Document:

exhibit4-2.htm

     

    EXHIBIT 4.2

    

    CERTIFICATE
OF DESIGNATIONS OF PREFERENCES AND RIGHTS OF

    SERIES
B-1 AND SERIES B-2 CONVERTIBLE PREFERRED STOCK

    OF

    ECO2
PLASTICS, INC.

    a
Delaware corporation

     

    Pursuant
to Section 151 of the Delaware General Corporation Law

     

    The
undersigned, Rodney S. Rougelot, certifies that:

     

    1. He is the
duly acting Chief Executive Officer and Secretary of ECO2 PLASTICS, INC., a
corporation organized and existing under the Delaware General Corporation Law
(the “Corporation”).

     

    2. Pursuant
to authority conferred upon the Board of Directors by the Third Amended and
Restated Certificate of Incorporation of the Corporation (the “Certificate of
Incorporation”), which authorizes 500,000,000 shares of preferred stock,
par value $0.001 per share (“Preferred
Stock”), of which no shares are issued and outstanding, and pursuant to
the provisions of the Delaware General Corporation Law, said Board of Directors,
pursuant to unanimous written consent dated April 25, 2008, adopted a resolution
establishing the rights, preferences, privileges and restrictions of, and the
number of shares comprising, the Corporation's Series B-1 Convertible Preferred
Stock and Series B-2 Convertible Preferred Stock, which resolution is as
follows:

     

    RESOLVED,
that two series of preferred stock in the Corporation, having the rights,
preferences, privileges and restrictions, and the number of shares constituting
each such series and the designation of each such series, set forth below be,
and it hereby is, authorized by the Board of Directors of the Corporation
pursuant to authority given by the Corporation's Certificate of
Incorporation.

     

    NOW,
THEREFORE, BE IT RESOLVED, that the Board of Directors hereby fixes and
determines the designations of, the number of shares constituting, and the
rights, preferences, privileges and restrictions relating to, each new series of
preferred stock as follows:

     

    (a) Designation.  The
first series of preferred stock is hereby designated Series B-1 Convertible
Preferred Stock (the “Series B-1
Preferred Stock”).  The second series of preferred stock is
hereby designated Series B-2 Convertible Preferred Stock (the “Series B-2
Preferred Stock” and, together with the Series B-1 Preferred Stock, the
“Series B
Preferred Stock”).

     

    (b) Authorized
Shares.  The number of authorized shares constituting the
Series B-1 Preferred Stock shall be 336,240,039.  The number of
authorized shares constituting the Series B-2 Preferred Stock shall be
10,916,547.

     

    (c) Original Issue
Price.  The Original Issue Price of the Series B-1 Preferred
Stock shall be $0.020 per share (as adjusted for any stock dividends,
combinations, splits, recapitalizations and the like with respect to such
shares).  The Original Issue Price of the Series B-2 Preferred Stock
shall be $0.025 per share (as adjusted for any stock dividends, combinations,
splits, recapitalizations and the like with respect to such
shares).

     

    (d) Dividends.  Commencing
on the dates of issuance of the Series B Preferred Stock and the Series A
Convertible Preferred Stock of the Corporation (the “Series A
Preferred Stock” and, together with the Series B Preferred Stock, the
“Senior
Preferred
Stock”), and subject to the rights of any series of Preferred Stock that
may from time to time come into existence, each holder of an outstanding share
of Senior Preferred Stock shall be entitled to receive, on a pari passu basis, when, as
and if declared by the Board of Directors, out of any assets of the Corporation
legally available therefor, dividends at a rate equal to 5% per share of the
Original Issue Price of such share of Senior Preferred Stock (in each case, as
adjusted for any stock dividends, combinations, splits, recapitalizations and
the like with respect to such shares) per annum prior and in preference to the
holders of the Corporation’s Common Stock (the “Common
Stock”), and in preference to the holders of any other equity securities
of the Corporation that may from time to time come into existence to which the
Senior Preferred Stock ranks senior (such junior securities, together with the
Common Stock, “Junior
Securities”).  No dividends will be paid on Junior Securities
in any year unless such dividends of the Senior Preferred Stock are paid in full
or declared and set apart.  Additionally, whenever the Corporation
shall pay a dividend on the Common Stock, each holder of a share of Senior
Preferred Stock shall be entitled to receive, at the same time the dividend is
paid on the Common Stock, out of the assets of the Corporation legally available
therefor, a dividend equal to the amount that would have been paid in respect of
the Common Stock issuable upon conversion of such share of Senior Preferred
Stock immediately prior to the close of business on the record date for
determining the holders entitled to receive such dividend on the Common Stock,
or, if no such record is taken, the date on which the record holders of Common
Stock entitled to such dividend is determined.

     

    (e) Liquidation Preference.

     

    (i) Preference upon Liquidation,
Dissolution or Winding Up.  In the event of any dissolution or
winding up of the Corporation, whether voluntary or involuntary, and subject to
the rights of any series of Preferred Stock that may from time to time come into
existence, holders of each outstanding share of Series B Preferred Stock shall
be entitled to be paid first out of the assets of the Corporation available for
distribution to shareholders, whether such assets are capital, surplus or
earnings, before any payment shall be made to the holders of the Common Stock,
the Series A Preferred Stock, or any other stock of the Corporation ranking
junior to the Series B Preferred Stock with regard to any distribution of assets
upon liquidation, dissolution or winding up of the Corporation, an amount per
share of Series B Preferred Stock equal to (x) the Original Issue Price of such
Series B Preferred Stock (as adjusted for any
stock splits, stock dividends or recapitalizations of the Series B Preferred
Stock) plus (y) any declared but unpaid dividends on such share.  The
foregoing preferential amount shall be subject to increase as set forth in
Section 2(e)(vii) below.  The holders of the Series B Preferred Stock
shall be entitled to share ratably, in accordance with the respective
preferential amounts payable on such stock, in any distribution which is not
sufficient to pay in full the aggregate of the amounts payable thereon. If, upon
any liquidation, dissolution or winding up of the Corporation, the assets
available to be distributed to the holders of the Series B Preferred Stock shall
be insufficient to permit payment to such shareholders of the full preferential
amounts aforesaid, then all of the assets of the Corporation available for
distribution to shareholders shall be distributed to the holders of Series B
Preferred Stock. Each holder of the Series B Preferred Stock shall be entitled
to receive that portion of the assets available for distribution as the number
of outstanding shares of Series B Preferred Stock held by such holder bears to
the total number of shares of Series B Preferred Stock.  Such payment
shall constitute payment in full to the holders of the Series B Preferred Stock
upon the liquidation, dissolution or winding up of the
Corporation.  After such payment shall have been made in full, or
funds necessary for such payment shall have been set aside by the Corporation in
trust for the account of the holders of Series B Preferred Stock, so as to be
available for such payment, such holders of Series B Preferred Stock shall be
entitled to no further participation in the distribution of the assets of the
Corporation.

     

    (ii) Consolidation, Merger and Other
Corporate Events.  Unless otherwise agreed by the holders of a
majority of the then outstanding Series B Preferred Stock, (A) A consolidation
or merger of the Corporation (except into or with a subsidiary corporation), (B)
any reclassification of the stock of the Corporation (other than a change in par
value or from no par to par, or from par to no par or as the result of an event
described in subsection (v), (vi), (vii) or (ix) of paragraph (g)), or (C) a
sale, lease, exclusive license or other disposition of all or substantially all
of the assets of the Corporation requiring approval of the Corporation’s
stockholders shall be regarded as a liquidation, dissolution or winding up of
the affairs of the Corporation within the meaning of this paragraph (e); provided, however, in the case
of a merger, if (a) the Corporation is the surviving entity, (b) the
Corporation’s shareholders retain, solely in respect of the shares of capital
stock of the Corporation held by them prior to the merger, a majority of the
shares of the surviving entity, and (c) the Corporation’s directors hold a
majority of the seats on the board of directors of the surviving entity, then
such merger shall not be regarded as a liquidation, dissolution or winding up
within the meaning of this paragraph (e).  In no event shall the
issuance of new classes of stock, whether senior, junior or on a parity with the
Series B Preferred Stock, or any stock splits, be deemed a “reclassification”
under or otherwise limited by the terms hereof.

     

    (iii) Change of Control.  A “Change of
Control” of the Corporation means such time as (A) the Corporation shall
consummate a merger, consolidation or similar transaction approved by the Board
of Directors, or there shall occur the consummation of a tender offer for, or
other acquisition of, Common Stock, in which an individual, corporation,
partnership, limited liability company, joint venture, trust or unincorporated
organization or a government or agency or political subdivision thereof (a
“Person”)
or group (as such term is defined in Rule 13d-5 under the Exchange Act) of
Persons who are not stockholders of the Company immediately following the
initial issuance of the Series B Preferred Stock become the beneficial owners
(as determined pursuant to Rule 13d-3 under the Exchange Act), directly or
indirectly, of 45% or more of the voting power of the outstanding shares of
Common Stock, (B) the majority of the seats of the Board of Directors is
occupied by persons other than the directors occupying such seats as of the date
of the initial issuance of shares of Series B preferred Stock (the “Current
Directors”) or persons nominated by Current Directors or their nominated
successors, or (C) there shall occur a change in the Chief Executive Officer of
the Corporation without the consent of holders of a majority of the outstanding
shares of Series B Preferred Stock.  A Change of
Control will be treated as a liquidation, dissolution or winding up of the
affairs of the Corporation within the meaning of this paragraph (e), except
as otherwise agreed by holders of a majority of the then outstanding Series B
Preferred Stock.

     

    (iv) Distribution of Cash and Other
Assets.  In the event of a liquidation, dissolution or winding
up of the Corporation resulting in the availability of assets other than cash
for distribution to the holders of the Series B Preferred Stock, the holders of
the Series B Preferred Stock shall be entitled to a distribution of cash and/or
assets equal to the value of the liquidation preference stated in subsection (i)
of this paragraph (e), which valuation shall be determined in good faith by the
Board of Directors and shall be conclusive.  Any securities shall be
valued as follows:

     

    (A)           Securities
not subject to investment letter or other similar restrictions on free
marketability covered by (B) below:

     

    (1)           If
traded on a securities exchange, the value shall be deemed to be the average of
the closing prices of the securities on such quotation system over the thirty
(30) day period ending three (3) days prior to the closing;

     

    (2)           If
actively traded over-the-counter, the value shall be deemed to be the average of
the closing bid or sale prices (whichever is applicable) over the thirty (30)
day period ending three (3) days prior to the closing; and

     

    (3)           If
there is no active public market, the value shall be the fair market value
thereof, as determined in good faith by the Board of Directors.

