Exhibit 10.2

 

MERIDIAN WASTE SOLUTIONS, INC.

One Glenlake Parkway NE, Suite 900

Atlanta, GA 30328

(770) 691-6350

 

November 20, 2017

 

YA II PN, Ltd.

1012 Springfield Ave.

Mountainside, NJ 07092

 

VIA ELECTRONIC MAIL

 

Re: Termination of Investment Agreement

 

You are being sent this letter (this “Letter Agreement”) to effect the
termination of that certain Investment Agreement (the “Investment Agreement”)
entered into on November 7, 2017 between Meridian Waste Solutions, Inc. (the
“Company”) and YA II PN, Ltd. (“YA”), in accordance with the parties’ mutual
agreement to do so on the terms and conditions set forth herein.

 

Except for the Fee Shares (as such term is defined in the Investment Agreement),
no shares of the Company’s common stock have been offered to YA or issued to YA,
nor has the Company filed with the U.S. Securities and Exchange Commission any
registration statement or prospectus supplement.

 

Pursuant to this Letter Agreement, the parties hereby agree that (i) the Company
will pay to YA a termination fee in the form of (a) $100,000 in cash paid to YA
on or before November 22, 2017 and (b) 82,282 shares of restricted common stock
of the Company will be issued to YA in further consideration for YA’s entry into
this Letter Agreement (the “Termination Shares” and, together with the Fee
Shares, the “Registrable Shares”) and (ii) the Company will register the
Registrable Shares for re-sale in a registration statement on Form S-3, which
registration statement shall include the shares of common stock into which the
Series E Preferred Stock is convertible and be filed on or before November 22,
2017. The Fee Shares were issued in consideration for the commitment fee in the
amount of $250,000 owed by the Company pursuant to YA’s having entered into the
Investment Agreement, calculated at the price of $1.03 per share, the closing
trading price of the Company’s common stock on the trading day prior to the date
the Investment Agreement was executed and delivered.

 

YA and the Company hereby agree to be bound by the respective representations,
warranties and other obligations set forth in Exhibit A attached hereto and made
a part hereof.

 

By their execution hereof, YA and the Company hereby mutually agree and
acknowledge that effective as of the date hereof the Investment Agreement, and
the private placement contemplated thereby, is hereby terminated and is of no
further force or effect, notwithstanding any term or condition contained in the
Investment Agreement, including, but not limited to, provisions surviving
termination, and no party will have any obligation arising therefrom.

 

 

 

 

This Letter Agreement contains the entire understanding between and among the
parties and supersedes any prior understandings and agreements among them
respecting the subject matter of this Letter Agreement. This Letter Agreement
shall be governed by and construed in accordance with the laws of the State of
New York without regard to choice of law principles. This Letter Agreement may
be executed in any number of counterparts, each of which shall be an original
but all of which together shall constitute one and the same instrument. In case
any provision of this Letter Agreement shall be held to be invalid, illegal or
unenforceable, such provision shall be severable from the rest of this Letter
Agreement, and the validity legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby.

 

The parties hereby consent and agree that if this Letter Agreement shall at any
time be deemed by the parties for any reason insufficient, in whole or in part,
to carry out the true intent and spirit hereof or thereof, the parties will
execute or cause to be executed such other and further assurances and documents
as in the reasonable opinion of the parties may be reasonably required in order
more effectively to accomplish the purposes of this Letter Agreement.

 

Please indicate confirmation of the terms provided herein by executing and
returning this letter in the space provided below.

 

  Very truly yours,       MERIDIAN WASTE SOLUTIONS, INC.         By:     Name:
Jeffrey Cosman  

Title:

Chief Executive Officer

 

ACCEPTED AND AGREED:         YA II PN, Ltd.         By: Yorkville Advisors
Global, LLC   Its: Investment Manager         By:                    

 

 

 

 

Exhibit A

 

DEFINITIONS

 

For purposes of the Letter Agreement dated November 20, 2017, of which this
Exhibit A forms a part (this “Agreement”), except as otherwise expressly
provided or otherwise defined elsewhere in this Agreement, or unless the context
otherwise requires, the capitalized terms in this Agreement shall have the
meanings assigned to them as follows:

 

A.       “Affiliate” means, with respect to a Person, any other Person directly
or indirectly controlling, controlled by, or under common control with, such
Person at any time during the period for which the determination of affiliation
is being made. For purposes of this definition, the term “control,”
“controlling” “controlled” and words of similar import, when used in this
context, means, with respect to any Person, the possession, directly or
indirectly, of the power to direct, or cause the direction of, management
policies of such Person, whether through the ownership of voting securities, by
contract or otherwise.

