Document:

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 Exhibit 4.2

Meridian Waste Solutions, Inc.

 

Amended and Restated Purchase Warrant for Common Shares and Series C Shares

 

July 19, 2016 

 

 

 

 

 

 

 

 

 

 

THIS AMENDED AND RESTATED WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS, AND MAY NOT BE PLEDGED, SOLD, OFFERED FOR SALE, TRANSFERRED, OR OTHERWISE DISPOSED OF IN THE ABSENCE OF REGISTRATION UNDER OR EXEMPTION FROM SUCH ACT AND ALL APPLICABLE
STATE SECURITIES LAWS.

 

  

  

  

Table of Contents

 

	
1
	
EXERCISE OF WARRANT
	
2

	
1.1
	
Manner of Exercise; Payment
	
2

	
1.2
	
When Exercise Effective
	
2

	
1.3
	
Reserved.
	
2

	
1.4
	
Delivery of Stock Certificates and New Warrant
	
2

	
1.5
	
Company to Reaffirm Obligations
	
3

	
2
	
DIVIDENDS, DISTRIBUTIONS, ETC..
	
3

	
2.1
	
Dividends, Distributions, etc
	
3

	
3
	
CONSOLIDATION, MERGER, ETC.
	
3

	
3.1
	
Adjustments for Consolidation, Merger, Sale of Assets, Reorganizations, etc
	
3

	
3.2
	
Assumption of Obligations
	
3

	
4
	
Reserved.
	
4

	
5
	
NO DILUTION OR IMPAIRMENT
	
4

	
6
	
NOTICES OF CORPORATE ACTION
	
4

	
7
	
PREEMPTIVE RIGHTS.
	
5

	
7.1
	
Preemptive Right on Senior Capital
	
5

	
7.2
	
Notice to Holder
	
5

	
8
	
REGISTRATION RIGHTS.
	
5

	
8.1
	
Generally
	
5

	
8.2
	
Demand Registration Rights
	
5

	
8.3
	
Piggyback Registration
	
6

	
8.4
	
Deemed Underwriter
	
6

	
8.5
	
Expenses
	
7

	
8.6
	
Obligations of the Company
	
7

	
8.7
	
Termination of Registration Rights
	
10

	
8.8
	
Indemnification.
	
10

	
9
	
PUT OF WARRANTS.
	
12

	
9.1
	
Put Right.
	
12

	
9.2
	
Failure to Pay Redemption Price.
	
13

	
10
	
AVAILABILITY OF INFORMATION.
	
14

	
10.1
	
Compliance
	
14

	
10.2
	
Cooperation
	
14

	
10.3
	
Reserved
	
14

	
10.4
	
Assistance with Sales of Warrant Shares
	
14

	
11
	
RESERVATION OF EQUITY SECURITIES, ETC
	
14

	
12
	
VOTING AND CONSENT RIGHTS
	
14

 

i

  

Table of Contents

 

	
12.1
	
General
	
14

	
12.2
	
Consent Rights
	
15

	
13
	
OWNERSHIP, TRANSFER AND SUBSTITUTION OF WARRANTS.
	
15

	
13.1
	
Ownership of Warrants
	
15

	
13.2
	
Office; Transfer and Exchange of Warrants.
	
15

	
13.3
	
Assistance in Disposition of Warrant or Warrant Shares
	
16

	
13.4
	
Replacement of Warrants
	
16

	
14
	
REPRESENTATIONS AND WARRANTIES.
	
16

	
14.1
	
Representations and Warranties of the Company
	
16

	
14.2
	
Representations and Warranties of the Holders
	
17

	
15
	
DEFINITIONS
	
18

	
16
	
EQUITY SECURITIES DEEMED OUTSTANDING
	
23

	
17
	
INFORMATION AND OBSERVATION RIGHTS.
	
23

	
17.1
	
Information Rights
	
23

	
17.2
	
Right to Appoint Observer
	
23

	
18
	
MULTIPLE HOLDERS; NO LIABILITIES AS A STOCKHOLDER.
	
24

	
18.1
	
Multiple Holders
	
24

	
18.2
	
No Liabilities As a Stockholder
	
24

	
19
	
NO EFFECT ON LENDER RELATIONSHIP
	
24

	
20
	
CORPORATE OPPORTUNITIES AND CONFLICTS OF INTEREST.
	
24

	
20.1
	
General
	
24

	
20.2
	
Duties of the Purchasers
	
25

	
20.3
	
Duties of Certain of the Purchaser’s Affiliates
	
25

	
20.4
	
Corporate Opportunities Defined
	
25

	
21
	
NON PROMOTION
	
25

	
22
	
USE OF LOGO
	
26

	
23
	
LOCK-UP LIMITATIONS
	
26

	
24
	
NOTICES.
	
26

	
24.1
	
Manner of Delivery
	
26

	
24.2
	
Place of Delivery
	
26

	
25
	
WAIVERS; AMENDMENTS
	
26

	
26
	
INDEMNIFICATION.
	
26

	
26.1
	
Generally
	
27

	
26.2
	
Other Indemnitors
	
27

	
26.3
	
Certain Limitations
	
28

	
26.4
	
Other
	
28

 

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Table of Contents

 

	
27
	
MISCELLANEOUS.
	
28

	
27.1
	
Expenses
	
28

	
27.2
	
Successors and Assigns
	
28

	
27.3
	
Severability
	
28

	
27.4
	
Equitable Remedies
	
28

	
28.5
	
Continued Effect
	
29

	
28.6
	
GOVERNING LAW
	
29

	
28.7
	
WAIVER OF JURY TRIAL
	
29

	
28.8
	
Section Headings; Construction
	
29

	
28.9
	
Counterparts
	
29

 

iii

  

THIS AMENDED AND RESTATED WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS, AND MAY NOT BE PLEDGED, SOLD, OFFERED FOR SALE, TRANSFERRED, OR OTHERWISE DISPOSED OF IN THE ABSENCE OF REGISTRATION UNDER OR EXEMPTION FROM SUCH ACT AND ALL APPLICABLE
STATE SECURITIES LAWS.

 

Meridian Waste Solutions, Inc.

 

Amended and Restated Purchase Warrant for Common Shares and Series C Shares

 

	
No. W-1
	
 New York, New York

 

 July 19, 2016

 

Meridian Waste Solutions, Inc., a New York corporation (the “Company”), for value received, hereby certifies that Goldman, Sachs & Co. (the “Purchaser”) and the other Holders (if any), are entitled to purchase from the Company (i) a number of Common Shares, measured
as of the time of exercise of this Warrant, equal to a 6.5% Percentage Interest less the number of Common Shares (if any, at the applicable time of measurement) for which the Aggregate Warrant Series C Shares are convertible (for the avoidance of doubt, the number of Aggregate Warrant Common Shares shall be calculated after giving effect to the exercise of this Warrant) (the “Aggregate Warrant Common Shares”), at an aggregate purchase price equal to $449,553 (the
“Aggregate Warrant Common Price”), (ii) a number of Series C Shares, measured as of the time of exercise of this Warrant, equal to 6.5% of the total number of issued and outstanding Series C Shares (for the avoidance of doubt, the number of Aggregate Warrant Series C Shares shall be calculated after giving effect to the exercise of this Warrant) (the “Aggregate Warrant Series C Shares” and, together with the
Aggregate Warrant Common Shares, the “Aggregate Warrant Shares”), at an aggregate purchase price equal to $10.00 (the “Aggregate Warrant Series C Price” and, when added to the Aggregate Warrant Common Price, the “Aggregate Warrant Price”), (iii) at any time on or before 5:00 P.M., New York, New York time on December 22, 2023 (the “Expiration
Date”). Assuming that the representations and warranties contained in Section 

14.1(e) are true and correct and that all Series B Shares are Subject Series B Shares, as of the date hereof, this Warrant is exercisable for 2,200,056 Aggregate Warrant Common Shares and 389,375 Aggregate Warrant Series C Shares, as calculated on Schedule II hereto.  For the avoidance of doubt, if all of the Series C Shares of the Company are automatically converted or redeemed pursuant to the Certificate
of Designations, Preferences and Rights of the Series C Convertible Preferred Stock of the Company (the “Series C Certificate of Designation”), this Warrant shall be exercisable for a number of Common Shares, measured as of the time of exercise, equal to a 6.5% Percentage Interest (for the avoidance of doubt, the Aggregate Warrant Common Shares shall be calculated after giving effect to the exercise of this Warrant) for an aggregate purchase price equal
to the Aggregate Warrant Common Price.

 

This Warrant amends and restates in its entirety that certain Warrant, dated December 22, 2015, by and between the parties hereto (the “Original Warrant”), which was issued in connection with that certain Credit and Guaranty Agreement, dated as of December 22, 2015, by and among the Company, certain of its Subsidiaries
and Affiliates, the Purchasers named therein, and Goldman Sachs Specialty Lending Group, L.P., as administrative agent and lead arranger (as amended, restated or otherwise modified from time to time, the “Credit Agreement”). Certain capitalized terms used herein are defined in Section 

15.

 

1

 

 

1. EXERCISE OF WARRANT

 

1.1 Manner of Exercise; Payment. The Holder may exercise this Warrant (or portion thereof owned by the Holder,
as the case may be), in whole or in part, during normal business hours on any Business Day on or prior to the Expiration Date, by surrender of this Warrant to the Company at its Chief Executive Office, accompanied by a subscription (in the form attached to this Warrant as

Exhibit I) duly executed by the Holder and accompanied by payment, at the Holder’s election, (i) in cash, (ii) by certified check payable to the order of the Company, (iii) by wire transfer of immediately available funds, (iv) by cancellation of Warrant Shares, with any such Warrant Shares so cancelled being credited against such payment in an amount equal to the Fair Market Value thereof (a “Cashless Exercise”),
or (v) if the Holder is the Purchaser or any of its Affiliates, by the surrender by the Holder to the Company of any Notes held by the Holder, with any such Notes so surrendered being credited against such payment in an amount equal to the then outstanding principal amount thereof plus accrued interest thereon through the date of surrender, or by any combination of any of the foregoing methods, of the amount obtained by multiplying (a) the number and type of Warrant Shares designated in such subscription by (b)
the Per Common Share Warrant Price or Per Series C Share Warrant Price, as applicable, and the Holder shall thereupon be entitled to receive the number and type of duly authorized Warrant Shares determined as provided in Sections 

2 and

3. In connection with any exercise of this Warrant, the Company shall provide the Holder with a certificate with the calculation of the Aggregate Warrant Shares as of the date of exercise. The Company acknowledges that the provisions of clause 

(iv) are intended, in part, to ensure that a full or partial exchange of this Warrant will qualify as a conversion, within the meaning of paragraph (d)(3)(ii) of Rule 144 under the Securities Act. At the request of the Holder, the Company will accept reasonable modifications to the exchange procedures provided for in this Section in order to accomplish such intent.

 

1.2 When Exercise Effective. Each exercise of this Warrant shall be deemed to have been effected immediately prior
to the close of business on the Business Day on which this Warrant shall be deemed to have been surrendered to the Company as provided in Section 

1.1, and, at such time, the Person or Persons in whose name or names any certificate or certificates for Warrant Shares shall be issuable upon such exercise as provided in Section 

1.4 shall be deemed to have become the holder or holders of record thereof.

 

1.3 Reserved.

 

1.4 Delivery of Stock Certificates and New Warrant. As soon as practicable after each exercise of this Warrant,
in whole or in part, the Company at its sole expense (including the payment by it of any applicable stamp, documentary or similar taxes) will cause to be issued in the name of and delivered to the Holder or, subject to Section 

13, as the Holder (upon payment by the Holder of any applicable transfer taxes) may direct:

 

(a) in lieu of any fractional Warrant Share to which the Holder would otherwise be entitled, cash in an amount equal to the Fair Market Value thereof on the day immediately preceding such exercise; and

 

(b) in case such exercise is in part only, a new Warrant or Warrants of like tenor, dated the date hereof, entitling the Holder to purchase from the Company a Percentage Interest of (i) Common Shares equal to (x) the Percentage Interest
represented by the Aggregate Warrant Common Shares (measured immediately prior to such exercise) minus (y) the Percentage Interest represented by the Warrant Common Shares for which this Warrant was exercised, and (ii) Series C Shares equal to (x) the Series C Percentage Interest represented by the Aggregate Warrant Series C Shares (measured immediately prior to such exercise) minus (y) the Series C Percentage Interest
represented by the Warrant Series C Shares for which this Warrant was exercised, which new Warrant or Warrant shall be subject to adjustment and measurement on the same terms as set forth in this Warrant.

 

 

2

 

 

1.5 Company to Reaffirm Obligations. The Company will, at the time of each exercise of this Warrant, upon the request
of the Holder, acknowledge in writing its continuing obligation to afford to the Holder all rights to which the Holder is entitled after such exercise in accordance with the terms of this Warrant; provided, however, that if the Holder shall fail to make any such request, then such failure shall not affect the continuing obligation of the Company to afford such rights to the Holder. Additionally, upon the request of
the Holder, the Company shall provide the Holder with a calculation of the Aggregate Warrant Shares as of the date of the Holder’s request (or such other date provided for in such request).

 

2.    DIVIDENDS, DISTRIBUTIONS, ETC..

 

2.1 Dividends, Distributions, etc. If the Company at any time or from time to time after the date hereof declares,
orders, pays or makes a dividend or other distribution (including any distribution of cash, Equity Securities or other property, by way of dividend or spin-off, reclassification, recapitalization or similar corporate rearrangement or otherwise) or makes any payment on or with respect to its Equity Securities (whether on Common Shares, Series C Shares or otherwise) then, and in each such case, the Holder shall be entitled to receive an amount in cash, Equity Securities or other property as if this Warrant had
been exercised in full and converted to Warrant Shares in accordance with the provisions of Section 1.1 immediately prior to the close of business on the day immediately preceding the record date.

 

3. CONSOLIDATION, MERGER, ETC.

 

3.1 Adjustments for Consolidation, Merger, Sale of Assets, Reorganizations, etc. If after the date hereof the Company (a) shall consolidate with or merge
into any other Person and shall not be the continuing or surviving corporation of such consolidation or merger, (b) shall permit any other Person to consolidate with or merge into the Company and the Company shall be the continuing or surviving Person but, in connection with such consolidation or merger, the Warrant Shares shall be changed into or exchanged for cash or Equity Securities of any other Person or any other property, (c) shall Transfer all or substantially all of its properties or assets to any other
Person or (d) shall effect a capital reorganization or reclassification of the Warrant Shares and/or its Equity Securities or a conversion to a new domicile, then, and in the case of each such transaction, proper provision shall be made so that upon the basis and the terms and in the manner provided in this Warrant, the Holder, upon the exercise hereof at any time after the consummation of such transaction, shall be entitled to receive (after giving effect to the payment of the Aggregate Warrant Price), in lieu
of Warrant Shares, the greatest amount of cash, Equity Securities or other property to which the Holder would actually have been entitled as an equity holder upon such consummation if the Holder had exercised the rights represented by this Warrant immediately prior thereto, subject to adjustments (subsequent to such consummation) as nearly equivalent as possible to the adjustments provided for in Sections 

2 and

3.

 

3.2 Assumption of Obligations. Notwithstanding anything contained in this Warrant or in the Credit Agreement to
the contrary, the Company will not effect any of the transactions described in Section 

3.1 unless, prior to the consummation thereof, each Person (other than the Company) that may be required to deliver any cash, Equity Securities or other property upon the exercise of this Warrant as provided herein shall assume, by written instrument delivered to, and reasonably satisfactory to, the Holder, (a) the obligations of the Company under this Warrant (and if the Company shall survive the consummation of such transaction, such assumption shall be in addition
to, and shall not release the Company from, any continuing obligations of the Company under this Warrant) and (b) the obligation to deliver to the Holder such cash, Equity Securities or other property as, in accordance with the foregoing provisions of this Section 

3, the Holder may be entitled to receive, and such Person shall have similarly delivered to the Holder an opinion of counsel for such Person, which counsel and opinion shall be reasonably satisfactory to the Holder, stating that this Warrant shall thereafter continue in full force and effect and the terms hereof (including all of the provisions of this Section 

3) shall be applicable to the cash, Equity Securities or other property that such Person may be required to deliver upon any exercise of this Warrant or the exercise of any rights pursuant hereto. Nothing in this Section 

3 shall be deemed to authorize the Company to enter into any transaction requiring the consent of the Purchaser or any of its Affiliates (or any other Holder) in any Transaction Document.

 

3

 

 

4. Reserved.

 

5. NO DILUTION OR IMPAIRMENT. The Company shall not, by amendment of its Charter Documents or through any consolidation, merger, reorganization, transfer of assets, dissolution, issue
or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such action as may be necessary or appropriate in order to protect the rights of the Holder against dilution or other impairment. Without limiting the generality of the foregoing, the Company (a) will not permit the par value of any Warrant Shares to exceed the amount
payable therefor upon such exercise, (b) will take all such action as may be reasonably necessary or appropriate in order that the Company may validly and legally issue the Warrant Shares and (c) will not take any action that results in any adjustment of the Per Common Share Warrant Price or Per Series C Share Warrant Price if the Aggregate Warrant Common Shares or Aggregate Warrant Series C Shares after such action would exceed the total number of Common Shares or Series C Shares, respectively, then authorized
by the Restated Certificate and available for the purpose of issuance upon such exercise.

 

6. NOTICES OF CORPORATE ACTION. If at any time prior to the expiration date of the Warrants and prior to their exercise in full, the Company agrees or commits to any one or more of
the following events:

 

(a) any taking by the Company of a record of the holders of any class of its Equity Securities for the purpose of determining the holders thereof who are entitled to receive any dividend or other distribution, or any right to subscribe
for, purchase or otherwise acquire any Equity Securities of the Company or any other property, or to receive any other right;

 

(b) any Warrant Trigger Event or any other capital reorganization of the Company, any reclassification or recapitalization of the Equity Securities of the Company or any consolidation or merger involving the Company and any other Person
or any Transfer of all or substantially all the assets of the Company (on a consolidated basis) to any other Person; or

 

(c) any voluntary or involuntary dissolution, liquidation or winding-up of the Company,

 

then the Company will deliver to the Holder a notice (which notice may be delivered to the Holder Appointee), not less than ten (10) days prior to the proposed occurrence of such event, specifying (i) the expected date on which any such record is to be taken for the purpose of such dividend, distribution or right, and the amount and character of such dividend, distribution
or right, (ii) the expected date on which any such reorganization, reclassification, recapitalization, consolidation, merger, Transfer, dissolution, liquidation or winding-up is to take place, and (iii) the time, if any such time is to be fixed, as of which the holders of record of Equity Securities shall be entitled to exchange their Equity Securities (or the Holder shall be entitled to exchange this Warrant) for the cash, Equity Securities or other property deliverable upon such reorganization, reclassification,
recapitalization, consolidation, merger, Transfer, dissolution, liquidation or winding-up and a description in reasonable detail of the transaction. Additionally, within thirty (30) days following the written request of the Holder, the Company shall provide to the Holder its calculation of the Aggregate Warrant Common Shares, the Per Common Share Warrant Price, the Aggregate Warrant Series C Shares and the Per Series C Share Warrant Price, along with supporting documentation relating thereto.

 

4

 

 

7. PREEMPTIVE RIGHTS.

 

7.1 Preemptive Right on Senior Capital. From and after the date hereof, the Holder shall have the right to purchase
its pro rata share of any issuance or sale of any Senior Capital of the Company or any of its Subsidiaries. The Holder’s “pro rata share” for purposes of this Section 

7.1 shall be equal to the Percentage Interest represented by the Aggregate Warrant Common Shares. The Company shall not grant (or permit any Subsidiary to grant) any other Person preemptive rights inconsistent herewith.

 

7.2 Notice to Holder. If the Company or its Subsidiary proposes to issue or sell Senior Capital, then it will give
the Holder written notice of its intention, describing the type of Senior Capital and the price and terms upon which the Company proposes to issue or sell the Senior Capital. The Holder will have fifteen (15) Business Days from the date of receipt of any such notice (and such other information as the Holder may reasonably request in order to facilitate its investment decision) to agree to purchase up to its pro rata share of the Senior Capital for the price and upon the terms specified in the notice from the
Company described above by giving written notice to the Company stating the amount of Senior Capital agreed to be purchased.

 

8. REGISTRATION RIGHTS.

 

8.1 Generally. If any Warrant Shares required to be reserved for purposes of exercise of this Warrant require registration with or approval of any governmental
authority under any federal or state law (other than the Securities Act) before such Warrant Shares may be issued upon exercise, then the Company will, at its sole expense and as expeditiously as possible, cause such Warrant Shares to be duly registered or approved, as the case may be.

 

8.2 Demand Registration Rights. So long as the Holder holds Warrant Shares (or Warrants exercisable for Warrant Shares) anticipated to have an aggregate
sale price (net underwriting discounts and commissions, if any) in excess of $500,000, the Holder (or, for the avoidance of doubt, if there are multiple Holders, then the Holder or Holders constituting the Requisite Holders) shall have the right to require the Company to file registration statements, including a shelf registration statement (if the Company is eligible at such time to utilize a shelf registration for the Warrant Shares), and if the Company is a well-known seasoned issuer, as defined in Rule 405
under the Securities Act, an automatic shelf registration statement, on Form S-3 or any successor form under the Securities Act covering all or any part of the Warrant Shares, by delivering a written request therefor to the Company. Such request shall state the number of Warrant Shares to be disposed of and the intended method of disposition of such shares by the Holder. In the event there are multiple Holders, the Company shall give notice to all other Holders of the receipt of a request for registration pursuant
to this Section 

8.2 and such Holders shall then have thirty (30) days to notify the Company in writing of their desire to participate in the registration. The Company shall use its commercially reasonable best efforts to effect promptly the registration statement registering all shares on Form S-3 (or a comparable successor form) to the extent requested by the Holder, but in any event shall cause the registration statement to become effective within ninety (90) days after the date
of the request by the Holder (or 120 days in the event of a “full review” by the SEC). The Company shall use its commercially reasonable best efforts to keep such registration statement effective until the earlier of one hundred twenty (120) days or until the Holder has completed the distribution described in such registration statement. Notwithstanding the forgoing, to the extent that registration on Form S-3 is not available to the Holder under this Section 

8.2, the Company shall use commercially reasonable efforts to effect such registration on Form S-1 under the Securities Act.

 

5

 

 

8.3 Piggyback Registration. If, at any time and from time to time, the Company proposes to register any of its
Equity Securities under the Securities Act in connection with an underwritten public offering of such shares of such Equity Securities, then the Company will promptly give notice to the Holder of its intention to do so. Upon the request of any Holder received within ten (10) days after receipt of any such notice from the Company, the Company will, in each instance, cause such Holder’s Warrant Shares to be registered under the Securities Act and registered or qualified, as the case may be, under any state
securities laws; provided, however, that the obligation to give such notice and to cause such registration shall not apply to any registration (a) on Form S-8 (or any successor form), (b) of solely a dividend reinvestment plan or (c) for the sole purpose of offering registered securities to another Person in connection with the acquisition of assets or Equity Securities of such Person or in connection with a merger,
consolidation, combination or similar transaction with such Person. In connection with any underwritten offering of securities on behalf of the Company or any Stockholder, the Company shall not be required to include any Warrant Shares held by a Holder unless the Holder agrees to the reasonable and customary terms of the underwriting; provided, however, that (i) such Holder shall not be required to make any representation
other than that it being the owner of the applicable Warrant Shares (subject to exercise of the applicable portion of this Warrant) that are being included in the offering and that it has full power and authority to transfer them pursuant such offering, and (ii) the total indemnification or other liability of such Holder thereunder shall be limited to the aggregate net cash proceeds received by such Holder from the sale of such Warrant Shares in such offering. The Company will include in any registration effected
pursuant to this Section 

8.3 (i) first, securities offered to be sold by the Company and by any holder of demand registration rights that is exercising such rights in connection with such registration, (ii) second, the Piggyback Shares, in each case pro rata based on the number of Warrant Shares held thereby (in such quantity as will not, in the written opinion of the underwriters, jeopardize the success of the offering), and (iii) third, any other securities requested to be included in
such registration (in such quantity as will not, in the written opinion of the underwriters, jeopardize the success of the offering).

