Document:

meec_ex105.htm

EXHIBIT 10.5

 

INVESTOR/REGISTRATION RIGHTS AGREEMENT

 

This Investor/Registration Rights Agreement (the “Agreement”) is made and entered into as of the 14th day of August, 2014, by and Midwest Energy Emissions Corp., a Delaware corporation (the “Company”) and AC Midwest Energy LLC, a Delaware limited liability company (the “Holder”).

 

WHEREAS, the Company and the Holder have entered into a certain Financing Agreement dated as of the date hereof (the “Financing Agreement”) pursuant to which the Company has agreed, upon the terms and conditions set forth in the Financing Agreement, to issue and sell to the Holder a senior secured convertible note in the principal amount of $10,000,000 (the “Note”), which Note shall be convertible into shares of the Company’s common stock, par value $0.001 per share (the “Common Stock,” and the shares of Common Stock issuable upon conversion of the Note, the “Conversion Shares”) and warrants (the “Warrants”) which will be exercisable to purchase shares of Common Stock (as exercised, collectively, the “Warrant Shares”) in accordance with the terms of the Warrants; and

 

WHEREAS, in accordance with the terms of the Financing Agreement the Company has agreed to provide the Holder with certain rights, including, without limitation: (i) registration rights under the Securities Act of 1933, as amended, and the rules and regulations thereunder, or any successor statute (collectively, the “1933 Act”), and applicable state securities laws; (ii) to consent to certain actions taken by the Company and its subsidiaries once the Note is repaid in full at which time the covenants set forth in the Financing Agreement no longer apply, (iii) to consult with management from time to time and to attend meetings of the Company’s Board of Directors (the “Board”) as an observer once the Note is repaid in full at which time the covenants set forth in the Financing Agreement no longer apply.

 

NOW, THEREFORE, in consideration of the foregoing, and for other good and valuable consideration, the parties hereto hereby agree as follows:

 

1. Definitions. For purposes of this Agreement:

 

“1933 Act” has the meaning set forth in the recitals.

 

“1934 Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder, or any successor statute thereto.

 

“Additional Effective Date” means the date the Additional Registration Statement is declared effective by the SEC.

 

“Additional Effectiveness Deadline” means the date which is the earlier of: (i) in the event that the Additional Registration Statement (a) is not subject to a full review by the SEC, 30 calendar days after the earlier of the Additional Filing Date and the Additional Filing Deadline, or (b) in the event that the Additional Registration Statement is subject to a full review by the SEC, 60 calendar days after the earlier of the Additional Filing Date and the Additional Filing Deadline, and (ii) the 5 Business Day after the date the Company is notified (orally or in writing, whichever is earlier) by the SEC that such Additional Registration Statement will not be reviewed or will not be subject to further review; provided, however, that if the Additional Effectiveness Deadline falls on a Saturday, Sunday or other day that the SEC is closed for business, the Additional Effectiveness Deadline shall be extended to the next Business Day on which the SEC is open for business.

 

  

1

  

 

“Additional Filing Date” means the date on which the Additional Registration Statement is filed with the SEC.

 

“Additional Filing Deadline” means if Cutback Shares are required to be included in any Additional Registration Statement, the later of (i) the date 60 calendar days after the date substantially all of the Registrable Securities registered under the immediately preceding Registration Statement are sold, and (ii) the date six months from the Initial Effective Date or the most recent Additional Effective Date, as applicable.

 

“Additional Registrable Securities” means: (i) any Cutback Shares not previously included on a Registration Statement, and (ii) any capital stock of the Company issued or issuable with respect to the Notes, Conversion Shares, Purchased Convertible Notes, Purchased Convertible Note Shares, Warrants, Warrant Shares or Cutback Shares, as applicable, as a result of any stock split, stock dividend, recapitalization, exchange or similar event or otherwise.

 

“Additional Registration Statement” means a registration statement or registration statements of the Company filed under the 1933 Act covering the resale of any Additional Registrable Securities.

 

“Additional Required Registration Amount” means (i) any Cutback Shares not previously included on a Registration Statement, all subject to adjustment as provided in Section 2.1(e), or (ii) such other amount as may be permitted by the staff of the SEC pursuant to Rule 415.

 

“Affiliate” means, with respect to a specified Person, another Person that is a director or officer of such Person, or directly or indirectly through one or more intermediaries, controls, is controlled by or is under common control with the Person specified

 

“Agreement” has the meaning set forth in the preamble.

 

“Allowable Grace Period” has the meaning set forth in Section 2.2(p).

 

“Approved Plan and Budget” has the meaning set forth in Section 3.

 

“Bloomberg” means Bloomberg Financial Markets.

 

“Blue Sky Filing” has the meaning set forth in Section 2.5(a).

 

“Board” has the meaning set forth in the preamble.

 

  

2

  

 

“Business Day” means any day other than Saturday, Sunday or any other day on which commercial banks in the City of New York are authorized or required by law to remain closed.

 

“Claims” has the meaning set forth in Section 2.5(a).

 

“Closing Bid Price” and “Closing Sale Price” means, for any security as of any date, the last closing bid price and last closing trade price, respectively, for such security on the Principal Market, as reported by Bloomberg, or, if the Principal Market begins to operate on an extended hours basis and does not designate the closing bid price or the closing trade price, as the case may be, then the last bid price or the last trade price, respectively, of such security prior to 4:00:00 p.m., New York time, as reported by Bloomberg, or, if the Principal Market is not the principal securities exchange or trading market for such security, the last closing bid price or last trade price, respectively, of such security on the principal securities exchange or trading market where such security is listed or traded as reported by Bloomberg, or if the foregoing do not apply, the last closing bid price or last trade price, respectively, of such security in the over-the-counter market on the electronic bulletin board for such security as reported by Bloomberg, or, if no closing bid price or last trade price, respectively, is reported for such security by Bloomberg, the average of the bid prices, or the ask prices, respectively, of any market makers for such security as reported in the OTC Link or “pink sheets” by OTC Markets Group Inc. (formerly Pink OTC Markets Inc.). If the Closing Bid Price or Closing Sale Price cannot be calculated for a security on a particular date on any of the foregoing bases, the Closing Bid Price or the Closing Sale Price, as the case may be, of such security on such date shall be the fair market value as mutually determined by the Company and the affected Investors. If the Company and such Investors are unable to agree upon the fair market value of such security, then the Company and the Investors shall agree, in good faith, upon an independent investment bank of nationally recognized standing to make such determination, whose determination shall be final and binding and whose fees and expenses shall be borne by the Company.

 

“Common Stock” has the meaning set forth in the recitals.

 

“Company” has the meaning set forth in the preamble.

 

“Conversion Shares” has the meaning set forth in the recitals.

 

“Current Public Information Failure” has the meaning set forth in Section 2.1(f).

 

“Cutback Shares” means any of the Initial Required Registration Amount or the Additional Required Registration Amount (without regard to clause (ii) in the definition thereof) of Registrable Securities not included in all Registration Statements previously declared effective hereunder as a result of a limitation on the maximum number of shares of Common Stock of the Company permitted to be registered by the staff of the SEC pursuant to Rule 415. For the purpose of determining the Cutback Shares, in order to determine any applicable Required Registration Amount, unless an Investor gives written notice to the Company to the contrary with respect to the allocation of its Cutback Shares, first the Warrant Shares shall be excluded on a pro rata basis among the Investors until all of the Warrant Shares have been excluded, second, the Purchased Convertible Note Shares shall be excluded on a pro rata basis among the Investors until all of the Purchased Convertible Note Shares have been excluded, and finally the Conversion Shares shall be excluded on a pro rata basis among the Investors until all of the Conversion Shares have been excluded.

 

  

3

  

 

“Effective Date” means the Initial Effective Date and the Additional Effective Date, as applicable.

 

“Effectiveness Deadline” means the Initial Effectiveness Deadline and the Additional Effectiveness Deadline, as applicable.

 

“Effectiveness Failure” has the meaning set forth in Section 2.1(f).

 

“Eligible Market” means the Principal Market, The New York Stock Exchange, Inc., the NYSE MKT LLC, The NASDAQ Capital Market, The NASDAQ Global Select Market or The NASDAQ Global Market.

 

“Filing Deadline” means the Initial Filing Deadline and the Additional Filing Deadline, as applicable.

 

“Filing Failure” has the meaning set forth in Section 2.1(f).

 

“Financing Agreement” has the meaning set forth in the recitals.

 

“Grace Period” has the meaning set forth in Section 2.2(p).

 

“Holder” has the meaning set forth in the preamble and shall also include or any transferee or assignee of the Holder identified in the preamble to whom the Holder identified in the preamble assigns its rights under this Agreement and who agrees to be bound by the provisions of this Agreement in accordance with Section 7.1 and any transferee or assignee thereof to whom a transferee or assignee assigns its rights under this Agreement and who agrees to become bound by the provisions of this Agreement in accordance with Section 7.1.

 

“Indemnified Damages” has the meaning set forth in Section 2.5(a).

 

“Indemnified Party” has the meaning set forth in Section 2.5(b).

 

“Indemnified Person” has the meaning set forth in Section 2.5(a).

 

“Initial Effective Date” means the date that the Initial Registration Statement has been declared effective by the SEC.

 

  

4

  

 

“Initial Effectiveness Deadline” means the date which is the earlier of: (i) in the event that the Initial Registration Statement (a) is not subject to a full review by the SEC, 90 calendar days after the Request Date, or (b) is subject to a full review by the SEC, 120 calendar days after the Request Date, and (ii) the fifth Business Day following the date on which the Company is notified (orally or in writing, whichever is earlier) by the SEC that such Initial Registration Statement will not be reviewed or will not be subject to further review; provided, however, that if the Initial Effectiveness Deadline falls on a Saturday, Sunday or other day that the SEC is closed for business, the Initial Effectiveness Deadline shall be extended to the next Business Day on which the SEC is open for business.

 

“Initial Filing Date” means the date on which the Initial Registration Statement is filed with the SEC.

 

“Initial Filing Deadline” means the date which is 30 calendar days after the Request Date.

 

“Initial Registrable Securities” means (i) the Warrant Shares issuable or issued upon exercise of the Warrant; (ii) the Conversion Shares issuable or issued pursuant to the terms of the Note; (iii) the Purchased Convertible Note Shares issuable or issued pursuant to the terms of the Purchased Convertible Notes; and (iv) any other capital stock issued or issuable with respect to the Note, Conversion Shares, Purchased Convertible Notes, Purchased Convertible Note Shares, Warrant or Warrant Shares as a result of any stock split, stock dividend, recapitalization, exchange or similar event or otherwise.

 

“Initial Registration Statement” means a registration statement or registration statements of the Company filed under the 1933 Act covering the resale of the Initial Registrable Securities.

 

“Initial Required Registration Amount” means (i) the sum of: (a) 135% of the maximum number of Conversion Shares issued and issuable pursuant to the Notes, (b) 100% of the maximum number of Warrant Shares issued and issuable pursuant to the Warrant, and (c) 100% of the maximum number of Purchased Convertible Note Shares issued and issuable pursuant to the Purchased Convertible Notes, each as of the Trading Day immediately preceding the applicable date of determination and all subject to adjustment as provided in Section 2.1(e), or (ii) such other amount as may be permitted by the staff of the SEC pursuant to Rule 415.

 

“Inspectors” has the meaning set forth in Section 2.2(g)(ii).

 

“Investor” means the Holder or any transferee or assignee of the Holder to whom the Holder assigns its rights under this Agreement and who agrees to be bound by the provisions of this Agreement in accordance with Section 7.1 and any transferee or assignee thereof to whom a transferee or assignee assigns its rights under this Agreement and who agrees to become bound by the provisions of this Agreement in accordance with Section 7.1.

 

“Note” has the meaning set forth in the recitals.

 

“Maintenance Failure” has the meaning set forth in Section 2.1(f).

 

  

5

  

 

“Major Action” has the meaning set forth in Section 3.

 

“Permitted Issuances” means any issuance or sale (or deemed issuance or sale in accordance with Section 4) by the Company after the Original Issue Date of shares of Common Stock issued or issuable with respect to any of the following: (a) upon conversion of the Note or the Prior Convertible Notes; (b) upon exercise each of the following warrants which were issued as of the date hereof: (i) this Warrant, (ii) the New Warrants (as defined in the Allonge to the Prior Senior Convertible Notes); and (iii) the warrants to be issued to the Placement Agent; (c) interest on the Note or Prior Senior Convertible Notes as a result of in kind payments of Common Stock in lieu of cash; (d) upon exercise of the existing warrants to the extent outstanding as of the Original Issue Date, including, without limitation: (i) the warrants issued in connection with the Prior Convertible Notes; (ii) the warrants issued to each of Arthur Peterson and James Stanley on September 19, 2013; and (iii) the warrants issued to View Trade Securities, Inc. between July 30, 2013 and May 8, 2014 to purchase up to an aggregate of 572,750 shares of Common Stock at an exercise price of $0.50 per share; (e) pursuant to the existing employment agreements with each of R. Alan Kelley, John F. Norris, Jr., Richard H. Gross and Marc Sylvester (the “Executive Employment Agreements”); (f) upon exercise of the following existing options to the extent outstanding as of the Original Issue Date: (i) the options issued pursuant to the 2005 Stock Option Plan (as amended in 2009); (ii) the options issued in connection with the Executive Employment Agreements; and (iii) the options issued to each of Keith McGee and Jim Trettel on January 1, 2014 (the forgoing clauses (a) through (f) collectively, the “Existing Issuance Obligations”); (g) in connection with the acquisition of any interest in an entity not affiliated with the Company (whether by merger, purchase of substantially all of the assets, purchase of stock or other otherwise) which is consented to by the Holder; and (h) pursuant to or in connection with any strategic alliance, joint venture or corporate partnership, each with an entity not affiliated with the Company which is consented to by the Holder, (i) shares issuable to EERCF and/or its designees as set forth in the Fifth Amendment to the EERCF License Agreement, in the event of exercise by MES of its option to cause EERCF to transfer the Patent Rights (as such term is defined in the EERCF License Agreement) to MES (or any of its assignees or Affiliates) pursuant to the EERCF License Agreement; provided that Holder has consented to MES exercising such right; and (j) the equity securities or equity linked securities as necessary to provide sufficient net proceeds to the Company to enable it to pay off at any time on or following maturity, the indebtedness evidenced by any of the “Prior Convertible Notes” (as that term is defined in the Financing Agreement).