 

B.       “Assets” means all of the properties and assets of the Person in
question, as the context may so require, whether real, personal or mixed,
tangible or intangible, wherever located, whether now owned or hereafter
acquired.

 

C.       “Business Day” shall mean any day other than a Saturday, Sunday or a
legal holiday on which federal banks are authorized or required to be closed for
the conduct of commercial banking business.

 

D.       “Claims” means any Proceedings, Judgments, Obligations, threats,
losses, damages, deficiencies, settlements, assessments, charges, costs and
expenses of any nature or kind.

 

E.       “Common Stock” means the common stock of the Company, par value $0.025
per share.

 

F.       “Common Stock Equivalents” means any securities of the Company or its
subsidiaries which would entitle the holder thereof to acquire at any time
Common Stock, including, without limitation, any debt, preferred stock, right,
option, warrant or other instrument that is at any time convertible into or
exercisable or exchangeable for, or otherwise entitles the holder thereof to
receive, Common Stock.

 

G.       “Consent” means any consent, approval, order or authorization of, or
any declaration, filing or registration with, or any application or report to,
or any waiver by, or any other action (whether similar or dissimilar to any of
the foregoing) of, by or with, any Person, which is necessary in order to take a
specified action or actions, in a specified manner and/or to achieve a specific
result.

 

H.       “Contract” means any written or oral contract, agreement, order or
commitment of any nature whatsoever, including, any sales order, purchase order,
lease, sublease, license agreement, services agreement, loan agreement,
mortgage, security agreement, guarantee, management contract, employment
agreement, consulting agreement, partnership agreement, shareholders agreement,
buy-sell agreement, option, warrant, Preferred Stock, subscription, call or put
required to be filed as an exhibit to the SEC Filings (as that term is defined
below).

 

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I.        “Encumbrance” means any lien, security interest, pledge, mortgage,
easement, leasehold, assessment, tax, covenant, restriction, reservation,
conditional sale, prior assignment, or any other encumbrance, claim, burden or
charge of any nature whatsoever.

 

J.        “Environmental Requirements” means all Laws and requirements relating
to human, health, safety or protection of the environment or to emissions,
discharges, releases or threatened releases of pollutants, contaminants, or
Hazardous Materials in the environment (including, without limitation, ambient
air, surface water, ground water, land surface or subsurface strata), or
otherwise relating to the treatment, storage, disposal, transport or handling of
any Hazardous Materials.

 

K.       “GAAP” means generally accepted accounting principles, methods and
practices set forth in the opinions and pronouncements of the Accounting
Principles Board and the American Institute of Certified Public Accountants, and
statements and pronouncements of the Financial Accounting Standards Board, or of
such other Person as may be approved by a significant segment of the U.S.
accounting profession, in each case as of the date or period at issue, and as
applied in the U.S. to U.S. companies.

 

L.       “Governmental Authority” means any foreign, federal, state or local
government, or any political subdivision thereof, or any court, agency or other
body, organization, group, stock market or exchange exercising any executive,
legislative, judicial, quasi-judicial, regulatory or administrative function of
government.

 

M.      “Hazardous Materials” means: (i) any chemicals, materials, substances or
wastes which are now or hereafter become defined as or included in the
definition of “hazardous substances,” “hazardous wastes,” “hazardous materials,”
“extremely hazardous wastes,” “restricted hazardous wastes,” “toxic substances,”
“toxic pollutants” or words of similar import, under any Law; and (iii) any
other chemical, material, substance, or waste, exposure to which is now or
hereafter prohibited, limited or regulated by any Governmental Authority.

 

N.       “Judgment” means any order, writ, injunction, fine, citation, award,
decree, or any other judgment of any nature whatsoever of any Governmental
Authority.

 

O.       “Law” means any provision of any law, statute, ordinance, code,
constitution, charter, treaty, rule or regulation of any Governmental Authority.

 

P.       “Leases” means all leases for real or personal property.

 

Q.       “Material Adverse Effect” shall mean: (i) a material adverse change in,
or a material adverse effect upon, the Assets, business, prospects, properties,
financial condition or results of operations of the Company; (ii) a material
impairment of the ability of the Company to perform any of its Obligations under
this Agreement; or (iii) a material adverse effect on: (A) the legality,
validity, binding effect or enforceability against the Company of this
Agreement; (B) the rights or remedies of YA under this Agreement; or (C) a
material adverse effect or impairment on YA’s ability to sell the shares of the
Company’s Common Stock issuable to YA under this Agreement without limitation or
restriction.