     

    (B)           The
method of valuation of securities subject to investment letter or other
restrictions on free marketability (other than restrictions arising solely by
virtue of a stockholder’s status as an affiliate or former affiliate) shall be
to make an appropriate discount from the market value determined as above in (A)
(1), (2) or (3) to reflect the approximate fair market value thereof, as
determined in good faith by the Board of Directors.

     

    (v) Distribution to Junior Security
Holders.  After the payment or distribution to the holders of
the Series B Preferred Stock of the full preferential amounts aforesaid, the
holders of the Series A Preferred Stock and Common Stock then outstanding, or
any other stock of the Corporation ranking junior to the Series B Preferred
Stock as to assets upon liquidation, dissolution or winding up of the
Corporation, shall be entitled to receive all of the remaining assets of the
Corporation available for distribution.

     

    (vi) Preference;
Priority.  References to a stock that is “senior”
to, on a “parity”
with or “junior” to
other stock as to liquidation shall refer, respectively, to rights of priority
of one series or class of stock over another in the distribution of assets on
any liquidation, dissolution or winding up of the Corporation. The Series B
Preferred Stock shall be senior to the Series A Preferred Stock and the Common
Stock of the Corporation with regard to liquidation, dissolution or winding up
of the Corporation.

     

    (vii) Greater-of
Treatment.  Notwithstanding Section 2(e)(i) above, for purposes
of determining the amount each holder of Series B Preferred Stock is entitled to
receive with respect to a liquidation, dissolution or winding up of the
Corporation (including without limitation the events to be treated as a
liquidation, dissolution or winding up as set forth in Sections 2(e)(ii) and
2(e)(iii) above), the holders of Series B Preferred Stock shall receive at the
closing of such event (and at each date after the closing of such event on which
additional amounts, such as earn out payments, escrow amounts or other
contingent payments are paid to stockholders of the Corporation as a result of
the event, but only to the extent of such additional amount), an amount equal to
the greater of (A) the amount specified in Section 2(e)(i) above, and (B)
the amount that the holders of Series B Preferred Stock would have been entitled
to receive had the holders of all Senior Preferred Stock and, if any, all
convertible stock ranking junior to the Series B Preferred Stock with regard to
any distribution of assets upon liquidation, dissolution or winding up of the
Corporation, converted their shares into Common Stock immediately prior to such
event at the then applicable conversion price for such shares.

     

    (f) Voting
Rights.

     

     

    (i)           Each
share of Series B Preferred Stock shall entitle the holder thereof to vote, in
person or by proxy, at a special or annual meeting of the stockholders of the
Corporation, on all matters except as required by law or as set forth herein,
voted on by holders of Common Stock, voting together as a single class with the
holders of the Common Stock and all other shares entitled to vote thereon as a
single class with the Common Stock.  With respect to all such matters,
each issued and outstanding share of Series B Preferred Stock shall entitle the
holder thereof to cast that number of votes per share as is equal to the number
of votes that such holder would be entitled to cast had such holder converted
such holder’s Series B Preferred Stock into Common Stock on the record date for
determining the stockholders of the Corporation eligible to vote on any such
matters.

     

    (ii)           For
so long as any shares of Series B Preferred Stock remain outstanding, the
affirmative vote of the holders of a majority of the outstanding shares of
Series B Preferred Stock, voting separately as a single class, shall be
necessary to take any of the following actions, however effected, whether by
amendment, merger, consolidation, recapitalization or otherwise:

     

    (A)           any
transactions with affiliates, except on an arms-length basis;

     

    (B)           authorize,
create or issue any class or classes of any now or hereafter authorized capital
stock of the Corporation ranking senior to, or on a parity with (as to rights
upon a liquidation, dissolution or winding up of the affairs of the Corporation
or upon a Change of Control, or dividend rights or rights of redemption) the
Series B Preferred Stock or any securities exercisable or exchangeable for, or
convertible into, any now or hereafter authorized capital stock of the
Corporation ranking senior to, or on a parity with (as to rights upon a
liquidation, dissolution or winding up of the affairs of the Corporation or upon
a Change of Control, or dividend rights or rights of redemption) the Series B
Preferred Stock (including, without limitation, the issuance of any shares of
Series B Preferred Stock (other than shares of Series B Preferred Stock issued
as a stock dividend or in a stock split) after the date the Series B Preferred
Stock is originally issued), or reclassify any existing security to be senior
to, or on a parity with, the Series B Preferred Stock as to
such rights;

     

    (C)           any
increase or decrease in the total authorized shares of Series B Preferred
Stock;

     

    (D)           any
amendment to the rights, preferences or privileges of the Series B Preferred
Stock;

     

    (E)           any
bankruptcy filing or liquidation of the Corporation or any significant
subsidiary;

     

    (F)           any
payment of any dividend or distribution on any shares of capital stock of the
Corporation (other than dividends paid on the Preferred Stock); and

     

    (G)           the
purchase or redemption of any shares of now or hereafter authorized capital
stock (except for the purchase or redemption from service providers, employees,
directors and consultants, at a price not to exceed the original issuance price
thereof, pursuant to agreements providing the Corporation with repurchase rights
upon termination of their services to the Corporation).

     

    (iii)           For
so long as forty percent (40%) or more of the total amount of Series B Preferred
Stock initially issued remain outstanding, holders of Series B Preferred Stock,
voting separately as a single class, shall have the right to elect three
directors to the Corporation’s Board of Directors.  In the case of any
vacancy in the office of a director elected by the holders of the Series B
Preferred Stock, the holders of a majority of the outstanding shares of Series B
Preferred Stock may elect a successor to hold office for the unexpired term of
the director whose place shall be vacant.  Any director who shall have
been elected by the holders of the Series B Preferred Stock may be removed
during the aforesaid term of office, either with or without cause, by, and only
by, the affirmative vote of the holders of a majority of the outstanding shares
of Series B Preferred Stock, given either at an annual meeting of the
Corporation’s stockholders or at a special meeting of such stockholders duly
called for that purpose or pursuant to a written consent of such
stockholders.  Any such act shall become effective on the date fixed
in the notice to the Corporation thereof, or upon the delivery thereof to the
Corporation, whichever is later, without the need for any other corporate
procedure or action.  For avoidance of any doubt, the appointment of a
director as aforesaid, the dismissal or replacement of any director so
appointed, shall be by written notice given to the Corporation by the party or
parties designating the director pursuant to the procedures set forth
above.

     

    

    (g) Conversion
Rights.  The holders of Series B Preferred Stock will have the
following conversion rights:

     

    (i) Right to
Convert.  Subject to and in compliance with the provisions of
this paragraph (g), any issued and outstanding shares of Series B Preferred
Stock may, at the option of the holder, be converted at any time or from time to
time into fully paid and non-assessable shares of Common Stock at the conversion
rate in effect at the time of conversion, determined as provided
herein.

     

    (ii) Automatic
Conversion.  Subject to and in compliance with the provisions
of this paragraph (g), upon election by holders of a majority of the then
outstanding shares of Series B Preferred Stock, all issued and outstanding
shares of Senior Preferred Stock shall be automatically converted into fully
paid and non-assessable shares of Common Stock at the conversion rate in effect
at the time of conversion.

     

    (iii) Mechanics of
Conversion.  Before any holder of Series B Preferred Stock
shall be entitled to convert the same into shares of Common Stock, he shall
surrender the certificate or certificates therefor, duly endorsed, at the office
of the Corporation or of any transfer agent for the Common Stock, and shall give
written notice to the Corporation at such office that he elects to convert the
same and shall state therein the number of shares of Series B Preferred Stock
being converted.  Thereupon, the Corporation shall promptly issue and
deliver at such office to such holder of Series B Preferred Stock a certificate
or certificates for the number of shares of Common Stock to which he shall be
entitled.  Such conversion shall be deemed to have been made
immediately prior to the close of business on the date of such surrender of the
shares of Series B Preferred Stock to be converted, and the Person or Persons
entitled to receive the shares of Common Stock issuable upon such conversion
shall be treated for all purposes as the record holder or holders of such shares
of Common Stock on such date.  Promptly following a conversion
pursuant to paragraph (g)(ii) above, the Corporation shall send each holder of
Series B Preferred Stock a written notice thereof.  Thereafter, as
soon as practicable following the surrender of one or more certificates
representing the Series B Preferred Stock that is so converted, the Corporation
shall issue and deliver to such holder one or more certificates for the number
of whole shares of Common Stock issuable upon conversion in accordance with the
provisions hereof.

     

    (iv) Conversion
Price.  The number of shares into which one share of Series B-1
Preferred Stock shall be convertible shall be determined by dividing the
Original Issue Price of the Series B-1 Preferred Stock by the then existing
Series B-1 Conversion Price (as set forth below).  The number of
shares into which one share of Series B-2 Preferred Stock shall be convertible
shall be determined by dividing the Original Issue Price of the Series B-2
Preferred Stock by the then existing Series B-2 Conversion Price (as set forth
below).  The “Series B-1
Conversion Price” shall initially be equal to the Original Issue Price of
the Series B-1 Preferred Stock, and the “Series B-2
Conversion Price” shall initially be equal to the Original Issue Price of
the Series B-2 Preferred Stock, and each of the foregoing shall be subject to
adjustment upon the occurrence of any event in paragraph
(g)(v)-(vii).

     

    (v) Adjustment for Stock Splits and
Combinations.  If the Corporation shall at any time, or from
time to time after the date shares of the Series B Preferred Stock are first
issued (the “Original Issue
Date”), effect a subdivision of the outstanding Common Stock, the Series
B-1 Conversion Price and the Series B-2 Conversion Price in effect immediately
prior thereto shall be proportionately decreased, and conversely, if the
Corporation shall at any time or from time to time after the Original Issue Date
combine the outstanding shares of Common Stock, the Series B-1 Conversion Price
and the Series B-2 Conversion Price then in effect immediately before the
combination shall be proportionately increased.  Any adjustment under
this paragraph (g)(v) shall become effective at the close of business on the
date the subdivision or combination becomes effective.