 

8.4 Deemed Underwriter. The Company agrees that, if a Holder or any of its Affiliates could reasonably be deemed
to be an “underwriter,” as defined in Section 2(a)(11) of the Securities Act, in connection with any registration of the Company’s securities of any Holder or any of its Affiliates pursuant to this Warrant, and any amendment or supplement thereof (any such registration statement or amendment or supplement a “Deemed Underwriter Registration Statement”), then the Company will cooperate with such Holder or Affiliate in allowing such Holder or Affiliate
to conduct reasonable and customary “underwriter’s due diligence” with respect to the Company and satisfy its obligations in respect thereof. In addition, at applicable Holder’s request, the Company will furnish to such Holder, on the date of the effectiveness of any Deemed Underwriter Registration Statement and thereafter from time to time on such dates as such Holder may reasonably request (a) a letter, dated such date, from the Company’s independent certified public accountants
in form and substance as is customarily given by independent certified public accountants to underwriters in an underwritten public offering, addressed to such Holder, and (b) an opinion, dated as of such date, of counsel representing the Company for purposes of such Deemed Underwriter Registration Statement, in form, scope and substance as is customarily given in an underwritten public offering, including a standard “10b-5” statement for such offering, addressed to such Holder. The Company will also
permit legal counsel to the applicable Holder to review and comment upon any such Deemed Underwriter Registration Statement at least ten (10) Business Days prior to its filing with the Commission and all amendments and supplements to any such Deemed Underwriter Registration Statement within a reasonable number of days prior to their filing with the Commission and not file any Deemed Underwriter Registration Statement or amendment or supplement thereto in a form to which such Holder’s legal counsel reasonably
objects.

 

6

 

 

8.5 Expenses. The Company will pay all Registration Expenses in connection with all registrations (which, for purposes
of this section, shall include any qualifications, notifications and exemptions) under this section. “Registration Expenses” means all reasonable expenses incident to the Company’s performance of or compliance with Section 

8, including all registration and filing fees (including fees of the Commission and a national stock exchange or national securities market), all fees and expenses of complying with state securities or blue sky laws, all word processing, duplicating and printing expenses, messenger and delivery expenses, the fees and disbursements of counsel for the Company and of its independent public accountants, including the expenses of any special audits or “cold comfort”
letters in underwritten offerings required by or incident to such performance and compliance, the reasonable fees and disbursements of Holder’s Counsel, not to exceed $25,000 in the aggregate (or such greater amount with the Company’s consent, which consent shall not be unreasonably withheld, conditioned or delayed), and any accountants retained by the Holders with respect to any Warrant Shares being registered, premiums and other costs of policies of insurance against liabilities arising out of the
public offering of such securities and any fees and disbursements of underwriters customarily paid by issuers or sellers of securities, but excluding underwriting discounts and commissions and transfer taxes, if any, provided, however, that the Company shall not be required to pay for any expenses of the Holders for any registration proceeding pursuant to Section 

8.2 if the registration request is subsequently withdrawn at the request of the Holders (in which case all selling Holders shall bear such expenses pro rata based upon the number of Registrable Securities that were to be included in the withdrawn registration), unless the Requisite Holders agree to forfeit their right to one registration pursuant to Section 

8.2. All underwriting discounts, selling commissions, and stock transfer taxes and other non-Registration Expenses applicable to the sale of the Warrant Shares of the Holders shall be borne and paid by the Holders pro rata on the basis of the number of Warrant Shares registered on their behalf.

 

8.6 Obligations of the Company. Whenever required under this section to effect the registration of any Warrant
Shares, the Company shall, as expeditiously as reasonably possible:

 

(a) prepare and file with the Commission a registration statement with respect to such Warrant Shares and use commercially reasonable efforts to cause such registration statement to become effective and, unless the Holders of a majority
of the Warrant Shares registered thereunder notify the Company otherwise, to keep such registration statement effective for a period of up to one hundred twenty (120) days or, if earlier, until the distribution contemplated in the registration statement has been completed; provided, that, the Company shall furnish, at least five (5) Business Days before filing such registration statement, a prospectus relating thereto
or any amendments or supplements relating to such a registration statement or prospectus, to counsel selected by the Holder (the “Holder’s Counsel”), copies of all such documents proposed to be filed for such counsel’s review and comment (it being understood that such five (5) Business Day period need not apply to successive drafts of the same document proposed to be filed so long as such successive drafts are supplied to such counsel in advance of
the proposed filing by a period of time that is customary and reasonable under the circumstances) and not file any such registration statement, prospectus or amendment or supplement thereto in a form to which Holder’s Counsel reasonably objects;

 

(b) prepare and file with the Commission such amendments and supplements to such registration statement and the prospectus used in connection with such registration statement as may be necessary to comply with the provisions of the Securities
Act with respect to the disposition of all securities covered by such registration statement and to make public any material non-public information provided to the Purchaser Group during the effective period of such registration statement;

 

7

 

 

(c) notify in writing the Holder’s Counsel promptly (x) of the receipt by the Company of any notification with respect to any comments by the Commission with respect to such registration statement or prospectus or any amendment
or supplement thereto or any request by the Commission for the amending or supplementing thereof or for additional information with respect thereto, (y) of the receipt by the Company of any notification with respect to the issuance by the Commission of any stop order suspending the effectiveness of such registration statement or prospectus or any amendment or supplement thereto or the initiation of any action threatening any proceeding for that purpose and (z) of the receipt by the Company of any notification
with respect to the suspension of the qualification of such Warrant Shares for sale in any jurisdiction or the initiation of any action threatening the qualification of such Warrant and/or Warrant Shares for sale in any jurisdiction;

 

(d) furnish to each Holder of Warrant Shares covered by such registration such numbers of copies of a prospectus, including a preliminary prospectus, in conformity with the requirements of the Securities Act and such other documents as
such Holder may reasonably request in order to facilitate the disposition of the Warrant Shares owned thereby;

 

(e) use commercially reasonable efforts to register, exempt from registration, and/or to qualify the securities covered by such registration statement under such other securities or blue sky laws of such jurisdictions as may be required
for the Holder to sell securities under the registration statement or as shall be reasonably requested by the Holders; provided, however, that the Company shall not be required in connection therewith or as a condition thereto (x) to qualify to do business in any such states or jurisdictions, (y) to file a general consent to service of process in any such states or jurisdictions or (z) to subject itself to taxation in any such states or jurisdictions;

 

(f) in the event of any underwritten public offering, enter into and perform its obligations under an underwriting agreement, in usual and customary form, with the managing underwriter of such offering, provided that each Holder participating
in such underwriting shall also enter into and perform its obligations under such underwriting agreement;

 

(g) notify each Holder of Warrant Shares covered by such registration statement at any time when a prospectus relating thereto is required to be delivered under the Securities Act of the happening of any event as a result of which the
prospectus included in such registration statement, as then in effect, includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances then existing and, at the request of such Holder, prepare and furnish to such Holder a reasonable number of copies of a supplement to or amendment of such prospectus so that, as thereafter delivered to any offeree of such shares, such prospectus
shall not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances then existing;

 

(h) notify each Holder in advance of the delivery of any information under the Credit Agreement that would constitute material non-public information and cooperate with the Holders’ reasonable requests related to the coordination
of such information with amendments to the registration to ensure the public availability of such information (which amendments shall be effected promptly upon the awareness by the Company of the new information);

 

8

 

 

(i) make available for inspection by each Holder of Warrant Shares covered by such registration statement, the Holder’s Counsel or any underwriter participating in any disposition pursuant to such registration statement and any attorney,
accountant or other agent retained by any such Holder or underwriter (collectively, the “Inspectors”) all pertinent financial and other records, pertinent corporate documents and properties of the Company (collectively, the “Records”), as shall be reasonably necessary to enable them to exercise their due diligence responsibility, and cause the Company’s officers, directors and employees to supply all information
(together with the Records, the “Information”) reasonably requested by any such Inspector in connection with such registration statement, including, but not limited to, monthly, quarterly and annual financial statements. Any of the Information that the Company determines in good faith to be confidential, and of which determination the Inspectors are so notified, shall not be disclosed by the Inspectors to any third party unless (x) the disclosure of such
Information is necessary to avoid or correct a misstatement or omission in the registration statement, (y) the release of such Information is ordered pursuant to a subpoena or other order from a court of competent jurisdiction or a governmental agency having jurisdiction over such matter, or (z) such Information has been made generally available to the public by the Company, provided, in any event, that the Holders shall use commercially reasonable efforts to provide the Company with reasonable advance
written notice prior to any such disclosure. The Holders of any Warrant Shares covered by such registration statement hereby agree that they will, upon learning that disclosure of such Information is sought by a court of competent jurisdiction or a governmental agency having jurisdiction over such matter, give notice to the Company and allow the Company, at the Company’s expense, to undertake appropriate action to prevent disclosure of the Information deemed confidential;

 

(j) in the case of an underwritten offering, use commercially reasonable efforts to obtain from its independent certified public accountants “comfort” letters (x) listing the Company and each selling Holder as an addressee
thereof or otherwise naming the Company and each selling Holder as a third party beneficiary thereof and (y) otherwise in customary form and at customary times and covering matters of the type customarily covered by comfort letters given by independent certified public accountants in such transactions;

 

(k) in the case of an underwritten offering, use commercially reasonable efforts to obtain from its counsel an opinion or opinions (x) listing the Company and each selling Holder as an addressee thereof or otherwise naming the Company
and each selling Holder as a third party beneficiary thereof and (y) otherwise covering such matters as are customary in such transactions, including a standard “10b-5” opinion for such offering;

 

(l) provide a transfer agent and registrar (which may be the same entity and which may be the Company) for such Warrant Shares;

 

(m) issue to any underwriter to which any Holder may sell Warrant Shares in such offering one or more certificates (or replacements warrants) evidencing such Warrant Shares;

 

(n) use commercially reasonable efforts to assist the selling Holders and the managing underwriters or agents, if any, in marketing any Warrant Shares that are included in the registration statement, including causing its officers and
employees to participate in any “roadshow” and other investor presentations that the Holders may reasonably request; and

 

(o) subject to all of the other provisions of this Warrant, use commercially reasonable efforts to take all other steps necessary to effect the registration of the Warrant Shares contemplated hereby.

 

9

 

 

The Company may suspend the use of a prospectus included in any registration statement filed pursuant to this Section 

8 if the Company is then in possession of material, non-public information, the disclosure of which the Company’s board of directors has reasonably determined in good faith would have a material adverse effect upon the Company. The Company shall promptly notify all Holders of Warrant Shares covered by such registration of any such determination by the board of directors and, upon receipt of such notice, each such Holder shall immediately discontinue any sales
of securities pursuant to such registration statement. Upon such suspension, the Company shall take all commercially reasonable steps to cause the condition that caused such suspension to cease to exist as soon as practicable (but such efforts need not include the abandonment of any proposed transaction). The Company hereby agrees that no such suspension shall last more than ninety (90) days without the prior written consent of the Requisite Holders.

 

8.7 Termination of Registration Rights. The right to request registration of including of Equity Securities set
forth on this Section 

8, shall terminate at such time as Rule 144 or another similar exemption under the Securities Act is available for the sale of all of the Holders’ Warrant Shares without limitation during a three-month period without registration.

 

8.8 Indemnification.

 

(a) In connection with any registration, subject to Section 

8.8(d) below, the Company shall indemnify and hold harmless each Holder selling Warrant Shares and each of its Affiliates, each underwriter (as defined in the Securities Act), and directors, officers, employees and agents of any of them, and each other Person who participates in the offering of such securities and each other Person, if any, who controls (within the meaning of the Securities Act) such seller, underwriter or participating Person (collectively, the
“Holder Indemnified Person”) against any losses, claims, damages or liabilities (collectively, the “liability”), joint or several, to which such Holder Indemnified Person may become subject under the Securities Act or any other statute or at common law, insofar as such liability (or action in respect thereof) arises out of or is based upon (w) any untrue statement or
alleged untrue statement of any material fact contained, on the effective date thereof, in any registration statement under which such securities were registered under the Securities Act, any preliminary prospectus or final prospectus contained therein, or any amendment or supplement thereto, or any free writing prospectus used in connection with any offering, including but not limited to, any free writing prospectus used by the Company, the underwriters or the Holders, or (x) any omission or alleged omission
to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, or (y) any violation by the Company of the Securities Act, any state securities or “blue sky” laws or any sale or regulation thereunder in connection with such registration, or (z) any information provided by the Company or at the instruction of the Company to any Person participating in the offer at the point of sale containing any untrue statement or alleged untrue
statement of any material fact or omitting or allegedly omitting any material fact required to be included in such information or necessary to make the statements therein not misleading. Except as otherwise provided in Section 

8.8(c), the Company shall reimburse each such Holder Indemnified Person in connection with investigating or defending any such liability; provided, however, that the Company shall not be liable to any Holder Indemnified Person in any such case to the extent that any such liability arises out of or is based upon any untrue statement or alleged untrue statement or omission
or alleged omission made in such registration statement, preliminary or final prospectus, or amendment or supplement thereto, free writing prospectus, or other information, in reliance upon and in conformity with information furnished in writing to the Company by such Person specifically for use therein; and provided further, however, that the Company shall not be required to indemnify any Person against any liability arising from any untrue or misleading statement or omission contained in any preliminary prospectus
if such deficiency is corrected in the final prospectus or for any liability which arises out of the failure of any Person to deliver a prospectus as required by the Securities Act

 

10

 

 

(b) In connection with any registration, subject to Section 

8.8(d) below, a Holder selling any Warrant Shares included in such registration being effected shall indemnify and hold harmless each other selling holder of any Warrant Shares, the Company, its directors and officers, each underwriter and each other Person, if any, who controls (within the meaning of the Securities Act) the Company or such underwriter (collectively, the “Company Indemnified
Persons” and together with the “Holder Indemnified Persons,” collectively, the “Indemnified Persons”), against any liability, joint or several, to which any such Holder Indemnified Person may become subject under the Securities Act or any other statute or at common law, insofar as such liability (or actions in respect thereof) arises out of or is based upon (x) any untrue statement or alleged
untrue statement of any material fact contained, on the effective date thereof, in any registration statement under which securities were registered under the Securities Act at the request of such selling Holder, any preliminary prospectus or final prospectus contained therein, or any amendment or supplement thereto, any free writing prospectus used in connection with such offering, including but not limited to, any free writing prospectus used by the Company, the underwriters, or the Holders, or (y) any
omission or alleged omission by such selling Holder to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, or (z) any information provided at the instruction of the Company to any Person participating in the offer at the point of sale containing any untrue statement or alleged untrue statement of any material fact or omitting or allegedly omitting any material fact required to be included in such information or necessary to make the statements
therein not misleading, and in the case of (x), (y) and (z) to the extent, but only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission was made in such registration statement, preliminary or final prospectus, amendment or supplement thereto, free writing prospectus or other information, in reliance upon and in conformity with information furnished in writing to the Company by such selling Holder specifically for use therein. Such selling Holder shall reimburse
any Holder Indemnified Person for any reasonable legal expenses incurred in investigating or defending any such liability; provided, however, that in no event shall the liability of any Holder for indemnification under this Section 

8 in its capacity as a seller of Warrants and/or Warrant Shares exceed the lesser of (i) that proportion of the total of such losses, claims, damages, expenses or liabilities indemnified against equal to the proportion of the total securities sold under such registration statement which is being held by such Holder, or (ii) the amount equal to the proceeds to such Holder of the securities sold in any such registration; and provided further, however, that no selling
Holder shall be required to indemnify any Person against any liability arising from any untrue or misleading statement or omission contained in any preliminary prospectus if such deficiency is corrected in the final prospectus or for any liability which arises out of the failure of any Person to deliver a prospectus as required by the Securities Act.

 

(c) In the event the Company, any selling Holder or other Person receives a complaint, claim or other notice of any liability or action, giving rise to a claim for indemnification under Section 

8.2 or Section 

8.3 above, the Person claiming indemnification under such paragraphs shall promptly notify the Person against whom indemnification is sought of such complaint, notice, claim or action, and such indemnifying Person shall have the right to investigate and defend any such loss, claim, damage, liability or action.

 

11

 

 

(d) If the indemnification provided for in this Section 

8.8 is held by a court of competent jurisdiction to be unavailable to an Indemnified Person with respect to any loss, claim, damage, expense or liability referred to therein, then the indemnifying party, in lieu of indemnifying such Indemnified Person hereunder, shall contribute to the amount paid or payable by such Indemnified Person as a result of such any loss, claim, damage, expense or liability in such proportion as is appropriate to reflect the relative fault
of the indemnifying party, on the one hand, and of the Indemnified Person, on the other hand, in connection with the statements or omissions that resulted in such any loss, claim, damage, expense or liability as well as any other relevant equitable considerations; provided, however, that in no event shall any contribution by a Holder under this Section 

8.8(d) when combined with any other amounts paid by such Holder pursuant to this Section 

8 exceed the lesser of (a) that proportion of the total of such losses, claims, damages, expenses or liabilities indemnified against equal to the proportion of the total securities sold under such registration statement which is being held by such Holder, or (b) the amount equal to the proceeds to such Holder of the securities sold in any such registration. The relative fault of the indemnifying party and of the Indemnified Person shall be determined by reference
to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission to state a material fact relates to information supplied by the indemnifying party or by the Indemnified Person and the parties’ relative intent, knowledge, access to information, and opportunity to correct or prevent such statement or omission.

 

(e) Unless otherwise superseded by an underwriting agreement entered into in connection with the underwritten public offering, the obligations of the Company and Holders under this Section 

8.8 shall survive the completion of any offering of securities in a registration statement under this Section 

8 or otherwise (and shall survive the termination of this Agreement).

 

9. PUT OF WARRANTS.

 

9.1 Put Right.

 

(a) At any time from and after the earliest to occur of: (i) the Maturity Date; (ii) the payment in full of at least seventy-five percent (75%) of the outstanding Obligations under the Credit Agreement; (iii) an uncured Event of Default
(as defined in the Credit Agreement) or any breach of this Warrant that remains uncured (to the extent curable) for a period of thirty (30) days); and (iv) the consummation of any Sale Transaction (the occurrence of any of the foregoing events being hereinafter referred to as a “Warrant Trigger Event”), the Holder may demand that the Company purchase all (but not less than all) of this Warrant for an amount equal to the Redemption Price by delivery of a written
notice to the Company (the date such notice is delivered to the Company shall hereinafter be referred to as, the “Put Demand Date”). Subject to the other provisions of this Section 

9.1, the Redemption Price shall be payable to the Holder (A) in the case of the Holder’s exercise of the Put Right in connection with a Warrant Trigger Event set forth in clauses (ii) or (iii), on the date of the repayment of such Obligations under the Credit Agreement or consummation of such Sale Transaction or (B) in the case of the Holder’s exercise of the Put Right other than as provided in the foregoing clause (A), on the ninetieth (90th)
day immediately following the Put Demand Date (the relevant date above, the “Put Payment Date”), upon surrender of this Warrant to the Company at its Chief Executive Office. Notwithstanding the foregoing, the commencement of a case under the Bankruptcy Code or under any other applicable bankruptcy, insolvency or similar law now or hereafter in effect in respect of the Company or any of its Subsidiaries (other than an involuntary case that is dismissed, bonded
or discharged within sixty days) shall constitute a Warrant Trigger Event and the Holder shall be deemed to have automatically exercised its Put Right upon, and the Put Payment Date shall be the same day as, the occurrence thereof (without the requirement to deliver any notice).

 

12

 

 

(b) In the event of a Sale Transaction, the Holder shall be entitled to receive the Redemption Price by wire transfer of immediately available funds to any account in the United States of America specified by written notice to the Company.
In the event that there shall be more than one Holder, each other Holder acknowledges and agrees that only the Requisite Holders may exercise the Put Right and that the Requisite Holders may act on behalf of all other Holders with respect to the matters described in Section 

9.

 

(c) Upon surrender of this Warrant in accordance with the procedures set forth in Section 

9.1(a), the right to purchase Warrant Shares represented by this Warrant shall terminate and this Warrant shall represent the right of the Holder to receive only the Redemption Price from the Company in accordance with Section 

9.1. The Holder’s right to demand redemption of this Warrant pursuant to this Section 

9.1 shall be referred to herein as the Holder’s “Put Right.”

 

9.2 Failure to Pay Redemption Price.

 

(a) Subject to the provisions of Section 

9.2(b), if the Company does not pay the Redemption Price in full on or before the Put Payment Date, then, on the day immediately following the Put Payment Date, all of the rights heretofore represented by this Warrant shall convert, automatically and irrevocably and without any further action or acknowledgment on the part of the Company or the Holder, into a secured obligation of the Company to pay to the Holder, on demand (or at such other time described below),
an amount equal to the Unpaid Put Amount, together with accrued interest (based on a 365-day year) on the unpaid principal amount thereof at fifteen percent (15%) per annum, with interest payable-in-kind, compounding quarterly, until the maturity thereof.

 

(b) Notwithstanding any other provision of this Section 

9.2, if on the Put Demand Date there are any Obligations owed to the Purchaser or its Affiliates under the Credit Agreement, then the Company shall be permitted, in lieu of paying all or any portion of the Redemption Price to the Holder, to issue to the Holder on or before the Put Payment Date, a note, the face amount of which shall equal the unpaid portion of the Redemption Price, with terms, covenants and other provisions substantially identical to those applicable
to the Notes (a “Put Note”), except that (i) the Put Note shall accrue interest at a rate equal to fifteen percent (15%) per annum, with interest payable-in-kind, compounding quarterly, until the maturity thereof, and (ii) the maturity date of the Put Note shall be the date that is ninety-one (91) days after the earlier to occur of (a) the date of maturity of the Obligations or (b) the date that the Obligations are paid in full.

 

(c) The rate of interest payable on the Unpaid Put Amount shall increase by one percent (1%) as of the end of each three (3) month period following the end of Put Payment Date until the Unpaid Put Amount is paid or prepaid in full or until
such interest rate reaches the maximum rate permitted by applicable law and the rate of interest shall automatically be reduced to the maximum rate permitted by applicable law for any period where it would otherwise be in excess thereof (it being acknowledged that nothing in this Section 

9.2 shall require the Company to pay interest at a rate in excess of the maximum rate permitted by applicable law). “Unpaid Put Amount” means the aggregate amount of the unpaid portion of the Redemption Price, together with accrued interest thereon, as determined in accordance with Section 

9.1(b) or

9.2(b), as applicable, and this Section 

9.2(c).

 

(d) Without limiting the Holder’s right to receive the Unpaid Put Amount on demand, the entire Unpaid Put Amount may be paid by the Company at any time without premium or penalty, but in any event shall be immediately due and payable
(i) upon any acceleration by the Purchaser or its Affiliates of any of the Notes and (ii) upon the occurrence of any Sale Transaction. All payments of the Unpaid Put Amount shall be made by wire transfer of immediately available funds to an account or accounts designated in writing by the Holder. Upon the request of the Holder, the Company shall issue to the Holder one or more Put Notes (as defined below) evidencing the obligations of the Company to the Holder under this Section 

9.2(c).