 

“Person” means an individual, a limited liability company, a partnership, a joint venture, a corporation, a trust, an unincorporated organization and a government or any department or agency thereof.

 

“Principal Market” means The OTC QB.

 

“Purchased Convertible Note Shares” means the shares of Common Stock issuable upon conversion of any Purchased Convertible Notes.

 

“Purchased Convertible Notes” means any of the Prior Senior Convertible Notes purchased by the Holder.

 

“Records” has the meaning set forth in Section 2.2(g)(ii).

 

“register”, “registered” and “registration” mean a registration effected by preparing and filing one or more Registration Statements in compliance with the 1933 Act and pursuant to Rule 415, and the declaration or ordering of effectiveness of such Registration Statement or Registration Statements by the SEC.

 

“Registrable Securities” means the Initial Registrable Securities and the Additional Registrable Securities.

 

“Registration Delay Payments” has the meaning set forth in Section 2.1(f).

 

  

6

  

 

“Registration Failure” has the meaning set forth in Section 2.1(f)

 

“Registration Period” has the meaning set forth in Section 2.2(a).

 

“Registration Statement” means the Initial Registration Statement and the Additional Registration Statement, as applicable.

 

“Required Holders” means the holders of at least a majority of the Registrable Securities and shall include the Holder so long as the Holder or any Affiliate of the Holder holds any Registrable Securities.

 

“Request Date” means the date that the Required Holder have delivered a notice to the Company requesting that the Company file the Initial Registration Statement, such notice in accordance with the notice provisions set forth in Section 7.3 hereof.

 

“Required Registration Amount” means either the Initial Required Registration Amount or the Additional Required Registration Amount, as applicable.

 

“Rule 144” has the meaning set forth in Section 2.7.

 

“Rule 415” means Rule 415 promulgated under the 1933 Act or any successor rule providing for offering securities on a continuous or delayed basis.

 

“SEC” means the U.S. Securities and Exchange Commission.

 

“Trading Day” means any day on which the Common Stock is traded on the Principal Market, or, if the Principal Market is not the principal trading market for the Common Stock, then on the principal securities exchange or securities market on which the Common Stock is then traded; provided that “Trading Day” shall not include any day on which the Common Stock is scheduled to trade on such exchange or market for less than 4.5 hours or any day that the Common Stock is suspended from trading during the final hour of trading on such exchange or market (or if such exchange or market does not designate in advance the closing time of trading on such exchange or market, then during the hour ending at 4:00:00 p.m., New York time).

 

“Transaction Documents” means the Financing Agreement, the Note, the Warrant, and each of the other agreements, documents and certificates entered into by the Holder and the Company in connection with the transactions contemplated by the Financing Agreement.

 

“Violations” has the meaning set forth in Section 2.5(a).

 

“Warrant” has the meaning set forth in the recitals.

 

  

7

  

 

“Warrant Shares” has the meaning set forth in the recitals.

 

Capitalized terms used but not otherwise defined herein shall have the respective meanings ascribed to them in the Financing Agreement.

 

2. Registration Rights.

 

2.1 Demand Registration.

 

(a) Initial Registration. Promptly following the Request Date, the Company shall prepare, and, as soon as practicable but in no event later than the Initial Filing Deadline, file with the SEC the Initial Registration Statement on Form S-3. The Initial Registration Statement prepared pursuant hereto shall register for resale at least the number of shares of Common Stock equal to the Initial Required Registration Amount determined as of the date the Initial Registration Statement is initially filed with the SEC, subject to adjustment as provided in Section 2.1(e). The Initial Registration Statement shall contain (except if otherwise directed by the Required Holders) the “Plan of Distribution” and “Selling Shareholders” sections in substantially the form attached hereto as Exhibit B. The Company shall use its commercially reasonable efforts to have the Initial Registration Statement declared effective by the SEC as soon as practicable, but in no event later than the Initial Effectiveness Deadline. By 9:30 a.m. New York time on the Business Day following the Initial Effective Date, the Company shall file with the SEC in accordance with Rule 424 under the 1933 Act the final prospectus to be used in connection with sales pursuant to such Initial Registration Statement.

 

(b) Additional Registrations. The Company shall prepare, and, as soon as practicable but in no event later than the Additional Filing Deadline, file with the SEC an Additional Registration Statement on Form S-3 covering the resale of all of the Additional Registrable Securities not previously registered on an Additional Registration Statement hereunder. To the extent the staff of the SEC does not permit the Additional Required Registration Amount to be registered on an Additional Registration Statement, the Company shall file Additional Registration Statements successively trying to register on each such Additional Registration Statement the maximum number of remaining Additional Registrable Securities until the Additional Required Registration Amount has been registered with the SEC. Each Additional Registration Statement prepared pursuant hereto shall register for resale at least that number of shares of Common Stock equal to the Additional Required Registration Amount determined as of the date such Additional Registration Statement is initially filed with the SEC, subject to adjustment as provided in Section 2.1(e). Each Additional Registration Statement shall contain (except if otherwise directed by the Investors) the “Plan of Distribution” and “Selling Shareholders” sections in substantially the form attached hereto as Exhibit B. The Company shall use its commercially reasonable efforts to have each Additional Registration Statement declared effective by the SEC as soon as practicable, but in no event later than the Additional Effectiveness Deadline. By 9:30 a.m. New York time on the Business Day following the Additional Effective Date, the Company shall file with the SEC in accordance with Rule 424 under the 1933 Act the final prospectus to be used in connection with sales pursuant to such Additional Registration Statement.

 

(c) Allocation of Registrable Securities. The initial number of Registrable Securities included in any Registration Statement and any increase or decrease in the number of Registrable Securities included therein shall be allocated pro rata among the Investors based on the number of Registrable Securities held by each Investor at the time the Registration Statement covering such initial number of Registrable Securities or increase or decrease thereof is declared effective by the SEC. In the event that an Investor sells or otherwise transfers any of such Investor’s Registrable Securities, each transferee shall be allocated a pro rata portion of the then remaining number of Registrable Securities included in such Registration Statement for such transferor. Any shares of Common Stock included in a Registration Statement and which remain allocated to any Person which ceases to hold any Registrable Securities covered by such Registration Statement shall be allocated to the remaining Investors, pro rata based on the number of Registrable Securities then held by such Investors which are covered by such Registration Statement. In no event shall the Company include any securities other than Registrable Securities on any Registration Statement without the prior written consent of the Required Holders.

 

  

8

  

 

(d) Ineligibility for Form S-3. Notwithstanding anything herein to the contrary, in the event that Form S-3 is not available for the registration of the resale of Registrable Securities hereunder, the Company shall: (i) register the resale of the Registrable Securities on Form S-1 or another appropriate form reasonably acceptable to the Required Holders, and (ii) undertake to register the Registrable Securities on Form S-3 as soon as such form is available; provided that the Company shall maintain the effectiveness of the Registration Statement then in effect until such time as a Registration Statement on Form S-3 covering the Registrable Securities has been declared effective by the SEC.

 

(e) Sufficient Number of Shares Registered. In the event the number of shares available under a Registration Statement filed pursuant to Sections 2.1(a) or 2.1(b) is insufficient to cover the Required Registration Amount of Registrable Securities required to be covered by such Registration Statement or an Investor’s allocated portion of the Registrable Securities pursuant to Section 2.1(c), the Company shall amend the applicable Registration Statement, or file a new Registration Statement (on the short form available therefor, if applicable), or both, so as to cover at least the Required Registration Amount as of the Trading Day immediately preceding the date of the filing of such amendment or new Registration Statement, in each case, as soon as practicable, but in any event not later than 15 calendar days after the necessity therefor arises. The Company shall use its commercially reasonable efforts to cause such amendment or new Registration Statement, or both, to become effective as soon as practicable following the filing thereof. For purposes of the foregoing provision, the number of shares available under a Registration Statement shall be deemed “insufficient to cover all of the Registrable Securities” if at any time the number of shares of Common Stock available for resale under the Registration Statement is less than the Required Registration Amount. The calculation set forth in the foregoing sentence shall assume: (i) that the Note is then convertible in full into shares of Common Stock at the then prevailing Conversion Price (as defined in the Financing Agreement) and (ii) the Warrant is then exercisable in full into shares of Common Stock at the then prevailing Exercise Price (as defined in the Warrant).

 

(f) Effect of Failure to File and Obtain and Maintain Effectiveness of Registration Statement. If: (i) the Initial Registration Statement when declared effective fails to register the Initial Required Registration Amount of Initial Registrable Securities (a “Registration Failure”), (ii) a Registration Statement covering all of the Registrable Securities required to be covered thereby and required to be filed by the Company pursuant to this Agreement is: (A) not filed with the SEC on or before the applicable Filing Deadline (a “Filing Failure”), or (B) not declared effective by the SEC on or before the Effectiveness Deadline (an “Effectiveness Failure”), (iii) on any day after the applicable Effective Date, sales of all of the Registrable Securities required to be included on such Registration Statement cannot be made (other than during an Allowable Grace Period) pursuant to such Registration Statement or otherwise (including, without limitation, because of the suspension of trading or any other limitation imposed by an Eligible Market, a failure to keep such Registration Statement effective, a failure to disclose such information as is necessary for sales to be made pursuant to such Registration Statement, a failure to register a sufficient number of shares of Common Stock or a failure to maintain the quotation or listing of the Common Stock) (a “Maintenance Failure”), or (iv) if a Registration Statement is not effective for any reason or the prospectus contained therein is not available for use for any reason, the Company fails to file with the SEC any required reports under Section 13 or 15(d) of the 1934 Act such that it is not in compliance with Rule 144(c)(1) (or Rule 144(i)(2), if applicable) (a “Current Public Information Failure”) as a result of which any of the Investors are unable to sell Registrable Securities without restriction under Rule 144 (including, without limitation, volume restrictions) then, as partial relief for the damages to any holder by reason of any such delay in or reduction of its ability to sell the underlying shares of Common Stock (which remedy shall not be exclusive of any other remedies available at law or in equity, including, without limitation, specific performance or the additional obligation of the Company to register any Cutback Shares), the Company shall pay to each holder of Registrable Securities relating to such Registration Statement an amount in cash equal to (x) 0.5% of the aggregate value of such holder’s Registrable Securities (such value being determined by multiplying the number of such holder’s Registerable Securities by: the Closing Sale Price of one share of Common Stock on the Trading Day immediately preceding the date of determination, on each of the following dates: (i) the day of a Registration Failure, (ii) the day of a Filing Failure; (iii) the day of an Effectiveness Failure; (iv) the initial day of a Maintenance Failure; (v) the initial day of a Current Public Information Failure, and (y) 1.0% of the aggregate value of such holder’s Registrable Securities, whether or not included in such Registration Statement, on each of the following dates: (i) on the thirtieth day after the date of a Registration Failure and every thirtieth day thereafter (prorated for periods totaling less than thirty days) until such Registration Failure is cured; (ii) on the thirtieth day after the date of a Filing Failure and every thirtieth day thereafter (prorated for periods totaling less than thirty days) until such Filing Failure is cured; (iii) on the thirtieth day after the date of an Effectiveness Failure and every thirtieth day thereafter (prorated for periods totaling less than thirty days) until such Effectiveness Failure is cured; (iv) on the thirtieth day after the initial date of a Maintenance Failure and every thirtieth day thereafter (prorated for periods totaling less than thirty days) until such Maintenance Failure is cured; and (v) on the thirtieth day after the initial date of a Public Information Failure and every thirtieth day thereafter (prorated for periods totaling less than thirty days) until such Public Information Failure is cured. The payments to which a holder shall be entitled pursuant to this Section 2.1(f) are referred to herein as “Registration Delay Payments.” Registration Delay Payments shall be paid on the earlier of (I) the dates set forth above, and (II) the third Business Day after the event or failure giving rise to the Registration Delay Payments is cured. In the event the Company fails to make Registration Delay Payments in a timely manner, such Registration Delay Payments shall bear interest at the rate of one and 1.0% per month (prorated for partial months) until paid in full. Notwithstanding anything herein to the contrary, (i) Registration Delay Payments shall cease to accrue when all of the Registrable Securities may be sold pursuant to Rule 144 without any restrictions or limitations, (ii) in no event shall the aggregate amount of all Registration Delay Payments (without regard to any accrued interest thereon in accordance with the preceding sentence) paid to an Investor exceed an amount equal to 2.5% of the original principal amount stated in the Note on the Closing Date (as defined in the Financing Agreement), (iii) no single event or failure shall give rise to more than one type of Registration Delay Payment, or (iv) if an Investor would be required to be named as an “underwriter” in the Registration Statement by the SEC and such Investor elects, pursuant to Section 2.2(q) below not to include any Registrable Securities of such Investor in the Registration Statement, no Registration Delay Payments shall accrue with respect to such Registrable Securities of such Investor.

 

  

9

  

 

2.2 Obligations of the Company. At such time as the Company is obligated to file a Registration Statement with the SEC pursuant to Section 2.1(a), 2.1(b), 2.1(d) or 2.1(e), the Company will use its reasonable commercially reasonable efforts to effect the registration of the Registrable Securities in accordance with the intended method of disposition thereof and, pursuant thereto, the Company shall have the following obligations:

 

(a) The Company shall promptly prepare and file with the SEC a Registration Statement with respect to the Registrable Securities and use its commercially reasonable efforts to cause such Registration Statement relating to the Registrable Securities to become effective as soon as practicable after such filing (but in no event later than the Effectiveness Deadline). The Company shall keep each Registration Statement effective pursuant to Rule 415 at all times until the earlier of: (i) the date as of which the Investors may sell all of the Registrable Securities covered by such Registration Statement without restriction or limitation pursuant to Rule 144 and without the requirement to be in compliance with Rule 144(c)(1) (or any successor thereto) promulgated under the 1933 Act, or (ii) the date on which the Investors shall have sold all of the Registrable Securities covered by such Registration Statement (the “Registration Period”). The Company shall ensure that each Registration Statement (including any amendments or supplements thereto and prospectuses contained therein) shall not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein, or necessary to make the statements therein (in the case of prospectuses, in the light of the circumstances in which they were made) not misleading. The term “commercially reasonable efforts” shall mean, among other things, that the Company shall submit to the SEC, within two Business Days after the later of the date that the Company learns that no review of a particular Registration Statement will be made by the staff of the SEC or that the staff has no further comments on a particular Registration Statement, as the case may be, a request for acceleration of effectiveness of such Registration Statement to a time and date not later than two Business Days after the submission of such request. The Company shall respond in writing to comments made by the SEC in respect of a Registration Statement as soon as practicable, but in no event later than fifteen days after the receipt of comments by or notice from the SEC that an amendment is required in order for a Registration Statement to be declared effective.