     

    (vi) Adjustment for Certain Dividends and
Distributions.  In the event the Corporation at any time, or
from time to time after the Original Issue Date, shall make or issue, or fix a
record date for the determination of holders of Common Stock entitled to
receive, a dividend or other distribution payable in additional shares of Common
Stock, then and in each such event the Series B-1 Conversion Price and the
Series B-2 Conversion Price then in effect shall be decreased as of the time of
such issuance or, in the event such a record date shall have been fixed, as of
the close of business on such record date, by multiplying the Series B-1
Conversion Price and the Series B-2 Conversion Price then in effect by a
fraction:

     

    (A) the
numerator of which shall be the total number of shares of Common Stock issued
and outstanding immediately prior to the time of such issuance or the close of
business on such record date, and

     

    (B) the
denominator of which shall be the total number of shares of Common Stock issued
and outstanding immediately prior to the time of such issuance or the close of
business on such record date plus the number of shares of Common Stock issuable
in payment of such dividend or distribution; provided, however, if such
record date shall have been fixed and such dividend is not fully paid or if such
distribution is not fully made on the date fixed therefor, the Series B-1
Conversion Price and the Series B-2 Conversion Price shall be recomputed
accordingly as of the close of business on such record date and thereafter, the
Series B-1 Conversion Price and the Series B-2 Conversion Price shall be
adjusted pursuant to this paragraph (g)(vi) as of the time of actual payment of
such dividends or distributions.

     

    (vii) Adjustments for Other Dividends and
Distributions.  In the event the Corporation at any time or
from time to time after the Original Issue Date shall make or issue, or fix a
record date for the determination of holders of Common Stock entitled to
receive, a dividend or other distribution payable in securities of the
Corporation other than shares of Common Stock, then and in each such event
provision shall be made so that the holders of such Series B Preferred Stock
shall receive upon conversion thereof in addition to the number of shares of
Common Stock receivable thereupon, the amount of securities of the Corporation
that they would have received had their Series B Preferred Stock been converted
into Common Stock on the date of such event and had thereafter, during the
period from the date of such event to and including the conversion date,
retained such securities receivable by them as aforesaid during such period
giving application to all adjustments called for during such period under this
paragraph (g) with respect to the rights of the holders of the Series B
Preferred Stock.

     

    (viii) Adjustment for
Reclassification Exchange or
Substitution.  If the Common Stock issuable upon the conversion
of the Series B Preferred Stock shall be changed into the same or a different
number of shares of any class or classes of stock, whether by capital
reorganization, reclassification or otherwise (other than a subdivision or
combination of shares or stock dividend provided for above, or a reorganization,
merger, consolidation or sale of assets provided for elsewhere in this paragraph
(g)), then and in each such event the holder of each share of Series B Preferred
Stock shall have the right thereafter to convert such share into the kind and
amount of shares of stock and other securities and property receivable upon such
reorganization, reclassification or other change, by holders of the number of
shares of Common Stock into which such shares of Series B Preferred Stock might
have been converted immediately prior to such reorganization, reclassification,
or change, all subject to further adjustment as provided herein.

     

    (ix) Reorganization, Mergers,
Consolidations or Sales of Assets.  If at any time or from time
to time there shall be a capital reorganization of the Common Stock (other than
a subdivision, combination, reclassification or exchange of shares provided for
elsewhere in this paragraph (g)) or a merger or consolidation of the Corporation
with or into another corporation, or the sale of all or substantially all of the
Corporation’s properties and assets to any other Person, then, as a part of such
reorganization, merger, consolidation or sale, provision shall be made so that
the holders of the Series B Preferred Stock shall thereafter be entitled to
receive upon conversion of such Series B Preferred Stock, the number of shares
of stock or other securities or property of the Corporation or of the successor
corporation resulting from such merger or consolidation or sale, to which a
holder of Common Stock deliverable upon conversion would have been entitled on
such capital reorganization, merger, consolidation or sale.  In any
such case, appropriate adjustment shall be made in the application of the
provisions of this paragraph (g) with respect to the rights of the holders of
the Series B Preferred Stock after the reorganization, merger, consolidation or
sale to the end that the provisions of this paragraph (g) (including adjustment
of the Series B-1 Conversion Price and the Series B-2 Conversion Price then in
effect and the number of shares purchasable upon conversion of the Series B
Preferred Stock) shall be applicable after that event as nearly equivalent as
may be practicable.

     

    (x) Certificate of
Adjustment.  In each case of an adjustment or readjustment of
the Series B-1 Conversion Price and the Series B-2 Conversion Price or the
securities issuable upon conversion of the Series B Preferred Stock, the
Corporation shall compute such adjustment or readjustment in accordance herewith
and the Corporation’s Chief Financial Officer shall prepare and sign a
certificate showing such adjustment or readjustment, and shall mail such
certificate by first class mail, postage prepaid, to each registered holder of
the Series B Preferred Stock at the holder’s address as shown in the
Corporation’s books. The certificate shall set forth such adjustment or
readjustment, showing in detail the facts upon which such adjustment or
readjustment is based.

     

    (xi) Notices of Record
Date.  In the event of (A) any taking by the Corporation of a
record of the holders of any class or series of securities for the purpose of
determining the holders thereof who are entitled to receive any dividend or
other distribution or (B) any reclassification or recapitalization of the
capital stock of the Corporation, any merger or consolidation of the Corporation
or any transfer of all or substantially all of the assets of the Corporation to
any other corporation, entity or Person, or any voluntary or involuntary
dissolution, liquidation or winding up of the Corporation, the Corporation shall
mail, via facsimile, regular or electronic mail or nationally recognized
overnight courier service, to each holder of Series B Preferred Stock at least
10 days prior to the record date specified therein, a notice specifying (1) the
date on which any such record is to be taken for the purpose of such dividend or
distribution and a description of such dividend or distribution, (2) the date on
which any such reorganization, reclassification, transfer, consolidation,
merger, dissolution, liquidation or winding up is expected to become effective
and (3) the time, if any is to be fixed, as to when the holders of record of
Common Stock (or other securities) shall be entitled to exchange their shares,
of Common Stock (or other securities) for securities or other property
deliverable upon such reorganization, reclassification, transfer, consolidation,
merger, dissolution, liquidation or winding up.

     

    (xii) Fractional
Shares.  No fractional shares of Common Stock shall be issued
upon conversion of the Series B Preferred Stock.  All shares of Common
Stock (including fractions thereof) issuable upon conversion of more than one
share of Series B Preferred Stock by a holder thereof shall be aggregated for
purposes of determining whether the conversion would result in the issuance of
any fractional share.  In lieu of any fractional shares to which the
holder would otherwise be entitled, the Corporation shall pay cash equal to the
product of such fraction multiplied by the fair market value of one share of the
Corporation’s Common Stock on the date of conversion, as determined in good
faith by the Board of Directors.

     

    (xiii) Reservation of Stock Issuable Upon
Conversion.  The Corporation shall at all times reserve and
keep available out of its authorized but unissued shares of Common Stock, solely
for the purpose of effecting the conversion of the shares of the Series B
Preferred Stock, such number of shares of Common Stock as shall from time to
time be sufficient to effect the conversion of all outstanding shares of Series
B Preferred Stock.  If at any time the number of authorized but
unissued shares of Common Stock shall not be sufficient to effect the conversion
of all then outstanding shares of Series B Preferred Stock, the Corporation will
take such corporate action as may, in the opinion of its counsel, be necessary
to increase its authorized but unissued shares of Common Stock to such number of
shares as shall be sufficient for such purpose.

     

    (xiv) Notices. Any notice required
by the provisions of this paragraph (g) to be given to the holders of shares of
Series B Preferred Stock shall be deemed given (A) if deposited in the United
States mail, postage prepaid, or (B) if given by any other reliable or generally
accepted means (including by facsimile, electronic mail or by a nationally
recognized overnight courier service), in each case addressed to each holder of
record at his address (or facsimile number) appearing on the books of the
Corporation.

     

    (xv) Payment of
Taxes.  The Corporation will pay all transfer taxes and other
governmental charges that may be imposed in respect of the issue or delivery of
shares of Common Stock upon conversion of shares of Series B Preferred
Stock.

     

    (xvi) No Dilution or
Impairment.  The Corporation shall not amend its Certificate of
Incorporation or participate in any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, for the purpose of avoiding or seeking to avoid the observance
or performance of any of the terms to be observed or performed hereunder by the
Corporation, without the approval of a majority of the then outstanding Series B
Preferred Stock.

     

    (h) No Reissuance of Preferred
Stock.  Any shares of Series B Preferred Stock acquired by the
Corporation by reason of purchase, conversion or otherwise shall be canceled,
retired and eliminated from the shares of Series B Preferred Stock that the
Corporation shall be authorized to issue.  All such shares shall upon
their cancellation become authorized but unissued shares of preferred stock and
may be reissued as part of a new series of preferred stock subject to the
conditions and restrictions on issuance set forth in the Certificate of
Incorporation or in any certificate of designations creating a series of
preferred stock or any similar stock or as otherwise required by law.

     

    (i) Not
Redeemable.  The Series B Preferred Stock is not redeemable,
except that, in the event of a Change of Control that is deemed by the
Corporation to be a liquidation, dissolution or winding up of the Corporation
pursuant to Section 2(e)(iii) above, holders of a majority of the then
outstanding shares of Series B Preferred Stock can require redemption of
the Series B Preferred Stock at the Original Issue
Price of such Series B Preferred Stock (as adjusted for any
stock splits, stock dividends or recapitalizations of the Series B Preferred
Stock) plus any accrued and unpaid dividends, and any such shares of Series B
Preferred Stock so requested to be redeemed, but not repurchased on the
designated repurchase date, will begin to accrue dividends at an annual rate
equal to 6% of the Original Issue Price of such Series B Preferred Stock per
share of Series B Preferred Stock held, compounded semiannually from the date
originally set for redemption, and will at all times until actual redemption
remain convertible into Common Stock.

     

    (j) Severability.  If
any right, preference or limitation of the Series B Preferred Stock set forth
herein is invalid, unlawful or incapable of being enforced by reason of any
rule, law or public policy, all other rights, preferences and limitations set
forth herein that can be given effect without the invalid, unlawful or
unenforceable right, preference or limitation shall nevertheless remain in full
force and effect, and no right, preference or limitation herein shall be deemed
dependent upon any other such right, preference or limitation unless so
expressed herein.

     

    3. The
number of authorized shares of preferred stock of the Corporation is five
hundred million (500,000,000).  The number of shares of Series B-1
Preferred Stock, none of which has been issued, is 336,240,039.  The number of shares of
Series B-2 Preferred Stock, none of which has been issued, is
10,916,547.

     

    
      
        
          
            	 
      	
                     

                  	 
      
	 
      	 
      	 
      

          

          

        

         

      

      
         

        
          

        

      

      
         

      

    

    Each of
the undersigned declares under penalty of perjury that the matters set out in
the foregoing Certificate are true of his own knowledge.  Executed at
San Francisco, California, on June 3,
2008.