 

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10. AVAILABILITY OF INFORMATION.

 

10.1 Compliance. The Company shall comply with the reporting requirements of Section 13 and 15(d) of the Exchange Act and shall comply with all public
information reporting requirements of the Commission (including Rule 144 promulgated by the Commission under the Securities Act (“Rule 144”)) from time to time in effect and relating to the availability of an exemption from the Securities Act for the sale of any Restricted Securities.

 

10.2 Cooperation. The Company shall also cooperate with the Holder (so long as it holds any Restricted Securities) in supplying such information as may
be necessary for the Holder to complete and file any information reporting forms presently or hereafter required by the Commission as a condition to the availability of an exemption from the Securities Act for the sale of any Restricted Securities.

 

10.3 Reserved

 

10.4 Assistance with Sales of Warrant Shares. If requested by the Holder, the Company shall make a public disclosure of any material non­public information
previously supplied to the Holder in order to facilitate the sale of Warrant Shares by the Holder pursuant to Rule 144; such disclosure shall be made no later than forty-five days following the request by the Holder. Notwithstanding the foregoing, Company may suspend the disclosure of material, non-public information, the disclosure of which the Board of Directors has reasonably determined in good faith would have a material adverse effect upon the Company, in which event the Company shall immediately provide
notice of the determination to the Holder. Upon such determination, the Company shall take all commercially reasonable steps to cause the condition that caused such suspension to cease to exist as soon as practicable (but such efforts need not include the abandonment of any proposed transaction). The Company hereby agrees that no such suspension shall last more than ninety (90) days without the prior written consent of the Requisite Holders.

 

11. RESERVATION OF EQUITY SECURITIES, ETC. The Company shall at all times reserve and keep authorized and available, solely for issuance and delivery upon exercise of this Warrant,
the number of Common Shares and Series C Shares from time to time issuable upon exercise in full of this Warrant. All Warrant Shares issuable upon exercise of this Warrant shall be duly authorized and, when issued upon such exercise, shall be validly issued and, in the case of shares, fully paid and nonassessable, with no liability on the part of the Holder.

 

12. VOTING AND CONSENT RIGHTS

 

12.1 General. Except as otherwise required by law or provided herein, the Holder shall not be entitled to any voting
rights in respect of this Warrant. Upon exercise of this Warrant, (a) the holders of Warrant Common Shares shall vote with the holders of Common Shares (and not as a separate class) with respect to such shares at any meeting of the Stockholders, and may act by written consent in the same manner as the holders of such shares, and (b) the holders of Warrant Series C Shares shall vote on an as-converted basis with the holders of the Common Shares (except as set forth in the Series C Certificate of Designation) with
respect to such shares at any meeting of the Stockholders, and may act by written consent in the same manner as the holders of such shares.

 

14

 

 

12.2 Consent Rights. In addition to any other vote or consent required herein or by law, the Company shall not,
without the prior written consent of the Holder (which may be given or withheld in the Holder’s sole discretion):

 

(a) amend (by merger or otherwise) the Restated Certificate or any other Transaction Document in any manner adverse to the Holder;

 

(b) incur, or refinance on terms less favorable to the Company, any indebtedness (other than incurrence of indebtedness that is permitted pursuant to Section 6.1 of the Credit Agreement (as in effect on the date hereof));

 

(c) enter into, amend, terminate or fail to enforce (or abandon any right under) any transaction with any Insider or Affiliate of the Company, other than compensation arrangements in the ordinary course and consistent with past practice
or transactions between or among the Company and its direct or indirect wholly-owned Subsidiaries;

 

(d) commence any voluntary bankruptcy proceedings;

 

(e) enter into or otherwise permit the occurrence of any Sale Transaction or dissolution, liquidation or winding-up of the Company;

 

(f) acquire or redeem any Equity Securities of the Company;

 

(g) take any material action in connection with regulatory proceedings or material litigation;

 

(h) reclassify any debt or Equity Securities of the Company or undertake any other corporate restructuring or reorganization, including any alteration of the rights, preferences or privileges of any Equity Securities of the Company;

 

(i) change the principal line of business of the Company;

 

(j) commit or agree to any of the foregoing; or

 

(k) permit any of its Subsidiaries to take any action which, if taken by the Company, would require the consent of the Holder.

 

13. OWNERSHIP, TRANSFER AND SUBSTITUTION OF WARRANTS.

 

13.1 Ownership of Warrants. The Company may treat any Person(s) in whose name this Warrant is registered on the
register kept at the Chief Executive Office as the owner and holder thereof for all purposes, notwithstanding any notice to the contrary, except that, if and when this Warrant is properly assigned in blank, the Company may (but shall not be obligated to) treat the bearer thereof as the owner of this Warrant for all purposes, notwithstanding any notice to the contrary. This Warrant, if properly assigned, may be exercised by a new Holder without a new Warrant first having been issued.

 

13.2 Office; Transfer and Exchange of Warrants.

 

(a) The Company shall maintain an office (which may be an agency maintained at a bank) in the State of Georgia where notices, presentations and demands in respect of this Warrant may be made upon it. Such office shall be the Company’s
“Chief Executive Office,” until such time as the Company shall notify the Holders of any change of location of such office within the State of Georgia.

 

15

 

 

(b) The Company shall cause to be kept at its Chief Executive Office a register for the registration and transfer of this Warrant. The names and addresses of the Holder, the transfer thereof and the names and addresses of any transferees
of this Warrant shall be registered in such register. The Person(s) in whose names this Warrant shall be so registered shall be deemed and treated as the owner and Holder thereof for all purposes of this Warrant, and the Company shall not be affected by any notice or knowledge to the contrary.

 

(c) Subject to the transfer restrictions referred to in the legend herein, this Warrant and all rights hereunder are transferable, in whole or in part, without charge to the Holder, upon surrender of this Warrant with a properly executed
assignment (in the form of

Exhibit II hereto) at the Company’s Chief Executive Office. Upon such surrender, the Company at its expense will execute and deliver to or upon the order of the applicable Holder a new Warrant or Warrants of like tenor, in the name of the Holder or as the Holder (upon payment by the Holder of any applicable transfer taxes) may direct, calling in the aggregate on the face or faces therefor for the number of Warrant Shares called for on the face or faces of
the Warrant or Warrants so surrendered.

 

13.3 Assistance in Disposition of Warrant or Warrant Shares. Notwithstanding any other provision herein, in the event that it becomes unlawful for the
Holder to continue to hold this Warrant, in whole or in part, or some or all of the Warrant Shares held by it, or restrictions are imposed on the Holder by any statute, regulation or governmental authority which, in the judgment of the Holder, make it unduly burdensome to continue to hold the Warrant or Warrant Shares, the Holder may sell or otherwise dispose of the Warrant or Warrant Shares (subject to any restrictions on transfer described herein), and the Company agrees to provide reasonable assistance to
the Holder in disposing of the Warrant or Warrant Shares in a prompt and orderly manner and, at the request of the Holder, to provide (and authorize the Holder to provide) such financial and other information concerning the Company to any prospective purchaser of the Warrant or Warrant Shares owned by the Holder.

 

13.4 Replacement of Warrants. Upon receipt of reasonable evidence of the loss, theft, destruction or mutilation
of any Warrant and, in the case of any such loss, theft or destruction of any Warrant held by a Person other than a Purchaser or any other institutional investor to whom the Purchaser may Transfer this Warrant, upon delivery of indemnity satisfactory to the Company in form and amount or, in the case of any such mutilation, upon surrender of such Warrant for cancellation at the Company’s Chief Executive Office, the Company at its sole expense will execute and deliver, in lieu thereof, a new Warrant of like
tenor and dated the date hereof.

 

14. REPRESENTATIONS AND WARRANTIES.

 

14.1 Representations and Warranties of the Company. The Company hereby represents and warrants to the Purchaser
as follows:

 

(a) each of the representations and warranties of the Credit Parties set forth in the Credit Agreement are true and correct as of the date hereof, each such representation and warranty being hereby incorporated by reference herein, mutatis
mutandis, for all purposes;

 

(b) the Company is not party to any contract, agreement or other arrangement which conflicts with the terms of this Warrant or any of the rights conferred to the Holder, or obligations imposed on the Company, hereby;

 

16

 

 

(c) the offer, sale, issuance and delivery of this Warrant in accordance with the terms herein will be exempt from the registration provisions of the Securities Act;

 

(d) the issuance of the Warrant Shares upon the exercise of this Warrant in accordance with the terms herein will be exempt from the registration provisions of the Securities Act;

 

(e) immediately after giving effect to transactions contemplated by this Warrant, (i) the Company has duly authorized the issuance of the Warrant Shares and has reserved them and made them available for issuance and delivery upon
exercise of this Warrant, (ii) the outstanding Equity Securities of the Company consists solely of this Warrant and the Equity Securities set forth on Schedule I hereto and (iii) each of the Company’s Subsidiaries is directly or indirectly wholly-owned by the Company; and

 

(f) assuming Purchaser only owns the Common Shares and Series C Shares issuable under this Warrant, Schedule II accurately states Purchaser’s ownership percentage of the Company required
to be disclosed by Purchaser on Schedule 13G pursuant to the Exchange Act, and Purchaser may rely on Schedule II in complying with its reporting obligations under the Exchange Act, including accurately reporting Holder’s ownership on an amended Schedule 13G to be filed with the Commission.

 

14.2 Representations and Warranties of the Holders. Each Holder represents and warrants to the Company and to each
other Holder, as of the date such Person becomes a Holder, as follows:

 

(a) Organization and Qualification. Such Holder, if an entity, is a corporation, limited partnership or limited liability company, in either case duly organized, validly existing and in good
standing under the laws of its jurisdiction of formation.

 

(b) Authority; Enforceability. Such Holder has all requisite power and authority to execute and deliver this Warrant and to perform its obligations hereunder and to consummate the transactions
contemplated hereby, and all action required on the part of such Holder for such execution, delivery and performance has been duly and validly taken. Assuming due execution and delivery by the Company, this Warrant constitutes the legal, valid and binding obligation of such Holder enforceable against such Holder in accordance with its terms, except as enforceability thereof may be limited by bankruptcy, insolvency, moratorium and other similar laws affecting creditors’ rights generally and by general equitable
principles.

 

(c) Accredited Investor; Securities Laws Compliance.

 

(i) Such Holder either (a) is an “accredited investor” (as defined in Regulation D under the Securities Act) or (b) has such knowledge, skill and experience in business and financial matters, based on actual participation,
that it is capable of evaluating the merits and risks of an investment in the Company and the suitability thereof as an investment for such Holder.

 

(ii) Except as otherwise contemplated by this Warrant, such Holder is acquiring this Warrant and any Warrant Shares for investment for its own account and not with a view to any distribution thereof in violation of applicable securities
laws.

 

(iii) The Holder understands that (a) the offering and sale of this Warrant and any Warrant Shares by the Company is intended to be exempt from registration under the Securities Act pursuant to section 4(2) thereof and Regulation D, (b)
there is no existing public or other market for this Warrant or the Warrant Shares, and (c) this Warrant and the Warrant Shares may be resold only pursuant to an effective registration statement under the Securities Act or pursuant to a valid exemption from the registration requirements of the Securities Act.

 

17

 

 

(iv) Such Holder is familiar with Rule 144, as presently in effect, and understands the resale limitations imposed thereby and by the Securities Act, including the Rule 144 condition that current information about the Company be made
available to the public. Such Holder acknowledges that such information is not now available and that the Company has no present plans to make such information available.

 

15. DEFINITIONS. As used herein, unless the context otherwise requires, the following terms have the respective meanings set forth below. All capitalized terms used and not defined
below or otherwise defined herein shall have the respective meanings set forth in the Credit Agreement:

 

 “Appraiser” means an independent nationally recognized investment banking firm mutually agreeable to the Holder and the Company. If the Holder and the Company cannot agree on an Appraiser within fifteen (15) days after the applicable Valuation Request,
then, the Company, on the one hand, and the Holder, on the other hand, shall each select an Appraiser within fifteen (15) days of the applicable Valuation Request. Each such Appraiser shall then independently determine the applicable Fair Market Value within thirty (30) days after the applicable Valuation Request (or if the Holder or the Company fails to timely select an Appraiser as contemplated in the immediately preceding sentence, the Appraiser timely selected by the Company or the Holder, as applicable,
shall make such determination). Other than with respect to Publicly Traded Securities, the prevailing market prices for any security or property will not be dispositive of the Fair Market Value thereof. If each of the Holder and the Company timely selects an Appraiser and (i) the difference between the determinations of Fair Market Value by the Appraisers is less than twenty percent (20%), then the average of such determinations shall be the conclusive and binding determination of the applicable Fair Market
Value or (ii) the difference between the determinations of Fair Market Value by the Appraisers is equal to or more than twenty percent (20%), then the Appraisers shall jointly select one independent Appraiser to determine the Fair Market Value, and the selection of the new Appraiser and its determination of Fair Market Value shall be made within sixty (60) days after the applicable Valuation Request. Any and all fees, costs and other expenses of the Appraiser(s) shall be borne by the Company. The determination
of the Fair Market Value pursuant to this definition and the definition of Fair Market Value shall be conclusive and binding on all applicable parties.

 

 “Articles” means the Company’s Certificate of Incorporation, as described in the Credit Agreement as of the date hereof, as the same may be amended, restated or otherwise modified from time to time in accordance with the terms thereof (and as permitted
by this Warrant).

 

 “Board of Directors” has the meaning given to such term in the Articles.

 

 “Business Day” means any day other than a Saturday or a Sunday or a day on which commercial banking institutions in New York, New York are authorized or obligated by law or executive order to be closed. Any reference to “days” (unless Business
Days are specified) shall mean calendar days.

 

 “Commission” means the United States Securities and Exchange Commission or any other federal agency at the time administering the Securities Act.

 

 “Common Shares” means shares of the Company’s Common Stock, par value $0.025, per share.

 

18

 

 

 “Company” has the meaning given to such term in the introduction to this Warrant and shall include any Person that shall succeed to or assume the obligations of the Company.

 

 “Company Group” means the Company and its Affiliates.

 

 “Convertible Securities” means any evidences of indebtedness or other instruments or securities (other than Options) directly or indirectly convertible into or exchangeable for Equity Securities of the Company.

 

 “Equity Plan Securities” means Common Shares issued, or reserved for issuance pursuant to an incentive equity plan (including any Common Shares issuable upon exercise of any Convertible Security or Option pursuant to any incentive equity plan) approved
by a majority of the independent directors on the Board.

 

 “Equity Securities” means, as to any Person, such Person’s equity securities or other equity interests authorized from time to time, and any other securities, options, interests, participations or other equivalents (however designated) of or in
such Person, whether voting or nonvoting, including options, warrants, phantom equity, equity appreciation rights, convertible notes or debentures, equity purchase rights, and all agreements, instruments, documents and securities convertible, exercisable, or exchangeable, in whole or in part, into any one or more of the foregoing. The Company’s Equity Securities, as of the date hereof, shall include Common Shares, shares of Series A Preferred Stock of the Company, par value $0.001 per share, shares of Series
B Preferred Stock of the Company, par value $0.001 per share (the “Series B Shares”), shares of Series C Preferred Stock of the Company, par value $0.001 per share (the “Series C Shares”), and the other Equity Securities set forth on Schedule I hereto.

 

 “Equity Value” means an amount, determined in accordance with the definition of Fair Market Value, equal to the enterprise value of the Company and its Subsidiaries as a whole less the amount of indebtedness
for borrowed money of the Company and/or its Subsidiaries. In connection with the determination of Equity Value in a Sale Transaction, the calculation of Equity Value shall be increased by (a) all amounts paid or payable under consulting agreements not on market terms, agreements not to compete or similar arrangements (including Excess Compensation) entered into in connection with such Sale Transaction, (b) the gross value of any post-closing payments (whether or not contingent) and (c) any extraordinary
or special dividends or distributions paid or payable in connection with such Sale Transaction.

 

  “Excess Compensation” means any cash, Equity Securities, other property or other remuneration (including perquisites) payable to any Stockholder during the twelve (12) month period subsequent to the closing of a Sale Transaction (collectively, “Remuneration”),
including any Remuneration related to future performance or payable subsequent to the closing of such Sale Transaction in excess of the sum of (a) 100% of the aggregate compensation in the form of salary and bonus (but excluding equity-based compensation) actually paid by the Company for services rendered by such Stockholder during the previous twelve (12) full months, plus (b) any consideration received by such Stockholder as a holder of Equity Securities in accordance
with the distribution provisions of the Articles (other than consideration received in connection with a Sale Transaction); provided, that, with respect to any Remuneration payable or potentially payable subsequent to the closing of the applicable Sale Transaction, the value of such Remuneration shall be determined at the closing of the Sale Transaction (with any unliquidated or contingent payments equal to the maximum
amount that may be payable), discounted at the time of such Sale Transaction at the Prime Rate. Excess Compensation does not include that portion of any equity based compensation resulting from an increase in the value of the equity underlying such compensation that occurs after the closing of a Sale Transaction.

 

19

 

 

 “Exchange Act” means the Securities Exchange Act of 1934, or any similar federal statute, and the rules and regulations of the Commission thereunder, all as the same shall be in effect at the time.

 

 “Fair Market Value” means, as to securities or other property, the fair market value of such securities or property as mutually and reasonably agreed upon by the Company and the Holders, assuming such securities or property is to be sold in an arm’s
length transaction between a willing seller and a willing buyer as a going concern, without any Impairment Deductions (but, for the avoidance of doubt, taking into account any liquidation preference, redemption or similar right relating to this Warrant, to the extent applicable to the valuation in question), at the time of the transaction requiring the applicable determination of Fair Market Value pursuant to this Warrant (each such transaction, a “Valuation Event”).
If the Company and the Holder are unable to agree on any calculation of Fair Market Value in accordance with the foregoing provisions within fifteen (15) days after the occurrence of any Valuation Event, then, upon the written request of either the Holder or the Company delivered at any time thereafter (the “Valuation Request”), the Fair Market Value of such securities and/or other property will be determined by the Appraiser in accordance with this definition
and the definition of Appraiser.

 

 “Fully-Diluted Basis” means at any time, without duplication, (i) as applied to any calculation of the number of securities of the Company, after giving effect to, without duplication, (w) all Common Shares of the Company outstanding at the time of determination,
(x) all Equity Securities convertible into or exercisable or exchangeable (directly or indirectly) for Common Shares and all interests, participations or other Common Shares equivalents; provided, however, for purposes of calculation in accordance with this defined term, the Subject Series B Shares shall be deemed convertible into Common Shares at a price not less than the price described in the Series B Side Letter, notwithstanding the certificate of designations, rights and preferences for the Series B Shares,
(y) all Common Shares issuable upon the exercise of any Convertible Security or Option outstanding as of the date of determination, and (z) all Equity Plan Securities not otherwise covered by the foregoing; and (ii) as applied to any calculation of value, after giving effect to the foregoing securities and the payment of any consideration payable upon the exercise of any Convertible Security or Option referred to in clause (i) above if such Convertible Security or Option were exercisable at such time; provided,
that, with respect to this clause (ii), Fully-Diluted Basis shall in all circumstances include the Warrant Shares but shall exclude any Common Shares that are issuable in connection with the exercise of any Option or Convertible Security (other than this Warrant) that is not “in the money,” nor shall it ascribe any value to any such Option or Convertible Security (other than this Warrant).

 

 “Holder” means each and every holder or beneficial owner of any portion of this Warrant, which shall initially be the Purchaser. For purposes of simplicity, this Warrant has been drafted in contemplation of one Holder. In the event that, at any given
time, there shall be more than one Holder, (i) references to “Holder” and this “Warrant” shall mean each Holder and the portion of this Warrant held by each such Holder, (ii) all notices shall be delivered to each Holder in accordance with Section 

24 and (iii) with respect to any action, approval, or consent of the Holder required or otherwise permitted pursuant to the provisions hereof (including Sections

9 and

12), or any amendment, modification or waiver under or with respect to this Warrant, such action, approval, consent, amendment, modification or waiver shall be deemed to have been taken, received or otherwise obtained if such action, approval or consent is taken, received or otherwise obtained by or from Requisite Holders, regardless of whether any such party has consented thereto, except that each Holder may, on an individual basis, exercise its rights described
in Section 

7 or exercise its portion of the Warrant. Without in any way limiting the foregoing, the term “Holder” shall include the Purchaser and each of their respective successors and/or assigns that at any time holds or otherwise owns any portion of this Warrant.

 

 “Impairment Deductions” means, with respect to the determination of the Fair Market Value of any securities or other property, any deduction for (a) liquidity considerations, (b) minority equityholder status, or (c) any liquidation or other preference
or any right of redemption in favor of any Equity Securities of the Company; provided, that, Impairment Deductions shall not include any liquidation preference, redemption or similar right relating to this Warrant (which shall be taken into account in determining Fair Market Value, to the extent applicable to the valuation in question).

 

20

 

 

 “Insider” means any officer or director of the Company, or any family member of such Person (to the second degree of consanguinity) or any Person that is an Affiliate of the foregoing.

 

 “Majority-in-Interest” means Stockholders of the Company holding Equity Securities accounting for fifty percent or more of the voting power of all of the Company’s Equity Securities.

 

 “Net Debt” means an amount equal to the Company’s Funded Debt minus its cash and cash equivalents.

 

 “Options” means any rights, options or warrants to subscribe for, purchase or otherwise acquire any of the Company’s Equity Securities.

 

 “Per Common Share Warrant Price” means, as of a date of determination, (a) the Aggregate Warrant Common Price divided by (b) the Aggregate Warrant
Common Shares.

 

 “Per Series C Share Warrant Price” means, as of a date of determination, (a) the Aggregate Warrant Series C Price divided by (b) the Aggregate Warrant
Series C Shares.

 

 “Percentage Interest” means, with respect to the Warrant Common Shares in question, an amount equal to (a) the number of Warrant Common Shares in question divided by (b) the
total number of Common Shares on a Fully-Diluted Basis.

 

  “Person” means an individual, a partnership, a limited liability company, a corporation, an association, a joint stock company, a trust, a joint venture, an unincorporated organization or any federal, state, county or municipal governmental or quasi-governmental
agency, department, commission, board, bureau, instrumentality or similar entity, Person that is not a United States Person (as such term is defined in Section 7701(a)(30) of the Internal Revenue Code) for U.S. federal income tax purposes or domestic, having jurisdiction over either the Company or any Holder.

 

 “Piggyback Shares” means, collectively, the Warrant Shares of each Holder requesting piggyback registration rights hereunder and the Common Shares requesting piggyback registration pursuant to that certain Warrant Cancellation and Stock Issuance Agreement,
dated as of the date hereof, by and among the Company and the Praesidian Funds thereunder.

 

 “Purchaser Group” means the Purchaser and its Affiliates.

 

 “Redemption Price” means an amount equal to the sum of (x) the Equity Value multiplied by the Percentage Interest represented by the Aggregate Warrant Common
Shares and (y) the Fair Market Value of the Aggregate Warrant Series C Shares.

 

  “Requisite Holders” means the Holder or Holders that own or otherwise hold more than fifty-percent (50%) of the Aggregate Warrant Shares.

 

21

 

 

 “Restricted Securities” means all of the following: (a) any Warrants bearing the legend or legends contained herein or substantially similar thereto, (b) any Warrant Shares that have been issued upon the exercise of this Warrant and that are evidenced
by a certificate or certificates bearing the applicable legend or legends contained herein or substantially similar thereto and (c) unless the context otherwise requires, any Warrant Shares that are at the time issuable upon the exercise of this Warrant and that, when so issued, will be evidenced by a certificate or certificates bearing the applicable legend or legends contained herein or substantially similar thereto.