 

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R.       “Obligation” means, now existing or in the future, any debt, liability
or obligation of any nature whatsoever (including any required performance of
any covenants or agreements), whether secured, unsecured, recourse, nonrecourse,
liquidated, unliquidated, accrued, voluntary or involuntary, direct or indirect,
absolute, fixed, contingent, ascertained, unascertained, known, unknown, whether
or not jointly owed with others, whether or not from time to time decreased or
extinguished and later decreased, created or incurred, or obligations under
Contracts, existing or incurred under this Agreement or the Preferred Stock, as
such obligations may be amended, supplemented, converted, extended or modified
from time to time.

 

S.       “Ordinary Course of Business” means the ordinary course of business of
the Person in question, consistent with past custom and practice (including with
respect to quantity, quality and frequency).

 

T.       “Permit” means any license, permit, approval, waiver, order,
authorization, right or privilege of any nature whatsoever, granted, issued,
approved or allowed by any Governmental Authority.

 

U.       “Person” means any individual, sole proprietorship, joint venture,
partnership, company, corporation, association, cooperation, trust, estate,
Governmental Authority, or any other entity of any nature whatsoever.

 

V.       “Proceeding” means any demand, claim, suit, action, litigation,
investigation, audit, study, arbitration, administrative hearing, or any other
proceeding of any nature whatsoever.

 

W.     “Tax” means (i) any foreign, federal, state or local income, profits,
gross receipts, franchise, sales, use, occupancy, general property, real
property, personal property, intangible property, transfer, fuel, excise,
accumulated earnings, personal holding company, unemployment compensation,
social security, withholding taxes, payroll taxes, or any other tax of any
nature whatsoever, (ii) any foreign, federal, state or local organization fee,
qualification fee, annual report fee, filing fee, occupation fee, assessment,
rent, or any other fee or charge of any nature whatsoever, or (iii) any
deficiency, interest or penalty imposed with respect to any of the foregoing.

 

X.       “Tax Return” means any tax return, filing, declaration, information
statement or other form or document required to be filed in connection with or
with respect to any Tax.

 

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REPRESENTATIONS AND WARRANTIES OF YA

 

YA, hereby represents and warrants as of the date hereof to the Company as
follows (unless as of a specific date therein, in which case they shall be
accurate as of such date):

 

A.       Investment Purpose. YA is acquiring the Registrable Shares for its own
account for investment only and not with a view towards, or for resale in
connection with, the public sale or distribution thereof.

 

B.       Accredited Status. YA is an “accredited investor” as that term is
defined in Rule 501 of Regulation D, as promulgated under the Securities Act of
1933.

 

C.       Reliance on Exemptions. YA understands that the Registrable Shares are
issued to it in reliance on specific exemptions from the registration
requirements of United States federal and state securities laws and that the
Company is relying in part upon the truth and accuracy of, and YA’s compliance
with, the representations, warranties, agreements, acknowledgments and
understandings of YA set forth herein in order to determine the availability of
such exemptions and the eligibility of YA to acquire the Registrable Shares.

 

D.       Information. YA and its advisors, if any, have been furnished with all
materials they have requested relating to the business, finances and operations
of the Company and information YA deemed material. YA and its advisors, if any,
have been afforded the opportunity to ask questions of the Company and its
management and have received response from the Company or management
satisfactory to YA.   Neither such inquiries, nor any materials provided to YA,
nor any other due diligence investigations conducted by YA or its advisors, if
any, or its representatives, shall modify, amend or affect YA’s right to fully
rely on the Company’s representations and warranties contained in the Company’s
representations and warranties below.

 

E.       No Governmental Review. YA understands that no United States federal or
state governmental authority has passed on or made any recommendation or
endorsement of the Registrable Shares, nor have such governmental authorities
passed upon or endorsed the merits of the issuance of the Registrable Shares.

 

F.       Authorization, Enforcement. This Agreement has been duly and validly
authorized, executed and delivered on behalf of YA and is a valid and binding
agreement of YA, enforceable in accordance with its terms, except as such
enforceability may be limited by general principles of equity or applicable
bankruptcy, insolvency, reorganization, moratorium, liquidation and other
similar laws relating to, or affecting generally, the enforcement of applicable
creditors’ rights and remedies.

 

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

 

The Company hereby represents and warrants as of the date hereof to YA as
follows (unless as of a specific date therein, in which case they shall be
accurate as of such date):

 

A.      Organization. The Company is a corporation, duly incorporated, validly
existing and in good standing under the Laws of the State of New York. The
Company has the full power and authority and all necessary certificates,
licenses, approvals and Permits to: (i) enter into and execute this Agreement
and to perform all of its obligations hereunder and thereunder; and (ii) own and
operate its assets and properties and to conduct and carry on its business as
and to the extent now conducted. The Company is duly qualified to transact
business and is in good standing as a foreign corporation in each jurisdiction
where the character of its business or the ownership or use and operation of its
Assets or properties requires such qualification.