     

    

     

                                                                                                      

     

                    /s/ Rodney S.
Rougelot                                                      

      Name: Rodney S. Rougelot

      Title: Chief Executive Officer and
Secretaryexhibit4-3.htm

    EXHIBIT 4.3

      INVESTOR RIGHTS
AGREEMENT

       

      

      THIS
INVESTOR RIGHTS AGREEMENT (the “Agreement”)
is entered into as of June 4, 2008, by and among ECO2 PLASTICS, INC., a
Delaware corporation (the “Company”),
and the investors signatory hereto (each an “Investor”
and collectively, the “Investors”),
who are holders of the Company’s Series A Preferred Stock (the “Series A
Stock”), the Company’s Series B-1 Preferred Stock (the “Series B-1
Preferred Stock”) and the Company’s Series B-2 Preferred Stock (the
“Series B-2
Preferred Stock” and, together with the Series B-1 Preferred Stock, the
“Series B
Stock”).  Capitalized terms used but not defined elsewhere
herein are defined in the Subscription Agreement (as defined
below).

       

      RECITALS

       

      WHEREAS,
the Company has entered into a Securities Subscription Agreement, dated as of
the date hereof (the “Subscription
Agreement”), with certain of the Investors (the “Series B
Investors”) pursuant to which the Company (i) has sold to the Series B
Investors, and the Series B Investors have purchased from the Company, shares of
Series B-1 Preferred Stock, and (ii) contemplates selling to certain of the
Series B Investors, and certain of the Series B Investors may elect to purchase
from the Company, shares of the Company’s Series B-2 Preferred Stock, each of
which is convertible into shares of the Company’s common stock (the “Common
Stock”).

       

      WHEREAS,
the Company has entered into a Securities Subscription Agreement, dated as of
June 4, 2008 (the “Series A
Subscription Agreement”), with certain of the Investors (the “Series A
Investors”) pursuant to which the Company has sold to the Series A
Investors, and the Series A Investors have purchased from the Company, shares of
Series A Stock, which is convertible into shares of Common Stock.

       

      WHEREAS,
as a condition to each of the Series B Investors’ obligations under the
Subscription Agreement, the Company and the Investors will enter into this
Agreement for the purpose of granting certain registration and other rights to
the Investors, as well as imposing certain restrictions on the ability of the
Investors to transfer their shares of Series B Stock or Series A Stock
(together, the “Shares”),
as applicable, or the shares of Common Stock issued or issuable upon conversion
thereof (the “Conversion
Shares” and, together with the Shares, the “Securities”).

       

      NOW,
THEREFORE, in consideration of the covenants and promises set forth herein, and
for other good and valuable consideration, intending to be legally bound hereby
the parties agree as follows:

       

      SECTION
1. Registration
Procedures.

       

      1.1. The
Company shall, subject to receipt of necessary information from the Investors,
prepare and file with the Securities and Exchange Commission (the “SEC”),
upon written notice of holders of at least 40% of the then outstanding
Registrable Securities (as defined below) (the “Demand
Notice”), on or after the date that is 90 days after the date of this
Agreement (the “Initial Filing
Date”), a registration statement on Form S-1 (or Form S-3, should
the Company become eligible to use such form) (the “Initial
Registration Statement”) to enable the resale of (A) the Conversion
Shares and (B) the shares of Common Stock issuable pursuant to the warrants
issued to each of Hutton Living Trust, dated 12-10-96 and Buzby-Vasan 1997 Trust
pursuant to Section 4(h) of the Subscription Agreement, in each case, together
with any shares of capital stock issued or issuable, from time to time, upon any
reclassification, share combination, share subdivision, stock split, share
dividend or similar transaction or event or otherwise as a distribution on, in
exchange for or with respect to any of the foregoing, in each case held at the
relevant time by an Investor (collectively the “Registrable
Securities”),
by the Investors from time to time through the National Association of
Securities Dealers OTC Bulletin Board, or other applicable exchange or in
privately-negotiated transactions; provided, however, that in the
event that publicly-available written guidance, rules of general applicability
of the SEC staff, or written comments, requirements or request of the SEC staff
to the Company in connection with the review of any registration statement (the
“SEC
Guidance”) does not permit the Initial Registration Statement to include
all Registrable Securities of each Investor (provided that, the
Company shall use reasonable best efforts to advocate with the SEC for the
registration of all or the maximum number of the Registrable Securities
permitted by SEC Guidance), then the Company will use reasonable best efforts to
file such additional registration statements (the “Subsequent
Registration Statements” and, together with the Initial Registration
Statements, the “Registration
Statements”) at the earliest practicable date on which the Company is
permitted by SEC Guidance to file such additional Registration Statements
related to the Registrable Securities (the “Subsequent Filing
Dates” and, together with the Initial Filing Date, the “Filing
Dates”).  If any SEC Guidance sets forth a limitation pursuant
to Rule 415 of the Securities Act of 1933, as amended (together with the rules
and regulations of the SEC promulgated thereunder, the “Securities
Act”) or any other applicable regulation on the number of Registrable
Securities to be registered on a particular Registration Statement, the number
of Registrable Securities to be registered on such Registration Statement will
be reduced on a pro rata basis based on the total number of unregistered
Conversion Shares held by such Investors.

       

      1.2. The
Company shall cause (A) the Initial Registration Statement to become
effective as soon as practicable after the Initial Registration Statement is
filed by the Company, but in any event no later than 4:00 p.m. Eastern Time on
the 90th day
after the Initial Filing Date; (B) any Subsequent Registration Statements, as
amended, which may be required to be filed hereunder pursuant to Section 1.1 to
become effective under the Securities Act as soon as practicable but in any
event no later than 4:00 p.m. Eastern Time on the 90th day
after such Subsequent Filing Date (each, its “Required
Effective Date”).

       

      1.3. The
Company shall cause any prospectus used in connection with any Registration
Statement (a “Prospectus”)
to be filed with the SEC pursuant to Rule 424(b) under the Securities Act as
soon as practicable but in any event no later than 5:30 p.m. Eastern Time the
next business day following the date such Registration Statement is declared
effective by the SEC.

       

      1.4. The
Company shall prepare and file with the SEC such amendments and supplements to
the Registration Statements and any Prospectus used in connection therewith as
may be necessary to keep such Registration Statements current and effective and
as may be reasonably requested by an Investor in order to incorporate
information concerning such Investor or such Investor’s intended method of
distribution for a period not exceeding, with respect to each Investor’s
Registrable Securities, the earlier of (A) the second anniversary of each
Required Effective Date, (B) the date on which such Investor (together with
its Affiliates (as defined below)) beneficially owns less than 1% of the then
outstanding shares of Common Stock (assuming for these purposes the conversion
of all outstanding Shares into Common Stock at the then applicable conversion
price), or (C) such time as all Registrable Securities purchased by such
Investor pursuant to this offering have been sold pursuant to a registration
statement.

       

      1.5. The
Company shall, so long as any Registration Statement is effective covering the
resale of Registrable Securities owned by the Investors, furnish via
electronic mail or regular mail to each Investor with respect to the
Registrable Securities registered under such Registration Statement (and to each
underwriter, if any, of such Registrable Securities) such number of copies of
such Registration Statement, Prospectuses and Preliminary Prospectuses in
conformity with the requirements of the Securities Act and such other documents
as such Investor may reasonably request, in order to facilitate the public
sale or other disposition of all or any of the Registrable Securities by
such Investor.

       

      1.6. The
Company shall file documents required of the Company for normal blue sky
clearance in states specified in writing by the Investors; provided, however, that the
Company shall not be required to qualify to do business or consent to service of
process in any jurisdiction in which it is not now so qualified or has not so
consented.

       

      1.7. The
Company shall furnish to each Investor via electronic mail or regular mail, two
(2) business days after the date that any Registration Statement becomes
effective, (A) a letter, dated such date, of outside counsel representing the
Company (and reasonably acceptable to such Investor) addressed to such Investor,
confirming the effectiveness of such Registration Statement and, to the
knowledge of such counsel, the absence of any stop order, and (B) in the case of
firmly underwritten offering, an opinion addressed to such Investor, dated such
date, of such outside counsel, in such reasonable and customary form and
substance as is required to be given to the underwriters.

       

      1.8. The
Company shall provide to each Investor and its representatives, if requested,
the opportunity to conduct a reasonable inquiry of the Company’s financial and
other records during normal business hours and make available its officers,
directors and employees for questions regarding information which such Investor
may reasonably request in order to fulfill any due diligence obligation on its
part, provided,
that in the case of this Section 1.8, the Company shall not be required to
provide, and shall not provide, any Investor with material, non-public
information unless such Investor agrees to receive such information and enters
into a written confidentiality agreement with the Company.

       

      1.9. The
Company shall, not less than three (3) trading days prior to the filing of a
Registration Statement and not less than two (2) trading days prior to the
filing of any related Prospectus or any amendment or supplement thereto
(including any document that would be incorporated or deemed to be incorporated
therein by reference) or, in the case of comments made by the staff of the
SEC and the Company’s responses thereto, within a reasonable period of time
following the receipt thereof by the Company, furnish to each Investor via
electronic mail or regular mail copies of all such documents proposed to be
filed or copies of such correspondence from and to the SEC relating to such
Registration Statement, as the case may be, which documents (other than those
incorporated or deemed to be incorporated by reference) will be subject to the
review of such Investor.  The Company shall reflect in each such
document when so filed with the SEC such comments relating to such Investor as
such Investor may reasonably propose; provided, however, that such
comments from such Investor must be received by the Company no later than one
(1) trading day prior to the filing of such document with the
SEC.  Notwithstanding any other provision of this Agreement, the
Company will have no obligation to deliver or make available to any Investor any
Registration Statement or Prospectus containing any material, nonpublic
information unless such Investor specifically consents in advance to receive
such material, nonpublic information in writing and such Investor has executed
an agreement to keep such material, nonpublic information confidential and
refrain from trading in any Company security for so long as such information
remains material, nonpublic information.

       

      1.10. If a
Demand Notice delivered in accordance with Section 1.1 specifies that the sale
of the Registrable Securities is intended to be conducted through an
underwritten offering, the holders of a majority of Registrable Securities
included in such Demand Notice shall have the right to select the managing
underwriter or underwriters to administer the offering; provided, however, that such managing
underwriter or underwriters shall be reasonably acceptable to the
Company.  The holders of Registrable Securities included in such
Demand Notice and the Company shall enter into an underwriting agreement in such
customary form as shall have been negotiated and agreed to by the Company with
the underwriter or underwriters selected for such underwriting.