 

(b) The Company shall prepare and file with the SEC such amendments (including post-effective amendments) and supplements to a Registration Statement and the prospectus used in connection with such Registration Statement, which prospectus is to be filed pursuant to Rule 424 promulgated under the 1933 Act, as may be necessary to keep such Registration Statement effective at all times during the Registration Period, and, during such period, comply with the provisions of the 1933 Act with respect to the disposition of all Registrable Securities of the Company covered by such Registration Statement until such time as all of such Registrable Securities shall have been disposed of in accordance with the intended methods of disposition by the seller or sellers thereof as set forth in such Registration Statement. In the case of amendments and supplements to a Registration Statement which are required to be filed pursuant to this Agreement (including pursuant to this Section 2.2(b)) by reason of the Company filing a report on Form 10-K, Form 10-Q, Form 8-K or any analogous report under the 1934 Act, the Company shall have incorporated such report by reference into such Registration Statement, if applicable, or shall file such amendments or supplements with the SEC on the same day on which the 1934 Act report is filed which created the requirement for the Company to amend or supplement such Registration Statement.

 

(c) The Company shall furnish to each Investor, without charge, (i) promptly after the same is prepared and filed with the SEC, at least one copy of such Registration Statement and any amendment(s) thereto, including financial statements and schedules, all documents incorporated therein by reference, if requested by an Investor, all exhibits and each preliminary prospectus, (ii) upon the effectiveness of any Registration Statement, ten copies of the prospectus included in such Registration Statement and all amendments and supplements thereto (or such other number of copies as such Investor may reasonably request), and (iii) such other documents, including copies of any preliminary or final prospectus, as such Investor may reasonably request from time to time in order to facilitate the disposition of the Registrable Securities.

 

  

10

  

 

(d) The Company shall use its commercially reasonable efforts to (i) register and qualify, unless an exemption from registration and qualification applies, the resale by the Investors of the Registrable Securities covered by a Registration Statement under such other securities or “blue sky” laws of all applicable jurisdictions in the United States, (ii) prepare and file in those jurisdictions such amendments (including post-effective amendments) and supplements to such registrations and qualifications as may be necessary to maintain the effectiveness thereof during the Registration Period, (iii) take such other actions as may be necessary to maintain such registrations and qualifications in effect at all times during the Registration Period, and (iv) take all other actions reasonably necessary or advisable to qualify the Registrable Securities for sale in such jurisdictions; provided, however, that the Company shall not be required in connection therewith or as a condition thereto to (x) qualify to do business in any jurisdiction where it would not otherwise be required to qualify but for this Section 2.2(d), (y) subject itself to general taxation in any such jurisdiction, or (z) file a general consent to service of process in any such jurisdiction. The Company shall promptly notify the Investors of the receipt by the Company of any notification with respect to the suspension of the registration or qualification of any of the Registrable Securities for sale under the securities or “blue sky” laws of any jurisdiction in the United States or its receipt of actual notice of the initiation or threatening of any proceeding for such purpose.

 

(e) The Company shall notify the Investors in writing of the happening of any event, as promptly as practicable after becoming aware of such event, as a result of which the prospectus included in a Registration Statement, as then in effect, includes an untrue statement of a material fact or omission to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading (provided that in no event shall such notice contain any material, nonpublic information), and, subject to Section 2.2(p), promptly prepare a supplement or amendment to such Registration Statement to correct such untrue statement or omission, and deliver ten copies of such supplement or amendment to each Investor (or such other number of copies as such Investor may reasonably request). The Company shall also promptly notify the Investors in writing: (i) when a prospectus or any prospectus supplement or post-effective amendment has been filed, and when a Registration Statement or any post-effective amendment has become effective (notification of such effectiveness shall be delivered to the Investors by facsimile or email on the same day of such effectiveness and by overnight mail), (ii) of any request by the SEC for amendments or supplements to a Registration Statement or related prospectus or related information, and (iii) of the Company’s reasonable determination that a post-effective amendment to a Registration Statement would be appropriate. By 9:30 a.m. New York City time on the date following the date any post-effective amendment has become effective, the Company shall file with the SEC in accordance with Rule 424 under the 1933 Act the final prospectus to be used in connection with sales pursuant to such Registration Statement.

 

(f) The Company shall use its commercially reasonable efforts to prevent the issuance of any stop order or other suspension of effectiveness of a Registration Statement, or the suspension of the qualification of any of the Registrable Securities for sale in any jurisdiction and, if such an order or suspension is issued, to obtain the withdrawal of such order or suspension at the earliest possible moment and to each Investor of the issuance of such order and the resolution thereof or its receipt of actual notice of the initiation or threat of any proceeding for such purpose.

 

(g) If any Investor is required under applicable securities laws to be described in the Registration Statement as an underwriter or an Investor believes that it could reasonably be deemed to be an underwriter of Registrable Securities, the Company shall

 

(i) furnish the Investor, on the date of the effectiveness of the Registration Statement and thereafter from time to time on such dates as the Investor 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 the Investor, and (B) an opinion, dated as of such date, of counsel representing the Company for purposes of such Registration Statement, in form, scope and substance as is customarily given in an underwritten public offering, addressed to the Investor; and

 

  

11

  

 

(ii) make available for inspection by (A) the Investor, (B) the Investor’s legal counsel, and (C) one firm of accountants or other agents retained by the Investor (collectively, the “Inspectors”), all pertinent financial and other records, and pertinent corporate documents and properties of the Company (collectively, the “Records”), as shall be reasonably deemed necessary by each Inspector, and cause the Company’s officers, directors and employees to supply all information which any Inspector may reasonably request; provided, however, that each Inspector shall agree to hold in strict confidence and shall not make any disclosure (except to the Investor) or use of any Record or other information which the Company determines in good faith to be confidential, and of which determination the Inspectors are so notified, unless (x) the disclosure of such Records is necessary to avoid or correct a misstatement or omission in any Registration Statement or is otherwise required under the 1933 Act, (y) the release of such Records is ordered pursuant to a final, non-appealable subpoena or order from a court or government body of competent jurisdiction, or (z) the information in such Records has been made generally available to the public other than by disclosure in violation of this Agreement. Each Investor agrees that it shall, upon learning that disclosure of such Records is sought in or by a court or governmental body of competent jurisdiction or through other means, give prompt notice to the Company and allow the Company, at its expense, to undertake appropriate action to prevent disclosure of, or to obtain a protective order for, the Records deemed confidential. Nothing herein shall be deemed to limit an Investor’s ability to sell Registrable Securities in a manner which is otherwise consistent with applicable laws and regulations.

 

(h) The Company shall hold in confidence and not make any disclosure of information concerning an Investor provided to the Company unless (i) disclosure of such information is necessary to comply with federal or state securities laws, (ii) the disclosure of such information is necessary to avoid or correct a misstatement or omission in any Registration Statement, (iii) the release of such information is ordered pursuant to a subpoena or other final, non-appealable order from a court or governmental body of competent jurisdiction, or (iv) such information has been made generally available to the public other than by disclosure in violation of this Agreement or any other agreement. The Company agrees that it shall, upon learning that disclosure of such information concerning an Investor is sought in or by a court or governmental body of competent jurisdiction or through other means, give prompt written notice to the Investor and allow the Investor, at the Investor’s expense, to undertake appropriate action to prevent disclosure of, or to obtain a protective order for, such information.

 

(i) The Company shall use its commercially reasonable efforts either to (i) cause all of the Registrable Securities covered by a Registration Statement to be listed on each securities exchange on which securities of the same class or series issued by the Company are then listed, if any, if the listing of such Registrable Securities is then permitted under the rules of such exchange or (ii) secure the inclusion for quotation of all of the Registrable Securities on the Principal Market or (iii) if, despite the Company’s commercially reasonable efforts, the Company is unsuccessful in satisfying the preceding clauses (i) and (ii), to secure the inclusion for quotation on another Eligible Market for such Registrable Securities and, without limiting the generality of the foregoing, to use its commercially reasonable efforts to arrange for at least two market makers to register with the Financial Industry Regulatory Authority, Inc. as such with respect to such Registrable Securities. The Company shall pay all fees and expenses in connection with satisfying its obligation under this Section 2.2(i).

 

(j) The Company shall cooperate with the Investors and, to the extent applicable, facilitate the timely preparation and delivery of certificates (not bearing any restrictive legend) representing the Registrable Securities to be offered pursuant to a Registration Statement and enable such certificates to be in such denominations or amounts, as the case may be, as the Investors may reasonably request and registered in such names as the Investors may request.

 

  

12

  

 

(k) If requested by an Investor, the Company shall as soon as practicable: (i) incorporate in a prospectus supplement or post-effective amendment such information as the Investor reasonably requests to be included therein relating to the sale and distribution of Registrable Securities, including, without limitation, information with respect to the number of Registrable Securities being offered or sold, the purchase price being paid therefor and any other terms of the offering of the Registrable Securities to be sold in such offering; (ii) make all required filings of such prospectus supplement or post-effective amendment after being notified of the matters to be incorporated in such prospectus supplement or post-effective amendment; and (iii) supplement or make amendments to any Registration Statement if reasonably requested by an Investor holding Registrable Securities.

 

(l) The Company shall use its commercially reasonable efforts to cause the Registrable Securities covered by a Registration Statement to be registered with or approved by such other governmental agencies or authorities as may be necessary to consummate the disposition of such Registrable Securities.

 

(m) The Company shall make generally available to its security holders as soon as practical, but not later than 90 days after the close of the period covered thereby, an earnings statement (in form complying with, and in the manner provided by, the provisions of Rule 158 under the 1933 Act) covering a twelve-month period beginning not later than the first day of the Company’s fiscal quarter next following the applicable Effective Date of a Registration Statement.

 

(n) The Company shall otherwise use its commercially reasonable efforts to comply with all applicable rules and regulations of the SEC in connection with any registration here.

 

(o) Within two Business Days after a Registration Statement which covers Registrable Securities is ordered effective by the SEC, the Company shall deliver, and shall cause legal counsel for the Company to deliver, to the transfer agent for such Registrable Securities (with copies to the Investors) confirmation that such Registration Statement has been declared effective by the SEC in the form attached hereto as Exhibit A

 

(p) Notwithstanding anything herein to the contrary, at any time after the Effective Date, the Company may delay the disclosure of material, non-public information concerning the Company the disclosure of which at the time is not, in the good faith opinion of the Board and its counsel, in the best interest of the Company and, in the opinion of counsel to the Company, otherwise required (a “Grace Period”); provided, that the Company shall promptly (i) notify the Investors in writing of the existence of material, non-public information giving rise to a Grace Period (provided that in each such notice the Company will not disclose the content of such material, non-public information to the Investors) and the date on which the Grace Period will begin, and (ii) notify the Investors in writing of the date on which the Grace Period ends; provided further, that (x) no Grace Period shall exceed ten consecutive Trading Days, (y) during any 365-day period such Grace Periods shall not exceed an aggregate of twenty (20) Trading Days, and (z) the first day of any Grace Period must be at least five (5) Trading Days after the last day of any prior Grace Period (each, an “Allowable Grace Period”). For purposes of determining the length of a Grace Period, the Grace Period shall begin on and include the date the Investors receive the notice referred to in clause (i) and shall end on and include the later of the date the Investors receive the notice referred to in clause (ii) and the date referred to in such notice. The provisions of Section 2.1(f) shall not be applicable during the period of any Allowable Grace Period. Upon expiration of the Grace Period, the Company shall again be bound by the first sentence of Section 2.2(e) with respect to the information giving rise thereto unless such material, non-public information is no longer applicable. Notwithstanding anything to the contrary, the Company shall cause its transfer agent to deliver unlegended shares of Common Stock to a transferee of an Investor in accordance with the terms of the Transaction Documents in connection with any sale of Registrable Securities with respect to which the Investor has entered into a contract for sale, prior to the Investor’s receipt of the notice of a Grace Period and for which the Investor has not yet settled.

 

  

13

  

 

(q) Neither the Company nor any Subsidiary or affiliate thereof shall identify an Investor as an underwriter in any public disclosure or filing with the SEC, the Principal Market or any Eligible Market and any Investor being deemed an underwriter by the SEC shall not relieve the Company of any obligations it has under this Agreement or any other Transaction Document; provided, however, that the foregoing shall not prohibit the Company from including the disclosure found in the “Plan of Distribution” section attached hereto as Exhibit B in the Registration Statement.

 

(r) Neither the Company nor any of its Subsidiaries has entered, as of the date hereof, nor shall the Company or any of its Subsidiaries, on or after the date of this Agreement, enter into any agreement with respect to its securities, that would have the effect of impairing the rights granted to the Holder in this Agreement or otherwise conflicts with the provisions hereof.

 

2.3 Obligations of the Investors.

 

(a) At least five Business Days prior to the first anticipated Filing Date of a Registration Statement, the Company shall notify each Investor in writing of the information the Company requires from such Investor. It shall be a condition precedent to the obligations of the Company to complete any registration pursuant to this Agreement with respect to the Registrable Securities of a particular Investor that such Investor shall furnish to the Company such information regarding itself, the Registrable Securities held by it and the intended method of disposition of the Registrable Securities held by it as shall be reasonably required to effect and maintain the effectiveness of the registration of such Registrable Securities and shall execute such documents in connection with such registration as the Company may reasonably request.