 

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B.       Authority and Approval of Agreement; Binding Effect. The execution and
delivery by the Company of this Agreement, and the performance by Company of all
of its obligations hereunder and thereunder, including the issuance of the
Registrable Shares, have been duly and validly authorized and approved by the
Company and its board of directors pursuant to all applicable laws and no other
action or consent on the part of Company, its board directors or any other
person is necessary or required by the Company to execute this Agreement,
consummate the transactions contemplated herein and therein, perform all of
Company’s obligations hereunder and thereunder, or to issue the Registrable
Shares. This Agreement has been duly and validly executed by Company (and the
officer executing this Agreement is duly authorized to act and execute same on
behalf of Company) and constitutes the valid and legally binding agreements of
Company, enforceable against Company in accordance with its terms, except as
such enforceability may be limited by general principles of equity or applicable
bankruptcy, insolvency, reorganization, moratorium, liquidation and other
similar laws relating to, or affecting generally, the enforcement of applicable
creditors’ rights and remedies.

 

C.       Capitalization. The authorized capital stock of the Company consists of
75,000,000 shares of Common Stock, par value $0.025 per share, of which
10,630,274 shares are issued and outstanding and the following preferred stock:
(i) 51 shares of Series A Preferred Stock authorized of which 51 shares of
Series A Preferred Stock are issued and outstanding; (ii) 71,120 shares of
Series B Preferred Stock authorized of which 0 shares of Series B Preferred
Stock are issued and outstanding; (iii) 67,361 shares of Series C Preferred
Stock authorized of which 0 shares of Series C Preferred Stock are issued and
outstanding; (iv) 141,000 shares of Series D Preferred Stock authorized, of
which 141,000 shares are issued and outstanding; and (v) 300,000 shares of
Series E Preferred Stock authorized, of which 300,000 shares are issued and
outstanding; (v) 4,420,468 shares of undesignated “blank check” preferred stock.
All of such outstanding shares have been validly issued and are fully paid and
nonassessable, have been issued in compliance with all foreign, federal and
state securities laws and none of such outstanding shares were issued in
violation of any preemptive rights or similar rights to subscribe for or
purchase securities. The Company has no subsidiaries other than Here to Serve –
Missouri Waste Division, LLC, Here to Serve – Georgia Waste Division, LLC,
Meridian Waste Operations, Inc., Meridian Land Company, LLC, Christian Disposal,
LLC, FWCD, LLC, The CFS Group, LLC, The CFS Group Disposal& Recycling Services,
LLC, RWG5, LLC, Meridian Waste Missouri, LLC, Meridian Innovations, LLC and
Mobile Science Technologies, LLC. As of the date of this Agreement, no shares of
the Company’s capital stock are subject to preemptive rights or any other
similar rights, claims or encumbrances suffered or permitted by the Company.
Except for the Registrable Shares and except as disclosed in the Company’s
filings with the Securities and Exchange Commission (the “SEC Filings”), as of
the date hereof: (i) there are no outstanding options, warrants, scrip, rights
to subscribe to, calls or commitments of any character whatsoever relating to,
or securities or rights convertible into, any shares of capital stock of the
Company, or contracts, commitments, understandings or arrangements by which the
Company is or may become bound to issue additional shares of capital stock of
the Company, or options, warrants, scrip, rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities or rights
convertible into, any shares of capital stock of the Company; (ii) except as
disclosed in the SEC Filings, there are no outstanding debt securities, notes,
credit agreements, credit facilities or other contracts or instruments
evidencing indebtedness of the Company or any of its, or by which the Company is
or may become bound; (iii) there are no outstanding registration statements with
respect to the Company or any of its securities; (iv) there are no agreements or
arrangements under which the Company is obligated to register the sale of any of
their securities under the Securities Act (except pursuant to this Agreement);
(v) there are no financing statements securing obligations filed in connection
with the Company or any of its assets except as set forth in the SEC Reports;
(vi) there are no securities or instruments containing anti-dilution or similar
provisions that will be triggered by this Agreement or any related agreement or
the consummation of the transactions described herein or therein; and (vii)
there are no outstanding securities or instruments of the Company which contain
any redemption or similar provisions, and there are no Contracts by which the
Company is or may become bound to redeem a security of the Company. The Company
has furnished to YA true, complete and correct copies of: (I) the Company’s
Articles of Incorporation, as amended and as in effect on the date hereof; and
(II) the Company’s Bylaws, as in effect on the date hereof (together, the
“Organizational Documents”). Except for the Organizational Documents or as
disclosed in the SEC Filings, there are no other shareholder agreements, voting
agreements or other Contracts of any nature or kind that restrict, limit or in
any manner impose obligations on the governance of the Company. No further
approval or authorization of any stockholder, the Board of Directors or others
is required for the issuance of the Registrable Shares.