       

      1.11. Notwithstanding
any other provision of this Section 1, if the managing underwriter or
underwriters of a proposed underwritten offering of the Registrable Securities
advise the Board of Directors of the Company that in its or their opinion, the
number of Registrable Securities requested to be included in the Registration
Statement and all other securities proposed to be sold in the offering
contemplated thereby exceeds the number which can be sold in such underwritten
offering in light of market conditions, the Registrable Securities and such
other securities to be included in such underwritten Registration Statement
shall be allocated, (i) first, up to the total number of securities the holders
of Registrable Securities have requested to be included in such Registration
Statement (pro rata based upon the number of securities that each of them shall
have requested to be included in such offering), (ii) second, and only if all
the Registrable Securities referred to in clause (i) have been included, up to
the total number of securities that other holders of piggyback registration
rights have requested to be included in such Registration Statement (pro rata
based upon the number of securities that each of them shall have requested to be
included in such Registration Statement) and (iii) third, and only if all the
securities referred to in clause (ii) have been included, the number of
securities that the Company and other holders have proposed to include in such
Registration Statement that, in the opinion of the managing underwriter or
underwriters can be sold without having such adverse effect.  To
facilitate the allocation of shares in accordance with the above provisions, the
Company or the managing underwriters may round the number of shares allocated to
any holder to the nearest 100 shares.  If any holder of Registrable
Securities disapproves of the terms of any such underwriting, such holder of
Registrable Securities may elect to withdraw therefrom by written notice to the
Company and the managing underwriter or underwriters.  Any securities
excluded or withdrawn from such underwriting shall be withdrawn from such
registration.

       

      1.12. In the
event any holder of Registrable Securities requests to participate in a
Registration Statement pursuant to this Section 1 in connection with a
distribution of Registrable Securities to its partners or members, the
Registration Statement shall in the event such distribution and subsequent
resale is permitted by applicable law provide for resale by such partners or
members, if requested by such holder of Registrable Securities.

       

      1.13. The
Investors shall have the right to have any registration initiated by them under
Section 1.1 terminated or withdrawn prior to the effectiveness
thereof.  If the Investors cause a registration to be terminated or
withdrawn in accordance with this Section 1.13, they shall again be entitled to
exercise their demand rights pursuant to Section 1.1.

       

      1.14. Until
such date as the Registrable Securities have been (A) registered under the Act
and disposed of in accordance with an effective Registration Statement relating
thereto; (B) publicly sold pursuant to Rule 144; or (C) transferred in a
transaction pursuant to which the registration rights are not also assigned in
accordance with Section 13 hereof, the Company shall be obligated to take
all necessary actions set forth in this Section 1 to effect such registration,
qualification, and compliance with respect to the Registrable Securities at the
request of holders of Registrable Securities; provided that holders
of Registrable Securities may not deliver more than one Demand Notice to the
Company in any consecutive six (6) month period.

       

      1.15. The
Company shall use all commercially reasonable efforts to prevent the issuance of
any stop order or other order suspending the effectiveness of the Registration
Statements and, if such an order is issued, to obtain the withdrawal thereof at
the earliest possible time and to notify each Investor of the issuance of such
order and the resolution thereof.

       

      1.16. With a
view to making available to the Investors the benefits of Rule 144 (or its
successor rule) and any other rule or regulation of the SEC that may at any time
permit the Investors to sell Registrable Securities to the public without
registration, the Company covenants and agrees to: (A) make and keep public
information available, as those terms are understood and defined in Rule 144,
until the earlier of (1) six months after such date as all of the
Investors’ Registrable Securities may be resold pursuant to Rule 144 or any
other rule of similar effect or (2) such date as all of the
Investors’ Registrable Securities shall have been resold; (B) file
with the SEC in a timely manner all reports and other documents required of the
Company under the Securities Act and under the Securities Exchange Act of 1934,
as amended (the “Exchange
Act”); and (C) furnish to any Investor upon request, as long as
such Investor owns any Registrable Securities, (1) a written statement
by the Company that it has complied with the reporting requirements of the
Securities Act and the Exchange Act, (2) a copy of the Company’s most
recent Annual Report on Form 10-K or Quarterly Report on Form 10-Q, and
(3) such other information as may be reasonably requested in order to avail
such Investor of any rule or regulation of the SEC that permits the selling
of any such Registrable Securities without registration.

       

      It shall
be a condition precedent to the obligations of the Company to take any action
pursuant to this Section 1 that such Investor shall furnish to the Company such
information required by the SEC as shall be required to effect and keep
effective the registration of the Registrable Securities.

       

      The
Company will not offer, sell, contract to sell, pledge, or otherwise dispose of,
(or enter into any transaction which is designed to, or might reasonably be
expected to, result in the disposition (whether by actual disposition or
effective economic disposition due to cash settlement or otherwise) by the
Company or any affiliate of the Company or any person acting on behalf of
the Company or any affiliate of the Company) directly or indirectly, including
the filing (or participation in the filing) of a registration statement with the
SEC in respect of, or establish or increase a put equivalent position or
liquidate or decrease a call equivalent position within the meaning of
Section 16 of the Exchange Act, any other shares of Common Stock or any
securities convertible into, or exercisable, or exchangeable for, shares of
Common Stock; or publicly announce an intention to effect any such transaction,
until sixty (60) days after the date hereof; provided, however, that the
Company may issue and sell Common Stock pursuant to any employee stock option
plan, stock ownership plan or dividend reinvestment plan of the Company or
pursuant to any employee or consultant compensation agreement of the Company in
effect as of the date hereof, may file an updated Form S-8 registration
statement and the Company may issue Common Stock issuable upon the conversion of
securities or the exercise of warrants outstanding as of the date
hereof.

       

      The
Company understands that each Investor disclaims being an underwriter, but any
Investor being deemed an underwriter by the SEC shall not relieve the Company of
any obligations it has hereunder; provided, however, that if the
Company receives notification from the SEC that any Investor is deemed an
underwriter, then such Investor shall provide such further information or take
such further action as may be required to allow any Registration Statement to
become effective for the Registrable Securities held by such
Investor.

       

      SECTION
2. Company
Registration.

       

      2.1. If at any
time or from time to time until the fourth anniversary of the date of this
Agreement, the Company shall determine to file a registration statement for an
underwritten public offering of its equity securities (for the avoidance of
doubt, the following will not apply to any registration statement filed on a
Form S-4, Form S-8 or any successor forms), the Company will: (A) promptly give
to each holder of Registrable Securities written notice thereof; and
(B) subject to Section 2.2 below, include in such registration (and any
related qualification under blue sky laws or other compliance) all the
Registrable Securities specified in a written request or requests made within 7
days after receipt of such written notice from the Company by any holder of
Registrable Securities.

       

      2.2. The right
of any holder of Registrable Securities to registration pursuant to this Section
2 shall be conditioned upon such holder’s participation in such underwriting and
the inclusion of Registrable Securities in the underwriting to the extent
provided herein.  Each holder of Registrable Securities proposing to
distribute its securities through such underwriting shall (together with the
Company and the other holders distributing their securities through such
underwriting) enter into and perform such holder’s obligations under an
underwriting agreement with the managing underwriter selected for such
underwriting by the Company or by the stockholders of the Company who have the
right to select the underwriters (such underwriting agreement to be in the form
negotiated by the Company or such stockholders, as the case may
be).  Notwithstanding any other provision of this Section 2, if the
managing underwriter or underwriters of a proposed underwritten offering with
respect to which holders of Registrable Securities have exercised their
piggyback registration rights advise the Board of Directors of the Company that
in its or their opinion the number of Registrable Securities requested to be
included in the offering thereby and all other securities proposed to be sold in
the offering exceeds the number which can be sold in such underwritten offering
in light of market conditions, the Registrable Securities and such other
securities to be included in such underwritten offering shall be allocated, (i)
first, up to the total number of securities that the Company has requested to be
included in such registration; provided that the
number of Registrable Securities to be included in such offering shall be
no less than thirty percent (30%) of the total number of securities proposed to
be distributed through such offering (allocated among the holders of Registrable
Securities pro rata based upon the number of Registrable Securities held by all
such holders of Registrable Securities), (ii) second, and only if all the
securities referred to in clause (i) have been included, up to the total number
of securities that the holders of Registrable Securities and the holders of
other securities having the contractual right to inclusion of their securities
in the offering have requested to be included in such offering (pro rata based
upon the number of Registrable Securities and other securities entitled to
registration rights held by all such holders of Registrable Securities and other
securities having such contractual right), and (iii) third, and only if all the
securities referred to in clause (ii) have been included, all other securities
proposed to be included in such offering that, in the opinion of the managing
underwriter or underwriters can be sold without having such adverse
effect.  To facilitate the allocation of shares in accordance with the
above provisions, the Company or the managing underwriters may round the number
of shares allocated to any holder of Registrable Securities or other holder to
the nearest 100 shares.  If any holder of Registrable Securities
disapproves of the terms of any such underwriting, such holder may elect to
withdraw therefrom by written notice to the Company and the managing underwriter
or underwriters.  Any securities excluded or withdrawn from such
underwriting shall be withdrawn from such registration.

       

      2.3. The
Company or the holders of securities who have caused a registration statement to
be filed as contemplated by this Section 2, as the case may be, shall have the
right to have any registration initiated by it or them under this Section 2
terminated or withdrawn prior to the effectiveness thereof, whether or not any
holder of Registrable Securities has elected to include securities in such
registration; provided, however, that such
holder of Registrable Securities shall again be entitled to exercise its demand
rights pursuant to this Section 2.

       

      SECTION
3. Transfer of Registrable
Securities After Registration; Suspension.

       

      3.1. Each
Investor agrees that it will not effect any Disposition of the Registrable
Securities or its right to purchase the Registrable Securities that would
constitute a sale within the meaning of the Securities Act or pursuant to any
applicable state securities or Blue Sky laws of any state, except (A) as
contemplated in any Registration Statement covering the Registrable Securities
that has been declared effective, (B) pursuant to the requirements of Rule 144
(in which case such Investor will provide the Company with reasonable evidence
of such Investor’s compliance therewith) or (C) pursuant to a written opinion of
legal counsel reasonably satisfactory to the Company and addressed to the
Company to the effect that registration under Section 5 of the Securities Act is
not required in connection with the proposed transfer; whereupon the holder of
such securities shall be entitled to transfer such securities.

