preferred Stock.
Section 8. Right of First Refusal on Rule 144 Sales. To the extent that
the Holders seek to avail themselves of the exemption from the registration
requirements of the Act by selling Common Stock in accordance with Rule 144 as
promulgated under the Act, the Holders hereby agree to notify the Company in
advance of any such proposed sales under Rule 144 and further agree to permit
the Company to purchase any or all of such shares which the Holders propose to
sell at a price which is consistent with the then prevailing market price for
the Company's Common Stock. The Company shall have three days from the
receipt of notice from either of the Holders of any proposed sales under Rule
144 to notify the Holder that the Company intends to exercise its right to
purchase some or all of such shares.
Section 9. No Inconsistent Agreements. The Company shall not on or
after the date of this Agreement enter into any agreement with respect to its
securities which is inconsistent with the rights granted to the Holders of
Registrable Securities in this Agreement or otherwise conflicts with the provisi
ons hereof. The rights granted to the Holders of Registrable Securities
hereunder do not in any way conflict with and are not inconsistent with the
rights granted to the holders of the securities of the Company under any other
agreements.
Section 10. Miscellaneous.
(a) All notices or other communications given or made hereunder shall
be in writing and shall be delivered by hand, against written receipt, or
mailed by registered or certified mail, return receipt requested, postage
prepaid, to the Holders at their respective addresses set forth above and to
the Company at its address set forth above. Notices shall be deemed given on
the date of receipt or, if mailed, three business days after mailing, except
notices of change of address, which shall be deemed given when received.
(b) Notwithstanding the place where this Agreement may be executed by
the Holders or the Company, they agree that all the terms and provisions
hereof shall be construed in accordance with and governed by the laws of the
State of New York without regard to principles of conflict of laws.
(c) This Agreement constitutes the entire agreement between the
Holders and the Company with respect to the subject matter hereof and may be
amended only by a writing executed by each of them.
(d) This Agreement shall be binding upon and inure to the benefit of
each of the Holder's and the Company and their respective heirs, legal
representatives, successors and assigns.
(e) The Holders and the Company each hereby submit to the exclusive
jurisdiction of the courts of the State of New York located in New York, New
York and of the federal courts located in the Southern District of New York
with respect to any action or legal proceeding commenced by either of them
with respect to this Agreement or to the Registrable Securities. Each of them
irrevocably waives any objection they now have or hereafter may have
respecting the venue of any such action or proceeding brought in such a court
or respecting the fact that such court is an inconvenient forum and consents
to the service of process in any such action or proceeding by means of
registered or certified mail, return receipt requested, in care of the address
set forth above or below or at such other address as either of them shall
furnish in writing to the other.
(f) The parties hereto acknowledge and agree that irreparable damage
would occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached.
It is accordingly agreed that the parties shall be entitled to an injunction
or injunctions to prevent or cure breaches of the provisions of this
Agreement, this being in addition to any other remedy to which they may be
entitled by law or equity.
(g) The invalidity or unenforceability of any provision of this Agreement
shall not affect the validity or enforceability of any other provision of this
Agreement.
(h) The waiver of a breach of any provision of this Agreement by
either the Holders or the Company shall not operate, or be construed, as a
waiver of any subsequent breach of any provision of this Agreement.
(i) The Purchasers and the Company agree to execute and deliver all
further documents, agreements and instruments and to take such other further
action as may be necessary or appropriate to carry out the purposes and intent
of this Agreement.
(j) This Agreement may be executed in one or more counterparts, each
of which shall be deemed an original, but all of which shall together
constitute one and the same instrument.
(k) References in this Agreement to the pronouns "him," "he" and
"his" are not intended to convey the masculine gender alone and are employed
in a generic sense and apply equally to the feminine gender or to an entity.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
LEAK-X ENVIRONMENTAL CORPORATION
By: /s/ Xxxxx X. Xxxxx
Xxxxx X. Xxxxx,
Chief Executive Officer
/s/ Xxxxxxx X. Xxxxxx, Xx. /s/ Xxxx X. Xxxxxx
Xxxxxxx X. Xxxxxx, Xx. Xxxx X. Xxxxxx