 

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D.       No Conflicts; Consents and Approvals. The execution, delivery and
performance of this Agreement, and the consummation of the transactions
contemplated thereby, including the issuance of the Registrable Shares, will
not: (i) constitute a violation of or conflict with the Organizational Documents
of the Company; (ii) constitute a violation of, or a default or breach under
(either immediately, upon notice, upon lapse of time, or both), or conflicts
with, or gives to any other person any rights of termination, amendment,
acceleration or cancellation of, any provision of any contract to which Company
is a party or by which any of its assets or properties may be bound, other than
the Amended and Restated Credit Agreement dated February 15, 2017, as amended,
and the Underwriting Agreement dated June 28, 2017; (iii) constitute a violation
of, or a default or breach under (either immediately, upon notice, upon lapse of
time, or both), or conflict with, any Judgment; (iv) constitute a violation of,
or conflict with, any Law (including United States federal and state securities
Laws); or (v) result in the loss or adverse modification of, or the imposition
of any fine, penalty or other Encumbrance with respect to, any Permit granted or
issued to, or otherwise held by or for the use of, Company or any of Company’s
assets. The Company is not in violation of its Organizational Documents and the
Company is not in default or breach (and no event has occurred which with notice
or lapse of time or both could put the Company in default or breach) under, and
the Company has not taken any action or failed to take any action that would
give to any other Person any rights of termination, amendment, acceleration or
cancellation of, any Contract to which the Company is a party or by which any
property or Assets of the Company are bound or affected. The businesses of the
Company are not being conducted in violation of any Law. Except as specifically
contemplated by this Agreement, the Company is not required to obtain any
Consent of, from, or with any Governmental Authority, or any other Person, in
order for it to execute, deliver or perform any of its obligations under this
Agreement in accordance with the terms hereof or thereof, or to issue the
Registrable Shares in accordance with the terms hereof. The Company is not aware
of any facts or circumstances which might give rise to any of the foregoing.

 

E.       Issuance of Registrable Shares. The Registrable Shares are duly
authorized and, upon issuance in accordance with the terms of this Agreement,
shall be duly issued, fully paid and non-assessable, and free from all
Encumbrances with respect to the issue thereof, and will be issued in compliance
with all applicable United States federal and state securities Laws.

 

F.       Absence of Litigation or Adverse Matters. No condition, circumstance,
event, agreement, document, instrument, restriction, litigation or Proceeding
(or threatened litigation or Proceeding or basis therefor) exists which: (i)
could adversely affect the ability of the Company to perform its obligations
under this Agreement; (ii) would constitute a default under any of this
Agreement; (iii) would constitute such a default with the giving of notice or
lapse of time or both; or (iv) would constitute or give rise to a Material
Adverse Effect. In addition: (v) there is no Proceeding before or by any
Governmental Authority or any other Person, pending, or the best of Company’s
knowledge, threatened or contemplated by, against or affecting the Company, its
business or assets; (vi) there is no outstanding Judgments against or affecting
the Company, its business or assets; (vii) the Company is not in breach or
violation of any Contract; and (viii) the Company has not received any material
complaint from any customer, supplier, vendor or employee.

 

G.       Title to Assets. The Company has good and marketable title to, or a
valid leasehold interest in, all of its assets which are material to the
business and operations of the Company as presently conducted, free of any
Encumbrance, except as set forth herein and in the SEC Filings. Except as would
not have a Material Adverse Effect, the Company’s assets are in good operating
condition and repair, ordinary wear and tear excepted, and are free of any
latent or patent defects which might impair their usefulness, and are suitable
for the purposes for which they are currently used and for the purposes for
which they are proposed to be used.

 

H.       Compliance with Laws. The Company is and at all times has been in full
compliance with all Laws, except for any instances which would not have a
Material Adverse Effect. The Company has not received any notice that it is in
violation of, has violated, or is under investigation with respect to, or has
been threatened to be charged with, any violation of any Law.

 

I.        Labor and Employment Matters. The Company is not involved in any labor
dispute or, to the knowledge of the Company, is any such dispute threatened. To
the knowledge of the Company and its officers, none of the Company’s employees
is a member of a union and the Company believes that its relations with its
employees are good. To the knowledge of the Company and its officers, the
Company has complied in all material respects with all Laws relating to
employment matters, civil rights and equal employment opportunities.