 

 “Sale Transaction” means any transaction pursuant to which (a) the Company sells or disposes (in one or a series of related sales or dispositions) of all or substantially all of the assets of the Company on a consolidated basis (other than inventory in
the ordinary course of business), including any sale or disposition of the Equity Securities or assets of the Subsidiaries of the Company, (b) the Company engages in any merger, consolidation, combination or similar transaction, (in one or a series of related transactions), such that the Majority-in-Interest immediately prior to the transaction or transactions will, immediately after such transaction or transactions, no longer constitute the Majority-in-Interest, (c) the Company engages in any transaction or
series of related transactions that results in any change of control of the Company (as the term “control” is defined in Rule 405 the Securities Act), whether such change of control occurs through the sale of assets, Equity Securities or otherwise, or (d) any other transaction constituting a “Change of Control” as defined in the Credit Agreement on the date hereof.

 

 “Securities Act” means the Securities Act of 1933, or any similar federal statute, and the rules and regulations of the Commission thereunder, all as the same shall be amended and in effect at the time.

 

 “Senior Capital” means any and all Equity Securities, indebtedness or debt securities of the Company or any of its Subsidiaries (other than such issuances between or among the Company and its direct or indirect wholly-owned Subsidiaries), other than Common
Shares (or Equity Securities convertible into or exercisable or exchangeable (directly or indirectly) for Common Shares) or first lien indebtedness for borrowed money.

 

 “Series C Percentage Interest” means, with respect to the Warrant Series C Shares in question, an amount equal to (a) the number of Warrant Series C Shares in question divided by (b) the
total number of Series C Shares issued and outstanding.

 

 “Specified Stockholders” means Jeffrey Cosman, CC2G Holdings, LLC, The Reich Family Trust, Charles E. Barcom and James P. Canouse.

 

 “Stockholder” means each holder of the Company’s Equity Securities.

 

 “Subject Series B Shares” means the Series B Shares held by any Stockholder party to that certain letter agreement, dated on or about the date hereof, by and among the Company and the Stockholders from time to time party thereto.

 

 “Transaction Documents” means this Warrant, the Credit Agreement and any document contemplated hereby or thereby.

 

 “Transfer” means any direct or indirect sale, transfer, issuance, assignment, pledge or other disposition or conveyance of Equity Securities of the Company.

 

 “Warrant” means this Purchase Warrant, as the same may be amended, restated or otherwise modified from time to time, together with any and all replacement and/or substitute warrants issued with respect hereto.

 

 “Warrant Common Shares” means the Common Shares issuable in connection with the exercise of this Warrant.

 

22

 

 

     “Warrant Series C Shares” means the Series C Shares issuable in connection with the exercise of this Warrant.

 

 “Warrant Shares” means the Common Shares and Series C Shares issuable in connection with the exercise of this Warrant.

 

Unless the context of this Warrant clearly requires otherwise, references to the plural include the singular, references to the singular include the plural, the term “including” is not limiting, and the term “or” has, except where otherwise indicated, the inclusive meaning represented by the phrase “and/or.”

 

16. EQUITY SECURITIES DEEMED OUTSTANDING. For all purposes of the computations to be made pursuant to this Warrant, there shall be deemed to be outstanding all Equity Securities issuable
pursuant to the exercise of Options and conversion of Convertible Securities (including this Warrant), after giving effect to (a) antidilution provisions contained in all such outstanding Options and Convertible Securities that cause an adjustment in the number of Equity Securities so issuable, either by virtue of such issuance of Equity Securities or Options or Convertible Securities or by virtue of the operation of such antidilution provisions, and (b) the definition of Fully-Diluted Basis.

 

17. INFORMATION AND OBSERVATION RIGHTS.

 

17.1 Information Rights. For so long as this Warrant is outstanding or the Purchaser or its Affiliates holds Equity
Securities of the Company, the Company shall provide the Holder with (i) copies of any and all information that the Company is required to deliver pursuant to the following subsections of Section 5.1 of the Credit Agreement: (a) (monthly reports), (b) (quarterly financial statements), (c) (annual financial statements), (g) (notice of litigation), (i) financial plan, (l) (notice regarding material contracts) and (m) (environmental reports and audits) of the Credit Agreement (as of the date hereof
and regardless of any termination thereof) and (ii) such other information relating to the financial condition, business, prospects or corporate affairs of the Company as the Purchaser or its Affiliates may from time to time reasonably request; provided, however, that the Company shall not be obligated under this clause (ii) to provide information (a) to the extent that the Company reasonably determines such
information to be a trade secret or similar confidential information (unless covered by an enforceable confidentiality agreement, in form acceptable to the Company) or (b) to the extent that providing such information would reasonably be expected to adversely affect the attorney-client privilege between the Company and its counsel.

 

17.2 Right to Appoint Observer. The Holder shall be entitled to appoint one Person (the “Holder
Appointee”) to attend, as a non-voting observer, each meeting of the Board of Directors, or any committee thereof, whether such meeting is conducted in person or by telephone. The Holder Appointee shall be entitled to receive, with respect to each meeting of the Board of Directors or any committee thereof: (a)(i) written notice of each regular meeting at least ten (10) days in advance thereof and (ii) written notice of each special meeting at least two (2) Business Days in advance of such meeting,
but, in any case involving any such regular or special meeting, such notice shall be delivered no later than the date on which the members of the Board of Directors or the committee, as applicable, are notified of such meeting, and (b) any and all information provided in connection with each such meeting to all other potential attendees of such meeting, in each case at the time and in the same manner as provided to such other attendees. Additionally, the Holder Appointee shall receive copies of all other notices,
minutes, consents and other material items that the Company provides to its directors at the same time and in the same manner as provided to such directors. The Holder Appointee shall receive reimbursement from the Company for any and all reasonable out-of-pocket expenses incurred in connection with attending any and all meetings of the Board of Directors or any committee thereof. The Holder shall be entitled to fill any vacancy caused by the resignation, death or removal of a prior Holder Appointee.

 

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18. MULTIPLE HOLDERS; NO LIABILITIES AS A STOCKHOLDER.

 

18.1 Multiple Holders. In the event that there shall be multiple Holders, each Holder agrees that (i) no other Holder will by virtue of this Warrant
or exercise thereof be under any fiduciary or other duty to give or withhold any consent or approval under this Warrant or to take any other action or omit to take any action under this Warrant and (ii) each other Holder may act or refrain from acting under this Warrant as such other Holder may, in its discretion, elect.

 

18.2 No Liabilities As a Stockholder. Nothing contained in this Warrant shall be construed as imposing any obligation on any Holder to purchase any securities
or as imposing any liabilities on any Holder as a holder of Equity Securities of the Company, whether such obligation or liabilities are asserted by the Company or by creditors of the Company.

 

19. NO EFFECT ON LENDER RELATIONSHIP. Each of the Company (on its behalf and, to the extent possible, on behalf of the Stockholders), each Specified
Stockholder and each Holder acknowledges and agrees that, notwithstanding anything in this Warrant or the Credit Agreement to the contrary, nothing contained in this Warrant or any other Transaction Document shall affect, limit or impair the rights and remedies of the Purchaser Group (a) in its or their capacity as a lender or as agent for lenders to the Company or any of its Subsidiaries pursuant to any agreement under which the Company or any of its Subsidiaries has borrowed money, including the Credit Agreement,
or (b) in its or their capacity as a lender or as agent for lenders to any other Person who has borrowed money. Without limiting the generality of the foregoing, any such Person, in exercising its rights as a lender, including making its decision on whether to foreclose on any collateral security, will have no duty to consider (x) its or any of its Affiliates’ status as a Holder, (y) the interests of the Company or its Subsidiaries or (z) any duty it may have to any holder of the Company’s Equity
Securities (including any other Holder, in the event that there shall be multiple Holders), except as may be required under the applicable loan documents or by commercial law applicable to creditors generally. No consent, approval, vote or other action taken or required to be taken by the Holder in such capacity shall in any way impact, affect or alter the rights and remedies of the Purchaser or any of its Affiliates as a lender or agent for lenders.

 

20. CORPORATE OPPORTUNITIES AND CONFLICTS OF INTEREST.

 

20.1 General. In recognition and anticipation (i) that the Purchaser will be a significant equityholder of the Company, (ii) that directors, officers
and/or employees of the Purchaser Group may serve as the Holder Appointee (or in other capacities of the Company Group), (iii) that the Company Group may, directly or indirectly, through ownership interests in a variety of enterprises, engage in activities that overlap with or compete with those in which the Company Group, directly or indirectly, may engage, (iv) that the Purchaser Group may have an interest in the same areas of corporate opportunity as the Company Group
and (v) that, as a consequence of the foregoing, it is in the best interests of the Company Group that the respective rights and duties of the Company Group and of the Purchaser Group, and the duties of any Holder Appointee (or any other Person in service to the Company Group) who are also directors, officers or employees of the Purchaser Group, be determined and delineated in respect of any transactions between, or opportunities that may be suitable for both, the Company Group, on the one hand, and the Purchaser
Group, on the other hand, the provisions of this Section 

20 shall to the fullest extent permitted by law regulate and define the conduct of certain of the business and affairs of the Company Group in relation to the Purchaser Group and the conduct of certain affairs of the Company Group as they may involve the Purchaser Group, their respective officers, directors and employees, and the power, rights, duties and liabilities of the Company Group and its officers, directors and equityholders in connection therewith. The
Stockholders and any Person purchasing or otherwise acquiring this Warrant or any Warrant Shares, or any interest therein, shall be deemed to have notice of and to have consented to the provisions of this Section 

20.

 

24

 

 

20.2 Duties of the Purchasers. Each of the Company (on its behalf and, to the extent possible, on behalf of the
Stockholders), each Specified Stockholder and each Holder hereto acknowledges and agrees that nothing in this Warrant, any other Transaction Document or otherwise shall create a fiduciary duty of the Purchaser Group, or any officer, director or employee of the Purchaser Group, to the Company Group or any of its equityholders. Notwithstanding anything to the contrary in the Transaction Documents or any actions or omissions by representatives of the Purchaser Group in whatever capacity, including as a Holder Appointee,
it is understood that the Purchaser Group is not acting as a financial advisor, agent or underwriter to the Company Group or otherwise on behalf of the Company Group unless retained to provide such services pursuant to a separate written agreement. Except as otherwise agreed in writing between the Company and the Purchaser, the Purchaser Group shall to the fullest extent permitted by law have no duty to refrain from (i) engaging in the same or similar activities or lines of business as the Company Group or (ii)
doing business with any client, customer or vendor of the Company Group. If the Purchaser Group acquires knowledge of a potential transaction or matter that may be a corporate opportunity for both the Company Group and the Purchaser Group, then each of the Company (on its behalf and, to the extent possible, on behalf of the Stockholders), each Specified Stockholder and each Holder (that is not a member of the Purchaser Group) to the fullest extent permitted by law renounces any interest or expectancy in such
business opportunity and waives any claim that such business opportunity constituted a corporate opportunity that should have been presented to the Company Group. In the case of any such corporate opportunity, the Purchaser Group shall to the fullest extent permitted by law not be liable to the Company Group or their equityholders or to any other Holder, as an equity holder of the Company by reason of the fact that the Purchaser Group acquires or seeks such corporate opportunity for themselves, direct such corporate
opportunity to another Person or otherwise does not communicate information regarding such corporate opportunity to the Company Group.

 

20.3 Duties of Certain of the Purchaser’s Affiliates. If a Holder Appointee acquires knowledge of a potential transaction or matter that may be
a corporate opportunity for both the Company Group and the Purchaser Group, then such Holder Appointee shall have no duty to communicate or present such corporate opportunity to the Company Group and shall, to the fullest extent permitted by law, not be liable to the Company Group or their equityholders, or to any other Holder, for breach of any fiduciary or other duty as an observer to the Board of Directors or committee thereof or in any other capacity by reason of the fact that the Purchaser Group pursues
or acquires such corporate opportunity for themselves, direct such corporate opportunity to another Person or do not present such corporate opportunity to the Company Group, and each of the Company (on its behalf and, to the extent possible, on behalf of the Stockholders), each Specified Stockholder and each Holder (that is not a member of the Purchaser Group) to the fullest extent permitted by law renounces any interest or expectancy in such business opportunity and waives any claim that such business opportunity
constituted a corporate opportunity that should be presented to the Company Group.

 

20.4 Corporate Opportunities Defined. For purposes of this Section 

20, “corporate opportunities” shall include, but not be limited to, business opportunities that the Company Group is financially able to undertake, that are, from their nature, in the line of the Company Group’s business, that are of practical advantage to it and that are ones in which the Company Group, but for the provisions of Sections 

20.2 and

20.3, would have an interest or a reasonable expectancy, and in which, by embracing the opportunities, the self-interest of the Purchaser Group or their officers or directors will be brought into conflict with that of the Company Group.

 

21. NON PROMOTION. The Company agrees that it will not, without the prior written consent of the Purchaser, in each instance, (a) use in advertising, publicity or otherwise any name
of the Purchaser Group, or any partner or employee of the Purchaser Group, nor any trade name, trademark, trade device, service mark, symbol or any abbreviation, contraction or simulation thereof owned by the Purchaser Group, or (b) represent, directly or indirectly, that any product or any service provided by the Company Group has been approved or endorsed by such Purchaser Group.

 

25

 

 

22. USE OF LOGO. The Company grants the Purchasers permission to use any name or logo of the Company Group in any marketing materials of the Purchaser Group. The Purchaser Group shall
include a trademark attribution notice giving notice of the Company Group’s ownership of its trademarks in the marketing materials in which the Company Group’s name and logo appear.

 

23. LOCK-UP LIMITATIONS. Notwithstanding anything in this Warrant, none of the provisions of this Warrant shall in any way limit the Purchaser Group from engaging in any brokerage,
investment advisory, financial advisory, anti-raid advisory, principaling, merger advisory, financing, asset management, trading, market making, arbitrage, investment activity and other similar activities conducted in the ordinary course of their business. Notwithstanding anything to the contrary set forth in this Warrant, no restrictions set forth in this Warrant shall apply to Equity Interests acquired by the Purchaser Group following the effective date of the first registration statement of the Company covering
Equity Securities to be sold on behalf of the Company in an underwritten public offering.

 

24. NOTICES.

 

24.1 Manner of Delivery. Any notice or other communication in connection with this Warrant shall (i) if delivered personally, be deemed received upon delivery; (ii) if
delivered by telecopy or electronic mail, be deemed received on the Business Day of confirmation; (iii) if delivered by certified mail, be deemed received upon actual receipt thereof or three Business Days after the date of deposit in the United States mail, as the case may be; and (iv) if delivered by nationally recognized overnight delivery service, be deemed received the Business Day after the date of deposit with the delivery service.

 

24.2 Place of Delivery. Any notice or other communication in connection with this Warrant shall be delivered to the following address (i) if to the Holder, to the address set
forth on the signature page hereto (or any other address that the Holder may designate by written notice to the Company in accordance with this Section 

24) with a copy of such notice delivered by electronic mail, (ii) if to the Company, to the attention of its Chief Executive Officer or President at its Chief Executive Office; provided, however, that the exercise of any Warrant shall be effective only in the manner provided in Section 

1.

 

25. WAIVERS; AMENDMENTS. Any provision of this Warrant may be amended or waived with the written consent of the Company and the Holder (or, for the avoidance of doubt, if there are
multiple Holders, then the Holder or Holders constituting the Requisite Holders), and no amendment or waiver of this Warrant shall require the consent of any Stockholder. Any amendment or waiver effected in compliance with this Section 

25 shall be binding upon the Company and the Holder and, if such amendment or waiver is acknowledged by Specified Stockholders holding a majority of Common Shares (on a Fully-Diluted Basis) held by all Specified Stockholders, all Specified Stockholders. In the event that there shall be multiple Holders, the Company shall give prompt notice to each Holder of any amendment or waiver effected in compliance with this Section 

25. No failure or delay of the Company or the Holder in exercising any power or right hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or power, or any abandonment or discontinuance of steps to enforce such a right or power, preclude any other or further exercise thereon or the exercise of any other right or power. No notice or demand on the Company in any case shall entitle the Company to any other or future
notice or demand in similar or other circumstances. The rights and remedies of the Company and the Holder hereunder are cumulative and not exclusive of any rights or remedies which it would otherwise have.

 

26

 

 

26. INDEMNIFICATION.

 

26.1 Generally. Without limitation of any other provision of this Warrant or any agreement executed in connection herewith, the Company agrees to defend, indemnify and hold the Holder,
its respective affiliates and direct and indirect partners (including partners of partners and stockholders and members of partners), members, stockholders, directors, officers, employees and agents and each person who controls any of them within the meaning of Section 15 of the Securities Act, or Section 20 of the Exchange Act (collectively, the “Holder Indemnified Parties” and, individually, a “Holder Indemnified Party”)
harmless from and against any and all damages, liabilities, losses, taxes, fines, penalties, reasonable costs and expenses (including reasonable fees of a single counsel representing the Holder Indemnified Parties), as the same are incurred, of any kind or nature whatsoever (whether or not arising out of third-party claims and including all amounts paid in investigation, defense or settlement of the foregoing) which may be sustained or suffered by any such Holder Indemnified Party (“Losses”),
based upon, arising out of, or by reason of (i) any breach of any representation or warranty made by the Company in this Warrant or any other agreement executed in connection herewith, (ii) any breach of any covenant or agreement made by the Company in this Warrant or in any other agreement executed in connection herewith, or (iii) any third party or governmental claims relating in any way to such Holder Indemnified Party’s status as a security holder, creditor, director, agent, representative or controlling
person of the Company or otherwise relating to such Holder Indemnified Party’s involvement with the Company (including any and all Losses under the Securities Act, the Exchange Act or other federal or state statutory law or regulation, at common law or otherwise, which relate directly or indirectly to the registration, purchase, sale or ownership of any securities of the Company or to any fiduciary obligation owed with respect thereto), including in connection with any third party or governmental action
or claim relating to any action taken or omitted to be taken or alleged to have been taken or omitted to have been taken by any Holder Indemnified Party as security holder, director, agent, representative or controlling person of the Company or otherwise, alleging so-called control person liability or securities law liability; provided, however, that the Company will not be liable to the extent (and then solely to
such extent) that such Losses arise from and are based on (1) an untrue statement or omission or alleged untrue statement or omission in a registration statement or prospectus which is made in reliance on and in conformity with written information furnished to the Company by or on behalf of such Holder Indemnified Party, or (2) conduct by a Holder Indemnified Party which constitutes fraud or willful misconduct.

 

26.2 Other Indemnitors. The Company hereby acknowledges that certain of the Holder Indemnified Parties have certain rights to indemnification, advancement of expenses or insurance
provided by the Purchaser Group (collectively, the “Other Indemnitors”). The Company hereby agrees, and the Stockholders acknowledge, that (a) to the extent legally permitted and as required by the terms of this Warrant (or by the terms of any other agreement between the Company and a Holder Indemnified Party), (i) the Company is the indemnitor of first resort (i.e., its obligations to each Holder Indemnified Party are primary and any obligation of the Other
Indemnitors to advance expenses or to provide indemnification for the same expenses or liabilities incurred by any Holder Indemnified Party are secondary) and (ii) the Company shall be required to advance the full amount of expenses incurred by a Holder Indemnified Party and shall be liable for the full amount of all expenses, judgments, penalties, fines and amounts paid in settlement, without regard to any rights that a Holder Indemnified Party may have against the Other Indemnitors and (b) the Company irrevocably
waives, relinquishes and releases the Other Indemnitors from any and all claims for contribution, subrogation or any other recovery of any kind in respect of any of the matters described in clause (a) of this sentence for which any Holder Indemnified Party has received indemnification or advancement from the Company. The Company further agrees that no advancement or payment by the Other Indemnitors on behalf of any Holder Indemnified Party with respect to any claim for which a Holder Indemnified Party has sought
indemnification from the Company shall affect the foregoing and that the Other Indemnitors shall have a right of contribution and/or be subrogated to the extent of such advancement or payment to all of the rights of recovery of such Holder Indemnified Party against the Company.

 

27

 

 

26.3 Certain Limitations. If the indemnification provided for in Section 

26.1 above for any reason is held by a court of competent jurisdiction to be unavailable to a Holder Indemnified Party in respect of any Losses referred to therein, then the Company, in lieu of indemnifying such Holder Indemnified Party thereunder, shall contribute to the amount paid or payable by such Holder Indemnified Party as a result of such Losses (i) in such proportion as is appropriate to reflect the relative benefits received by the Company and the Holder,
or (ii) if the allocation provided by clause 

(i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause 

(i) above but also the relative fault of the Company and the Holder in connection with the action or inaction which resulted in such Losses, as well as any other relevant equitable considerations. The relative fault of the Company and the Holder shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the
Company and the Holder and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission.

 

26.4 Other. Each of the Company and the Holder agrees that it would not be just and equitable if contribution pursuant to Section 

26.2 were determined by pro rata or per capita allocation or by any other method of allocation which does not take account of the equitable considerations referred to in the immediately preceding paragraph. The rights to indemnification provided to the Purchaser (and any other Person who becomes a Holder) and the other Holder Indemnified Parties in this Section 

26 shall survive the termination, exchange, exercise or transfer of this Warrant (or Warrant Shares, as applicable). The Holder Indemnified Parties and Other Indemnitors are express third party beneficiaries of the terms of this Section 

26.

 

27. MISCELLANEOUS.

 

27.1 Expenses. The Company shall pay all reasonable expenses of the Holder, including reasonable legal expenses, in connection with the preparation of
the Warrant, any waiver or consent hereunder or any amendment or modification hereof (regardless of whether the same becomes effective), or the enforcement of the provisions hereof.

 

27.2 Successors and Assigns. All the provisions of this Warrant by or for the benefit of the Company or the Holder shall bind and inure to the benefit
of their respective successors and permitted assigns.

 

27.3 Severability. In case any one or more of the provisions contained in this Warrant shall be invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained herein shall not in any way be affected or impaired thereby. Furthermore, in lieu of any such invalid, illegal or unenforceable provision, there shall be added automatically as a part of this Warrant a provision as similar in terms to such invalid, illegal or unenforceable provision as may be possible and be legal, valid and enforceable, unless the requisite parties separately agree to a replacement provision that is valid, legal and
enforceable.

 

27.4 Equitable Remedies. Without limiting the rights of the Company and the Holder to pursue all other legal rights available to such party (including
equitable remedies) for the other parties’ failure to perform its obligations hereunder, the Company and the Holders each hereto acknowledge and agree that the remedy at law for any failure to perform any obligations hereunder (or any failure to observe the terms of this Warrant by any Stockholder) may be inadequate and that may shall be entitled to specific performance, injunctive relief or other equitable remedies in the event of any such failure.

 

28

 

 

27.5 Continued Effect. Notwithstanding anything herein to the contrary, except as expressly provided herein (including as provided in Section 

8.8, Section 

13.3 and Section 

26), at such time as this Warrant is exercised in full or upon payment in full of the Redemption Price in connection with the exercise of the Put Right, this Agreement shall terminate. The Holder shall be entitled to retain a copy of this Warrant as evidence of the continued effect of the provisions hereof. The Company covenants and agrees not to become party to any contract, agreement or other arrangement which conflicts with the terms of this Warrant or any of
the rights conferred to the Holder, or obligations imposed on the Company, hereby.

 

27.6 GOVERNING LAW. THIS WARRANT SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK, EXCEPT AS OTHERWISE REQUIRED
BY MANDATORY PROVISIONS OF LAW.