       

      3.2. Except in
the event that Section 3.3 applies, the Company shall: (A) if deemed
necessary by the Company, prepare and file from time to time with the SEC a
post-effective amendment to the Registration Statements or a supplement to the
related Prospectus or a supplement or amendment to any document incorporated
therein by reference or file any other required document so that such
Registration Statement will not contain 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, and so that, as thereafter delivered
to purchasers of the Registrable Securities being sold thereunder, such
Prospectus will not contain 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, in light of the circumstances under which they were made,
not misleading; (B) upon request by any Investor, provide such Investor
copies of any documents filed pursuant to Section 3.2(A); and (C) inform
each Investor that the Company has complied with its obligations in Section
3.2(A) (or that, if the Company has filed a post-effective amendment to a
Registration Statement which has not yet been declared effective, the Company
will notify the Investors to that effect, will use its reasonable efforts to
secure the effectiveness of such post-effective amendment as promptly as
possible and will promptly notify the Investors pursuant to Section 3.2(A)
hereof when the amendment has become effective).

       

      3.3. Subject
to Section 3.4, in the event of: (A) any request by the SEC or any other
federal or state governmental authority during the period of effectiveness of
any Registration Statement for amendments or supplements to a Registration
Statement or related Prospectus or for additional information; (B) the
issuance by the SEC or any other federal or state governmental authority of any
stop order suspending the effectiveness of a Registration Statement or the
initiation of any proceedings for that purpose; (C) the receipt by the
Company of any notification with respect to the suspension of the qualification
or exemption from qualification of any of the Registrable Securities for sale in
any jurisdiction or the initiation of any proceeding for such purpose; or
(D) any event or circumstance which necessitates the making of any changes
in any Registration Statement or Prospectus, or any document incorporated or
deemed to be incorporated therein by reference, so that, in the case of such
Registration Statement, it will not contain any untrue statement of a material
fact or any omission to state a material fact required to be stated therein or
necessary to make the statements therein not misleading, and that in the case of
such Prospectus, it will not contain any untrue statement of a material fact or
any omission to state a material fact required to be stated therein or necessary
to make the statements therein, in the light of the circumstances under which
they were made, not misleading; then the Company shall deliver a certificate in
writing to the Investors (the “Suspension
Notice”) to the effect of the foregoing and, upon receipt of such
Suspension Notice, the Investors will refrain from selling any Registrable
Securities pursuant to the Registration Statement (a “Suspension”)
until the Investors’ receipt of copies of a supplemented or amended Prospectus
prepared and filed by the Company, or until it is advised in writing by the
Company that the current Prospectus may be used, and has received copies of any
additional or supplemental filings that are incorporated or deemed incorporated
by reference in any such Prospectus.  In the event of any Suspension,
the Company will use its reasonable efforts to cause the use of a Prospectus so
suspended to be resumed as soon as reasonably practicable within 20 business
days after delivery of a Suspension Notice to the Investors.  In
addition to and without limiting any other remedies (including, without
limitation, at law or at equity) available to the Investors, the Investors shall
be entitled to specific performance in the event that the Company fails to
comply with the provisions of this Section 3.3.

       

      3.4. Notwithstanding
the foregoing sections of this Section 3, the Investors shall not be prohibited
from selling Registrable Securities under a Registration Statement as a result
of Suspensions on more than two (2) occasions of not more than thirty (30) days
each in any twelve (12) month period (the “Permitted
Suspension Period”) unless, in the good faith judgment of the Company’s
Board of Directors, upon advice of counsel, the sale of Registrable Securities
under such Registration Statement in reliance on this Section 3.4 would be
reasonably likely to cause a violation of the Securities Act or the Exchange
Act.

       

      3.5. Provided
that a Suspension is not then in effect, any Investor may sell Registrable
Securities under the Registration Statements, provided that the Investor is
selling its Registrable Securities in accordance with such Registration
Statement, the Securities Act, applicable state securities laws and, to the
extent the exemption from prospectus delivery requirements in Rule 172
under the Securities Act is not available, satisfies the requirement of
delivering a current prospectus in connection with any proposed transfer or sale
of the Registrable Securities.

       

      SECTION
4. Information
Available.  So long as any
Registration Statement is effective covering the resale of Registrable
Securities owned by the Investors, the Company will furnish to the
Investors via electronic mail or regular mail:

       

      4.1. as soon
as practicable after it is available, one copy of (A) its Annual Report to
Stockholders (which Annual Report shall contain financial statements audited in
accordance with generally accepted accounting principles by a national firm of
certified public accountants) and (B) if not included in substance in the
Annual Report to Stockholders, its Annual Report on Form 10-K (the foregoing, in
each case, excluding exhibits);

       

      4.2. upon the
reasonable request of any Investor, all exhibits excluded by the parenthetical
to Section 4.1(B) as filed with the SEC and all other information that is made
available to stockholders; and upon the reasonable request of any Investor, an
adequate number of copies of Prospectuses to supply to any other party requiring
such Prospectuses; and the Company, upon the reasonable request of any Investor,
will meet with such Investor or a representative thereof at the Company’s
headquarters to discuss all information relevant for disclosure in such
Registration Statement covering the Registrable Securities and will otherwise
cooperate with any Investor conducting an investigation for the purpose of
reducing or eliminating such Investor’s exposure to liability under the
Securities Act, including the reasonable production of information at the
Company’s headquarters; provided that the
Company shall not be required to disclose any confidential information to or
meet at its headquarters with any Investor until and unless such Investor shall
have entered into a confidentiality agreement in form and substance reasonably
satisfactory to the Company with the Company with respect thereto.

       

      SECTION
5. Expenses of
Registration.  The Company shall bear all expenses in
connection with the procedures in Section 1 and Section 2 and the
registration of the Registrable Securities pursuant to the Registration
Statements.

       

      SECTION
6. Aggregation of Shares.  All
shares of Registrable Securities held or acquired by Affiliates (as defined
below) of a holder of Registrable Securities shall be aggregated for the purpose
of determining the availability of or discharge of any rights under this
Agreement. In addition, a holder of Registrable Securities and its Affiliates
may allocate among themselves any rights available under this Agreement, in any
manner they shall determine in their discretion.  Any such group of
Affiliates may designate in writing one person to serve as representative of
such group for the purposes of exercising any rights or undertaking any
obligations of such group hereunder, and the Company shall be entitled to rely
on such designated representative for such purposes.  For a holder of
Registrable Securities that is an investment entity and is a partnership,
corporation or limited liability company, the term “Affiliate”
shall include, (A) all Associated Entities (as defined below) of such holder,
and (B) all stockholders, all current or former constituent limited or general
partners, and all stockholders, current or former members of such holder and any
Associated Entities of such holder.  The term “Associated
Entity” shall include any entity that is (X) a direct or indirect
subsidiary or parent of a holder of Registrable Securities or (Y) with respect
to a holder of Registrable Securities that is a limited liability company or a
limited liability partnership, (i) the manager, managing member, general partner
or management company of such holder or (ii) a fund or entity managed by the
same manager, managing member, general partner or management company or by an
entity controlling, controlled by, or under common control with such manager,
managing member, general partner or management company.  For a holder
of Registrable Securities that is an individual, the term “Affiliate”
shall also include all family members of such holder, which shall include such
holder’s children, stepchildren, grandchildren, parents, stepparents,
grandparents, spouse, siblings, mothers-in-law, fathers-in-law, sons-in-law,
daughters-in-law, brothers-in-law and sisters-in-law (including adoptive
relationships) as well as any estate-planning related trusts for the benefit of
such holder and/or any of the foregoing persons.  The status of a
holder of Registrable Securities as an Affiliate under this Agreement shall not
be deemed to be an admission that such holder is an “affiliate” for any SEC
purposes.

       

      SECTION
7. Pre-Emptive Rights.
From the date hereof until the third anniversary of the date hereof, each
Investor holding at least 5,000,000 shares of Common Stock or Securities of the
Company, subject to appropriate adjustment for all stock splits, dividends,
recapitalizations and the like (each, a “Major
Holder”), shall have the rights contained in this Section
7.  The Company shall not directly or indirectly, offer, sell or grant
any option to purchase (or announce any offer, sale, grant or any option to
purchase or other disposition of) any securities (any such offer, sale, grant,
disposition or announcement being referred to as a “Subsequent
Placement”) unless the Company shall have first complied with this
Section 7.

       

      7.1. The
Company shall deliver, at least ten (10) business days prior to the closing of a
Subsequent Placement, to each Investor who is a Major Holder of the Company (an
“Eligible
Purchaser”), a written notice (the “Offer
Notice”) of any proposed or intended issuance or sale or exchange (the
“Subsequent
Offer”) of the securities being offered (the “Offered
Securities”) in a Subsequent Placement, which Offer Notice shall (A)
identify and describe the Offered Securities, (B) describe the price or pricing
mechanism and other terms upon which they are to be issued, sold or exchanged,
and the number or amount of the Offered Securities to be issued, sold or
exchanged, and (C) offer to issue and sell to or exchange with each Eligible
Purchaser that portion of the Offered Securities that represents such Eligible
Purchaser’s pro rata percentage of the number of shares of Common Stock then
outstanding (assuming for these purposes the conversion of all outstanding
Shares into Common Stock at the then applicable conversion price) (the “Pro Rata
Amount”).

       

      7.2. To accept
a Subsequent Offer, in whole or in part, such Eligible Purchaser must deliver a
written notice to the Company prior to the end of the 10th business day after
such Eligible Purchaser’s receipt of the Offer Notice (the “Offer
Period”), setting forth the portion of such Eligible Purchaser’s Pro Rata
Amount that such Eligible Purchaser elects to purchase (in either case, the
“Notice of
Acceptance”).

       

      7.3. In
connection with any Subsequent Placement, the Company shall distribute to the
Eligible Purchasers, other than any Eligible Purchaser that has indicated to the
Company it is not interested in participating in the Subsequent Offer or that
has not prior to the end of the Offer Period delivered a Notice of Acceptance
pursuant to Section 7.2 above, all agreements and other documents to be
executed by the purchasers in the Subsequent Placement, at substantially the
same time such items are distributed to the purchasers in the Subsequent
Placement other than the Eligible Purchasers.  If any Eligible
Purchaser shall have failed to execute and deliver any such agreement or other
document in the form so distributed by the such time as may be reasonably
requested by the Company in connection with the Subsequent Placement, then such
Eligible Purchaser shall not have a right to participate in such Subsequent
Placement and all securities which such Eligible Purchaser would have been
eligible to purchase in the Subsequent Placement shall be treated as Refused
Securities (as defined below) with respect thereto.