 

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J.       Employee Benefit Plans. Except as disclosed to YA in writing prior to
the date hereof, the Company does not have and has not ever maintained, and has
no Obligations with respect to any employee benefit plans or arrangements,
including employee pension benefit plans, as defined in Section 3(2) of the
Employee Retirement Income Security Act of 1974, as amended (“ERISA”),
multiemployer plans, as defined in Section 3(37) of ERISA, employee welfare
benefit plans, as defined in Section 3(1) of ERISA, deferred compensation plans,
stock option plans, bonus plans, stock purchase plans, hospitalization,
disability and other insurance plans, severance or termination pay plans and
policies, whether or not described in Section 3(3) of ERISA, in which employees,
their spouses or dependents of the Company participate (collectively, the
“Employee Benefit Plans”). To the Company’s knowledge, all Employee Benefit
Plans meet the minimum funding standards of Section 302 of ERISA, where
applicable, and each such Employee Benefit Plan that is intended to be qualified
within the meaning of Section 401 of the Internal Revenue Code of 1986 is
qualified. No withdrawal liability has been incurred under any such Employee
Benefit Plans and no “Reportable Event” or “Prohibited Transaction” (as such
terms are defined in ERISA), has occurred with respect to any such Employee
Benefit Plans, unless approved by the appropriate Governmental Authority. To the
Company’s knowledge, the Company has promptly paid and discharged all
Obligations arising under ERISA of a character which if unpaid or unperformed
might result in the imposition of an Encumbrance against any of its Assets or
otherwise have a Material Adverse Effect.

 

K.      Tax Matters. The Company has made and timely filed all Tax Returns
required by any jurisdiction to which it is subject, and each such Tax Return
has been prepared in compliance with all applicable Laws, and all such Tax
Returns are true and accurate in all respects. Except and only to the extent
that the Company has set aside on its books provisions reasonably adequate for
the payment of all unpaid and unreported Taxes, the Company has timely paid all
Taxes shown or determined to be due on such Tax Returns, except those being
contested in good faith, and the Company has set aside on its books provision
reasonably adequate for the payment of all Taxes for periods subsequent to the
periods to which such Tax Returns apply. There are no unpaid Taxes in any
material amount claimed to be due by the taxing authority of any jurisdiction,
and the officers of the Company know of no basis for any such claim. The Company
has withheld and paid all Taxes to the appropriate Governmental Authority
required to have been withheld and paid in connection with amounts paid or owing
to any Person. There is no Proceeding or Claim for refund now in progress,
pending or threatened against or with respect to the Company regarding Taxes.

 

L.       Insurance. The Company is covered by valid, outstanding and enforceable
policies of insurance which were issued to it by reputable insurers of
recognized financial responsibility, covering its properties, Assets and
businesses against losses and risks normally insured against by other
corporations or entities in the same or similar lines of businesses as the
Company is engaged and in coverage amounts which are prudent and typically and
reasonably carried by such other corporations or entities (the “Insurance
Policies”). Such Insurance Policies are in full force and effect, and all
premiums due thereon have been paid. None of the Insurance Policies will lapse
or terminate as a result of the transactions contemplated by this Agreement. The
Company has complied with the provisions of such Insurance Policies. The Company
has not been refused any insurance coverage sought or applied for and the
Company does not have any reason to believe that it will not be able to renew
its existing Insurance Policies as and when such Insurance Policies expire or to
obtain similar coverage from similar insurers as may be necessary to continue
its business at a cost that would not materially and adversely affect the
condition, financial or otherwise, or the earnings, business or operations of
the Company.

 

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M.       Permits. The Company possesses all Permits necessary to conduct its
business, and the Company has not received any notice of, or is otherwise
involved in any Proceedings relating to, the revocation or modification of any
such Permits. All such Permits are valid and in full force and effect and the
Company is in full compliance with the respective requirements of all such
Permits.

 

N.       Environmental Laws. Except as are used in such amounts as are customary
in the Company’s Ordinary Course of Business and in compliance with all
applicable Environmental Laws, the Company represents and warrants to YA that:
(i) the Company has not generated, used, stored, treated, transported,
manufactured, handled, produced or disposed of any Hazardous Materials, on or
off any of the premises of the Company (whether or not owned by the Company) in
any manner which at any time violates any Environmental Law or any Permit,
certificate, approval or similar authorization thereunder; (ii) the operations
of the Company comply in all material respects with all Environmental Laws and
all Permits certificates, approvals and similar authorizations thereunder; (iii)
there has been no investigation, Proceeding, complaint, order, directive, Claim,
citation or notice by any Governmental Authority or any other Person, nor is any
pending or, to the Company’s knowledge, threatened; and (iv) the Company does
not have any liability, contingent or otherwise, in connection with a release,
spill or discharge, threatened or actual, of any Hazardous Materials or the
generation, use, storage, treatment, transportation, manufacture, handling,
production or disposal of any Hazardous Material.