 

27.7 WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A
TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS WARRANT OR ANY OTHER TRANSACTION DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PERSON HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PERSON WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE
OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS WARRANT AND THE OTHER TRANSACTION DOCUMENTS BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.

 

27.8 Section Headings; Construction. The section headings used herein are for convenience of reference only and shall not be construed in any way to affect
the interpretation of any provisions of this Warrant. The titles and subtitles used in this Warrant are used for convenience only and are not to be considered in construing or interpreting this Warrant. Terms defined in the singular have the corresponding meanings in the plural, and vice versa. Unless the context of this Warrant clearly requires otherwise, words importing the masculine gender include the feminine and neutral genders and vice versa. The terms “include,” “includes” or “including”
mean “including without limitation.” The words “hereof,” “hereto,” “hereby,” “herein,” “hereunder” and words of similar import, when used in this Warrant, refer to this Warrant as a whole and not to any particular section or article in which such words appear.

 

27.9 Counterparts. This Warrant may be executed in one or more counterparts, each of which shall be deemed to be an original and all of which taken together,
shall be deemed to be one and the same instrument.

 

[Signature Page Follows]

 

29

 

 

IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed as of the date hereof.

 

COMPANY:

 

MERIDIAN WASTE SOLUTIONS, INC.

 

 

 

By:           /s/ Jeffrey Cosman_______________________

Name: Jeffrey Cosman

Title:           Chief Executive Officer

 

 

The undersigned is executing this Warrant as of the date hereof to make the representations and warranties set forth in Section 

14.2 of this Warrant and to evidence its consent to, and, to the extent applicable, its agreement to be bound by, the provisions of Sections

9,

18,

19,

20 and

27 of this Warrant (and the defined terms referenced therein) for the benefit of the Company and each other Holder.

 

PURCHASER:

 

GOLDMAN, SACHS & CO.

 

 

 

By:           /s/ Stephen W. Hipp_____________________

Name:           Stephen W. Hipp

Title:           Authorized Signatory

 

Address for Notices:

 

Goldman, Sachs & Co.

200 West Street

New York, New York 10272

Attn: AmSSG Legal Department

 

with copies to (which shall not constitute notice):

 

Vinson & Elkins L.L.P.

2001 Ross Avenue, Suite 3700

Dallas, Texas 75201

Attn: Chris Rowley and Peter Marshall

 Signature Page Purchase Warrant

 

 

ACKNOWLEDGED AND AGREED:

 

Jeffrey Cosman, CC2G Holdings, LLC, The Reich Family Trust, Charles E. Barcom and James P. Canouse.

 

SPECIFIED STOCKHOLDERS:

 

 

/s/ Jeffrey Cosman______________________________

Jeffrey Cosman

 

/s/ Charles E. Barcom____________________________

Charles E. Barcom

 

/s/ James P. Canouse____________________________

James P. Canouse

 

 

CC2G HOLDINGS, LLC

 

By:           /s/ Edward A. Kniep IV_________________

Name:           Edward A. Kniep IV

Title:           Manager

 

 

THE REICH FAMILY TRUST

 

 

 

By:           /s/ Patricia S. Reich____________________

Name:           Patricia S. Reich

Title:           Trustee

 

 Signature Page Purchase Warrant

 

 

EXHIBIT I

 

 

 

FORM OF SUBSCRIPTION

 

[To be executed only upon exercise of Warrant]

 

To [____________________________]

 

The undersigned registered Holder of the within Warrant hereby irrevocably exercises such Warrant for, and purchases thereunder, ______ [Common Shares] and ______ [Series C Shares]  and herewith makes payment of $_________ therefor, and requests that the certificates for such Common
Shares and Series C Shares, as applicable, be issued in the name of, and delivered to _______________________, whose address is __________________________.

 

Dated:

 

 

	
 
	
 

	
 
	
 (Signature must conform in all respects to name of Holder as specified on the face of Warrant)

	
 
	
 

	
 
	
 

	
 
	
(Street Address)

	
 
	
   

	
 
	
   

	
 
	
(City)                    (State)                 (Zip Code)

	
 
	
   

	
 
	
   

 

 

 

 I-1

 

 

EXHIBIT II 

 

 

 

FORM OF ASSIGNMENT

 

[To be executed only upon transfer of Warrant]

 

For value received, the undersigned registered Holder of the Warrant (the “Transferor”) hereby sells, assigns and transfers unto _________________________ (the “Transferee”) the rights represented by such Warrant to purchase _____ Common Shares and _____ Series C Shares  of
Meridian Waste Solutions, Inc. (the “Company”) to which and such Warrant relates, and appoints ____________________________ as its attorney-in-fact to make such transfer on the books of the Company maintained for such purpose, with full power of substitution in the premises. The Transferee makes the representations and warranties set forth in Section 

14.2 of the Warrant, and consents to, and, to the extent applicable, agrees to be bound by, the provisions of Sections,

9,

18,

19,

20 and

27 of the Warrant (and the defined terms referenced therein) for the benefit of the Company and each other Holder.

 

Dated: _________ __, _____

 

	
 
	
 Transferor:

	
 
	
 

	
 
	
 

	
 
	
 (Signature must conform in all respects to name of Holder as specified on the face of Warrant)

	
 
	
 

	
 
	
 

	
 
	
 (Street Address)

	
 
	
 

	
 
	
 

	
 
	
 (City)                    (State)                 (Zip Code)

	
 
	
 

	
 
	
 

	
 
	
 Transferee:

	
 
	
 

	
 
	
 

	
 
	
 (Signature must conform in all respects to name of Holder as specified on the face of Warrant)

	
 
	
 

	
 
	
 

	
 
	
 (Street Address)

	
 
	
 

	
 
	
 

	
 
	
 (City)                    (State)                 (Zip Code)

 

 

 II-1

 

 

SCHEDULE I

 

 

 

CAPITALIZATION

 

Meridian Waste Solutions, Inc. – 80,000,000 shares of capital stock are authorized, consisting of (i) 75,000,000 shares of Common Stock, par value $0.025 per share, of which 26,057,937 shares are issued and outstanding; (ii) 51 shares of Series A Preferred Stock, par value $0.001 per share, of which 51 shares are issued and outstanding; (iii) 71,120 shares of Series
B Preferred Stock, par value $0.001 per share, of which 71,120 shares are issued and outstanding; (iv) 67,361 shares of Series C Preferred Stock, par value $0.001 per share, of which 53,000 will be issued and outstanding, assuming, as is contemplated, (a) the sale of such 30,000 shares of Series C Preferred Stock in a private placement; and (b) the exchange of 2,053,573 shares of Common Stock for 23,000 shares of Series C Preferred Stock; and (v) 4,861,468 shares of undesignated blank check preferred stock, par
value $0.001 per share.

 

 

 

Conversion Rights

 

In addition to the rights granted to the Holders hereby:

 

●  

The Series B Preferred Stock of Meridian Waste Solutions, Inc. is convertible into shares of Common Stock of Meridian Waste Solutions, Inc. at the option of the holder, in accordance with the following conversion formula: (x) divide the Original Issue Price by 75% of the average closing bid price of the Common Stock for the five (5) consecutive trading days ending on the trading day of the receipt
by the Company of the notice of conversion. The Original Issue Price is $100. The holders of Series B Preferred Stock have agreed not to convert their shares for a price less than an amount equal to $100 / $3.50 per share ($28.57) and Schedule II and the calculation of the Initial Aggregate Warrant Shares reflects such agreement. For the avoidance of doubt, in the event that the holders of Series B Preferred Stock convert their shares for a lower amount, the Aggregate
Warrant Shares shall be adjusted accordingly.

 

●  

Meridian Waste Solutions, Inc. has issued a subordinated convertible promissory note in the principal amount of $1,250,000, dated December 22, 2015, to Timothy Drury. Such note is convertible 180 days after the date thereof at a price based on the volume-weighted average trading price.

 

 

 Schedule I

 

 

SCHEDULE II

 

CALCULATION OF AGGREGATE WARRANT SHARES

 

To be attached.

 

 

 

 Schedule IItest.htm

 Exhibit 10.1

SECURITIES PURCHASE AGREEMENT

 

             THIS SECURITIES PURCHASE AGREEMENT (this “Agreement”), dated as of [●], 2016, by and between Meridian Waste Solutions, Inc., a New York corporation with its headquarters located at 12540 Broadwell Road, Suite 2104, Milton, GA 30004 (“we”,
“our”, “us” or the “Company”), and the subscriber identified on the signature page hereto (the “Subscriber”).

 

               WHEREAS, effective July 19, 2016, the Company is offering up to Four Million Dollars ($4,000,000) of shares of the Company’s Series C Preferred Stock, par value $0.001 per share (the “Preferred Stock”), at a price of $100 per share to certain accredited
investors for a period of 60 days (the “Offering”);

 

 WHEREAS, the terms and conditions of the Preferred Stock are as set forth in the Certificate of Designations, Preferences and Rights attached hereto as Exhibit A, the substance of which has been filed with the Company’s Certificate
of Incorporation (the “Certificate of Designations”);

 

WHEREAS, pursuant to the Offering, the Subscriber wishes to purchase and acquire from the Company, and the Company desires to issue and sell to the Subscriber [●] shares of Preferred Stock (the “Shares”), for the aggregate principal amount of [$●] (the “Purchase Price”);

 

WHEREAS, the Purchase Price shall be held in escrow by Lucosky Brookman LLP (the “Escrow Agent”) pursuant to the terms of the Escrow Agreement (the “Escrow Agreement”) substantially in the form attached hereto as Exhibit
B;

 

WHEREAS, it is the intention of the Company to enter into securities exchange agreements with investors holding shares of the Company’s common stock, par value $0.025 per share (“Common Stock”) and/or warrants pursuant to subscriptions under private placement offerings in the aggregate amount of approximately $2.3
million during the period beginning March 1, 2016 through the date hereof, pursuant to which such Common Stock will be exchanged on a dollar-for-dollar basis for shares of Preferred Stock and such warrants will be cancelled (the “Securities Exchange”); and

 

WHEREAS, the Company and the Subscriber are executing and delivering this Agreement in reliance upon the exemption from securities registration for offers and sales to accredited investors afforded, inter alia, under Regulation D (“Regulation
D”) as promulgated by the United States Securities and Exchange Commission (the “SEC”) under the Securities Act of 1933, as amended (the “1933 Act”), and/or Section 4(a)(2) of the 1933 Act.

 

 NOW THEREFORE, in consideration of the premises and the mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:

 

1. Closings, Purchase and Sale.

 

(a) Closings. Subject to the satisfaction or waiver of the terms and conditions of this Agreement, a closing of the Offering will take place upon receipt and acceptance by the Company of subscriptions.
Each date on which the Escrow Agent disburses funds received from one or more Subscribers in accordance with the provisions of the Escrow Agreement shall be a “Closing Date” with respect to such released funds and the corresponding purchase and sale of the Series C Preferred. Such purchases, sales and disbursements are individually referred to herein as a “Closing” and collectively as the “Closings.” At a Closing, each Subscriber whose subscription funds are to be disbursed
from escrow shall purchase, and the Company shall sell to each such Subscriber, the Series C Preferred, as described in Section 2 below.

 

 

 

(b) Upon the terms and subject to the conditions set forth in this Agreement, upon a Closing, the Company hereby agrees to issue, sell, assign, transfer and deliver to Subscriber, and Subscriber hereby agrees to purchase and accept delivery
from the Company, the Shares, free of all liens, pledges, mortgages, security interests, charges, restrictions, adverse claims or other encumbrances of any kind or nature whatsoever (“Encumbrances”) to be issued to the Subscriber by no later than three (3) business days from such Closing Date.

 

2. Description of Company’s Business.

 

Meridian Waste Solutions, Inc. (the “Company” or “Meridian” or “Meridian Waste Solutions” or “we” or “us”) is currently operating under five separate Limited Liability Companies:

 

● 

Here To Serve Missouri Waste Division, LLC (“HTSMWD”), a Missouri Limited Liability Company

 

HTSMWD is a non-hazardous solid waste management company providing collection services for approximately 45,000 commercial, industrial and residential customers in Missouri. We own one collection operation based out of Bridgeton, Missouri. Approximately 100% of HTSMWD 2015 revenue was from collection, utilizing over 60 collection vehicles.

 

● 

Here To Serve Georgia Waste Division, LLC (“HTSGWD”), a Georgia Limited Liability Company

 

Currently non-operating entity.

 

● 

Meridian Land Company, LLC (“MLC”), a Georgia Limited Liability Company

 

MLC acquired the Eagle Ridge Landfill, and is currently permitted to accept municipal solid waste.  The Eagle Ridge Landfill is located in Bowling Green, Missouri.  MLC currently owns 265 acres at Eagle Ridge with 56.7 acres permitted and constructed to receive waste.

 

In addition to the Eagle Ridge Landfill, the Company operates, through MLC, hauling operations in Bowling Green, Missouri, servicing commercial, residential and roll off customers in this market.  The Company will be looking to expand its footprint in the market through an aggressive sales and marketing strategy, as well as through additional
acquisitions.

 

● 

Here to Serve Technology, LLC (“HTST”), a Georgia Limited Liability Company

 

The Company is formalizing plans to dissolve HTST, in which this LLC will cease to exist

 

 

 

● 

Christian Disposal, LLC and subsidiary (“CD”), a Missouri Limited Liability Company

 

Christian Disposal, along with its subsidiary, FWCD, LLC, is a non-hazardous solid waste management company providing collection and transfer services for approximately 35,000 commercial, industrial and residential customers in Missouri. Christian Disposal’s collection operation is based out of Winfield, Missouri. Along with operations in
Winfield, Christian Disposal operates two transfer stations, in the O’Fallon, Missouri and St. Peters, Missouri and own one transfer station, in Winfield, Missouri.  Approximately 100% of Christian Disposal and FWCD’s 2015 revenue was from collection and transfer, utilizing over 35 collection vehicles.

 

Christian Disposal began non-hazardous waste collection operations in 1978. Our acquisition of Christian Disposal is a key element of our strategy to create the vertically integrated infrastructure needed to expand our operations.

 

On January 7, 2015, in an effort to give investors a more concentrated presence in the waste industry the Company sold the assets of HTST to Mobile Science Technologies, Inc., a Georgia corporation (MSTI), a related party due to being owned and managed by some of the shareholders of the Company. On this date HTST ceased operations and became a dormant Limited Liability
Company (“LLC”). Currently, Meridian is formalizing plans to dissolve HTST, in which this LLC will cease to exist.

 

In 2014, HTSMWD purchased the assets of a large solid waste disposal company in the St. Louis, MO market. This acquisition is considered the platform company for future acquisitions in the solid waste disposal industry.  HTSGWD was created to facilitate expansion in this industry throughout the Southeast.

 

The Company is primarily in the business of residential and commercial waste disposal and hauling and has contracts with various cities and municipalities.  The majority of the Company’s customers are located in the St. Louis metropolitan and surrounding areas.

 

Acquisition of Christian Disposal, LLC and Eagle Ridge Landfill, LLC

 

On December 22, 2015, Meridian Waste Solutions, Inc. and subsidiaries (the “Company”) completed its acquisition of Christian Disposal LLC, and subsidiary (“Christian Purchase Agreement”). Pursuant to the Christian Purchase Agreement, the Company acquired 100% of the membership interests of Christian Disposal, which is integrated into the operations
of the Company; refer to intangible assets and acquisition footnote below.

 

Simultaneous with the closing thereof, Christian Disposal LLC, and subsidiary, entered into a Lease Agreement, in which, the Company leased 4551 Commerce Avenue, High Ridge, Missouri, for a five-year term at a monthly rent of $6,500. Additionally, the Company entered into an employment agreement with an executive employee for a term of five years.

 

Concurrently, the Company completed an asset purchase agreement with WCA Waste Corporation (the “Eagle Purchase Agreement”). The Company acquired all of the assets of Eagle Ridge Landfill, LLC (“ERL”), its rights and properties related to such business of ERL, which includes certain assets and operations of the Eagle Ridge Hauling Business
(“ERH”) and certain debts, which is now operating under Meridian Land Company, LLC.

 

 

 

Overview

 

Here to Serve – Missouri Waste Division, LLC d/b/a Meridian Waste

 

Meridian Waste is a non-hazardous solid waste management company providing collection services for approximately 45,000 commercial, industrial and residential customers in Missouri. We own one collection operation based out of Bridgeton, Missouri. Approximately 100% of Meridian Waste’s 2015 revenue was from collection, utilizing over 60 collection vehicles.

 

Meridian Waste began non-hazardous waste collection operations in May 2014 upon the acquisition of nearly all of the assets from Meridian Waste Service, LLC that in turn became the core of our operations. From our formation through today, we have begun to create the infrastructure needed to expand our operations through acquisitions and market development opportunities.

 

Christian Disposal, LLC; FWCD

 

Christian Disposal, along with its subsidiary, FWCD, LLC, is a non-hazardous solid waste management company providing collection and transfer services for approximately 35,000 commercial, industrial and residential customers in Missouri. Christian Disposal’s collection operation is based out of Winfield, Missouri. Along with operations in Winfield, Christian
Disposal operates two transfer stations, in the O’Fallon, Missouri and St. Peters, Missouri and own one transfer station, in Winfield, Missouri.  Approximately 100% of Christian Disposal and FWCD’s 2015 revenue was from collection and transfer, utilizing over 35 collection vehicles.

 

Christian Disposal began non-hazardous waste collection operations in 1978. Our acquisition of Christian Disposal is a key element of our strategy to create the vertically integrated infrastructure needed to expand our operations.

 

Meridian Land Company, LLC (Assets of Eagle Ridge Landfill & Hauling)

 

The Eagle Ridge Landfill (the “Eagle Ridge Landfill”), acquired by Meridian Land, is currently permitted to accept municipal solid waste.  The Eagle Ridge Landfill is located in Bowling Green, Missouri.  Meridian Land Company currently owns 265 acres at Eagle Ridge with 56.7 acres permitted and constructed to receive waste.

 

In addition to the Eagle Ridge Landfill, the Company operates, through Meridian Land Company, hauling operations in Bowling Green, Missouri, servicing commercial, residential and roll off customers in this market.  The Company will be looking to expand its footprint in the market through an aggressive sales and marketing strategy, as well as through additional
acquisitions.

 

Waste Industry Overview

 

The non-hazardous solid waste industry can be divided into the following three categories: collection, transfer and disposal services.  In our management’s experience, companies engaging in collection and/or transfer operations of solid waste typically have lower margins than those performing disposal service operations.  By vertically
integrating collection, transfer and disposal operations, operators seek to capture significant waste volumes and improve operating margins.

 

 

 

During the past four decades, our industry has experienced periods of substantial consolidation activity; however, we believe significant fragmentation remains.  We believe that there are two primary factors that lead to consolidation:

 

	
●  
	
Stringent industry regulations have caused operating and capital costs to rise, with many local industry participants finding these costs difficult to bear and deciding to either close their operations or sell them to larger operators; and

 

	
●  
	
Larger operators are increasingly pursuing economies of scale by vertically integrating their operations or by utilizing their facility, asset and management infrastructure over larger volumes and, accordingly, larger solid waste collection and disposal companies have become more cost-effective and competitive by controlling a larger waste stream and by gaining access
to significant financial resources to make acquisitions.

 

Competition

 

The solid waste collection and disposal industry is highly competitive and fragmented and requires substantial labor and capital resources.  The industry presently includes large, publicly-held, national waste companies such as Republic Services, Inc. and Waste Management, Inc., as well as numerous other public and privately-held waste companies.  Our
existing market and certain of the markets in which we will likely compete are served by one or more of these companies, as well as by numerous privately-held regional and local solid waste companies of varying sizes and resources, some of which have accumulated substantial goodwill in their markets.  We also compete with operators of alternative disposal facilities and with counties, municipalities and solid waste districts that maintain their own waste collection and disposal operations.  Public
sector operations may have financial advantages over us because of potential access to user fees and similar charges, tax revenues and tax-exempt financing.

 

We compete for collection based primarily on geographic location and the price and quality of our services.  From time to time, our competitors may reduce the price of their services in an effort to expand their market share or service areas or to win competitively bid municipal contracts.  These practices may cause us to reduce the price of our
services or, if we elect not to do so, to lose business.

 

Our management has observed significant consolidation in the solid waste collection and disposal industry, and, as a result of this perceived consolidation, we encounter competition in our efforts to acquire landfills, transfer stations and collection operations.  Competition exists not only for collection, transfer and disposal volume but also for acquisition
candidates.  We generally compete for acquisition candidates with large, publicly-held waste management companies, private equity backed firms as well as numerous privately-held regional and local solid waste companies of varying sizes and resources.  Competition in the disposal industry may also be affected by the increasing national emphasis on recycling and other waste reduction programs, which may reduce the volume of waste deposited in landfills.  Accordingly, it may become
uneconomical for us to make further acquisitions or we may be unable to locate or acquire suitable acquisition candidates at price levels and on terms and conditions that we consider appropriate, particularly in markets we do not already serve.

 

 

 

Sales and Marketing

 

We focus our marketing efforts on increasing and extending business with existing customers, as well as increasing our new customer base.  Our sales and marketing strategy is to provide prompt, high quality, comprehensive solid waste collection to our customers at competitive prices.  We target potential customers of all sizes, from small quantity
generators to large companies and municipalities.  Because the waste collection and disposal business is a highly localized business, most of our marketing activity is local in nature.  

 

Government Contracts

 

We are party to contracts with municipalities and other associations and agencies.  Many of these contracts are or will be subject to competitive bidding.  We may not be the successful bidder, or we may have to substantially lower prices in order to be the successful bidder.  In addition, some of our customers may have the right to terminate
their contracts with us before the end of the contract term.

 

Municipalities may annex unincorporated areas within counties where we provide collection services, and as a result, our customers in annexed areas may be required to obtain service from competitors who have been franchised or contracted by the annexing municipalities to provide those services.  Some of the local jurisdictions in which we currently operate
grant exclusive franchises to collection and disposal companies, others may do so in the future, and we may enter markets where franchises are granted by certain municipalities, thereby reducing the potential market opportunity for us.

 

Regulation

 

Our business is subject to extensive and evolving federal, state and local environmental, health, safety and transportation laws and regulations.  These laws and regulations are administered by the U.S. Environmental Protection Agency, or EPA, and various other federal, state and local environmental, zoning, air, water, transportation, land use, health and
safety agencies.  Many of these agencies regularly inspect our operations to monitor compliance with these laws and regulations.  Governmental agencies have the authority to enforce compliance with these laws and regulations and to obtain injunctions or impose civil or criminal penalties in cases of violations.  We believe that regulation of the waste industry will continue to evolve, and we will adapt to future legal and regulatory requirements to ensure compliance.

 

Our operations are subject to extensive regulation, principally under the federal statutes described below.

 

The Resource Conservation and Recovery Act of 1976, as amended, or RCRA.  RCRA regulates the handling, transportation and disposal of hazardous and non-hazardous wastes and delegates authority to states to develop programs to ensure the safe disposal of solid wastes.  On October 9, 1991, the EPA promulgated
Solid Waste Disposal Facility Criteria for non-hazardous solid waste landfills under Subtitle D of RCRA.  Subtitle D includes location standards, facility design and operating criteria, closure and post-closure requirements, financial assurance standards and groundwater monitoring, as well as corrective action standards, many of which had not commonly been in place or enforced at landfills.  Subtitle D applies to all solid waste landfill cells that received waste after October 9, 1991, and,
with limited exceptions, required all landfills to meet these requirements by October 9, 1993. All states in which we operate have EPA-approved programs which implemented at least the minimum requirements of Subtitle D and in some states even more stringent requirements.