 

(b) Each Investor, by such Investor’s acceptance of the Registrable Securities, agrees to cooperate with the Company as reasonably requested by the Company in connection with the preparation and filing of any Registration Statement hereunder, unless such Investor has notified the Company in writing of such Investor’s election to exclude all of such Investor’s Registrable Securities from such Registration Statement.

 

(c) Each Investor agrees that, upon receipt of any notice from the Company of the happening of any event of the kind described in the first sentence of Section 2.2(e) or in Section 2.2(f), the Investor will immediately discontinue disposition of Registrable Securities pursuant to any Registration Statement covering such Registrable Securities until the such Investor’s receipt of copies of the supplemented or amended prospectus as contemplated by the first sentence of Section 2.2(e) or Section 2.2(f) or receipt of notice that no supplement or amendment is required. Notwithstanding anything to the contrary, the Company shall cause its transfer agent to deliver unlegended shares of Common Stock to a transferee of an Investor in accordance with the terms of the Transaction Documents in connection with any sale of Registrable Securities with respect to which the Investor has entered into a contract for sale prior to the Investor’s receipt of a notice from the Company of the happening of any event of the kind described in the first sentence of Section 2.2(e) or in Section 2.2(f) and for which the Investor has not yet settled.

 

(d) Each Investor covenants and agrees that it will comply with the prospectus delivery requirements of the 1933 Act as applicable to it or an exemption therefrom in connection with sales of Registrable Securities pursuant to the Registration Statement.

 

  

14

  

 

2.4 Expenses of Registration. All expenses, other than underwriting discounts and commissions, incurred in connection with registrations, filings or qualifications of Registrable Securities pursuant to Sections 2.1 and 2.2, (which right may be assigned as provided in Section 7.1), including, without limitation, all registration, listing and qualifications fees, printers and accounting fees, and fees and disbursements of counsel for the Company shall be paid by the Company. The Company shall also reimburse the Investors for the reasonable fees and disbursements of counsel for the Investors in connection with each registration, filing or qualification pursuant Sections 2.1 and 2.2 of this Agreement.

 

2.5 Indemnification. In the event any Registrable Securities are included in a registration statement under this Section 1:

 

(a) To the fullest extent permitted by law, the Company will, and hereby does agree to, indemnify, hold harmless and defend each Investor, the directors, officers, partners, members, employees, agents, representatives of, and each Person, if any, who controls any Investor within the meaning of the 1933 Act or the 1934 Act (each, an “Indemnified Person”), against any losses, claims, damages, liabilities, judgments, fines, penalties, charges, costs, reasonable attorneys’ fees, amounts paid in settlement or expenses, joint or several (collectively, “Claims”), incurred in investigating, preparing or defending any action, claim, suit, inquiry, proceeding, investigation or appeal taken from the foregoing by or before any court or governmental, administrative or other regulatory agency, body or the SEC, whether pending or threatened, whether or not an indemnified party is or may be a party thereto (“Indemnified Damages”), to which any of them may become subject insofar as such Claims (or actions or proceedings, whether commenced or threatened, in respect thereof) arise out of or are based upon: (i) any untrue statement or alleged untrue statement of a material fact in a Registration Statement or any post-effective amendment thereto or in any filing made in connection with the qualification of the offering under the securities or other “blue sky” laws of any jurisdiction in which Registrable Securities are offered (“Blue Sky Filing”), or the omission or alleged omission to state a material fact required to be stated therein or necessary to make the statements therein not misleading, (ii) any untrue statement or alleged untrue statement of a material fact contained in any preliminary prospectus if used prior to the effective date of such Registration Statement, or contained in the final prospectus (as amended or supplemented, if the Company files any amendment thereof or supplement thereto with the SEC) or the omission or alleged omission to state therein any material fact necessary to make the statements made therein, in light of the circumstances under which the statements therein were made, not misleading, (iii) any violation or alleged violation by the Company of the 1933 Act, the 1934 Act, any other law, including, without limitation, any state securities law, or any rule or regulation thereunder relating to the offer or sale of the Registrable Securities pursuant to a Registration Statement or (iv) any violation of this Agreement (the matters in the foregoing clauses (i) through (iv) being, collectively, “Violations”). Subject to Section 2.5(c), the Company shall reimburse the Indemnified Persons, promptly as such expenses are incurred and are due and payable, for any legal fees or other reasonable expenses incurred by them in connection with investigating or defending any such Claim. Notwithstanding anything to the contrary contained herein, the indemnification agreement contained in this Section 2.5(a): (i) shall not apply to a Claim by an Indemnified Person arising out of or based upon a Violation which occurs in reliance upon and in conformity with information furnished in writing to the Company by such Indemnified Person for such Indemnified Person expressly for use in connection with the preparation of the Registration Statement or any such amendment thereof or supplement thereto, if such prospectus was timely made available by the Company pursuant to Section 2.2(c); and (ii) shall not apply to amounts paid in settlement of any Claim if such settlement is effected without the prior written consent of the Company, which consent shall not be unreasonably withheld or delayed. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of the Indemnified Person and shall survive the transfer of the Registrable Securities by the Investors pursuant to Section 7.1.

 

  

15

  

 

(b) In connection with any Registration Statement in which an Investor is participating, each such Investor agrees to severally and not jointly indemnify, hold harmless and defend, to the same extent and in the same manner as is set forth in Section 2.5(a), the Company, each of its directors, each of its officers who signs the Registration Statement and each Person, if any, who controls the Company within the meaning of the 1933 Act or the 1934 Act (each, an “Indemnified Party”), against any Claim or Indemnified Damages to which any of them may become subject, under the 1933 Act, the 1934 Act or otherwise, insofar as such Claim or Indemnified Damages arise out of or are based upon any Violation, in each case to the extent, and only to the extent, that such Violation occurs in reliance upon and in conformity with written information furnished to the Company by such Investor expressly for use in connection with such Registration Statement; and, subject to Section 2.5(c), such Investor shall reimburse the Indemnified Party for any legal or other expenses reasonably incurred by an Indemnified Party in connection with investigating or defending any such Claim; provided, however, that the indemnity agreement contained in this Section 2.5(b) and the agreement with respect to contribution contained in Section 2.6 shall not apply to amounts paid in settlement of any Claim if such settlement is effected without the prior written consent of such Investor, which consent shall not be unreasonably withheld or delayed; provided, further, that the Investor shall be liable under this Section 2.5(b) for only that amount of a Claim or Indemnified Damages as does not exceed the net proceeds to such Investor as a result of the sale of Registrable Securities pursuant to such Registration Statement. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of such Indemnified Party and shall survive the transfer of the Registrable Securities by the Investors pursuant to Section 7.1.

 

(c) Promptly after receipt by an Indemnified Person or Indemnified Party under this Section 2.5 of notice of the commencement of any action or proceeding (including any governmental action or proceeding) involving a Claim, such Indemnified Person or Indemnified Party shall, if a Claim in respect thereof is to be made against any indemnifying party under this Section 2.5, deliver to the indemnifying party a written notice of the commencement thereof, and the indemnifying party shall have the right to participate in, and, to the extent the indemnifying party so desires, jointly with any other indemnifying party similarly noticed, to assume control of the defense thereof with counsel mutually satisfactory to the indemnifying party and the Indemnified Person or the Indemnified Party, as the case may be; provided, however, that an Indemnified Person or Indemnified Party shall have the right to retain its own counsel with the fees and expenses of not more than one counsel for all such Indemnified Person or Indemnified Party to be paid by the indemnifying party, if, in the reasonable opinion of counsel retained by the Indemnified Person or Indemnified Party, as applicable, the representation by such counsel of the Indemnified Person or Indemnified Party and the indemnifying party would be inappropriate due to actual or potential differing interests between such Indemnified Person or Indemnified Party and any other party represented by such counsel in such proceeding. In the case of an Indemnified Person, legal counsel referred to in the immediately preceding sentence shall be selected by the Investors holding at least a majority in interest of the Registrable Securities included in the Registration Statement to which the Claim relates. The Indemnified Party or Indemnified Person shall reasonably cooperate with the indemnifying party in connection with any negotiation or defense of any such action or Claim by the indemnifying party and shall furnish to the indemnifying party all information reasonably available to the Indemnified Party or Indemnified Person which relates to such action or Claim. The indemnifying party shall keep the Indemnified Party or Indemnified Person fully apprised at all times as to the status of the defense or any settlement negotiations with respect thereto. No indemnifying party shall be liable for any settlement of any action, claim or proceeding effected without its prior written consent, provided, however, that the indemnifying party shall not unreasonably withhold, delay or condition its consent. No indemnifying party shall, without the prior written consent of the Indemnified Party or Indemnified Person, consent to entry of any judgment or enter into any settlement or other compromise which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such Indemnified Party or Indemnified Person of a release from all liability in respect to such Claim or litigation and such settlement shall not include any admission as to fault on the part of the Indemnified Party. Following indemnification as provided for hereunder, the indemnifying party shall be subrogated to all rights of the Indemnified Party or Indemnified Person with respect to all third parties, firms or corporations relating to the matter for which indemnification has been made. The failure to deliver written notice to the indemnifying party within a reasonable time of the commencement of any such action shall not relieve such indemnifying party of any liability to the Indemnified Person or Indemnified Party under this Section 2.5, except to the extent that the indemnifying party is prejudiced in its ability to defend such action.

 

  

16

  

 

(d) The indemnification required by this Section 2.5 shall be made by periodic payments of the amount thereof during the course of the investigation or defense, as and when bills are received or Indemnified Damages are incurred.

 

(e) The indemnity agreements contained herein shall be in addition to (i) any cause of action or similar right of the Indemnified Party or Indemnified Person against the indemnifying party or others, and (ii) any liabilities the indemnifying party may be subject to pursuant to the law

 

2.6 Contribution. To the extent any indemnification by an indemnifying party is prohibited or limited by law, the indemnifying party agrees to make the maximum contribution with respect to any amounts for which it would otherwise be liable under Section 2.5 to the fullest extent permitted by law; provided, however, that: (i) no Person involved in the sale of Registrable Securities which Person is guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the 1933 Act) in connection with such sale shall be entitled to contribution from any Person involved in such sale of Registrable Securities who was not guilty of fraudulent misrepresentation; and (ii) contribution by any seller of Registrable Securities shall be limited in amount to the amount of net proceeds received by such seller from the sale of such Registrable Securities pursuant to such Registration Statement.

 

2.7 Reports Under Securities Exchange Act of 1934. With a view to making available to the Investors the benefits of Rule 144 promulgated under the 1933 Act or any other similar rule or regulation of the SEC that may at any time permit the Investors to sell securities of the Company to the public without registration (“Rule 144”), the Company agrees to:

 

(a) make and keep public information available, as those terms are understood and defined in Rule 144;

 

(b) file with the SEC in a timely manner all reports and other documents required of the Company under the 1933 Act and the 1934 Act so long as the Company remains subject to such requirements and the filing of such reports and other documents is required for the applicable provisions of Rule 144; and

 

(c) furnish to each Investor so long as such Investor owns Registrable Securities, promptly upon request, (i) a written statement by the Company, if true, that it has complied with the reporting requirements of Rule 144, the 1933 Act and the 1934 Act, (ii) a copy of the most recent annual or quarterly report of the Company and such other reports and documents so filed by the Company, and (iii) such other information as may be reasonably requested to permit the Investors to sell such securities pursuant to Rule 144 without registration.

 

  

17

  

 

3. Major Action Approval Rights.

 

3.1 Subject to the Section 3.2 below, the Company shall not be authorized to take, and the Company shall not take any of the actions that are set out below (each a “Major Action”) without the prior written consent of the Holder:

 

(a) amending this Agreement;

 

(b) merging, consolidating or reorganizing the Company;

 

(c) purchasing another business (whether by a purchase of assets, purchase of stock, merger or otherwise) involving the expenditure of $2,000,000 or more in cash or comparable value.

 

(d) selling, exchanging or otherwise disposing of all or substantially all of the assets of the Company;

 

(e) dissolving, liquidating and/or winding up the Company;

 

(f) making an assignment for the benefit of creditors or admitting in writing the inability of the Company to pay its debts generally as they become due or petitioning or applying to any tribunal for the appointment of a custodian, trustee, receiver or liquidator for the Company or of any substantial part of the assets, or commencing of any proceeding relating to the Company under any bankruptcy, reorganization, arrangement insolvency, readjustment of debt, dissolution or liquidation law of any jurisdiction;

 

(g) paying dividends to stockholder of the Company other than quarterly dividends as approved by the board of directors;

 

(h) issuing additional equity interests in the Company or any debt security which by its terms is convertible into or exchangeable for any equity interests of the Company to new or existing equity holders or otherwise recapitalizing the Company, except for Permitted Issuances;

 

(i) creating, incurring or assuming any indebtedness, refinancing any indebtedness other than Permitted Indebtedness (as defined in the Financing Agreement);

 

(j) changing any annual business plan and budget approved by the Company’s board of directors (the “Approved Plan and Budget”) and engaging in any transaction that is not provided for in an Approved Plan and Budget, except to the extent that such item is incurred in the ordinary course of business (including but not limited to taking on new business and incurring customary expenses and obligations associated with servicing such new business) or otherwise incurs any obligation which does not exceed $250,000.

 

  

18

  

 

(k) amend or terminate the EERCF License Agreement, or permit MES (or any of its assignees or Affiliates) to cause EERCF to transfer the Patent Rights (as such term is defined in the EERCF License Agreement) to MES (or any of its assignees or Affiliates) pursuant to the EERCF License Agreement;

 

(l) taking any action that constitutes or could, with the giving of notice or the passage of time, reasonably be expected to constitute an event of default under any contract that could have an impact of $2,000,000 or more regarding the Company;

 

(m) taking any action that requires the consent of a lender to the Company where such consent is not obtained from the lender;

 

(n) transacting any business with an officer of the Company or a member of the Company’s board of directors based upon a rate of compensation that is less than an arm’s length rate as determined by a majority of those members of the board of directors unaffiliated with the officer or director in question;

 

(o) making any investments, other than holding working capital and reserves in short term depository accounts or financial instruments or holding an interest in a subsidiary where the Company is not actively involved in the operations of the subsidiary;

 

(p) entering into any contract, agreement or other commitment to undertake any Major Action;

 

(q) engaging in any other transaction or matter or making any decision outside of the ordinary course of the Company’s business;

 

(r) taking any act in contravention of this Agreement or the Company’s organizational documents; or

 

(s) taking, permitting or allowing to occur any of the foregoing on behalf of, or by, a Subsidiary of the Company.