 

O.       Illegal Payments. Neither the Company, nor any director, officer,
agent, employee or other Person acting on behalf of the Company has, in the
course of his actions for, or on behalf of, the Company: (i) used any corporate
funds for any unlawful contribution, gift, entertainment or other unlawful
expenses relating to political activity; (ii) made any direct or indirect
unlawful payment to any foreign or domestic government official or employee from
corporate funds; (iii) violated or is in violation of any provision of the U.S.
Foreign Corrupt Practices Act of 1977, as amended; or (iv) made any bribe,
rebate, payoff, influence payment, kickback or other unlawful payment to any
foreign or domestic government official or employee.

 

P.       Related Party Transactions. Except for arm’s length transactions
pursuant to which the Company makes payments in the Ordinary Course of Business
upon terms no less favorable than the Company could obtain from third parties,
and except as described in the SEC filings, none of the officers, directors or
employees of the Company, nor any stockholders who own, legally or beneficially,
five percent (5%) or more of the issued and outstanding shares of any class of
the Company’s capital stock (each a “Material Shareholder”), is presently a
party to any transaction with the Company (other than for services as employees,
officers and directors), including any Contract providing for the furnishing of
services to or by, providing for rental of real or personal property to or from,
or otherwise requiring payments to or from, any officer, director or such
employee or Material Shareholder or, to the best knowledge of the Company, any
other Person in which any officer, director, or any such employee or Material
Shareholder has a substantial or material interest in or of which any officer,
director or employee of the Company or Material Shareholder is an officer,
director, trustee or partner. There are no Claims or disputes of any nature or
kind between the Company and any officer, director or employee of the Company or
any Material Shareholder, or between any of them, relating to the Company and
its business.

 

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Q.       Brokerage Fees. There is no Person acting on behalf of the Company who
is entitled to or has any claim for any brokerage or finder’s fee or commission
in connection with the execution of this Agreement or the consummation of the
transactions contemplated hereby..

 

R.       No General Solicitation. Neither the Company, nor any of its
Affiliates, nor any Person acting on its or their behalf, has engaged in any
form of general solicitation or general advertising (within the meaning of
Regulation D under the Securities Act) in connection with the issuance of the
Registrable Shares.

 

S.       No Disqualification Events. With respect to the Registrable Shares
issued hereunder in reliance on Rule 506 under the Securities Act, none of the
Company, any of its predecessors, any affiliated issuer, any director, executive
officer, other officer of the Company participating in the offering hereunder,
any beneficial owner of 20% or more of the Company’s outstanding voting equity
securities, calculated on the basis of voting power, nor any promoter (as that
term is defined in Rule 405 under the Securities Act) connected with the Company
in any capacity at the time of sale (each, an "Issuer Covered Person" and,
together, "Issuer Covered Persons") is subject to any of the "Bad Actor"
disqualifications described in Rule 506(d)(1)(i) to (viii) under the Securities
Act (a "Disqualification Event"), except for a Disqualification Event covered by
Rule 506(d)(2) or (d)(3). The Company has exercised reasonable care to determine
whether any Issuer Covered Person is subject to a Disqualification Event. The
Company has complied, to the extent applicable, with its disclosure obligations
under Rule 506(e), and has furnished to YA a copy of any disclosures provided
thereunder.

 

T.       Management. During the past ten-year period, no current officer or
director or, to the knowledge of the Company, no current five percent (5%) or
greater stockholder of the Company has been the subject of:

 

(i)       a petition under bankruptcy laws or any other insolvency or moratorium
law or the appointment by a court of a receiver, fiscal agent or similar officer
for such Person, or any partnership in which such person was a general partner
at or within two years before the filing of such petition or such appointment,
or any corporation or business association of which such person was an executive
officer at or within two years before the time of the filing of such petition or
such appointment;

 

(ii)      a conviction in a criminal proceeding or a named subject of a pending
criminal proceeding (excluding traffic violations that do not relate to driving
while intoxicated or driving under the influence);

 

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(iii)     any order, judgment or decree, not subsequently reversed, suspended or
vacated, of any court of competent jurisdiction, permanently or temporarily
enjoining any such person from, or otherwise limiting, the following activities:

 

(1)       Acting as a futures commission merchant, introducing broker, commodity
trading advisor, commodity pool operator, floor broker, leverage transaction
merchant, any other person regulated by the United States Commodity Futures
Trading Commission or an associated person of any of the foregoing, or as an
investment adviser, underwriter, broker or dealer in securities, or as an
affiliated person, director or employee of any investment company, bank, savings
and loan association or insurance company, or engaging in or continuing any
conduct or practice in connection with such activity;

 

(2)       Engaging in any particular type of business practice; or

 

(3)       Engaging in any activity in connection with the purchase or sale of
any security or commodity or in connection with any violation of securities laws
or commodities laws;