 

 

 

The Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, or CERCLA.  CERCLA, which is also known as Superfund, addresses problems created by the release or threatened release of hazardous substances (as defined in CERCLA) into the environment.  CERCLA’s primary mechanism
for achieving remediation of such problems is to impose strict joint and several liability for cleanup of disposal sites on current owners and operators of the site, former site owners and operators at the time of disposal and parties who arranged for disposal at the facility (i.e., generators of the waste and transporters who select the disposal site).  The costs of a CERCLA cleanup can be substantial.  Liability under CERCLA is not dependent on the existence or intentional disposal of “hazardous
wastes” (as defined under RCRA), but can also be based upon the release or threatened release, even as a result of lawful, unintentional and non-negligent action, of any one of the more than 700 “hazardous substances” listed by the EPA, even in minute amounts.

 

The Federal Water Pollution Control Act of 1972, as amended, or the Clean Water Act.  This act establishes rules regulating the discharge of pollutants into streams and other waters of the United States (as defined in the Clean Water Act) from a variety of sources, including solid waste disposal sites.  If runoff from our transfer stations
may be discharged into surface waters, the Clean Water Act requires us to apply for and obtain discharge permits, conduct sampling and monitoring and, under certain circumstances, reduce the quantity of pollutants in those discharges.  In 1990, the EPA issued additional rules under the Clean Water Act, which establish standards for management of storm water runoff from landfills and which require landfills that receive, or in the past received, industrial waste to obtain storm water discharge permits.  In
addition, if a landfill or transfer station discharges wastewater through a sewage system to a publicly-owned treatment works, the facility must comply with discharge limits imposed by the treatment works.  Also, if development of a landfill may alter or affect “wetlands,” the owner may have to obtain a permit and undertake certain mitigation measures before development may begin.  This requirement is likely to affect the construction or expansion of many solid waste disposal sites.

 

 The Clean Air Act of 1970, as amended, or the Clean Air Act.  The Clean Air Act provides for increased federal, state and local regulation of the emission of air pollutants.  The EPA has applied the Clean Air Act to solid waste landfills and vehicles with heavy duty engines, such as waste collection
vehicles.  Additionally, in March 1996, the EPA adopted New Source Performance Standards and Emission Guidelines (the “Emission Guidelines”) for municipal solid waste landfills to control emissions of landfill gases.  These regulations impose limits on air emissions from solid waste landfills.  The Emission Guidelines impose two sets of emissions standards, one of which is applicable to all solid waste landfills for which construction, reconstruction or modification was
commenced before May 30, 1991.  The other applies to all municipal solid waste landfills for which construction, reconstruction or modification was commenced on or after May 30, 1991.  These guidelines, combined with the new permitting programs established under the Clean Air Act, could subject solid waste landfills to significant permitting requirements and, in some instances, require installation of gas recovery systems to reduce emissions to allowable limits.  The EPA also regulates
the emission of hazardous air pollutants from municipal landfills and has promulgated regulations that require measures to monitor and reduce such emissions.

 

 

 

Climate Change.  A variety of regulatory developments, proposals or requirements have been introduced that are focused on restricting the emission of carbon dioxide, methane and other gases known as greenhouse gases.  Congress has considered legislation directed at reducing greenhouse gas emissions.  There
has been support in various regions of the country for legislation that requires reductions in greenhouse gas emissions, and some states have already adopted legislation addressing greenhouse gas emissions from various sources.  In 2007, the U.S. Supreme Court held in Massachusetts, et al. v. EPA that greenhouse gases are an “air pollutant” under the federal Clean Air Act and, thus, subject to future regulation.  In a move toward regulating greenhouse gases, on December 15, 2009,
the EPA published its findings that emission of carbon dioxide, methane and other greenhouse gases present an endangerment to human health and the environment because greenhouse gases are, according to EPA, contributing to climate change.  On October 30, 2009, the EPA published the greenhouse gas reporting final rule, effective December 29, 2009, which establishes a new comprehensive scheme requiring certain specified industries as well as operators of stationary sources emitting more than established
annual thresholds of carbon dioxide-equivalent greenhouse gases to inventory and report their greenhouse gas emissions annually.  Municipal solid waste landfills are subject to the rule.  In 2009, the EPA also proposed regulations that would require a reduction in emissions of greenhouse gases from motor vehicles.  According to the EPA, the final motor vehicle greenhouse gas standards will trigger construction and operating permit requirements for stationary sources that exceed potential-to-emit
(PTE) thresholds for regulated pollutants.  As a result, the EPA has proposed to tailor these programs such that only large stationary sources, such as electric generating units, cement production facilities, and petroleum refineries will be required to have air permits that authorize greenhouse gas emissions.

 

The Occupational Safety and Health Act of 1970, as amended, or OSHA.  OSHA establishes certain employer responsibilities, including maintenance of a workplace free of recognized hazards likely to cause death or serious injury, compliance with standards promulgated by the Occupational Safety and Health Administration
and various record keeping, disclosure and procedural requirements.  Various standards, including standards for notices of hazards, safety in excavation and demolition work and the handling of asbestos, may apply to our operations.

  

Flow Control/Interstate Waste Restrictions.  Certain permits and approvals, as well as certain state and local regulations, may limit a landfill or transfer station to accepting waste that originates from specified geographic areas, restrict the importation of out-of-state waste or wastes originating outside the local
jurisdiction or otherwise discriminate against non-local waste.  From time to time, federal legislation is proposed that would allow some local flow control restrictions.  Although no such federal legislation has been enacted to date, if such federal legislation should be enacted in the future, states in which we use landfills could limit or prohibit the importation of out-of-state waste or direct that wastes be handled at specified facilities. These restrictions could also result in
higher disposal costs for our collection operations.  If we were unable to pass such higher costs through to our customers, our business, financial condition and operating results could be adversely affected.

 

State and Local Regulation.  Each state in which we now operate or may operate in the future has laws and regulations governing the generation, storage, treatment, handling, transportation and disposal of solid waste, occupational safety and health, water and air pollution and, in most cases, the siting, design, operation,
maintenance, closure and post-closure maintenance of landfills and transfer stations.  State and local permits and approval for these operations may be required and may be subject to periodic renewal, modification or revocation by the issuing agencies.  In addition, many states have adopted statutes comparable to, and in some cases more stringent than, CERCLA.  These statutes impose requirements for investigation and cleanup of contaminated sites and liability for costs and damages
associated with such sites, and some provide for the imposition of liens on property owned by responsible parties.  Furthermore, many municipalities also have ordinances, local laws and regulations affecting our operations.  These include zoning and health measures that limit solid waste management activities to specified sites or activities, flow control provisions that direct or restrict the delivery of solid wastes to specific facilities, laws that grant the right to establish franchises
for collection services and then put such franchises out for bid and bans or other restrictions on the movement of solid wastes into a municipality.

 

 

 

Certain state and local jurisdictions may also seek to enforce flow control restrictions through local legislation or contractually.  In certain cases, we may elect not to challenge such restrictions.  These restrictions could reduce the volume of waste going to landfills in certain areas, which may adversely affect our ability to operate our landfills
at their full capacity and/or reduce the prices that we can charge for landfill disposal services.  These restrictions may also result in higher disposal costs for our collection operations.  If we were unable to pass such higher costs through to our customers, our business, financial condition and operating results could be adversely affected.

 

Permits or other land use approvals with respect to a landfill, as well as state or local laws and regulations, may specify the quantity of waste that may be accepted at the landfill during a given time period and/or specify the types of waste that may be accepted at the landfill.  Once an operating permit for a landfill is obtained, it must generally be
renewed periodically.

 

There has been an increasing trend at the state and local level to mandate and encourage waste reduction and recycling and to prohibit or restrict the disposal in landfills of certain types of solid wastes, such as yard wastes, beverage containers, unshredded tires, lead-acid batteries, paper, cardboard and household appliances. 

 

Many states and local jurisdictions have enacted “bad boy” laws that allow the agencies that have jurisdiction over waste services contracts or permits to deny or revoke these contracts or permits based on the applicant’s or permit holder’s compliance history.  Some states and local jurisdictions go further and consider the compliance
history of the parent, subsidiaries or affiliated companies, in addition to that of the applicant or permit holder. These laws authorize the agencies to make determinations of an applicant’s or permit holder’s fitness to be awarded a contract to operate and to deny or revoke a contract or permit because of unfitness unless there is a showing that the applicant or permit holder has been rehabilitated through the adoption of various operating policies and procedures put in place to assure future compliance
with applicable laws and regulations. 

 

Some state and local authorities enforce certain federal laws in addition to state and local laws and regulations. For example, in some states, RCRA, OSHA, parts of the Clean Air Act and parts of the Clean Water Act are enforced by local or state authorities instead of the EPA, and in some states those laws are enforced jointly by state or local and federal authorities.

 

Public Utility Regulation.  In many states, public authorities regulate the rates that landfill operators may charge.  

 

Seasonality

 

Based on our industry and our historic trends, we expect our operations to vary seasonally.  Typically, revenue will be highest in the second and third calendar quarters and lowest in the first and fourth calendar quarters.  These seasonal variations result in fluctuations in waste volumes due to weather conditions and general economic activity.  We
also expect that our operating expenses may be higher during the winter months due to periodic adverse weather conditions that can slow the collection of waste, resulting in higher labor and operational costs.  

 

 

 

Employees

 

As of May 17, 2016, we have approximately 180 full-time employees.  None of our employees are represented by a labor union.   We have not experienced any work stoppages and we believe that our relations with our employees are good.

 

Here to Serve – Georgia Waste Division, LLC

 

Here to Serve – Georgia Waste Division, LLC was formed to locate and acquire a waste facility in Georgia which would be owned and operated by the Company. At this time, we have not located any potential waste facilities for a future acquisition. We are not aware of the estimated schedule for any potential future acquisition or estimated amount of capital required
to consummate a potential future acquisition at this time.

 

Here To Serve Technology, LLC

 

HTS Tech was in the business of designing, developing and selling mobile based apps for smartphones and computers to the general public as well as Enterprise versions. On January 7, 2015, in an effort to give investors a more concentrated presence in the waste industry the Company sold the capitalized software assets of HTS Tech to Mobile Science Technologies,
Inc., a Georgia corporation, a related party due to being owned by some of the shareholders of the Company.

 

Management

 

 (i)           Jeffrey S. Cosman, Chief Executive Officer, Director. Jeffrey S. Cosman combines over 10 years’ experience in the solid waste industry, which includes
local operations, local and regional accounting and corporate finance.  Mr. Cosman has served as the Chief Executive Officer and a Director of the Company since October 31, 2014, and has managed the operations of Here to Serve - Missouri Waste Division, LLC and Here to Serve - Georgia Waste Division, LLC since May 2014. In 2012, Mr. Cosman purchased Rosewood Communication Supply, a warehouse centric telecom parts and supplies distributor. In 2010, Mr. Cosman shifted his career focus back to the solid
waste industry, founding, in 2010, Legacy Waste Solutions, LLC, a compressed natural gas consulting business.  Prior to that, in the early 2000’s, Mr. Cosman became involved in start-up technology in the medical device industry, following his work at Republic Services from February 1996 until February 1999, where, in his role in Corporate Finance, Mr. Cosman assisted due diligence of acquisitions, provided accounting guidance in over 168 transactions totaling $1.6 Billion in annualized revenue, supported
corporate controllers in monthly reporting and assisted in the preparation of a registration statement for Republic Services. From 1993 through 1996, Mr. Cosman had a career in professional baseball with the New York Mets’ minor league organization.  In addition, Mr. Cosman has experience in mobile-based app development, medical device sales leadership and capital raising. Mr. Cosman holds a B.B.A. in Managerial Finance and Banking and Finance, and a Bachelors of Accountancy from the University
of Mississippi.  The Board of Directors believes that Mr. Cosman’s “ground up” experience in the solid waste industry, together with his background in related fields, as well as finance, will support the Company’s growth plans as it moves forward in implementing its transition into the waste industry. Mr. Cosman is the majority shareholder in Here To Serve Holding Corp, an OTC Markets company based in Milton, Georgia.  Mr. Cosman has approximately 65% of the outstanding
shares of Here To Serve Holding Corp.  The Company does not have an arrangement with Here To Serve or Mr. Cosman for past, current or future services to be performed between Here To Serve and Meridian Waste Solutions, Inc. Mr. Cosman may in the future consult from time to time with Here To Serve on matters that do not conflict with the operation of the Company. Mr. Cosman spends several hours a month on Here To Serve. Additionally, Mr. Cosman has a minority equity interest in Rush The Puck, LLC. The
Company does not have an arrangement with Rush The Puck, LLC or Mr. Cosman for past, current or future services to be performed between Rush The Puck LLC and Meridian Waste Solutions, Inc. Mr. Cosman spends approximately one hour per week on Rush The Puck, LLC.

 

 

 

 

 (ii)           Walter H. Hall, Jr., President, Chief Financial Officer, Director. Walter H. Hall, age 58, brings 25 years of management experience in the waste industry. Most recently Mr. Hall served as Chief Operating
Officer for Advanced Disposal Services, Inc., from 2001 through 2014, where he had direct responsibility for profit and loss decisions, development and implementation of strategic marketplace plans, sales, safety, acquisitions, and coordination of assets and personnel for a company having operations in multiple states with annual revenues in excess of $1 billion. Prior to that, Mr. Hall held positions as President and General Manager with Southland Waste Systems and Southland Waste Systems of Georgia, respectively,
following six years with Brown Ferris Industries as District Manager and Regional Operations Manager. Mr. Hall has an undergraduate degree from Mississippi College. The Board of Directors believes that Mr. Hall’s extensive and directly applicable experience within the waste industry makes him ideally qualified to help lead the Company towards continued growth.

 

 (iii)           Jeffrey S. Cosman and Walter H. Hall, Jr. both have employment contracts detailing their compensation.  For more detailed information with respect
to their compensation and employment contracts please refer to the Company’s Current Report on Form 8-K filed with the SEC on March 17, 2016 and the Company’s Annual Report on Form 10-K filed with the SEC on April 14, 2016.

 

3.           Subscriber Representations and Warranties.  Subscriber hereby represents, warrants and agrees with the Company that:

 

(a)           Standing of Subscriber.  If Subscriber is an entity, such Subscriber is duly organized, validly existing and in good standing under the laws of the jurisdiction
of its formation.  If Subscriber is a natural person, such Subscriber is not a minor and has the legal capacity to enter into this Agreement;

 

(b)           Authorization and Power.  Subscriber has the requisite power and authority to enter into and perform this Agreement and to purchase the Shares.  The execution, delivery and performance of this Agreement by Subscriber
and, if Subscriber is an entity, the consummation by Subscriber of the transactions contemplated hereby have been duly authorized by all necessary company action, and no further consent or authorization of Subscriber, its board of directors or similar governing body, or stockholders is required, as applicable.  This Agreement has been duly authorized, executed and delivered by Subscriber and constitutes, or shall constitute when executed and delivered, a valid and binding obligation of Subscriber, enforceable
against Subscriber in accordance with the terms thereof;

 

(c)           Independent Advice.  Subscriber has been urged, and has been given the opportunity, to seek independent advice from professional advisors relating to the suitability of an investment
in the Company in view of subscriber’s overall financial needs and with respect to the legal and tax consequences of such investment.  The Subscriber acknowledges that there may be certain adverse tax consequences to me in connection with the purchase of the Shares.

 

 

 

(d)           No Conflicts.  If Subscriber is an entity, the execution, delivery and performance of this Agreement and the consummation by Subscriber of the transactions contemplated hereby do not and will not result in a violation of
Subscriber’s charter documents, bylaws or other organizational documents, as applicable;

 

(e)           Information on Subscriber.  Such Subscriber is an “accredited investor,” as such term is defined in Rule 501(a) of Regulation D promulgated by
the Commission under the 1933 Act, is experienced in investments and business matters, has made investments of a speculative nature and has purchased securities of United States companies in private placements in the past and, with its representatives, has such knowledge and experience in financial, tax and other business matters as to enable Subscriber to utilize the information made available by the Company to evaluate
the merits and risks of and to make an informed investment decision with respect to the proposed purchase, which represents a speculative investment.  Subscriber is able to bear the risk of such investment for an indefinite period and to afford a complete loss thereof.  Subscriber is not required to be registered as a broker-dealer under Section 15 of the Securities Exchange Act of 1934, as amended.  Subscriber understands that the Company is relying on Subscriber’s representations
and agreements for the purpose of determining whether this transaction meets the requirements of the exemptions afforded by the 1933 Act and certain state securities laws;

 

(f)           Purchase of Shares.  Subscriber will purchase the Shares for its own account for investment and not with a view toward, or for resale
in connection with, the public sale or any distribution thereof in violation of the 1933 Act or any applicable state securities law, and has no direct or indirect arrangement or understandings with any other person or entity to distribute or regarding the distribution of such Shares;

 

(g)           Transfer or Re-sale.  The Subscriber understands that the sale or re-sale of the Shares has not been and is not being registered under the 1933 Act or any applicable state securities laws, and the Shares may not be transferred unless
the Shares are sold pursuant to an effective registration statement under the 1933 Act, the Subscriber shall have delivered to the Company an opinion of counsel that shall be in form, substance and scope customary for opinions of counsel in comparable transactions to the effect that the Shares to be sold or transferred may be sold or transferred pursuant to an exemption from such registration, which opinion shall be accepted by the Company, the Shares are sold or transferred to an “affiliate”
(as defined in Rule 144 promulgated under the 1933 Act (or a successor rule) (“Rule 144”)) of the Subscriber who agrees to sell or otherwise transfer the Shares only in accordance with this Section 3(g) and who is an Accredited Investor,  the Shares are sold pursuant to Rule 144, or    the Shares are sold pursuant to Regulation S under the 1933 Act (or a successor rule), and the Subscriber shall have delivered to the Company  an opinion of counsel
that shall be in form, substance and scope customary for opinions of counsel in corporate transactions, which opinion shall be accepted by the Company; (ii) any sale of such Shares made in reliance on Rule 144 may be made only in accordance with the terms of said Rule and further, if said Rule is not applicable, any re-sale of such Shares under circumstances in which the seller (or the person through whom the sale is made) may be deemed to be an underwriter (as that term is defined in the 1933 Act) may require
compliance with some other exemption under the 1933 Act or the rules and regulations of the SEC thereunder; and (iii) neither the Company nor any other person is under any obligation to register such Securities under the 1933 Act or any state securities laws or to comply with the terms and conditions of any exemption thereunder (in each case).  Notwithstanding the foregoing or anything else contained herein to the contrary, the Shares may be pledged as collateral in connection with a bona
fide margin account or other lending arrangement.  

 

 

 

(h)           Legend.  The Shares shall bear the following or similar legend:

 

“THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, NOR APPLICABLE STATE SECURITIES LAWS.  THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR
THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL (REASONABLY ACCEPTABLE TO THE COMPANY), IN AN ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT.”

 

(i)           No Governmental Endorsement. Subscriber understands that no United States federal or state agency or any other governmental or state agency has passed on or made recommendations or endorsement of the Shares or the suitability of the investment in the Shares,
nor have such authorities passed upon or endorsed the merits of the offering of the Shares;

 

(j)           Receipt of Information.  Subscriber believes it has received all the information it considers necessary or appropriate for deciding whether to purchase the Shares.  Subscriber further represents that through its representatives it has
had an opportunity to ask questions and receive answers from the Company regarding the terms and conditions of the offering of the Shares and the business, properties and financial condition of the Company and to obtain additional information (to the extent the Company possessed such information or could acquire it without unreasonable effort or expense) necessary to verify the accuracy of any information furnished to it or to which it had access; and

 

(k)           Highly Speculative Investment. Subscriber acknowledges and agrees that a purchase of the Shares is highly speculative and involves significant risks and that the Shares should not be purchased if Subscriber cannot afford the loss of Subscriber’s entire
investment. The business objectives of the Company are speculative, and it is possible that the Company may be unable to achieve them. Subscriber understands that Subscriber may be unable to realize a substantial return on the purchase of the offered Shares, or any return whatsoever, and may lose Subscriber’s entire investment. Subscriber fully understands the nature of the risks involved in purchasing the Shares and it is qualified by its knowledge and experience to evaluate investments of this type.  Subscriber
has carefully considered the potential risks relating to the Company and purchase of its securities and has independently evaluated the risks of purchasing the Shares.

 

(l)           Subscriber believes that the investment in the Shares is suitable for it based upon its investment objectives and financial needs, and it has adequate means for providing for its current financial needs and contingencies and has no need for liquidity with respect to its investment in the Company.

 

(m)           Subscriber has such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of an investment in the Shares and have obtained, in its judgment, sufficient information from the Company to evaluate the merits and risks of an investment in the Company.  Subscriber
has not utilized any person as its purchaser representative as defined in Regulation D under the 1933 Act in connection with evaluating such merits and risks.

 

 

 

(n)           Subscriber has relied solely upon its own investigation in making a decision to invest in the Company.

 

(o)           Subscriber has received no representation or warranty from the Company or any of its officers, directors, employees, or agents in respect of its investment in the Company and in making its investment in the Shares, Subscriber has not relied upon any information (written or otherwise) from them relating
to this offering other than as set forth herein.

 

(p)           Subscriber is not participating in the offer as a result of or subsequent to: (i) any advertisement, article, notice or other communication published in any newspaper, magazine or similar media or broadcast over television or radio or (ii) any seminar or meeting whose attendees have been invited by any
general solicitation or general advertising.

 

(q)           Subscriber hereby acknowledges and is aware that Subscriber is not entitled to cancel, terminate, or revoke this subscription, and any agreements made in connection herewith survives any death or disability of a natural person Subscriber.

 

(r)           Subscriber understands that the price for the Shares has been arbitrarily determined.  The price for the Shares bears no necessary relationship to the assets, earnings or book value of the Company, or any other objective standard of value.

 

(s)            No Market Manipulation.  Subscriber and Subscriber’s affiliates have not taken, and will not take, directly or indirectly, any action designed to, or that might reasonably be expected to, cause or result in stabilization or manipulation
of the price of the Common Stock, to facilitate the sale or resale of the Shares or affect the price at which the Shares may be issued or resold.

 

(t)           Reliance on Exemptions.  The Subscriber understands that the Shares are being offered and sold or assigned to it in reliance on specific exemptions from the registration requirements of United States federal and state securities laws and that the Company
is relying in part upon the truth and accuracy of, and Subscriber’s compliance with, the representations, warranties, agreements, acknowledgments and understandings of Subscriber set forth herein in order to determine the availability of such exemptions and the eligibility of Subscriber to acquire the Shares.

(u)           The Subscriber has read the Company’s most recent Annual Report on Form 10-K filed with the SEC on April 14, 2016, as well as the Company’s subsequent filings with the SEC of Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, available at www.sec.gov.

 

(v)           The following items discuss certain risks of the Company (the terms “we”, “us”, and “our” referring to the Company), and Subscriber understands that these risks do not represent all the risks associated with an investment in the Company:

 

 (i)           WE ARE SUBJECT TO ENVIRONMENTAL AND SAFETY LAWS, WHICH RESTRICT OUR OPERATIONS AND INCREASE OUR COSTS.