 

3.2 The provisions of Section 3.1 above shall take effect upon the earlier to occur of (i) the repayment in full of the Note or (i) Holder’s conversion of the Note into Common Stock representing at least 10 percent of the Common Stock of the Company on a fully-diluted basis, provided however, that at such point in time thereafter as Holder holds less than 10 percent of the Common Stock on a fully diluted basis, then the provisions of this Section 3.1 shall no longer be of force or effect. Holder may assign its rights under this Section 3 to one or more of its Affiliates, but Holder may not assign any of its rights under this Section 3 to any non-Affiliate third party without the prior written consent of the Company.

 

  

19

  

 

4. Changes in Common Stock. If, and as often as, there is any change in the Common Stock by way of a stock split, stock dividend, combination or reclassification, or through a merger, consolidation, reorganization or recapitalization, or by any other means, appropriate adjustment shall be made in the provisions hereof so that the rights and privileges granted hereby shall continue with respect to the Common Stock as so changed.

 

5. Rights of Inspection. The Company shall permit Holder to visit and inspect the Company’s properties, to examine its books of account and records and to discuss the Company’s affairs, finances and accounts with its officers, all at such reasonable times as may be requested; provided, however, the Company shall not be obligated under this Section 4 with respect to information the Company determines in good faith to be confidential, and therefore, not to be disclosed. The Company’s covenant pursuant to this Section 4 shall be in addition to, and not in limitation of, any other Holder right of inspection as a stockholder, director or creditor of the Company.

 

6. Board Meeting Notice Requirement/Observation Rights. If notice is given of an annual meeting or special meeting of the Board of Directors at any time when the Board of Directors consists of no individuals who are Holder nominees, the Company shall deliver written notice of such meeting to Holder concurrently with the delivery of meeting notices to the Board of Directors. Holder shall be entitled to designate, and the Company shall accept, one (1) individual to attend any such meeting, subject to the right to recuse the individual from attending that portion of the meeting that deals with: (a) the relationship between the Company and/or its Subsidiaries on the one hand and Holder or its Affiliates on the other hand; or (b) any matter where such recusal is necessary to preserve attorney client privilege as to the matters being discussed.

 

7. Miscellaneous.

 

7.1 Successors and Assigns; Assignment.

 

(a) Generally. Except as otherwise provided in this Agreement, the terms and conditions of this Agreement shall inure to the benefit of and be binding upon the respective permitted successors and assigns of the parties hereto (including transferees of any shares of the Common Stock, the Note or the Warrant). Nothing in this Agreement, express or implied, is intended to confer upon any party other than the parties hereto or their respective successors and assigns any rights, remedies, obligations, or liabilities under or by reason of this Agreement, except as expressly provided in this Agreement. No party to this Agreement other than Holder may assign its rights or delegate its obligations hereunder, whether by operation of law or otherwise, without the prior written consent of the other parties to this Agreement and delivery by the assigning party to the non-assigning parties of a writing by its assignee containing such assignee’s agreement to be bound by this Agreement.

 

  

20

  

 

(b) Registration Rights. The registration rights provided in Section 2 of this Agreement shall be automatically assignable by the Investors to any transferee of all or any portion of such Investor’s Registrable Securities if: (i) the Investor agrees in writing with the transferee or assignee to assign such rights, and a copy of such agreement is furnished to the Company within a reasonable time after such assignment; (ii) the Company is, within a reasonable time after such transfer or assignment, furnished with written notice of (A) the name and address of such transferee or assignee, and (B) the securities with respect to which such registration rights are being transferred or assigned; (iii) immediately following such transfer or assignment the further disposition of such securities by the transferee or assignee is restricted under the 1933 Act or applicable state securities laws; (iv) at or before the time the Company receives the written notice contemplated by clause (ii) of this sentence the transferee or assignee agrees in writing with the Company to be bound by all of the provisions contained herein; (v) such transfer shall have been made in accordance with the applicable requirements of the Transaction Documents; and (vi) the limitations on liability of the Company pursuant to this Agreement shall apply to Holder and all assignees collectively, and not individually.

 

7.2 Amendments and Waivers. Any term of this Agreement may be amended or waived only with the written consent of the parties hereto. Any amendment or waiver effected in accordance with this Section 7.2 shall be binding upon Holder of any Registrable Securities then outstanding, each future holder of all such Registrable Securities, the Common Holders, each future holder of the Common Stock now held by the Common Holders and the Company.

 

7.3 Consents. All consents and other determinations required to be made by the Investors pursuant to this Agreement shall be made, unless otherwise specified in this Agreement, by the Required Holders, determined as if any portion of the outstanding Note then held by the Investors has been converted for Registrable Securities and the outstanding Warrants then held by Investors have been exercised for Registrable Securities.

 

7.4 Notices.

 

(a) A Person is deemed to be a holder of Registrable Securities whenever such Person owns or is deemed to own of record such Registrable Securities. If the Company receives conflicting instructions, notices or elections from two or more Persons with respect to the same Registrable Securities, the Company shall act upon the basis of instructions, notice or election received from such record owner of such Registrable Securities.

 

(b) All notices and other communications provided for herein shall be in writing and shall be delivered by hand or overnight courier service, mailed by certified or registered mail or sent by facsimile, as follows:

 

	
 
If to the Company:

 

Midwest Energy Emissions Corp.

 
Attn: Alan Kelley, CEO

 
500 W Wilson Bridge Rd Ste 140

 
Worthington, OH 43085

 
Fax: (614) 505-7377

 
E-mail: akelley@midwestemissions.com

 

  

21

  

 

	 
With a copy (for informational purposes only):

 

Taft Stettinius & Hollister LLP

Attn: Mitchell D. Goldsmith

111 E. Wacker Drive, Suite 2800

Chicago, Illinois 60601-3713

Fax: (312) 275-7569

E-mail: mgoldsmith@taftlaw.com

 

If to the Holder:

 

c/o Alterna Capital Partners LLC

 
 
Attn: Samir Patel

Wilton, Connecticut 06897

Fax: (203) 563-92110

 
 
E-Mail: samir.patel@alternacapital.com

 
With copies to (for informational purposes only):

 
Levenfeld Pearlstein, LLC

 
Attn: David B. Solomon

 
2 North LaSalle Street-Suite 1300

 
Chicago, IL 60602

 
E-Mail: dsolomon@lplegal.com

 

and 
 

Qashu & Schoenthaler, LLP

 
Attn.: Vanessa J. Schoenthaler

 
495 Madison Avenue, 12th Floor

 
New York, New York 10017

 
E-Mail: vschoenthaler@qsllp.com

 

22

  

 

7.5 Severability. It is the intent of the parties hereto that each of the provisions of this Agreement be read and interpreted with every reasonable inference given to its enforceability. However, it is also the intent of the parties that if any term, provision or condition hereof is held by a court of competent jurisdiction to be invalid, void or unenforceable, the remainder of the provisions thereof shall remain in full force and effect and shall in no way be affected, impaired or invalidated. Finally, it is also the intent of the parties that if a court should determine any of the terms, provisions or conditions hereof are unenforceable, then the court shall modify said term, provision or condition so as to make it reasonable and enforceable under the prevailing circumstances.

 

7.6 Investor Obligations Several and Not Joint. The obligations of each Investor hereunder are several and not joint with the obligations of any other Investor, and no provision of this Agreement is intended to confer any obligations on any Investor vis-à-vis any other Investor. Nothing contained herein or in any other Transaction Document, and no action taken by any Investor pursuant hereto or thereto, shall be deemed to constitute the Investors as, and the Company acknowledges that the Investors do not so constitute, a partnership, an association, a joint venture or any other kind of group or entity, or create a presumption that the Investors are in any way acting in concert or as a group or entity with respect to such obligations or the transactions contemplated by the Transaction Documents or any matters, and the Company acknowledges that the Investors are not acting in concert or as a group, and the Company shall not assert any such claim, with respect to such obligations or the transactions contemplated by this Agreement or any of the other the Transaction Documents. Each Investor shall be entitled to independently protect and enforce its rights, including, without limitation, the rights arising out of this Agreement or out of any other Transaction Documents, and it shall not be necessary for any other Investor to be joined as an additional party in any proceeding for such purpose. The use of a single agreement with respect to the obligations of the Company contained herein was solely in the control of the Company, not the action or decision of any Investor, and was done solely for the convenience of the Company and not because it was required or requested to do so by any Investor. It is expressly understood and agreed that each provision contained in this Agreement and in each other Transaction Document is between the Company and an Investor, solely, and not between the Company and the Investors collectively and not between and among Investors.

 

7.7 Governing Law; Submission to Jurisdiction. This Agreement shall be governed by and construed in accordance with the internal laws (without regard to the conflict of laws provisions) of the State of New York. The Parties hereto hereby irrevocably and unconditionally submits, for itself and its property, to the nonexclusive jurisdiction of any U.S. Federal or State court sitting in New York, New York in any action or proceeding arising out of or relating to this Agreement, or for recognition or enforcement of any judgment, and each of the parties hereto hereby irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding may be heard and determined in such New York State or, to the extent permitted by law, in such Federal court. Each party to this Agreement irrevocably consents to service of process in the manner provided for notices in Section 6.5. Nothing in this Agreement will affect the right of any party to this Agreement to serve process in any other manner permitted by law.

 

  

23

  

 

7.8 Waiver of Jury Trial. EACH PARTY HERETO HEREBY 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 AGREEMENT (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH SUBORDINATED CREDITOR AND EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY 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 AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.

 

7.9 Counterparts/Electronic Signatures. This Agreement may be executed in multiple counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. Delivery of an executed counterpart of a signature page of this Agreement by facsimile or other electronic transmission shall be effective as delivery of a manually executed counterpart of this Agreement.

 

7.10 Entire Agreement. This Agreement, the Transaction Documents and the documents referred to herein, constitute the entire agreement between the parties hereto pertaining to the subject matter hereof and supersede any and all other written or oral agreements existing among the parties hereto, which agreements are expressly canceled.

 

7.11 Conflict. In the event of any conflict between any term, covenant or condition of this Agreement and any term, covenant or condition of any of the Company’s or its Subsidiaries’ organizational documents, the provisions of this Agreement shall control and govern.

 

7.12 Titles and Subtitles. The titles and subtitles used in this Agreement are used for convenience only and are not to be considered in construing or interpreting this Agreement.

 

7.13 Attorneys’ Fees. Notwithstanding anything to the contrary contained herein, in the event of any dispute between the parties hereto with respect to this Agreement and the transactions contemplated hereby, the prevailing party shall be entitled to receive from the other part(ies) its reasonable attorneys’ fees and court costs.

 

[SIGNATURE PAGE FOLLOWS]

 

  

24

  

 

IN WITNESS WHEREOF, the undersigned have caused this Investor/Registration Rights Agreement to be duly executed and delivered as of the date first written above.

 

 

	 	
MIDWEST ENERGY EMISSIONS CORP., 

a Delaware corporation

	 
	 	 	 	 
	
 

	
By: 

	 	 
	 	Name:	 	 
	 	Title:	 	 

 

 

	 	
AC MIDWEST ENERGY, LLC, 

a Delaware limited liability company

	 
	 	 	 	 
	
 

	
By: 

	 	 
	 	Name:	 	 
	 	Title:	 	 

 

 

25meec_ex106.htm

EXHIBIT 10.6

 

ALLONGE TO

SECURED PROMISSORY NOTE

 

THIS ALLONGE TO SECURED PROMISSORY NOTE (the “Allonge”), dated and effective as of the Effective Date set forth below, is attached to and made part of that certain Secured Promissory Note (Note”) issued by Midwest Energy Emissions Corp., a Delaware corporation (“Company”), payable to the order of each of the holders listed on Exhibit A attached hereto and made a part hereof (each a “Holder” and with the notes issued to all the Holders being collectively, the “Notes”) pursuant to the 2013 offering of up to $6,000,000 of Notes by Holder and pursuant to which Richard Galterio is serving as “Noteholder Agent” for the Holders of the Notes, with authority to amend each Note pursuant to actions taken with respect to the Noteholder Agency Appointment Agreement among the Holders of the Notes, Company and Agent. Capitalized terms used herein and not otherwise defined shall have the same meaning as set forth in the Note.

 

The Note of each Holder set forth on Exhibit A is hereby amended effective as of the date of initial funding of a loan from AC Midwest Energy LLC, a Delaware limited liability company to Borrower in the following manner:

 

1.  Stock Issuance Option. The following sentence is added to the end of the paragraph on page 1 of the Note that commences “FOR VALUE RECEIVED:”

 

“Notwithstanding anything to the contrary contained in this Note, effective as of the date of initial funding of a secured loan (“New Loan Closing Date”) from AC Midwest Energy LLC (such entity or its designees being the “New Lender” and the amount loaned by the New Lender to the Company from time to time being the “New Loan” with the obligations evidenced thereby being the “New Loan Obligations” and the note evidencing the same being the “New Note”) to the Company: (i) the Company shall make all future payments of interest called for hereunder pursuant to the Stock Issuance Option until notice is otherwise provided by the Company to Holder; and (ii) the Maturity Date for this Note shall be the later of the original maturity date set forth in this Note and the maturity date of the New Loan (presently July 31, 2018, or as extended from time to time by agreement between the Company and the New Lender), provided that, subject to the terms of the Intercreditor Agreement (as such term is defined herein), the Company shall have the right to pay off this Note without penalty or premium at any time following December 20, 2016 and prior to its Maturity Date after giving at least 10 days’ notice of the proposed date of payment so as to provide the Holder the opportunity to convert this Note to Common Stock prior to tender of payment.”