 

(iv)     any order, judgment or decree, not subsequently reversed, suspended or
vacated, of any authority barring, suspending or otherwise limiting for more
than sixty (60) days the right of any such person to engage in any activity
described in the preceding sub paragraph, or to be associated with persons
engaged in any such activity;

 

(v)      a finding by a court of competent jurisdiction in a civil action or by
the SEC or other authority to have violated any securities law, regulation or
decree and the judgment in such civil action or finding by the SEC or any other
authority has not been subsequently reversed, suspended or vacated; or

 

(vi)     a finding by a court of competent jurisdiction in a civil action or by
the Commodity Futures Trading Commission to have violated any federal
commodities law, and the judgment in such civil action or finding has not been
subsequently reversed, suspended or vacated.

 

U.     Full Disclosure. All the representations and warranties made by Company
herein or in the Schedules hereto, and all of the financial statements,
schedules, certificates, confirmations, agreements, contracts, and other
materials submitted to YA in connection with or in furtherance of this Agreement
or pertaining to the transaction contemplated herein, whether made or given by
Company, its agents or representatives, are complete and accurate to the best of
the knowledge of the Company, its officers and directors, and do not omit any
information required to make the statements and information provided, in light
of the transaction contemplated herein and in light of the circumstances under
which they were made, not misleading, accurate and meaningful.

 

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INDEMNIFICATION

 

A.       Indemnification by the Company. The Company will indemnify and hold YA
and its directors, officers, stockholders, members, partners, employees and
agents (and any other Persons with a functionally equivalent role of a Person
holding such titles notwithstanding a lack of such title or any other title),
each Person who controls YA (within the meaning of Section 15 of the 1933 Act
and Section 20 of the Exchange Act), and the directors, officers, stockholders,
agents, members, partners or employees (and any other Persons with a
functionally equivalent role of a Person holding such titles notwithstanding a
lack of such title or any other title) of such controlling person (each, a “YA
Party”) harmless from any and all losses, liabilities, obligations, claims,
contingencies, damages, costs and expenses, including all judgments, amounts
paid in settlements, court costs and reasonable attorneys’ fees and costs of
investigation that any such YA Party may suffer or incur as a result of (i) any
breach of any of the representations, warranties, covenants or agreements made
by the Company in this Agreement or (ii) any action instituted against a YA
Party in any capacity, or any of them or their respective Affiliates, by any
stockholder of the Company who is not an Affiliate of such YA Party, with
respect to any of the transactions contemplated by this Agreement. The Company
will not be liable to any YA Party under this Agreement to the extent, but only
to the extent that a loss, claim, damage or liability is attributable to any YA
Party’s breach of any of the representations, warranties, covenants or
agreements made by such YA Party in this Agreement; provided that such a claim
for indemnification relating to any breach of any of the representations or
warranties made by the Company in this Agreement is made within 24 months from
the Closing.

 

B.       Conduct of Indemnification Proceedings. Promptly after receipt by any
Person (the “Indemnified Person”) of notice of any demand, claim or
circumstances which would or might give rise to a claim or the commencement of
any action, proceeding or investigation in respect of which indemnity may be
sought, such Indemnified Person shall promptly notify the Company in writing and
the Company shall assume the defense thereof, including the employment of
counsel reasonably satisfactory to such Indemnified Person, and shall assume the
payment of all fees and expenses; provided, however, that the failure of any
Indemnified Person so to notify the Company shall not relieve the Company of its
obligations hereunder except to the extent that the Company is actually and
materially and adversely prejudiced by such failure to notify. In any such
proceeding, any Indemnified Person shall have the right to retain its own
counsel, but the fees and expenses of such counsel shall be at the expense of
such Indemnified Person unless: (i) the Company and the Indemnified Person shall
have mutually agreed to the retention of such counsel; (ii) the Company shall
have failed promptly to assume the defense of such proceeding and to employ
counsel reasonably satisfactory to such Indemnified Person in such proceeding;
or (iii) in the reasonable judgment of counsel to such Indemnified Person,
representation of both parties by the same counsel would be inappropriate due to
actual or potential differing interests between them. The Company shall not be
liable for any settlement of any proceeding effected without its written
consent, which consent shall not be unreasonably withheld, delayed or
conditioned. Without the prior written consent of the Indemnified Person, which
consent shall not be unreasonably withheld, delayed or conditioned, the Company
shall not effect any settlement of any pending or threatened proceeding in
respect of which any Indemnified Person is or could have been a party and
indemnity could have been sought hereunder by such Indemnified Party, unless
such settlement includes an unconditional release of such Indemnified Person
from all liability arising out of such proceeding.

 

 

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