 

 

 

We are subject to extensive federal, state and local laws and regulations relating to environmental protection and occupational safety and health.  These include, among other things, laws and regulations governing the use, treatment, storage and disposal of wastes and materials, air quality, water quality and the remediation of contamination associated with
the release of hazardous substances.  Our compliance with existing regulatory requirements is costly, and continued changes in these regulations could increase our compliance costs. Government laws and regulations often require us to enhance or replace our equipment. We are required to obtain and maintain permits that are subject to strict regulatory requirements and are difficult and costly to obtain and maintain.  We may be unable to implement price increases sufficient to offset the cost
of complying with these laws and regulations.  In addition, regulatory changes could accelerate or increase expenditures for closure and post-closure monitoring at solid waste facilities and obligate us to spend sums over the amounts that we have accrued. In order to develop, expand or operate a landfill or other waste management facility, we must have various facility permits and other governmental approvals, including those relating to zoning, environmental protection and land use. The permits and
approvals are often difficult, time consuming and costly to obtain and could contain conditions that limit our operations.

 

 (ii)           WE MAY BECOME SUBJECT TO ENVIRONMENTAL CLEAN-UP COSTS OR LITIGATION THAT COULD CURTAIL OUR BUSINESS OPERATIONS AND MATERIALLY DECREASE OUR EARNINGS.

 

The Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended, or CERCLA, and analogous state laws provide for the remediation of contaminated facilities and impose strict joint and several liability for remediation costs on current and former owners or operators of a facility at which there has been a release or a threatened release of
a hazardous substance.  This liability is also imposed on persons who arrange for the disposal of and who transport such substances to the facility.  Hundreds of substances are defined as hazardous under CERCLA and their presence, even in small amounts, can result in substantial liability.  The expense of conducting a cleanup can be significant.  Notwithstanding our efforts to comply with applicable regulations and to avoid transporting and receiving hazardous substances,
we may have liability because these substances may be present in waste collected by us.  The actual costs for these liabilities could be significantly greater than the amounts that we might be required to accrue on our financial statements from time to time.

 

In addition to the costs of complying with environmental regulations, we may incur costs to defend against litigation brought by government agencies and private parties.  As a result, we may be required to pay fines or our permits and licenses may be modified or revoked.  We may in the future be a defendant in lawsuits brought by governmental agencies
and private parties who assert claims alleging environmental damage, personal injury, property damage and/or violations of permits and licenses by us.  A significant judgment against us, the loss of a significant permit or license or the imposition of a significant fine could curtail our business operations and may decrease our earnings.

 

(iii)           OUR BUSINESS IS CAPITAL INTENSIVE, REQUIRING ONGOING CASH OUTLAYS THAT MAY STRAIN OR CONSUME OUR AVAILABLE CAPITAL AND FORCE US TO SELL ASSETS, INCUR DEBT, OR SELL EQUITY ON UNFAVORABLE TERMS.

 

Our ability to remain competitive, grow and maintain operations largely depends on our cash flow from operations and access to capital.  Maintaining our existing operations and expanding them through internal growth or acquisitions requires large capital expenditures.  As we undertake more acquisitions and further expand our operations, the amount we
expend on capital will increase. These increases in expenditures may result in lower levels of working capital or require us to finance working capital deficits.  We intend to continue to fund our cash needs through cash flow from operations, equity and debt financings and borrowings under our credit facility, if necessary.  However, we may require additional equity or debt financing to fund our growth.

 

 

 

We do not have complete control over our future performance because it is subject to general economic, political, financial, competitive, legislative, regulatory and other factors.  It is possible that our business may not generate sufficient cash flow from operations, and we may not otherwise have the capital resources, to allow us to make necessary capital
expenditures.  If this occurs, we may have to sell assets, restructure our debt or obtain additional equity capital, which could be dilutive to our stockholders.  We may not be able to take any of the foregoing actions, and we may not be able to do so on terms favorable to us or our stockholders.

 

(iv)           THE COMPANY’S FAILURE TO COMPLY WITH THE OBLIGATIONS SET FORTH IN THE AGREEMENTS ENTERED INTO WITH GOLDMAN SACHS SPECIALTY LENDING GROUP, L.P. MAY RESULT IN THE FORECLOSURE OF THE COMPANY’S OR ITS SUBSIDIARIES’ PLEDGED ASSETS
AND OTHER ADVERSE CONSEQUENCES.

 

Effective December 22, 2015, the Company closed a Credit and Guaranty Agreement (the “Credit Agreement”) by and among the Company, Brooklyn Cheesecake & Dessert Acquisition Corp., Here to Serve - Missouri Waste Division, LLC, Here to Serve - Georgia Waste Division, LLC, Meridian Land Company, LLC, Christian Disposal, LLC, and FWCD, LLC, and certain subsidiaries
of the Company, as Guarantors, the Lenders party thereto from time to time and Goldman Sachs Specialty Lending Group, L.P., as Administrative Agent, Collateral Agent, and Lead Arranger.

 

Pursuant to the Credit Agreement, Lenders have agreed to extend certain credit facilities to the Companies, in an aggregate amount not to exceed $55,000,000, consisting of $40,000,000 aggregate principal amount of Tranche A Term Loans (the “Tranche A Term Loans”), $10,000,000 aggregate principal amount of Multi-Draw Term Loans (the “MDTL Term Loans”),
and up to $5,000,000 aggregate principal amount of Revolving Commitments (the “Revolving Commitments” and, together with the Tranche A Term Loans and the MDTL Term Loans, the “Loans”). The proceeds of the Loans are to be used as follows: (i) the proceeds of the Tranche A Term Loans shall be applied by Companies to (a) partially fund the acquisitions of Christian Disposal, FWCD and certain assets of Eagle Ridge Landfill, LLC, (b) refinance existing indebtedness of the Companies, (c) pre-fund
certain capital expenditures, (d) pay fees and expenses in connection with the transactions contemplated by the Credit Agreement and (e) for working capital and other general corporate purposes; (ii) the proceeds of the Revolving Commitments will be used for working capital and general corporate purposes and (iii) the proceeds of the MDTL Term Loans will be used for acquisitions permitted under the Credit Agreement. The Loans are evidenced, respectively, by that certain Tranche A Term Loan Note, MDTL
Note and Revolving Loan Note, all issued on December 22, 2015 (collectively, the “Notes”). Under the Notes and Credit Agreement, prepayments are subject to certain prepayment premiums, and payment obligations are subject to acceleration upon the occurrence of events of default under the Credit Agreement.

 

The Loans and other obligations under the Credit Agreement are secured by a first position security interest in substantially all of the Company’s and the Companies’ assets in favor of the Collateral Agent, in accordance with that certain Pledge and Security Agreement dated as of December 22, 2015 (the “Pledge and Security Agreement”).

 

 

 

In connection with the Credit Agreement, on December 22, 2015, the Company issued that certain Purchase Warrant for Common Shares to Goldman, Sachs & Co. (the “Warrant”) for the purchase of shares of the Company’s common stock equivalent to a 6.5% Percentage Interest (as such term is defined in the Warrant) at a purchase price equal to $449,553, exercisable
on or before December 22, 2023. The Warrant grants the holder certain other rights, including registration rights, preemptive rights for certain capital raises, board observation rights and indemnification. 

 

The Company’s failure to comply with the obligations set forth in the Credit Agreement and related documents or the occurrence of certain other specified events could result in an event of default that, if not cured or waived, could result in the acceleration of all or a substantial portion of our debt, potential foreclosure on our assets and other adverse consequences.
Events of Default under the Credit Agreement include, without limitation, the Company’s: failure to make payments when due, defaults under other agreements, breach of certain covenants or representations, bankruptcy, change of control and termination of a material contract.

 

(iv)           THE COMPANY’S FAILURE TO MAINTAIN CERTAIN LEVERAGE RATIOS SET FORTH IN THE CREDIT AGREEMENT HAS HISTORICALLY RESULTED IN, AND MAY CONTINUE TO RESULT IN, THE COMPANY BEING UNABLE TO DRAW DOWN ADDITONAL FUNDS PURSUANT TO THE CREDIT AGREEMENT,
AND AS A RESULT, WE MAY NEED TO SEEK OTHER SOURCES OF CAPITAL, WHICH COULD BE ON LESS FAVORABLE TERMS .

 

Due to certain unanticipated delays in integration of landfill operations, including due to flooding in St. Louis area in December 2015, the Company has historically not been able to, and may continue not to be able to, maintain the leverage ratios set forth in the Credit Agreement. As a result, the Company will not be able to draw down additional funds pursuant to
the Credit Agreement until such time as such leverage ratios comply with the requirements of the Credit Agreement. If the Company is unable to draw down additional funds pursuant to the Credit Agreement, it may be required to seek other sources of capital, and such capital may only be available on terms that are substantially less favorable than the terms of the Credit Agreement.

 

(v)           WE DEPEND ON A LIMITED NUMBER OF CUSTOMERS FOR OUR REVENUE.

 

At this time, the Company has two municipal contracts that account for 26% and 18% of our long term contracted revenues for the fiscal year ended December 31, 2015. Because we depend on these customers for a majority of our revenue, a loss of one of these customers could materially adversely affect our business and financial condition. If these principal customers
cease using our services, our business could be materially adversely affected.

 

(vi)           GOVERNMENTAL AUTHORITIES MAY ENACT CLIMATE CHANGE REGULATIONS THAT COULD INCREASE OUR COSTS TO OPERATE.

 

 Environmental advocacy groups and regulatory agencies in the United States have been focusing considerable attention on the emissions of greenhouse gases and their potential role in climate change.  Congress has considered recent proposed legislation directed at reducing greenhouse gas emissions
and President Obama has indicated his support of legislation aimed at reducing greenhouse gases.  The EPA has proposed rules to regulate greenhouse gases, regional initiatives have formed to control greenhouse gases and certain of the states in which we operate are contemplating air pollution control regulations that are more stringent than existing and proposed federal regulations, in particular the regulation of emissions of greenhouse gases.  The adoption of laws and regulations to implement
controls of greenhouse gases, including the imposition of fees or taxes, could adversely affect our collection operations.  Changing environmental regulations could require us to take any number of actions, including the purchase of emission allowances or installation of additional pollution control technology, and could make some operations less profitable, which could adversely affect our results of operations.

 

 

 

(vii)           OUR OPERATIONS ARE SUBJECT TO ENVIRONMENTAL, HEALTH AND SAFETY LAWS AND REGULATIONS, AS WELL AS CONTRACTUAL OBLIGATIONS THAT MAY RESULT IN SIGNIFICANT LIABILITIES.

 

We risk incurring significant environmental liabilities in connection with our use, treatment, storage, transfer and disposal of waste materials. Under applicable environmental laws and regulations, we could be liable if our operations are found to cause environmental damage to our properties or to the property of other landowners, particularly as a result of the contamination
of air, drinking water or soil. Under current law, we could also be held liable for damage caused by conditions that existed before we acquired the assets or operations involved. This risk is of particular concern as we execute our growth strategy, partially though acquisitions, because we may be unsuccessful in identifying and assessing potential liabilities during our due diligence investigations. Further, the counterparties in such transactions may be unable to perform their indemnification obligations owed
to us. Additionally, we could be liable if we arrange for the transportation, disposal or treatment of hazardous substances that cause environmental contamination, or if a predecessor owner made such arrangements and, under applicable law, we are treated as a successor to the prior owner. Any substantial liability for environmental damage could have a material adverse effect on our financial condition, results of operations and cash flows.

 

(viii)           OUR BUSINESS IS SUBJECT TO OPERATIONAL AND SAFETY RISKS, INCLUDING THE RISK OF PERSONAL INJURY TO EMPLOYEES AND OTHERS.

 

Providing environmental and waste management services, including operating landfills, involves risks such as vehicular accidents and equipment defects, malfunctions and failures. Additionally, there are risks associated with waste mass instability and releases of hazardous materials or odors. There may also be risks presented by the potential for subsurface chemical reactions
causing elevated landfill temperatures and increased production of leachate, landfill gas and odors. Any of these risks could potentially result in injury or death of employees and others, a need to shut down or reduce operation of facilities, increased operating expense and exposure to liability for pollution and other environmental damage, and property damage or destruction.

 

While we seek to minimize our exposure to such risks through comprehensive training, compliance and response and recovery programs, as well as vehicle and equipment maintenance programs, if we were to incur substantial liabilities in excess of any applicable insurance, our business, results of operations and financial condition could be adversely affected. Any such incidents
could also adversely impact our reputation and reduce the value of our brand. Additionally, a major operational failure, even if suffered by a competitor, may bring enhanced scrutiny and regulation of our industry, with a corresponding increase in operating expense.

 

 

 

(ix)           INCREASES IN THE COSTS OF FUEL MAY REDUCE OUR OPERATING MARGINS.

 

The price and supply of fuel needed to run our collection vehicles is unpredictable and fluctuates based on events outside our control, including geopolitical developments, supply and demand for oil and gas, actions by OPEC and other oil and gas producers, war and unrest in oil producing countries, regional production patterns and environmental concerns.  Any
significant price escalations or reductions in the supply could increase our operating expenses or interrupt or curtail our operations.  Failure to offset all or a portion of any increased fuel costs through increased fees or charges would reduce our operating margins.

 

(x)           CHANGES IN INTEREST RATES MAY AFFECT OUR PROFITABILITY.

 

Potential future acquisitions could require us to incur substantial additional indebtedness in the future, which will increase our interest expense.  Further, to the extent that these borrowings are subject to variable rates of interest, increases in interest rates will increase our interest expense, which will affect our profitability.  We bear exposure
to, and are primarily affected by, changes in LIBOR rates.  

 

(xi)           INCREASES IN THE COSTS OF DISPOSAL MAY REDUCE OUR OPERATING MARGINS.

 

In 2015, we disposed of approximately 100% of the waste that we collect in landfills operated by others, and, even with our recent acquisition of a landfill, that rate may not decrease significantly in the immediate future.  We may incur increases in disposal fees paid to third parties.  Failure to pass these costs on to our customers may reduce
our operating margins.  In December 2015, the Company purchased Eagle Ridge as part of its strategy to internalize a majority of its volume.  As of April 2016, the Company has begun to move its volume away from third party landfills.  Going forward, the Company may not internalize all of its volume in its own landfill, which may limit the expected savings it anticipated from the acquisition of Eagle Ridge.

 

(xii)           INCREASES IN THE COSTS OF LABOR MAY REDUCE OUR OPERATING MARGINS.

 

We compete with other businesses in our markets for qualified employees.  A shortage of qualified employees would require us to enhance our wage and benefits packages to compete more effectively for employees or to hire more expensive temporary employees.  Labor is our second largest operating cost, and even relatively small increases in labor costs
per employee could materially affect our cost structure.  Failure to attract and retain qualified employees, to control our labor costs, or to recover any increased labor costs through increased prices we charge for our services or otherwise offset such increases with cost savings in other areas may reduce our operating margins.

 

 

 

(xiii)           INCREASES IN COSTS OF INSURANCE WOULD REDUCE OUR OPERATING MARGINS.

 

One of our largest operating costs is maintaining insurance coverage, including general liability, automobile physical damage and liability, property, employment practices, pollution, directors and officers, fiduciary, workers’ compensation and employer’s liability coverage, as well as umbrella liability policies to provide excess coverage over the underlying
limits contained in our primary general liability, automobile liability and employer’s liability policies.  Changes in our operating experience, such as an increase in accidents or lawsuits or a catastrophic loss, could cause our insurance costs to increase significantly or could cause us to be unable to obtain certain insurance. Increases in insurance costs would reduce our operating margins.  Changes in our industry and perceived risks in our business could have a similar effect.

 

 (xiv)           WE MAY NOT BE ABLE TO MAINTAIN SUFFICIENT INSURANCE COVERAGE TO COVER THE RISKS ASSOCIATED WITH OUR OPERATIONS, WHICH COULD RESULT IN UNINSURED LOSSES THAT WOULD ADVERSELY AFFECT OUR FINANCIAL CONDITION.

 

Integrated non-hazardous waste companies are exposed to a variety of risks that are typically covered by insurance arrangements.  However, we may not be able to maintain sufficient insurance coverage to cover the risks associated with our operations for a variety of reasons.  Increases in insurance costs and changes in the insurance markets may, given
our resources, limit the coverage that we are able to maintain or prevent us from insuring against certain risks.  Large or unexpected losses may exceed our policy limits, adversely affecting our results of operations, and may result in the termination or limitation of coverage, exposing us to uninsured losses, thereby adversely affecting our financial condition.

 

(xv)           OUR FAILURE TO REMAIN COMPETITIVE WITH OUR NUMEROUS COMPETITORS, SOME OF WHOM HAVE GREATER RESOURCES, COULD ADVERSELY AFFECT OUR ABILITY TO RETAIN EXISTING CUSTOMERS AND OBTAIN FUTURE BUSINESS.

 

Because our industry is highly competitive, we compete with large companies and municipalities, many of whom have greater financial and operational resources.  The non-hazardous solid waste collection and disposal industry includes large national, publicly-traded waste management companies; regional, publicly-held and privately-owned companies; and numerous small,
local, privately-owned companies.  Additionally, many counties and municipalities operate their own waste collection and disposal facilities and have competitive advantages not available to private enterprises. If we are unable to successfully compete against our competitors, our ability to retain existing customers and obtain future business could be adversely affected.

 

(xvi)           WE MAY LOSE CONTRACTS THROUGH COMPETITIVE BIDDING, EARLY TERMINATION OR GOVERNMENTAL ACTION, OR WE MAY HAVE TO SUBSTANTIALLY LOWER PRICES IN ORDER TO RETAIN CERTAIN CONTRACTS, ANY OF WHICH WOULD CAUSE OUR REVENUE TO DECLINE.

 

We are parties to contracts with municipalities and other associations and agencies.  Many of these contracts are or will be subject to competitive bidding.  We may not be the successful bidder, or we may have to substantially lower prices in order to be the successful bidder.  In addition, some of our customers may terminate their contracts
with us before the end of the contract term.  If we were not able to replace revenue from contracts lost through competitive bidding or early termination or from lowering prices or from the renegotiation of existing contracts with other revenue within a reasonable time period, our revenue could decline.

 

Municipalities may annex unincorporated areas within counties where we provide collection services, and as a result, our customers in annexed areas may be required to obtain service from competitors who have been franchised or contracted by the annexing municipalities to provide those services.  Some of the local jurisdictions in which we currently operate grant
exclusive franchises to collection and disposal companies, others may do so in the future, and we may enter markets where franchises are granted by certain municipalities.  Unless we are awarded a franchise by these municipalities, we will lose customers which will cause our revenue to decline.

 

 

 

We are currently pursuing through a bidding process the renewal of an agreement to which we are currently party, for the operation of a transfer station, scheduled to expire in the fourth quarter of 2016. If we are not awarded renewal of this agreement, we will be forced to utilize other transfer stations which would cause our revenue to decline.

 

(xvii)           EFFORTS BY LABOR UNIONS TO ORGANIZE OUR EMPLOYEES COULD DIVERT MANAGEMENT ATTENTION AND INCREASE OUR OPERATING EXPENSES.

 

We do not have any union representation in our operations.  Groups of employees may seek union representation in the future, and the negotiation of collective bargaining agreements could divert management attention and result in increased operating expenses and lower net income.  If we are unable to negotiate acceptable collective bargaining agreements,
we might have to wait through “cooling off” periods, which are often followed by union-initiated work stoppages, including strikes.  Depending on the type and duration of these work stoppages, our operating expenses could increase significantly.

 

(xviii)           POOR DECISIONS BY OUR REGIONAL AND LOCAL MANAGERS COULD RESULT IN THE LOSS OF CUSTOMERS OR AN INCREASE IN COSTS, OR ADVERSELY AFFECT OUR ABILITY TO OBTAIN FUTURE BUSINESS.

 

We manage our operations on a decentralized basis.  Therefore, regional and local managers have the authority to make many decisions concerning their operations without obtaining prior approval from executive officers.  Poor decisions by regional or local managers could result in the loss of customers or an increase in costs, or adversely affect our
ability to obtain future business.

 

(xix)           WE ARE VULNERABLE TO FACTORS AFFECTING OUR LOCAL MARKETS, WHICH COULD ADVERSELY AFFECT OUR STOCK PRICE RELATIVE TO OUR COMPETITORS.

 

Because the non-hazardous waste business is local in nature, our business in one or more regions or local markets may be adversely affected by events and economic conditions relating to those regions or markets even if the other regions of the country are not affected.  As a result, our financial performance may not compare favorably to our competitors with
operations in other regions, and our stock price could be adversely affected by our inability to compete effectively with our competitors.

 

(xx)           SEASONAL FLUCTUATIONS WILL CAUSE OUR BUSINESS AND RESULTS OF OPERATIONS TO VARY AMONG QUARTERS, WHICH COULD ADVERSELY AFFECT OUR STOCK PRICE.

 

Based on historic trends experienced by the businesses we have acquired, we expect our operating results to vary seasonally, with revenue typically lowest in the first quarter, higher in the second and third quarters, and again lower in the fourth quarter.  This seasonality generally reflects the lower volume of waste during the winter months.  Adverse
weather conditions negatively affect waste collection productivity, resulting in higher labor and operational costs.  The general increase in precipitation during the winter months increases the weight of collected waste, resulting in higher disposal costs, as costs are often calculated on a per ton basis.  Because of these factors, we expect operating income to be generally lower in the winter months.  As a result, our operating results may be negatively affected by these variations.  Additionally,
severe weather during any time of the year can negatively affect the costs of collection and disposal and may cause temporary suspensions of our collection services.  Long periods of inclement weather may interfere with collection operations and reduce the volume of waste generated by our customers.  Any of these conditions can adversely affect our business and results of operations, which could negatively affect our stock price.

 

 

 

(xxi)           WE ARE DEPENDENT ON OUR MANAGEMENT TEAM AND DEVELOPMENT AND OPERATIONS PERSONNEL, AND THE LOSS OF ONE OR MORE KEY EMPLOYEES OR GROUPS COULD HARM OUR BUSINESS AND PREVENT US FROM IMPLEMENTING OUR BUSINESS PLAN IN A TIMELY MANNER.

 

Our success depends substantially upon the continued services of our executive officers and other key members of management, particularly our chief executive officer, Mr. Jeffrey S. Cosman. From time to time, there may be changes in our executive management team resulting from the hiring or departure of executives. Such changes in our executive management team may be disruptive
to our business. We are also substantially dependent on the continued service of our existing development and operations personnel because of the complexity of our service and technologies. We have an employment agreement with Mr. Cosman. We maintain key person life insurance policy on Mr. Cosman. The loss of one or more of our key employees or groups could seriously harm our business.

 

(xxii)           WE HAVE IDENTIFIED A LACK OF ADEQUATE SEGREGATION OF DUTIES AND ABSENCE OF AN AUDIT COMMITTEE AS A MATERIAL WEAKNESS IN OUR INTERNAL CONTROLS, WHICH COULD CAUSE STOCKHOLDERS AND PROSPECTIVE INVESTORS TO LOSE CONFIDENCE IN THE RELIABILITY OF OUR
FINANCIAL REPORTING.

 

We currently have limited segregation of duties among our officers and employees with respect to the preparation and review of financial statements, which is a material weakness in internal controls. If we fail to maintain an effective system of internal controls, we may not be able to accurately report financial results or prevent fraud. As a result, current
and potential stockholders could lose confidence in the company's financial reporting that could harm the trading price of our shares, if a trading market does develop.

 

The company has identified limited segregation as a material weakness in the company's internal controls. We intend to remedy this material weakness by hiring additional employees and reallocating duties among employees, including responsibilities for financial reporting, as soon as we have available sufficient resources and personnel. However, until such
time, this material weakness will continue to exist.

 

 

 

(xxiii)           WE NEED ADDITIONAL CAPITAL TO DEVELOP OUR BUSINESS.

 

The development of our services will require the commitment of substantial resources to implement our business plan. In addition, substantial expenditures will be required to enable us to complete projects in the future.  Currently, we have a credit agreement with Goldman Sachs Specialty Lending Group.  However, it is likely we would need to seek additional
financing through subsequent future private or public offerings of our equity securities or through strategic partnerships and other arrangements with corporate partners.