 

2. Prepayment. Section 2 (Prepayment) of the Note is amended and restated in its entirety as follows:

 

“This Note may not be prepaid in whole or part without the consent of the Holder at any time prior to December 20, 2016.”

 

3. Ranking, New Warrant. The following paragraph is added at the end of Section 4 of the Note:

 

“Holder acknowledges and agrees that effective as of the New Loan Closing Date: (i) the definition of “Permitted Senior Debt” has been amended to include the New Loan; (ii) Richard Galterio, in his capacity as “Noteholder Agent” for the benefit of Holder pursuant to the Noteholder Agency Appointment Agreement to which Holder is subject with respect to this Note (in the form included with the original subscription materials for the issuance of this Notes including this Note, with the holders of all the Notes being the “Holders”) is authorized to execute such form of intercreditor agreement (“Intercreditor Agreement”) among the Holders, the Company and one or more of its subsidiaries with the New Lender, as the Noteholder Agent deems necessary and proper), which shall provide among other things for the subordination as to right of payment of this Note and the other Notes to payment to the New Lender, except in certain instances of liquidation of the collateral securing the New Loan, and the Holder shall be bound by the terms of the Intercreditor Agreement, which shall supersede any inconsistencies with the terms of this Note. The Intercreditor Agreement shall contain a right in favor of the New Lender to purchase this Note following the occurrence of an event of default with respect to the New Loan for the outstanding principal amount of this Note. In the event of a purchase of this Note by the New Lender in accordance with the terms of the Intercreditor Agreement, then the Company shall prepare and issue to Holder a warrant (“New Warrant”) substantially identical to the form attached hereto as Exhibit B, and the New Warrant shall be for a term ending on the original Maturity Date of this Note in 2016, to purchase Common Stock of the Company at a price equal to fifty cents ($0.50) per share, subject to adjustment as set forth on Exhibit B and shall be for an amount of shares equal to two times the number of dollars paid by the New Lender for the purchase of this Note, rounded up to the nearest whole share, subject to adjustment (to be adjusted equitably to account for forward or reverse stock splits of the Company or other changes in its capital structure for transactions occurring after August 1, 2014 as set forth in Section 4 of the form of New Warrant).”

 

  

1

  

 

4. Conversion of this Note at the Option of the Company. The following paragraph is added at the end of Section 5(b) of this Note:

 

“Notwithstanding anything to the contrary contained in this Note, the forced conversion rights of the Company set forth in this Section 5(b) shall only be exercisable in the following instance: (i) the Company has applied for listing of its shares on NASDAQ, the NYSE or another national securities exchange of the United States (collectively, a “National Exchange”); (ii) the Company has met the conditions to exercise the forced conversion rights set forth in this Section 5(b); and (iii) the listing on the National Exchange is ready for approval, conditioned upon the forced conversion of the Notes in order to meet the listing requirements of the National Exchange.”

 

5.  Negative Covenants of the Company. The lead in sentence of Section 8 preceding Section 8(a) is amended and restated in its entirety as follows:

 

“The Company hereby agrees that, so long as all or any portion of the Notes remains outstanding and unpaid it will not, nor will it permit any of its subsidiaries, if any, without the consent of either: (i) the Noteholder Agent; or (ii) the New Lender, for so long as the New Loan or any portion thereof is issued and outstanding, to:”

 

6.  Agency Agreement. The following sentence is added at the end of Section 9 of this Note.

 

“Holder ratifies, confirms and approves the appointment of Richard Galterio as Noteholder Agent. The Holder authorizes the Noteholder Agent to take all actions on behalf of Holder pursuant to the Intercreditor Agreement as the Noteholder Agent deems necessary and proper.

 

7. Most Favored Nation Status. The following sentence is added at the end of Section 10 of this Note.

 

“Notwithstanding anything to the contrary contained herein, “New Financing” shall not include any issuance of equity linked securities to the New Lender in connection with the funding of the New Loan or in connection with any modification or amendment thereof; provided however, to the extent that the conversion price for the New Note is reduced below $0.50 per share of Common Stock (as equitably adjusted for forward or reverse splits), then the conversion price for this Note shall be reduced to the same per share conversion price as applies to the New Note. ”

 

8.  Transfer of Note. The following sentence is added to the end of Section 15 of this Note:

 

“Notwithstanding anything to the contrary contained herein, while the Intercreditor Agreement is in effect, no transfer of this Note may be made without the prior written consent of the New Lender, which consent shall not be unreasonably withheld.”

 

[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]

 

  

2

  

 

IN WITNESS WHEREOF, Noteholder Agent on behalf of each of the Holders named on Exhibit A attached hereto and made a part hereof and the Company have executed this Allonge as of the date set forth above amending the Note issued by the Company to each of the Holders named on Exhibit A hereto effective as of the date of execution by Company set forth below (the “Effective Date”).

 

 

	
COMPANY:

	 	
NOTEHOLDER AGENT:

	 
	  	 	  	 
	
Midwest Energy Emissions Corp.

	 	  	 
	  	 	Richard Galterio(1)	 
	  	 	 	 
	
By:

	  	 	  	 
	
Name:

	  	 	  	 
	
Title:

	  	 	  	 
	
Effective Date:

	
August ___, 2014

	 	  	 

 

(1)  On behalf of each of the Holders set forth on Exhibit A.

 

Signature Page

MEEC Allonge to Secured Promissory Note

 

  

3

  

 

EXHIBIT A

LIST OF NOTEHOLDERS

 

	
Name

	 	
Principal as

of 07/15/14

	 
	  	 	$	50,000	 
	  	 	 	100,000	 
	  	 	 	100,000	 
	  	 	 	50,000	 
	  	 	 	20,000	 
	  	 	 	100,000	 
	  	 	 	65,000	 
	  	 	 	50,000	 
	  	 	 	100,000	 
	  	 	 	10,000	 
	  	 	 	5,000	 
	  	 	 	30,000	 
	  	 	 	150,000	 
	  	 	 	40,000	 
	  	 	 	10,000	 
	  	 	 	30,000	 
	  	 	 	20,000	 
	  	 	 	50,000	 
	  	 	 	10,000	 
	  	 	 	50,000	 
	  	 	 	30,000	 
	  	 	 	100,000	 
	  	 	 	25,000	 
	  	 	 	15,000	 
	  	 	 	125,000	 
	  	 	 	50,000	 
	  	 	 	40,000	 
	  	 	 	50,000	 
	  	 	 	10,000	 
	  	 	 	75,000	 
	  	 	 	100,000	 
	  	 	 	50,000	 
	  	 	 	75,000	 
	  	 	 	10,000	 
	
Total:

	 	$	1,795,000	 

  

4

  

EXHIBIT B

FORM OF NEW WARRANT

 

THIS WARRANT AND THE COMMON STOCK ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED UNLESS REGISTERED UNDER THE SECURITIES ACT AND ANY APPLICABLE STATE OR FOREIGN SECURITIES LAWS, OR UNLESS AN OPINION OF COUNSEL HAS BEEN RENDERED TO THE COMPANY, IN FORM AND SUBSTANCE SATISFACTORY TO THE COMPANY AND ITS COUNSEL, TO THE EFFECT THAT SUCH REGISTRATION IS NOT REQUIRED.

 

WARRANT

TO PURCHASE SHARES OF

COMMON STOCK, PAR VALUE $.001 PER SHARE OF

MIDWEST ENERGY EMISSIONS CORP.

AT $0.50 PER SHARE

 

Warrant Certificate No.: [NUMBER]

 

Original Issue Date: [_______ ______], 201_

 

FOR VALUE RECEIVED, Midwest Energy Emissions Corp., a Delaware corporation (the “Company”), hereby certifies that [NAME OF HOLDER], a [JURISDICTION AND TYPE OF ENTITY], or its registered assigns (the “Holder”), is entitled to purchase from the Company [SPECIFIED NUMBER] duly authorized, validly issued, fully paid and non-assessable shares of Common Stock at a purchase price per share of $0.50 (the “Exercise Price”), all subject to the terms, conditions and adjustments set forth below in this Warrant. Certain capitalized terms used herein are defined in Section 1 hereof.

 

This Warrant has been issued in connection with the rights granted to Holder as a result of the purchase by AC Midwest Energy, LLC or its assigns of the 10% Convertible Promissory Note issued to Holder or Holder’s predecessors in interest in 2013 by Company (the “Convertible Note” and the date of issuance being the “Convertible Note Issuance Date”), between the Company and the Holder. AC Midwest Energy, LLC funded a $10,000,000 loan to the Company in August, 2014 (the “Senior Loan).”

 

  

5

  

 

1. Definitions. As used in this Warrant, the following terms have the respective meanings set forth below:

 

“Aggregate Exercise Price” means an amount equal to the product of (a) the number of Warrant Shares in respect of which this Warrant is then being exercised pursuant to Section 3 hereof, multiplied by (b) the Exercise Price in effect as of the Exercise Date in accordance with the terms of this Warrant.

 

“Board” means the Board of Directors of the Company.

 

“Business Day” means any day, except a Saturday, Sunday or legal holiday, on which banking institutions in the city of Wilmington, Delaware are authorized or obligated by law or executive order to close.

 

“Common Stock” means the common stock, par value $0.001 per share, of the Company, and any capital stock into which such Common Stock shall have been converted, exchanged or reclassified following the date hereof.

 

“Company” has the meaning set forth in the preamble.

 

“Convertible Note” has the meaning set forth in the preamble.

 

“Convertible Note Issuance Date” has the meaning set forth in the preamble.

 

“Convertible Securities” means any securities (directly or indirectly) convertible into or exchangeable for Common Stock, but excluding Options.

 

“Exercise Date” means, for any given exercise of this Warrant, the date on which the conditions to such exercise as set forth in Section 3 shall have been satisfied at or prior to 5:00 p.m., Delaware time, on a Business Day, including, without limitation, the receipt by the Company of the Exercise Agreement, the Warrant and the Aggregate Exercise Price.

 

“Exercise Agreement” has the meaning set forth in Section 3(a)(i).

 

  

6

  

 

“Exercise Period” has the meaning set forth in Section 2.

 

“Exercise Price” has the meaning set forth in the preamble.

 

 “Holder” has the meaning set forth in the preamble.

 

“Options” means any warrants or other rights or options to subscribe for or purchase Common Stock or Convertible Securities.

 

“Original Issue Date” means the date on which the Warrant was issued by the Company.

 

“Nasdaq” means The Nasdaq Stock Market, Inc.

 

“OTC Bulletin Board” means the OTC Bulletin Board.

 

“Person” means any individual, sole proprietorship, partnership, limited liability company, corporation, joint venture, trust, incorporated organization or government or department or agency thereof.

 

“SEC Filings” means the Company’s most recent Annual Report on Form 10-K filed with the SEC and any Form 10-Q and Form 8-K filed thereafter.

 

“Securities Act” means the Securities Act of 1933, as amended.

 

“Senior Loan Date” means the original date of issuance of the Senior Loan

 

“Senior Loan Note” means the promissory note issued by the Company to evidence the Senior Loan, and all modifications, replacements and substitutions thereof.

 

“Subscription Agreement” means the subscription agreement pursuant to which the Convertible Note was originally purchased by the Holder or the Holder’s predecessors in interest..

 

“Warrant” means this Warrant and all warrants issued upon division or combination of, or in substitution for, this Warrant.

 

“Warrant Shares” means the shares of Common Stock of the Company then purchasable upon exercise of this Warrant in accordance with the terms of this Warrant.

 

  

7

  

 

2. Term of Warrant. Subject to the terms and conditions hereof, at any time or from time to time after the date hereof and prior to 5:00 p.m., Delaware time, on the later of: (i) the three year anniversary of the Convertible Note Issuance Date, or (ii) two years following the date of issuance of this Warrant, provided if such day (per subparagraph (i) or (ii)) is not a Business Day, on the next preceding Business Day (the “Exercise Period”), the Holder of this Warrant may exercise this Warrant for all or any part of the Warrant Shares purchasable hereunder (subject to adjustment as provided herein); provided, however, the Exercise Period will terminate upon the closing of a sale of the Company (pursuant to merger, stock sale, or otherwise).

 

3. Exercise of Warrant

 

(a) Exercise Procedure. This Warrant may be exercised on any Business Day, for all or any part of the unexercised Warrant Shares, during the Exercise Period upon

 

i. surrender of this Warrant to the Company at its then principal executive offices (or an indemnification undertaking with respect to this Warrant in the case of its loss, theft or destruction), together with an Exercise Agreement in the form attached hereto as Exhibit A (each, an “Exercise Agreement”), duly completed (including specifying the number of Warrant Shares to be purchased) and executed; and

 

ii. payment to the Company of the Aggregate Exercise Price in accordance with Section 3(b).

 

(b) Payment of the Aggregate Exercise Price. Payment of the Aggregate Exercise Price shall be made by delivery to the Company of a certified or official bank check payable to the order of the Company or by wire transfer of immediately available funds to an account designated in writing by the Company, in the amount of the Aggregate Exercise Price.

 

(c) Delivery of Stock Certificates. Upon receipt by the Company of the Exercise Agreement, surrender of this Warrant (in accordance with Section 3(a) hereof) and payment of the Aggregate Exercise Price (in accordance with Section 3(b) hereof) or cashless exercise (in accordance with Section 3(i) hereof), the Company shall, as promptly as practicable, and in any event within 30 Business Days thereafter, execute (or cause to be executed) and deliver (or cause to be delivered) to the Holder a certificate or certificates representing the Warrant Shares issuable upon the exercise, together with cash in lieu of any fraction of a share, as provided in Section 3(d) hereof. The stock certificate or certificates delivered shall be, to the extent possible, in the denomination or denominations as the exercising Holder shall reasonably request in the Exercise Agreement and shall be registered in the name of the Holder or, subject to compliance with Section 5 below, any other Person’s name as shall be designated in the Exercise Agreement. This Warrant shall be deemed to have been exercised and the certificate or certificates of Warrant Shares shall be deemed to have been issued, and the Holder or any other Person designated to be named therein shall be deemed to have become a holder of record of the Warrant Shares for all purposes, as of the Exercise Date.