       

      7.4. The
Company shall have ninety (90) days from the expiration of the Offer Period
above to offer, issue, sell or exchange all or any part of such Offered
Securities as to which a Notice of Acceptance has not been given by the Eligible
Purchasers (the “Refused
Securities”), but only upon terms and conditions (including, without
limitation, the total amount of the financing, unit prices and interest rates)
that are not materially more favorable to the acquiring person or persons or
materially less favorable to the Company than those set forth in the Offer
Notice, except for such changes which may, in the reasonable judgment of the
Company, be necessary or appropriate on account of changes in market conditions,
provided that
if the Company makes such changes, it will use reasonable commercial efforts to
consult with the Eligible Purchasers and to provide them the opportunity to
participate in the financing as modified by such changes.

       

      7.5. Upon the
closing of the issuance, sale or exchange of all or less than all of the Refused
Securities, the Eligible Purchasers shall acquire from the Company, and the
Company shall issue to the Eligible Purchasers, the number or amount of Offered
Securities specified in the Notices of Acceptance, upon the terms and conditions
specified in the Subsequent Offer, subject to the terms and conditions contained
in this Section 7.

       

      7.6. The
restrictions and other provisions contained in this Section 7 shall not apply to
the issuance of any securities issued or issuable: (A) to any employee, officer,
director or consultant in connection with any plan or other compensatory
arrangement approved by the Board of Directors or the compensation committee of
the Board of Directors of the Company; (B) upon the exercise of any warrants
outstanding as of the date hereof; (C) to financial institutions, equipment
lessors, brokers or similar persons in connection with commercial credit
arrangements, equipment financings, commercial property lease transactions or
similar non-equity transactions; (D) in connection with bona fide acquisition,
merger or similar transaction; or (E) to an entity as a component of any
business relationship with such entity primarily for the purpose of (1) joint
venture, technology licensing or development activities, (2) distribution,
supply or manufacture of the Company’s products or services or (3) any other
arrangements that are primarily for purposes other than raising equity
capital.  For the avoidance of doubt, the restrictions and other
provisions contained in this Section 7 shall apply to the issuance of any
securities issued or issuable in any underwritten public offering.

       

      SECTION
8. Market Standoff
Agreement.  Each Investor agrees that if so requested by the
Company or any representative of the underwriters (the “Managing
Underwriter”) in connection with any registration of the offering of any
securities of the Company under the Securities Act, such Investor shall
not, directly or indirectly, offer, sell, pledge, contract to sell, enter into
any hedge or swap transaction with respect to, grant any option to purchase,
sell short, grant a security interest in or otherwise dispose of or transfer or
enter into any transaction which is designed to, or might reasonably be expected
to, result in the disposition of (whether by actual disposition or effective
economic disposition due to cash settlement or otherwise) any Securities or
other securities of the Company (other than securities to be sold in such
registration) for a period specified by the Managing Underwriter not to exceed
90 days (or 180 days if holders of 40% of the then outstanding Registrable
Securities have agreed to such longer period) (the “Market Standoff
Period”) following the effective date of a registration statement of the
Company filed under the Securities Act.  The Company may impose
stop-transfer instructions with respect to securities subject to the foregoing
restrictions until the end of such Market Standoff Period and these restrictions
shall be binding on any transferee of such shares.  Notwithstanding
the foregoing, the Market Standoff Period may be extended for up to such number
of additional days (not to exceed 18 more days) as is deemed necessary by the
Company or the Managing Underwriter in good faith upon the advice of counsel to
continue coverage by research analysts in accordance with NASD Rule 2711 or any
successor rule.

       

      SECTION
9. Indemnification.

       

      9.1. For
purposes of this Section 9 only:

       

      (A)           the
term “Prospectus”
shall mean the prospectus and any amendment or supplement thereto in the form
first filed with the SEC pursuant to Rule 424(b) promulgated under the
Securities Act or, if no Rule 424(b) filing is required, filed as part of the
Registration Statement at the time of effectiveness, as supplemented or amended
from time to time;

       

      (B)           the
term “Registration
Statement” shall include any final prospectus, exhibit, supplement or
amendment included in or relating to a Registration Statement; and

       

      (C)           the
term “Indemnified
Party” shall mean each Investor and any officer, director, shareholder,
partner, member, employee, agent, trustee or affiliate of each Investor and each
Person, if any, who controls, is controlled by or is under common control with
any Investor within the meaning of Section 15 of the Securities Act and Section
20 of the Exchange Act.

       

      9.2. The
Company agrees to indemnify and hold harmless each Indemnified Party against any
losses, claims, damages, liabilities or expenses, joint or several, to which
such Indemnified Party may become subject under the Securities Act, the Exchange
Act, or any other federal or state statutory law or regulation, or at common law
or otherwise (including in settlement of any litigation, if such settlement is
effected with the written consent of the Company), insofar as such losses,
claims, damages, liabilities or expenses (or actions in respect thereof as
contemplated below) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in a Registration
Statement or Prospectus, 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, or arise out of or are based in whole or
in part on any inaccuracy in the representations and warranties of the Company
contained in the Subscription Agreement, or arise out of the Company’s failure
to provide written notice of a Suspension, or any failure of the Company to
perform its obligations hereunder, and will reimburse each Indemnified Party for
any legal and other expenses reasonably incurred as such expenses are reasonably
incurred by such Indemnified Party in connection with investigating, defending,
settling, compromising or paying any such loss, claim, damage, liability,
expense or action; provided, however, that the
Company will not be liable in any such case to the extent that any such loss,
claim, damage, liability or expense arises out of or is based upon (i) an
untrue statement or alleged untrue statement or omission or alleged omission
made in a Registration Statement or Prospectus in reliance upon and in
conformity with written information furnished to the Company by or on behalf of
the Indemnified Party expressly for use therein, (ii) the failure of such
Indemnified Party to comply with the covenants and agreements contained in this
Agreement respecting sale of the Registrable Securities, (iii) the
inaccuracy of any representations made by such Indemnified Party in the
Subscription Agreement.

       

      9.3. Each
Investor will severally, and not jointly, indemnify and hold harmless the other
Investors and the Company, each of its directors, each of its officers who
signed a Registration Statement and each Person, if any, who controls the
Company within the meaning of the Securities Act, against any losses, claims,
damages, liabilities or expenses to which the Company, each of its directors,
each of its officers who signed a Registration Statement or controlling Person
may become subject, under the Securities Act, the Exchange Act, or any other
federal or state statutory law or regulation, or at common law or otherwise
(including in settlement of any litigation, if such settlement is effected with
the written consent of such Investor) insofar as such losses, claims, damages,
liabilities or expenses (or actions in respect thereof as contemplated below)
arise out of or are based upon (i) any failure by such Investor to
comply with the agreements contained in Section 3 above respecting the sale of
the Registrable Securities unless such failure by such Investor is directly
caused by the Company’s failure to provide written notice of a Suspension to
such Investor, (ii) the inaccuracy of any representation made by such
Investor in the Subscription Agreement or (iii) any untrue or alleged
untrue statement of any material fact contained in a Registration Statement or
the Prospectus, or 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 made in a
Registration Statement or Prospectus in reliance upon and in conformity with
written information furnished to the Company by or on behalf of such Investor
expressly for use therein, and will reimburse the Company, each of its
directors, each of its officers who signed a Registration Statement or
controlling Person for any legal and other expense reasonably incurred, as such
expenses are reasonably incurred by the Company, each of its directors, each of
its officers who signed a Registration Statement or controlling Person in
connection with investigating, defending, settling, compromising or paying any
such loss, claim, damage, liability, expense or action; provided, however, that the
aggregate liability of any Investor under this Section 9 shall not exceed
the net proceeds received by such Investor upon the sale of the Registrable
Securities included in the Registration Statement or Prospectus giving rise to
such indemnification obligation.  No Investor shall be liable for the
indemnification obligations of any other Investor.

       

      9.4. Promptly
after receipt by an indemnified party under this Section 9 of notice of the
threat or commencement of any action, such indemnified party will, if a claim in
respect thereof is to be made against an indemnifying party under this
Section 9, promptly notify the indemnifying party in writing thereof, but
the omission so to notify the indemnifying party will not relieve it from any
liability which it may have to any indemnified party hereunder or otherwise to
the extent it is not prejudiced as a result of such failure.  In case
any such action is brought against any indemnified party and such indemnified
party seeks or intends to seek indemnity from an indemnifying party, the
indemnifying party will be entitled to participate in, and, to the extent that
it may wish, jointly with all other indemnifying parties similarly notified, to
assume the defense thereof with counsel reasonably satisfactory to such
indemnified party; provided, however, if the
defendants in any such action include both the indemnified party and the
indemnifying party and the indemnified party shall have reasonably concluded
that there may be a conflict between the positions of the indemnifying party and
the indemnified party in conducting the defense of any such action or that there
may be legal defenses available to it and/or other indemnified parties which are
different from or additional to those available to the indemnifying party, the
indemnified party or parties shall have the right to select separate counsel to
assume such legal defenses and to otherwise participate in the defense of such
action on behalf of such indemnified party or parties.  Upon receipt
of notice from the indemnifying party to such indemnified party of its election
to assume the defense of such action and approval by the indemnified party of
counsel, the indemnifying party will not be liable to such indemnified party
under this Section 9 for any legal or other expenses subsequently incurred
by such indemnified party in connection with the defense thereof unless
(i) the indemnified party shall have employed such counsel in connection
with the assumption of legal defenses in accordance with the proviso to the
preceding sentence (it being understood, however, that the indemnifying party
shall not be liable for the expenses of more than one separate counsel,
reasonably satisfactory to the indemnifying party, representing the indemnified
parties who are parties to such action) or (ii) the indemnified party shall
not have employed counsel reasonably satisfactory to the indemnified party to
represent the indemnified party within a reasonable time after notice of
commencement of action, in each of which cases the reasonable fees and expenses
of counsel shall be at the expense of the indemnifying party.  No
indemnifying party, in the defense of any claim covered by this Section 9,
shall, except with the prior written consent of the indemnified party, which
consent shall not be unreasonably conditioned, withheld or delayed, consent to
entry of any judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
indemnified party of a release from all liability in respect to such
claim.  An indemnified party shall not consent to entry of any
judgment or enter into any settlement without the prior written consent of the
indemnifying party.