 

We cannot give you any assurance that any additional financing will be available to us, or if available, will be on terms favorable to us.  The sale of additional equity securities will result in dilution to our stockholders.  The occurrence of indebtedness would result in increased debt service obligations and could require us to agree to operating
and financing covenants that would restrict our operations. If adequate additional financing is not available on acceptable terms, we may not be able to implement our business development plan or continue our business operations.

 

(xxiv)           THE MARKET PRICE OF OUR COMMON STOCK IS LIKELY TO BE VOLATILE AND COULD SUBJECT US TO LITIGATION.

 

The market price of our common stock has been and is likely to continue to be subject to wide fluctuations. Factors affecting the market price of our common stock include:

 

	
  
	
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variations in our operating results, earnings per share, cash flows from operating activities, deferred revenue, and other financial metrics and non-financial metrics, and how those results compare to analyst expectations;

	
  
	
  
	
  

	
  
	
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issuances of new stock which dilutes earnings per share;

	
  
	
  
	
  

	
  
	
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forward looking guidance to industry and financial analysts related to future revenue and earnings per share;

	
  
	
  
	
  

	
  
	
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the net increases in the number of customers and paying subscriptions, either independently or as compared with published expectations of industry, financial or other analysts that cover our company;

	
  
	
  
	
  

	
  
	
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changes in the estimates of our operating results or changes in recommendations by securities analysts that elect to follow our common stock;

	
  
	
  
	
  

	
  
	
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announcements of technological innovations, new services or service enhancements, strategic alliances or significant agreements by us or by our competitors;

	
  
	
  
	
  

	
  
	
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announcements by us or by our competitors of mergers or other strategic acquisitions, or rumors of such transactions involving us or our competitors;

	
  
	
  
	
  

	
  
	
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announcements of customer additions and customer cancellations or delays in customer purchases;

	
  
	
  
	
  

	
  
	
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recruitment or departure of key personnel; and

 

	
  
	
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trading activity by a limited number of stockholders who together beneficially own a majority of our outstanding common stock.

 

In addition, if the stock market in general experiences uneven investor confidence, the market price of our common stock could decline for reasons unrelated to our business, operating results or financial condition. The market price of our common stock might also decline in reaction to events that affect other companies within, or outside, our industries even if these
events do not directly affect us. Some companies that have experienced volatility in the trading price of their stock have been the subject of securities class action litigation. If we are to become the subject of such litigation, it could result in substantial costs and a diversion of management’s attention and resources.

 

 

 

(xxv)           THE OWNERSHIP BY OUR CHIEF EXECUTIVE OFFICER OF SERIES A PREFERRED STOCK WILL LIKELY LIMIT YOUR ABILITY TO INFLUENCE CORPORATE MATTERS.

 

Mr. Jeffrey S. Cosman, our chief executive officer, is the beneficial owner of 100% of the outstanding shares of the Company’s Series A Preferred Stock. As a result, our chief executive officer would have significant influence over most matters that require approval by our stockholders, including the election of directors and approval of significant corporate transactions,
even if other stockholders oppose them. In addition, Mr. Cosman beneficially owns approximately 49% of our issued and outstanding common stock. This concentration of ownership might also have the effect of delaying or preventing a change of control of our company that other stockholders may view as beneficial.

 

(xxvi)           OUR COMMON STOCK IS CURRENTLY ELIGIBLE FOR QUOTATION ON THE OTCQB OPERATED BY OTC MARKETS GROUP, INC. AND AN INVESTOR’S ABILITY TO TRADE OUR COMMON STOCK MAY BE LIMITED BY TRADING VOLUME.

 

The trading volume in our common shares has been relatively limited.  A consistently active trading market for our common stock may not develop on the OTCQB.  The average daily trading volume in our common stock on the OTCQB as of April 14, 2016 was limited or negligible. Accordingly, the ability of our shareholders to sell their shares of
our common stock may be extremely limited.

 

(xxvii)          WE ARE SUBJECT TO PENNY STOCK RULES WHICH WILL MAKE THE SHARES OF OUR COMMON STOCK MORE DIFFICULT TO SELL.

 

We are currently subject to the SEC’s “penny stock” rules because our shares of common stock sell below $5.00 per share.  Penny stocks generally are equity securities with a price of less than $5.00 per share.  The penny stock rules require broker-dealers to deliver a standardized risk disclosure document prepared by the SEC which
provides information about penny stocks and the nature and level of risks in the penny stock market.  The broker-dealer must also provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson, and monthly account statements showing the market value of each penny stock held in the customer’s account.  The bid and offer quotations, and the broker-dealer and salesperson compensation information must be given to
the customer orally or in writing prior to completing the transaction and must be given to the customer in writing before or with the customer’s confirmation.

 

In addition, the penny stock rules require that prior to a transaction the broker dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written agreement to the transaction.  The penny stock rules are burdensome and may reduce purchases of any offerings and reduce the
trading activity for shares of our common stock.  As long as our shares of common stock are subject to the penny stock rules, the holders of such shares of common stock may find it more difficult to sell their securities.

 

 

 

(xxviii)          THERE MAY BE RESTRICTIONS ON YOUR ABILITY TO RESELL SHARES OF COMMON STOCK UNDER RULE 144.

 

Currently, Rule 144 under the Securities Act permits the public resale of securities under certain conditions after a six or twelve month holding period by the seller, including requirements with respect to the manner of sale, sales volume restrictions, filing requirements and a requirement that certain information about the issuer is publicly available. At the time that
stockholders intend to resell their shares under Rule 144, there can be no assurances that we will be subject to the reporting requirements of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) or, if so, current in our reporting requirements under the Exchange Act, in order for stockholders to be eligible to rely on Rule 144 at such time. In addition to the foregoing requirements of Rule 144 under the federal securities laws, the various state securities laws may impose further
restrictions on the ability of a holder to sell or transfer the shares of Common Stock.

 

(xxix)           SALES OF OUR CURRENTLY ISSUED AND OUTSTANDING STOCK THAT HAS BEEN REGISTERED OR MAY BECOME FREELY TRADABLE PURSUANT TO RULE 144 AND MAY DILUTE THE MARKET FOR YOUR SHARES AND HAVE A DEPRESSIVE EFFECT ON THE PRICE OF THE SHARES OF OUR COMMON
STOCK

 

A substantial majority of our outstanding shares of common stock are “restricted securities” within the meaning of Rule 144 under the Securities Act.  As restricted shares, these shares may be resold only pursuant to an effective registration statement or under the requirements of Rule 144 or other applicable exemptions from registration under
the Act and as required under applicable state securities laws.  Rule 144 provides in essence that an Affiliate (as such term is defined in Rule 144(a)(1)) of an issuer who has held restricted securities for a period of at least six months (one year after filing Form 10 information with the SEC for shell companies and former shell companies) may, under certain conditions, sell every three months, in brokerage transactions, a number of shares that does not exceed the greater of 1% of a company’s
outstanding shares of common stock or the average weekly trading volume during the four calendar weeks prior to the sale (the four calendar week rule does not apply to companies quoted on the OTC Bulletin Board).  Rule 144 also permits, under certain circumstances, the sale of securities, without any limitation, by a person who is not an Affiliate of the Company and who has satisfied a one-year holding period. Additionally, pursuant to a Registration Statement on Form S-1, declared effective on July
7, 2016, the Company registered 1,191,774 shares of common stock held by Here to Serve Holdings Corp. and all of such shares may be freely traded. A sale under Rule 144 or under any other exemption from the Act, if available, or pursuant to effective or subsequent registrations of our shares of common stock, may have a depressive effect upon the price of our shares of common stock in any active market that may develop.

 

(xxx)           YOU MAY EXPERIENCE DILUTION OF YOUR OWNERSHIP INTEREST BECAUSE OF THE FUTURE ISSUANCE OF ADDITIONAL SHARES OF OUR COMMON STOCK AND BECAUSE OF OUR PREFERRED STOCK AND OUTSTANDING WARRANTS.

 

 

 

In the future, we expect to issue our authorized but previously unissued equity securities in connection with future financing, resulting in the dilution of the ownership interests of our present stockholders.  We are currently authorized to issue an aggregate of 80,000,000 shares of capital stock, which includes 4,928,829 shares of blank check preferred stock, par value $0.001, for which the designations, rights and preferences may be established by the Board.

 

We may also issue additional shares of our common stock or other securities that are convertible into or exercisable for common stock in connection with hiring or retaining employees or consultants, future acquisitions, future sales of our securities for capital raising purposes, or for other business purposes.  The future issuance of any such additional shares
of our common stock or other securities may create downward pressure on the trading price of our common stock.  There can be no assurance that we will not be required to issue additional shares, warrants or other convertible securities in the future in conjunction with hiring or retaining employees or consultants, future acquisitions, future sales of our securities for capital raising purposes or for other business purposes, including at a price (or exercise prices) below the price at which shares of
our common stock are trading.

 

There are currently 71,120 shares of Series B Preferred Stock outstanding, which may be converted into Common Stock using the “Conversion Formula” set forth in the Series B Preferred Stock Certificate of Designations, which is equal to the Original Issue Price divided by 75% of the average closing bid price of the Common Stock for the five (5) consecutive trading
days ending on the trading day of the receipt by the Company of the applicable notice of conversion.

 

In connection with the Credit Agreement the Company issued in favor of Goldman, Sachs & Co. a Purchase Warrant for Common Shares, dated December 22, 2015 (the “GS Warrant”).  The GS Warrant may be converted by the holder, at any time until December 22, 2023, into the number of shares of Common Stock that, after giving effect to conversion of the
GS Warrant, is equal to a 6.5% ownership interest in the Company calculated on a fully-diluted basis, pursuant to the terms and conditions of the Warrant.

 

In connection with subscriptions pursuant to a private placement offering during 2016, the Company granted “true-up” rights with respect to subscription agreements in the aggregate amount of $1,600,000,  with such agreements providing that the Company shall issue additional shares of Common Stock in the event that, prior to the first anniversary of such
subscription agreement, an investor sells all of the Common Stock purchased under such subscription agreement and receives less than the full amount of the purchase price paid under such subscription agreement.

 

In connection with subscriptions pursuant to a second private placement offering during 2016, the Company issued warrants to purchase Common Stock (the “Private Placement Warrants”). In the event that, for a six-month period beginning six months from the date of such a subscription (subject to extension under certain circumstances), one or more of such subscribers
were to sell all shares of Common Stock purchased by such subscriber pursuant to such offering and fail to receive proceeds equal to or in excess of the aggregate purchase price paid by such subscriber for such shares, such subscriber could exercise the Private Placement Warrant, requiring the Company to, at its election, (i) issue to such subscriber the number of shares of Common Stock equivalent to amount by which such purchase price exceeds such sale proceeds, valued at the average closing price for the Common
Stock on the primary trading market on the three (3) trading days preceding the date of exercise or (ii) redeem such shortfall amount in cash. The Private Placement Warrants may be exercised more than once each, in the event that sale proceeds, including shares issued pursuant to a Private Placement Warrant, continue to fall short of the original purchase price and the Company has not elected to redeem such Private Placement Warrant for cash.

 

 

 

(xxxi)           THERE MAY BE AN ADVERSE EFFECT OF THE ISSUANCE OF PREFERRED STOCK.

 

Our Restated Certificate of Incorporation authorizes the issuance of 5,000,000 shares of preferred stock, of which, following filing of the Certificate of Designations, 4,828,829 shares are available for issuance, with designations, rights and preferences as determined from time to time by the Board of Directors. As a result of the foregoing, the Board of Directors
can issue, without further shareholder approval, Preferred Stock with dividend, liquidation, conversion, voting or other rights that could adversely affect the voting power or other rights of the holders of Common Stock.  The issuance of Preferred Stock could, under certain circumstances, discourage, delay or prevent a change in control of the Company.

 

(xxxi)           ELIGIBLE HOLDERS OF COMMON STOCK MAY CHOOSE NOT TO PARTICIPATE IN THE SECURITIES EXCHANGE, AND, AS A RESULT, MAY BE ABLE TO SELL STOCK AND, IF APPLICABLE, RECEIVE ADDITIONAL SHARES BASED ON ADJUSTMENT FOR SHORFALL OF SUCH PROCEEDS BELOW SUCH
HOLDERS’ INVESTMENT, PRIOR TO THE DATE ON WHICH YOU ARE ABLE TO CONVERT THE SHARES AND SELL THE SHARES OF COMMON STOCK INTO WHICH IT HAS CONVERTED..

 

The holders of Common Stock who are eligible to participate in the Securities Exchange, having invested approximately $2.3 million in the aggregate, have rights to receive additional shares in the event that proceeds from the sale of all of each such holder’s shares of Common Stock are less than such holder’s investment amount. In the event that such holders
choose not to participate in the Securities Exchange, such holders may sell their Common Stock, and, if applicable, additional shares issued to such holders to account for such shortfall, prior to the date that the shares of Common Stock into which the Shares purchased hereunder are convertible may be sold.  Such sales by such other sellers could have an adverse effect on the price of the Company’s stock.

 

 

4.           Company Representations and Warranties.  The Company represents, warrants and agrees with, Subscriber that:

 

(a)           Due Incorporation.  The Company is a corporation duly incorporated, validly existing and in good standing under the laws of the jurisdiction of its incorporation;

 

(b)           Authority; Enforceability.  This Agreement has been duly authorized, executed and delivered by the Company and is the valid and binding agreement of the Company, enforceable in accordance with their terms, except as may be limited by bankruptcy,
insolvency, moratorium or other similar laws affecting the enforcement of creditors’ rights generally, or principles of equity.  The Company has full corporate power and authority necessary to enter into and deliver this Agreement and to perform its obligations thereunder;

 

(c)           Consents.  No consent, approval, authorization or order of any court, governmental agency or body having jurisdiction over the Company or of any other person is required for the execution by the Company of this Agreement and compliance and performance
by the Company of its obligations hereunder, including, without limitation, the issuance of the Shares;

 

 

 

(d)           No Violation or Conflict.  Neither the issuance of the Shares nor the performance of the Company’s obligations under this Agreement will:

 

(i)           violate, conflict with, result in a breach of, or constitute a default (or an event which with the giving of notice or the lapse of time or both would be reasonably likely to constitute a default) under (a) the charter or bylaws of the Company or (b) any decree, judgment, order or determination applicable
to the Company of any court, governmental agency or body having jurisdiction over the Company or over the properties or assets of the Company or (c) any contract, agreement, instrument or undertaking to which the Company or any subsidiary is a party; or

 

(ii)           result in the creation or imposition of any lien, charge or encumbrance upon the Shares except in favor of Subscriber as described herein;

 

(e)           The Shares.  Upon issuance, the Shares:

 

(i)           shall be free and clear of any security interests, liens, claims or other Encumbrances, subject only to restrictions upon transfer under the 1933 Act and any applicable state securities laws;

 

(ii)           shall have been duly and validly issued, fully paid and non-assessable; and

 

(iii)           will not subject the holders thereof to personal liability by reason of being such holders;

 

(f)           Litigation.  There is no pending or, to the knowledge of the Company, threatened action, suit, proceeding or investigation before or by any court, governmental agency or body having jurisdiction over the Company including, without limitation,
any such that would effect the execution by the Company or the complete and timely performance by the Company of its obligations under this Agreement.

 

(g)           Full Disclosure.  No representation or warranty or other statement made by the Company in this Agreement in connection with the contemplated transactions contains any untrue statement of material fact or omits to state a material fact necessary
to make the representations and warranties set forth herein, in light of the circumstances in which they were made, not misleading.

 

(h)           Use of Proceeds.  The Company will use the proceeds of the Offering for capital expenditures.

 

5.           Adjustments.  It is the intention of the Company and Subscriber that the Subscriber shall be able to sell (if Subscriber so elects, in Subscriber’s sole and absolute discretion), pursuant to conversion into common stock pursuant to the Certificate
of Designations, the Shares, and generate net proceeds (net of all brokerage commissions and other fees or charges payable by Subscriber in connection with the sale thereof) from such sale equal to the Purchase Price for a six-month reconciliation period beginning on the date that is six months from the date hereof.  In the event that the sale proceeds for all Shares are less than the Purchase Price, the Subscriber may be entitled receive additional stock from the Company in accordance with the terms and
conditions of the Certificate of Designations.

 

 

 

6.           Broker’s Commission/Finder’s Fee.  The Company on the one hand, and Subscriber on the other hand, agrees to indemnify the other against and hold the other harmless from any all liabilities to anyone claiming brokerage commission or similar
fees on account of services purported to have been rendered on behalf of the indemnifying party in connection with this Agreement or the transactions contemplated hereby and arising out of such party’s actions, other than Garden State Securities, to whom the Company agrees and acknowledges to pay broker’s commissions in the form of (i) cash, in the amount equal to a 6.25% of the Purchase Price and (ii) stock, in the amount equal to 1.75% of the number of the shares of common stock into which such
shares of Preferred Stock are convertible pursuant to the Certificate of Designations. The Company represents that to the best of its knowledge there are no other parties entitled to receive fees, commissions, finder’s fees, due diligence fees or similar payments in connection with the offering of the Shares.  Anything in this Agreement to the contrary notwithstanding, each Subscriber is providing indemnification only for such Subscriber’s own actions and not for any action of any other
Subscriber.  The liability of the Company and each Subscriber’s liability hereunder is several and not joint.

 

7.           Covenants Regarding Indemnification.  Each party hereto agrees to indemnify, hold harmless, reimburse and defend the other party and the other party’s officers, directors, agents, counsel, affiliates,
members, managers, control persons, and principal shareholders, as applicable, against any claim, cost, expense, liability, obligation, loss or damage (including reasonable legal fees) of any nature, incurred by or imposed upon the indemnified party or any such person which results, arises out of or is based upon (i) any breach of any representation or warranty by the indemnifying party in this Agreement or (ii) any breach or default in performance by the indemnifying party of any covenant or undertaking to be
performed by the indemnifying party.

 

8.           Subscriber Covenant Regarding Lock-up.  Subscriber covenants that, in the event that Subscriber is or becomes the owner of five (5%) percent or a greater percentage of the issued and outstanding common stock of the Company, Subscriber will execute
and deliver a lock up agreement in connection with any underwritten public offering of equity securities of the Company. Such lock-up agreement will cover a period of three months, and will otherwise be in form and substance reasonably required by the Company.  Subscriber agrees and acknowledges that this covenant is a condition to the Company’s entering into this Subscription Agreement and acceptance of Subscriber’s subscription hereunder.

 

9.           Miscellaneous.

 

(a)           Notices.  All notices, demands, requests, consents, approvals, and other communications required or permitted hereunder shall be in writing and, unless otherwise specified herein, shall be (i) personally served, (ii) deposited in the mail, registered
or certified, return receipt requested, postage prepaid, (iii) delivered by reputable air courier service with charges prepaid, or (iv) transmitted by hand delivery or facsimile, addressed as set forth on the signature pages hereto or to such other address as such party shall have specified most recently by written notice.  Any notice or other communication required or permitted to be given hereunder shall be deemed effective (a) upon hand delivery or delivery by facsimile, with accurate confirmation
generated by the transmitting facsimile machine, at the address or number designated on the signature page hereto (if delivered on a business day during normal business hours where such notice is to be received), or the first business day following such delivery (if delivered other than on a business day during normal business hours where such notice is to be received) or (b) on the second business day following the date of mailing by express courier service, fully prepaid, addressed to such address, or upon
actual receipt of such mailing, whichever shall first occur.

 

 

 

(b)           Entire Agreement; Assignment.  This Agreement constitutes the entire agreement between the parties hereto with respect to the subject matter hereof and may be amended only by a writing executed by both parties hereto.  Neither the Company
nor Subscriber has relied on any representations not contained or referred to in this Agreement and the documents delivered herewith.

 

(c)           Counterparts/Execution.  This Agreement may be executed in any number of counterparts and by the different signatories hereto on separate counterparts, each of which, when so executed, shall be deemed an original, but all such counterparts shall
constitute but one and the same instrument.  This Agreement may be executed by facsimile transmission, PDF, electronic signature or other similar electronic means with the same force and effect as if such signature page were an original thereof.

 

(d)           Law Governing this Agreement.  This Agreement shall be governed by and construed in accordance with the laws of the State of New York without regard to principles of conflicts of laws. Any action brought by either party hereto against the other
concerning the transactions contemplated by this Agreement shall be brought only in the state courts of New York or in the federal courts located in the State of New York.  The parties to this Agreement hereby irrevocably waive any objection to jurisdiction and venue of any action instituted hereunder and shall not assert any defense based on lack of jurisdiction or venue or based upon forum non conveniens.  The parties hereto agree to submit
to the in personam jurisdiction of such courts and hereby irrevocably waive trial by jury. The prevailing party shall be entitled to recover from the other party its reasonable attorney’s fees and costs.

 

(e)           Severability. In the event that any provision of this Agreement or any other agreement delivered in connection herewith is invalid or unenforceable under any applicable statute or rule of law, then such provision shall be deemed inoperative to the extent
that it may conflict therewith and shall be deemed modified to conform with such statute or rule of law.  Any such provision which may prove invalid or unenforceable under any law shall not affect the validity or enforceability of any other provision of any agreement.  Each party hereto hereby irrevocably waives personal service of process and consents to process being served in any suit, action or proceeding in connection with this Agreement by mailing a copy thereof via registered or certified
mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof.  Nothing contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted by law.

 

(f)           Captions.  The captions of the various sections and paragraphs of this Agreement have been inserted only for the purposes of convenience; such captions are not a part of this Agreement and shall not be deemed in any manner to modify, explain,
enlarge or restrict any of the provisions of this Agreement.

 

 

 

 

RESIDENTS OF ALL STATES: THE SHARES OFFERED HEREBY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE OR OTHER JURISDICTION AND ARE BEING OFFERED AND SOLD IN RELIANCE ON EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF SAID ACT AND SUCH LAWS.  THE SHARES IS
SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER SAID ACT AND SUCH LAWS PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM. INVESTORS SHOULD BE AWARE THAT THEY WILL BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD OF TIME. THE SHARES HAS NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION, ANY STATE SECURITIES COMMISSION OR OTHER REGULATORY AUTHORITY, NOR HAVE ANY OF THE FOREGOING AUTHORITIES
PASSED UPON OR ENDORSED THE MERITS OF THIS OFFERING.  ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.

 

 

SIGNATURE PAGE TO SECURITIES PURCHASE AGREEMENT

 

 

 

 

Please acknowledge your acceptance of the foregoing Securities Purchase Agreement by signing and returning a copy to the undersigned whereupon it shall become a binding agreement between us.

 

	
 
	
 

 
MERIDIAN WASTE SOLUTIONS, INC

a New York corporation

 

By:           ______________________________

Name: Jeffrey Cosman

Title:  Chief Executive Officer

 

Address:

 

 

 

Facsimile No.:                                _______________________

 

Dated: _____________, 2016
  

 

 

 

	
SUBSCRIBER

	
Name of Subscriber: ____________________________________

Address: _________________________________________

_________________________________________

Fax No.: ________________________________

Taxpayer ID# (if applicable): ________________

_________________________________________

(Signature)

By: _____________________________________

Dated: _____________, 2016

Aggregate Purchase Price:  ________________

 

 

 [Signature Page to Meridian Waste Solutions, Inc. Securities Purchase Agreement]

 

 

 

 

Exhibit A

 

Series C Preferred Stock

Certificate of Designations

 

 

(see attached)

 

 

 

 

 

 

 

 

Exhibit B

 

Escrow Agreement

 

 

(see attached)

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