 

  

8

  

 

(d) Fractional Shares. The Company shall not be required to issue a fractional Warrant Share upon exercise of any Warrant. As to any fraction of a Warrant Share that the Holder would otherwise be entitled to purchase upon the exercise, the Company shall pay to the Holder an amount in cash (by delivery of a check or by wire transfer of immediately available funds) equal to the product of (i) the fraction multiplied by (ii) the Fair Market Value of one Warrant Share on the Exercise Date.

 

(e) Delivery of New Warrant. Unless the purchase rights represented by this Warrant shall have expired or shall have been fully exercised, the Company shall, at the time of delivery of the certificate or certificates representing the Warrant Shares being issued in accordance with Section 3(c) hereof, deliver to the Holder a new Warrant evidencing the rights of the Holder to purchase the unexpired and unexercised Warrant Shares called for by this Warrant. Such new Warrant shall in all other respects be identical to this Warrant.

 

(f) Valid Issuance of Warrant and Warrant Shares; Payment of Taxes. With respect to the exercise of this Warrant, the Company represents, covenants and agrees:

 

i. This Warrant is, and any Warrant issued in substitution for or replacement of this Warrant shall be, upon issuance, duly authorized and validly issued.

 

ii. All Warrant Shares issuable upon the exercise of this Warrant pursuant to the terms hereof shall be, upon issuance, and the Company shall take all such actions as may be necessary or appropriate in order that the Warrant Shares are, validly issued, fully paid and non-assessable, issued without violation of any preemptive or similar rights of any stockholder of the Company and free and clear of all taxes, liens and charges.

 

iii. The Company shall take all commercially reasonable actions as may be necessary to ensure that all Warrant Shares are issued without material violation by the Company of any applicable law or governmental regulation.

 

iv. The Company shall pay all expenses in connection with, and all taxes and other governmental charges that may be imposed with respect to, the issuance or delivery of Warrant Shares upon exercise of this Warrant; provided, that the Company shall not be required to pay any tax or governmental charge that may be imposed with respect to any applicable withholding or the issuance or delivery of the Warrant Shares to any Person other than the Holder, and no issuance or delivery shall be made unless and until the Person requesting issuance has paid to the Company the amount of the tax, or has established to the satisfaction of the Company that the tax has been paid.

 

(g) Conditional Exercise. Notwithstanding any other provision hereof, if an exercise of any portion of this Warrant is to be made in connection with a public offering or a sale of the Company (pursuant to a merger, sale of stock, or otherwise), such exercise may at the election of the Holder be conditioned upon the consummation of such transaction, in which case such exercise shall not be deemed to be effective until immediately prior to the consummation of such transaction.

 

  

9

  

 

(h) Reservation of Shares. During the Exercise Period, the Company shall at all times reserve and keep available out of its authorized but unissued Common Stock or other securities constituting Warrant Shares, solely for the purpose of issuance upon the exercise of this Warrant, the maximum number of Warrant Shares issuable upon the exercise of this Warrant, and the par value per Warrant Share shall at all times be less than or equal to the applicable Exercise Price. The Company shall not increase the par value of any Warrant Shares receivable upon the exercise of this Warrant above the Exercise Price then in effect, and shall take all such actions as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and non-assessable shares of Common Stock upon the exercise of this Warrant.

 

(i) Cashless Exercise. Notwithstanding any provisions herein to the contrary, in lieu of exercising this Warrant in the manner set forth in Sections 3(a) and 3(b), the Holder may elect to exercise this Warrant, or a portion hereof, and to pay for the Warrant Shares by way of cashless exercise. If the Holder wishes to effect a cashless exercise, the Holder shall surrender this Warrant, with an Exercise Agreement duly completed (including specifying the number of Warrant Shares to be purchased) and executed, at the principal office of the Company, or at such other office or agency as the Company may designate in writing prior to the date of such exercise, in which event the Company shall issue to the Holder the number of Warrant Shares computed according to the following equation:

 

	X=	Y * (A-B)
	A

 

X = the number of Warrant Shares to be issued to the Holder.

 

Y = the Warrant Shares purchasable under this Warrant or, if only a portion of the Warrant is being exercised, the portion of the Warrant Shares being exercised.

 

A = the Fair Market Value (defined below) of one share of Common Stock (on the exercise date).

 

B = the Exercise Price (as adjusted pursuant to the provisions of this Warrant).

 

For purposes of this Section 3(i), the “Fair Market Value” of one share of Common Stock on the exercise date shall have one of the following meanings:

 

i. if the Company’s Common Stock is traded on a national securities exchange, the Fair Market Value shall be deemed to be the average of the Closing Prices over a five trading day period ending on the exercise date. For the purposes of this Warrant, “Closing Price” means the final price at which one share of Common Stock is traded during any trading day; or

 

ii. if the Company’s Common Stock is actively traded over-the-counter, the Fair Market Value shall be deemed to be the average of the closing sales price over the thirty (30) day period ending three (3) days before the date of exercise; or

 

iii. if neither (1) nor (2) is applicable, the Fair Market Value shall be at the highest price per share which the Company could obtain on the date of exercise from a willing buyer (not a current employee or director) for shares of Common Stock sold by the Company, from authorized but unissued shares, as determined in good faith by the Company’s Board of Directors.

 

  

10

  

 

For illustration purposes only, if this Warrant entitles the Holder the right to purchase 100,000 Warrant Shares and the Holder were to exercise this Warrant for 50,000 Warrant Shares at a time when the Fair Market Value of each share of Common Stock was $2.00 on the Exercise Date, the cashless exercise calculation would be as follows:

 

X = 50,000 ($2.00-$1.00)

$2.00

X = 25,000

Therefore, the number of Warrant Shares to be issued to the Holder after giving effect to the cashless exercise would be 25,000 Warrant Shares and the Company would issue the Holder a new Warrant to purchase 50,000 Warrant Shares, reflecting the portion of this Warrant not exercised by the Holder.

 

4. Adjustment to Exercise Price and Number of Warrant Shares. The Exercise Price and the number of Warrant Shares issuable upon exercise of this Warrant shall be subject to adjustment from time to time as provided in this Section 4.

 

(a) Adjustment to Exercise Price and Warrant Shares Upon Subdivision or Combination of Common Stock. If the Company shall, at any time or from time to time after the Senior Loan Date, subdivide (by any stock split, recapitalization or otherwise) its outstanding shares of Common Stock into a greater number of shares, the Exercise Price in effect immediately prior to the subdivision shall be proportionately reduced and the number of Warrant Shares issuable upon exercise of this Warrant shall be proportionately increased. If the Company at any time combines (by combination, reverse stock split or otherwise) its outstanding shares of Common Stock into a smaller number of shares, the Exercise Price in effect immediately prior to the combination shall be proportionately increased and the number of Warrant Shares issuable upon exercise of this Warrant shall be proportionately decreased. Any adjustment under this Section 4(a) shall become effective at the close of business on the date the dividend, subdivision or combination becomes effective. If the conversion price per share with respect to the Senior Loan Note is reduced below 50 cents per share (after adjustments in the Senior Loan Note for subdivisions or combinations in any of the categories outlined above in this Section 4(a) or due to the weighted average anti-dilution adjustments), then the Exercise Price shall be adjusted to the same price per share as is applicable to the Senior Loan Note.

 

(b) Merger Sale, Reclassification, Etc. In case of any (i) consolidation or merger (including a merger in which the Company is the surviving entity), (ii) sale or other disposition of all or substantially all of the Company’s assets or distribution of property to shareholders (other than distributions payable out of earnings or retained earnings), or reclassification, change or conversion of the outstanding securities of the Company or of any reorganization of the Company (or any other corporation the stock or securities of which are at the time receivable upon the exercise of this Warrant) or any similar corporate reorganization on or after the date hereof, then and in each such case the holder of this Warrant, upon the exercise hereof at any time thereafter shall be entitled to receive, in lieu of the stock or other securities and property receivable upon the exercise hereof prior to such consolidation, merger, sale or other disposition, reclassification, change, conversion or reorganization, the stock or other securities or property to which such holder would have been entitled upon such consummation if such holder had exercised this Warrant immediately prior thereto, all subject to further adjustment as provided in Section 4(a) or 4(b); and in each such case, the terms of this Section 4 shall be applicable to the shares of stock or other securities properly receivable upon the exercise of this Warrant after such consolidation, merger, sale or other disposition, reclassification, change, conversion or reorganization.

 

  

11

  

 

(c) Weighted Average Adjustment. If the Company Issues (hereinafter defined) Additional Common Shares (defined hereunder) after the date of the Warrant and the consideration per Additional Common Share is less than the Exercise Price in effect immediately before such Issuance (a “Diluting Issuance”), other than with respect to Excluded Securities (hereinafter defined), the Exercise Price in effect immediately before such Diluting Issue shall be reduced, concurrently with such Diluting Issuance, to a price (calculated to the nearest hundredth of a cent) determined by multiplying the Exercise Price by a fraction:

 

i. the numerator of which is the number of shares of Common Stock outstanding immediately before such Diluting Issuance plus the number shares of Common Stock that the aggregate consideration received by Company for the Additional Common Shares would purchase at the Exercise Price in effect immediately before such Diluting Issuance, and

 

ii. the denominator of which is the number of shares of Common Stock outstanding immediately before such Diluting Issuance plus the number of such Additional Common Shares.

 

For purposes of clarity, the exercise shall be determined in accordance with the following formula:

EP2 = EP1 x (A + B) / (A + C)

For purposes of the foregoing formula, the following definitions shall apply:

i. “EP2” shall mean the Exercise Price in effect immediately after such Diluting Issuance of Additional Common Shares;

 

ii. “EP1” shall mean the Exercise Price in effect immediately prior to such Diluting Issuance of Additional Common Shares;

 

iii. “A” shall mean the number of shares of Common Stock outstanding and deemed outstanding immediately prior to such Diluting Issuance of Additional Common Shares;

 

iv. “B” shall mean the number of shares of Common Stock that would have been issued if such Additional Common Shares had been issued at a price per share equal to EP1 (determined by dividing the aggregate consideration received or receivable by the Company in respect of such issue by EP1); and

 

v. “C” shall mean the number of such Additional Common Shares issued in such transaction.

 

  

12

  

 

As used herein the following terms shall have the following meanings:

 

i. “Issue” means to grant, issue or sell Additional Common Shares, whichever of the foregoing is the first to occur.

 

ii. “Additional Common Shares” means all Common Stock (including reissued shares) Issued after the date of the Warrant during the term of the Warrant.

 

iii. “Excluded Securities” means any of the following: (a) shares of Common Stock issued pursuant to any employee benefit plan which has been approved by the Board of Directors of the Company, pursuant to which the Company’s securities may be issued to any employee, officer, director or consultant for services provided to the Company and (b) issuances of Common Stock upon exercise or conversion of currently outstanding derivative securities.

 

(d) Certificate as to Adjustment.

 

i. As promptly as reasonably practicable following any adjustment of the Exercise Price, but in any event not later than 10 Business Days thereafter, the Company shall furnish to the Holder a certificate of an executive officer setting forth in reasonable detail such adjustment and the facts upon which it is based and certifying the calculation thereof.

 

ii. As promptly as reasonably practicable following the receipt by the Company of a written request by the Holder, but in any event not later than 10 Business Days thereafter, the Company shall furnish to the Holder a certificate of an executive officer certifying the Exercise Price then in effect and the number of Warrant Shares or the amount, if any, of other shares of stock, securities or assets then issuable upon exercise of the Warrant.

 

(e) Notices. In the event:

 

i. that the Company shall take a record of the holders of its Common Stock (or other capital stock or securities at the time issuable upon exercise of the Warrant) for the purpose of entitling or enabling them to receive any dividend or other distribution, to vote at a meeting (or by written consent), to receive any right to subscribe for or purchase any shares of capital stock of any class or any other securities, or to receive any other security; or

 

ii. of any capital reorganization of the Company, any reclassification of the Common Stock of the Company, any consolidation or merger of the Company with or into another Person, or sale of all or substantially all of the Company’s assets to another Person; or the Company;

 

iii. of the voluntary or involuntary dissolution, liquidation or winding-up of the Company;

 

  

13

  

 

then, and in each such case, the Company shall send or cause to be sent to the Holder at least 20 days prior to the applicable record date or the applicable expected effective date, as the case may be, for the event, a written notice specifying, as the case may be, (A) the record date for the dividend, distribution, meeting or consent or other right or action, and a description of the dividend, distribution or other right or action to be taken at such meeting or by written consent, or (B) the effective date on which the reorganization, reclassification, consolidation, merger, sale, dissolution, liquidation or winding-up is proposed to take place, and the date, if any is to be fixed, as of which the books of the Company shall close or a record shall be taken with respect to which the holders of record of Common Stock (or such other capital stock or securities at the time issuable upon exercise of the Warrant) shall be entitled to exchange their shares of Common Stock (or such other capital stock or securities) for securities or other property deliverable upon the reorganization, reclassification, consolidation, merger, sale, dissolution, liquidation or winding-up, and the amount per share and character of the exchange applicable to the Warrant and the Warrant Shares.

 

5. Transfer of Warrant. Subject to the transfer conditions referred to in the legend endorsed hereon this Warrant and all rights hereunder are transferable in whole or in part by the Holder without charge to the Holder, upon surrender of this Warrant to the Company at its then principal executive offices with a properly completed and duly executed Assignment in the form attached hereto as Exhibit B, together with funds sufficient to pay any transfer taxes described in Section 3(f)(iv) in connection with the making of such transfer. Upon such compliance, surrender and delivery and, if required, such payment, the Company shall execute and deliver a new Warrant or Warrants in the name of the assignee or assignees and in the denominations specified in such instrument of assignment, and shall issue to the assignor a new Warrant evidencing the portion of this Warrant, if any, not so assigned and this Warrant shall promptly be cancelled.