       

      9.5. If the
indemnification provided for in this Section 9 is unavailable to or insufficient
to hold harmless an indemnified party under Section 9.2 or Section 9.3 in
respect of any losses, claims, damages, liabilities or expenses (or actions in
respect thereof) referred to therein, then each indemnifying party shall
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages, liabilities or expenses (or actions in respect
thereof) in such proportion as is appropriate to reflect the relative fault of
the Company on the one hand and the Investors on the other in connection with
the statements or omissions or other matters which resulted in such losses,
claims, damages, liabilities or expenses (or actions in respect thereof), as
well as any other relevant equitable considerations.  The relative
fault shall be determined by reference to, among other things, in the case of an
untrue statement, whether the untrue statement relates to information supplied
by the Company on the one hand or an Investor on the other and the parties’
relative intent, knowledge, access to information and opportunity to correct or
prevent such untrue statement.  The Company and the Investors agree
that it would not be just and equitable if contribution pursuant to this Section
9.5 were determined by pro rata allocation (even if the Investors were treated
as one entity for such purpose) or by any other method of allocation which does
not take into account the equitable considerations referred to above in this
Section 9.5.  The amount paid or payable by an indemnified party as a
result of the losses, claims, damages, liabilities or expenses (or actions in
respect thereof) referred to above in Section 9.5 shall be deemed to include any
legal or other expenses reasonably incurred by such indemnified party in
connection with investigating or defending any such action or claim; provided, however, that the
aggregate liability of any Investor under this Section 9 shall not exceed
the net proceeds received by such Investor upon the sale of the Registrable
Securities included in the Registration Statement or Prospectus giving 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.  The Investors’ obligations in this Section 9.5 to
contribute are several in proportion to their sales of Registrable Securities to
which such loss relates and not joint.

       

      SECTION
10. Information
Rights.  Each Major Holder shall receive via regular or
electronic mail (i) Annual Reports on Form 10-K, or audited annual financials,
no later than 90 days, or 105 days should the Company file an extension on Form
12b-25, following each fiscal year end, and (ii) Quarterly Reports on Form 10-Q,
or unaudited quarterly financials prepared in accordance with GAAP consistently
applied, no later than 45 days, or 50 days should the Company file an extension
on Form 12b-25, following each quarter end.

       

      SECTION
11. Board
Representation.  Pursuant to the Company’s certificate of
incorporation and related certificate of designations of Series B Stock,
holders of Series B Stock have the right to elect three directors to the
Company’s Board of Directors, who shall initially be David Buzby, Tom Hutton and
a representative designated by funds associated with Trident Capital (the
“Investor
Designees”), with Tom Hutton as Chairman of the Board of
Directors.  Three existing members of the Board of Directors shall
have resigned from the Board of Directors, leaving four prior members and the
Investor Designees on the Board of Directors.  In addition, one of the
four prior members of the Board of Directors shall resign at such time as
requested by holders of a majority of the outstanding shares of Series B Stock
to permit election of a new seventh member of the Board of Directors approved by
a majority of the remainder of the Board of Directors.  Each Investor
Designee shall be entitled to serve on any committee of the Board of Directors.
Gary DeLaurentiis, if not a member of the Board of Directors, shall be provided
board observer status following his resignation from the Board of Directors, in
which he may attend meetings of the Board of Directors, except in executive
session.

       

      SECTION
12. Limitations on Subsequent
Registration Rights.  From and after the date hereof, the
Company shall not enter into any agreement granting any holder or prospective
holder of any securities of the Company registration rights with respect to such
securities that conflict with, dilute or impair the rights granted to the
holders of Registrable Securities herein, without the consent of holders of at
least a majority of the Registrable Securities.

       

      SECTION
13. Transfer of Registration
Rights.  The rights to cause the Company to register securities
granted to a holder of Registrable Securities under this Agreement may be
assigned by such holder only to a transferee or assignee of not less than
five million (5,000,000) shares of the Registrable Securities (as
appropriately adjusted for stock splits, stock dividends, reorganizations and
the like) then outstanding, provided that the
Company is given prior written notice of such assignment, stating the name and
address of the transferee or assignee and identifying the securities with
respect to which such registration rights are being assigned, and, provided, further, that the
assignee of such rights assumes in writing the obligations of such holder of
Registrable Securities under this Agreement.  Notwithstanding the
foregoing, no such minimum share assignment requirement shall be necessary for
an assignment by a holder of Registrable Securities to an Affiliate of such
holder.

       

      SECTION
14. Prior
Agreements.  This Agreement supersedes and replaces agreements
with holders of Common Stock (or other securities or warrants convertible into
shares of Common Stock) granting such holders registration rights, among other
things (the “Prior
Agreements”) in their entirety, and the Prior Agreements are hereby
void and of no further force or effect.  By execution of this
Agreement, each Investor which is a party to a Prior Agreement expressly waives
any registration right, right of first refusal, participation right or similar
right granted to such Investor pursuant to the Prior Agreements.

       

      SECTION
15. Miscellaneous.

       

      15.1. Notices.  All
communications hereunder shall be in writing and shall be hand delivered, mailed
by first-class mail, couriered by next-day air courier or by facsimile and
confirmed in writing (i) if to the Company, at the addresses set forth
below, or (ii) if to an Investor, to the address set forth for such party
on the signature page hereto, with a copy to Latham &Watkins LLP, 140 Scott
Drive, Menlo Park, California 94025, Attention: Patrick Pohlen,
Esq.

       

      If to the
Company:

      

      ECO2
Plastics, Inc.

      680
Second Street, Suite 200

      San
Francisco, California 94107

      

      Attention:  Chief
Executive Officer

      Telephone:
415-829-6002

      Facsimile:  415-829-6001

      

      with a
copy to:

      

      The Otto
Law Group, PLLC

      601 Union
Street, Suite 4500

      Seattle,
Washington 98101

      Attn:  David
Otto

      Telephone:  206-838-9731

      Facsimile:  206-262-9513

      

                            All
such notices and communications shall be deemed to have been duly
given:  (i) when delivered by hand, if personally delivered;
(ii) five business days after being deposited in the mail, postage prepaid,
if mailed certified mail, return receipt requested; (iii) one business day
after being timely delivered to a next-day air courier guaranteeing overnight
delivery; (iv) the date of transmission if sent via facsimile to the
facsimile number as set forth in this Section or the signature page hereof prior
to 5:00 pm in the time zone of the recipient on a business day, with
confirmation of successful transmission or (v) the business day following
the date of transmission if sent via facsimile at a facsimile number set forth
in this Section or on the signature page hereof after 5:00 p.m. in the time zone
of the recipient or on a date that is not a business day.  Change of a
party’s address or facsimile number may be designated hereunder by giving notice
to all of the other parties hereto in accordance with this Section.

       

      15.2. Successors and
Assigns.  This Agreement will be binding upon and inure to the
benefit of the parties hereto and their respective successors and permitted
assigns.  Any purported assignment or delegation in violation of this
Agreement shall be null and void ab initio.

       

      15.3. Amendment and
Waiver.

       

      (a)           Except
as otherwise expressly provided herein, this Agreement may be amended or
modified only upon the written consent of (i) the Company and (ii) the holders
of at least a majority of the then outstanding shares of Series B Stock, voting
together as a single class on an as-converted basis and including any Common
Stock issued upon conversion thereof; provided, however, that no
amendment of this Agreement shall materially and adversely affect the rights of
an Investor in a manner that materially and disproportionately discriminates
against such Investor in relation to the other Investors without such Investor's
written consent.

       

      (b)           Except
as otherwise expressly provided, the obligations of the Company and the rights
of the Investors under this Agreement may be waived only with the written
consent of (i) the Company and (ii) the holders of at least a majority of the
then outstanding shares of Series B Stock voting together as a single class on
an as-converted basis and including any Common Stock issued upon conversion
thereof; provided, however, that no
waiver of this Agreement shall materially and adversely affect the rights of an
Investor in a manner that materially and disproportionately discriminates
against such Investor in relation to the other Investors without such Investor’s
written consent.

       

      (c)           For
the purposes of determining the number of Investors entitled to vote or exercise
any rights hereunder, the Company shall be entitled to rely solely on the list
of record holders of its stock as maintained by or on behalf of the
Company.

       

      15.4. Entire Agreement; No Third
Party Beneficiary.  This Agreement, together with the other
Transaction Documents (as defined in the Subscription Agreement), constitutes
the entire agreement among the parties hereto and supersedes all prior
agreements, understandings and arrangements, oral or written, among the parties
hereto with respect to the subject matter hereof and thereof.  This
Agreement is not intended to confer upon any Person not a party hereto (or their
successors and permitted assigns) any rights or remedies hereunder.

       

      15.5. Severability.  If
any provision of this Agreement is held to be invalid or unenforceable in any
respect, the validity and enforceability of the remaining terms and provisions
of this Agreement shall not in any way be affected or impaired
thereby.

       

      15.6. APPLICABLE
LAW.  THE VALIDITY AND INTERPRETATION OF THIS AGREEMENT, AND
THE TERMS AND CONDITIONS SET FORTH HEREIN SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA, WITHOUT GIVING EFFECT TO
PROVISIONS RELATING TO CONFLICTS OF LAW TO THE EXTENT THE APPLICATION OF THE
LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.  THE PARTIES
HEREBY IRREVOCABLY AND UNCONDITIONALLY AGREE THAT ACTIONS, SUITS OR PROCEEDINGS
ARISING OUT OF OR RELATING TO THIS AGREEMENT MAY BE BROUGHT ONLY IN STATE OR
FEDERAL COURTS LOCATED IN THE CITY OF SAN FRANCISCO, CALIFORNIA AND HEREBY
SUBMIT TO THE EXCLUSIVE JURISDICTION OF SUCH COURTS FOR SUCH
PURPOSE.

       

      15.7. Counterparts.  This
Agreement may be executed in two or more counterparts and may be delivered by
facsimile transmission, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.

       

      15.8. Rights of
Holders.  Each party to this Agreement shall have the absolute
right to exercise or refrain from exercising any right or rights that such party
may have by reason of this Agreement, including, without limitation, the right
to consent to the waiver or modification of any obligation under this Agreement,
and such party shall not incur any liability to any other party or other holder
of any securities of the Company as a result of exercising or refraining from
exercising any such right or rights.

       

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      IN
WITNESS WHEREOF, the parties have executed this Investor Rights Agreement as of
the date first above written.

      

       

      ECO2
PLASTICS, INC.

       

      

       

      By:           

      Name:  Rodney S.
Rougelot

      Title:    Chief
Executive Officer

      

      

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      INVESTORS:

      

      

      Trident
Capital Fund-VI, L.P.

      Trident
Capital Fund-VI Principals Fund, L.L.C.

      

      Executed
by the undersigned as an authorized signatory of the General Partner of Trident
Capital Fund-VI, L.P. and of the Managing Member of Trident Capital Fund-VI
Principals Fund, L.L.C.

      

      

      (signature)

      

      

      (print name)

      

      

       

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      INVESTORS:

      

      
        	 
      	 
      
	 
      	
                By:       _________________________________

              
	 
      	
                Name:  _________________________________

              
	 
      	
                Title:    _________________________________

              

      

      

      

      

       

      
        
          
            

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