 

6. Holder Not Deemed a Stockholder; Limitations on Liability. Except as otherwise specifically provided herein, prior to the issuance to the Holder of the Warrant Shares to which the Holder is then entitled to receive upon the due exercise of this Warrant, the Holder shall not be entitled to vote or receive dividends or be deemed the holder of shares of capital stock of the Company for any purpose, nor shall anything contained in this Warrant be construed to confer upon the Holder, as such, any of the rights of a stockholder of the Company or any right to vote, give or withhold consent to any corporate action (whether any reorganization, issue of stock, reclassification of stock, consolidation, merger, conveyance or otherwise), receive notice of meetings, receive dividends or subscription rights, or otherwise. In addition, nothing contained in this Warrant shall be construed as imposing any liabilities on the Holder to purchase any securities (upon exercise of this Warrant or otherwise) or as a stockholder of the Company, whether such liabilities are asserted by the Company or by creditors of the Company

 

7. Replacement on Loss; Division and Combination.

 

(a) Replacement of Warrant on Loss. Upon receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant and upon delivery of an indemnity reasonably satisfactory to it (it being understood that a written indemnification agreement or affidavit of loss of the Holder shall be a sufficient indemnity) and, in case of mutilation, upon surrender of the Warrant for cancellation to the Company, the Company shall, at its own expense, execute and deliver to the Holder, in lieu hereof, a new Warrant of like tenor and exercisable for an equivalent number of Warrant Shares as the Warrant lost, stolen, mutilated or destroyed; provided, that, in the case of mutilation, no indemnity shall be required if this Warrant in identifiable form is surrendered to the Company for cancellation.

 

(b) Division and Combination of Warrant. Subject to compliance with the applicable provisions of this Warrant as to any transfer or other assignment which may be involved in the division or combination, this Warrant may be divided, or following any division of this Warrant, subsequently combined with other Warrants, upon the surrender of this Warrant or Warrants to the Company at its then principal executive offices, together with a written notice specifying the names and denominations in which new Warrants are to be issued, signed by the respective Holders or their agents or attorneys. Subject to compliance with the applicable provisions of this Warrant as to any transfer or assignment which may be involved in the division or combination, the Company shall, at its own expense, execute and deliver a new Warrant or Warrants in exchange for the Warrant or Warrants so surrendered in accordance with the notice. The new Warrant or Warrants shall be of like tenor to the surrendered Warrant or Warrants and shall be exercisable in the aggregate for an equivalent number of Warrant Shares as the Warrant or Warrants so surrendered in accordance with such notice.

 

  

14

  

 

8. Compliance with the Securities Act.

 

(a) Agreement to Comply with the Securities Act; Legend. The Holder, by acceptance of this Warrant, agrees to comply in all respects with the provisions of this Section 8 and the restrictive legend requirements set forth on the face of this Warrant and further agrees that the Holder shall not offer, sell or otherwise dispose of this Warrant or any Warrant Shares to be issued upon exercise hereof except under circumstances that will not result in a violation of the Securities Act of 1933, as amended (the “Securities Act”). This Warrant and all Warrant Shares issued upon exercise of this Warrant (unless registered under the Securities Act) shall be stamped or imprinted with a legend in substantially the following form (in addition to any legend required by state securities laws):

 

“THIS WARRANT AND THE COMMON STOCK ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED UNLESS REGISTERED UNDER THE SECURITIES ACT AND ANY APPLICABLE STATE OR FOREIGN SECURITIES LAWS, OR UNLESS AN OPINION OF COUNSEL HAS BEEN RENDERED TO THE COMPANY, IN FORM AND SUBSTANCE SATISFACTORY TO THE COMPANY AND ITS COUNSEL, TO THE EFFECT THAT SUCH REGISTRATION IS NOT REQUIRED.”

 

(b) Representations of the Holder. In connection with the issuance of this Warrant, the Holder specifically represents, as of the date hereof, to the Company by acceptance of this Warrant as follows:

 

i. The Holder is an “accredited investor” as defined by Rule 501 under the Securities Act, and has such knowledge and experience in financial and business matters that he/she/it is capable of evaluating the merits and risks of an investment in this Warrant and the Warrant Shares to be issued upon exercise hereof and of making an informed investment decision, and has the capacity to protect the Holder’s own interests.

 

ii. The Holder understands and acknowledges that this Warrant and the Warrant Shares to be issued upon exercise hereof are “restricted securities” under the federal securities laws, have not been, and will not be, registered under the Securities Act or the securities laws of any state by reason of a specific exemption from the registration provisions of the Securities Act and the applicable state securities laws, the availability of which depends upon, among other things, the bona fide nature of the investment intent and the accuracy of the Holder’s representations as expressed herein.

 

iii. Holder acknowledges and understands that this Warrant and the Warrant Shares to be issued upon exercise hereof are being purchased for investment purposes and not with a view to distribution or resale, nor with the intention of selling, transferring or otherwise disposing of all or any part of this Warrant or the Warrant Shares to be issued upon exercise hereof for any particular price, or at any particular time, or upon the happening of any particular event or circumstances, except selling, transferring, or disposing of this Warrant or the Warrant Shares to be issued upon exercise hereof made in full compliance with all applicable provisions of the Securities Act, the rules and regulations promulgated by the Securities and Exchange Commission thereunder, and applicable state securities laws; and that this Warrant and the Warrant Shares to be issued upon exercise hereof are not a liquid investment. The Company has no obligation or intention to register this Warrant or the Warrant Shares to be issued upon exercise hereof for resale at this time, nor has the Company made any representations, warranties, or covenants regarding the registration of this Warrant and the Warrant Shares to be issued upon exercise hereof.

 

  

15

  

 

iv. The Holder acknowledges that this Warrant and the Warrant Shares to be issued upon exercise hereof must be held indefinitely unless subsequently registered under the Securities Act or unless an exemption from such registration is available. The Holder is aware of the provisions of Rule 144 promulgated under the Securities Act which permit investors who have satisfied a certain holding period such securities purchased in a private placement. The Holder acknowledges that the Holder is not relying on the Company in any way to satisfy the conditions precedent for resale of securities pursuant to Rule 144 under the Securities Act.

 

v. The Holder acknowledges that the Holder has had the opportunity to ask questions of, and receive answers from the Company or any person acting on its behalf concerning the Company and its business and to obtain any additional information, to the extent possessed by the Company (or to the extent it could have been acquired by the Company without unreasonable effort or expense) necessary to verify the accuracy of the information received by the Holder. In connection therewith, the Holder acknowledges that the Holder has had the opportunity to discuss the Company’s business, management and financial affairs with the Company’s management or any person acting on its behalf. The Holder has received and reviewed all the information, both written and oral, that it desires. Without limiting the generality of the foregoing, the Holder has been furnished with or has had the opportunity to acquire, and to review, (i) copies of the Company’s most recent Annual Report on Form 10-K filed with the SEC and any Form 10-Q and Form 8-K filed thereafter (the “SEC Filings”), and other publicly available documents, and (ii) all information, both written and oral, that it desires with respect to the Company’s business, management, financial affairs and prospects. In determining whether to make this investment, the Holder has relied solely on the Subscription Agreement, the SEC Filings, the Convertible Note and the Holder’s own knowledge and understanding of the Company and its business based upon the Holder’s own due diligence investigations and the information furnished pursuant to this paragraph. Except as set forth herein, the Subscription Agreement and the Convertible Note, the Holder understands that no person has been authorized to give any information or to make any representations which were not furnished pursuant to this paragraph and the Holder has not relied on any other representations or information.

 

vi. The Holder has all requisite legal and other power and authority to execute and deliver this Warrant and to carry out and perform the Holder’s obligations under the terms of this Warrant. This Warrant constitutes a valid and legally binding obligation of the Holder, enforceable in accordance with its terms, and subject to laws of general application relating to bankruptcy, insolvency and the relief of debtors and rules of law governing specific performance, injunctive relief or other general principals of equity, whether such enforcement is considered in a proceeding in equity or law.

 

vii. The Holder has not, and will not, incur, directly or indirectly, as a result of any action taken by the Holder, any liability for brokerage or finders’ fees or agents’ commissions or any similar charges in connection with this Warrant.

 

viii. To the extent the Holder deems necessary, the Holder has reviewed with the Holder’s own tax advisors the federal, state, local and foreign tax consequences of this investment and the transactions contemplated by this Warrant. The Holder relies solely on such advisors and not on any statements or representations of the Company or any of its agents, other than the statements or representations set forth in the Subscription Agreement, the SEC Filings, herein and in the Convertible Note. The Holder understands that the Holder (and not the Company) shall be responsible for the Holder’s own tax liability that may arise as a result of this investment or the transactions contemplated by this Warrant.

 

  

16

  

 

ix. There are no actions, suits, proceedings or investigations pending against the Holder or the Holder’s properties before any court or governmental agency (nor, to the Holder’s knowledge, is there any threat thereof) which would impair in any way the Holder’s ability to enter into and fully perform the Holder’s commitments and obligations under this Warrant or the transactions contemplated hereby.

 

x. The execution, delivery and performance of and compliance with this Warrant, and the issuance of the Securities will not result in any material violation of, or conflict with, or constitute a material default under, any of Holder’s articles of incorporation, bylaws or other; governing documents, if applicable, or any of the Holder’s material agreements nor result in the creation of any mortgage, pledge, lien, encumbrance or charge against any of the assets or properties of the Holder or the Securities.

 

xi. Holder acknowledges that this Warrant and the Warrant Shares to be issued upon exercise hereof are speculative and involve a high degree of risk and that the Holder can bear the economic risk of the purchase of this Warrant and the Warrant Shares to be issued upon exercise hereof, including a total loss of his/her/its investment. Holder acknowledges that he/she/it has carefully reviewed and considered the risk factors contained in the Subscription Agreement, as well as the factors described under “Risk Factors” in the Company’s SEC Filings.

 

xii. The Holder recognizes that no federal, state or foreign agency has recommended or endorsed the purchase of this Warrant and the Warrant Shares to be issued upon exercise hereof.

 

xiii. Holder understands that any and all certificates representing this Warrant and the Warrant Shares to be issued upon exercise hereof and any and all securities issued in replacement thereof or in exchange therefor shall bear the legend, or one substantially similar thereto, described in Section 8(a), which Holder has read and understands.

 

xiv. In addition, the certificates representing this Warrant and the Warrant Shares to be issued upon exercise hereof, and any and all securities issued in replacement thereof or in exchange therefor, shall bear such legend as may be required by the securities laws of the jurisdiction in which the Holder resides.

 

xv. Holder further represents that the address set forth below is his/her principal residence (or, if the Holder is a corporation, partnership or other entity, the address of its principal place of business).

 

xvi. The Holder represents that Holder has not received any general solicitation or general advertising regarding the purchase of this Warrant and the Warrant Shares to be issued upon exercise hereof.

 

xvii. The Holder further represents that the social security number or taxpayer identification set forth below is correct, and the Holder is not subject to backup withholding because (i) the Holder has not been notified that he/she/it is subject to backup withholding as a result of a failure to report all interest and dividends, or (ii) the Internal Revenue Service has notified the Holder that he/she/it is no longer subject to backup withholding.

 

  

17

  

 

9. Warrant Register. The Company shall keep and properly maintain at its principal executive offices books for the registration of the Warrant and any transfers thereof. The Company may deem and treat the Person in whose name the Warrant is registered on such register as the Holder thereof for all purposes, and the Company shall not be affected by any notice to the contrary, except any assignment, division, combination or other transfer of the Warrant effected in accordance with the provisions of this Warrant.

 

10. Notices. All notices, requests, consents, claims, demands, waivers and other communications hereunder shall be in writing and shall be deemed to have been given: (a) when delivered by hand (with written confirmation of receipt); (b) when received by the addressee if sent by a nationally recognized overnight courier (receipt requested); (c) on the date sent by facsimile or e-mail of a PDF document (with confirmation of transmission) if sent during normal business hours of the recipient, and on the next Business Day if sent after normal business hours of the recipient (with confirmation of transmission); or (d) on the third day after the date mailed, by certified or registered mail, return receipt requested, postage prepaid. Such communications must be sent to the respective parties at the addresses indicated below (or at such other address for a party as shall be specified in a notice given in accordance with this Section 10).

 

	
If to the Company:

	
Midwest Energy Emissions Corp.

500 West Wilson Bridge Road

Suite 140

Worthington, Ohio 43085

Phone: 614-505-6115

Fax: 614-505-7377

Email: rgross@midwestemissions.com

Attention: Chief Financial Officer

	 	 
	 	[HOLDER ADDRESS]
	If to the Holder:	 
	 	
Facsimile: [FAX NUMBER]

E-mail: [E-MAIL ADDRESS]

Attention: [NAME (AND TITLE, IF APPLICABLE) OF PERSON]

  

18

  

 

11. Cumulative Remedies. Except to the extent expressly provided in Section 6 to the contrary, the rights and remedies provided in this Warrant are cumulative and are not exclusive of, and are in addition to and not in substitution for, any other rights or remedies available at law, in equity or otherwise.

 

12. Equitable Relief. Each of the Company and the Holder acknowledges that a breach or threatened breach by such party of any of its obligations under this Warrant would give rise to irreparable harm to the other party hereto for which monetary damages would not be an adequate remedy and hereby agrees that in the event of a breach or a threatened breach by party of any obligation, the other party hereto shall, in addition to any and all other rights and remedies that may be available to it in respect of breach, be entitled to equitable relief, including a restraining order, an injunction, specific performance and any other relief that may be available from a court of competent jurisdiction.

 

13. Entire Agreement. This Warrant, together with the Convertible Note and the Subscription Agreement, constitutes the sole and entire agreement of the parties to this Warrant with respect to the subject matter contained herein, and supersedes all prior and contemporaneous understandings and agreements, both written and oral, with respect to such subject matter. In the event of any inconsistency between the statements in the body of this Warrant, the Convertible Note and the Subscription Agreement, the statements in the body of this Warrant shall control.

 

14. Successor and Assigns. The Company may not assign this Agreement or its rights and obligations hereunder without the prior written consent of the Holder. This Warrant and the rights evidenced hereby shall be binding upon and shall inure to the benefit of the parties hereto and the successors of the Company and the successors and permitted assigns of the Holder. Such successors and/or permitted assigns of the Holder shall be deemed to be a Holder for all purposes hereunder.

 

15. No Third-Party Beneficiaries. This Warrant is for the sole benefit of the Company and the Holder and their respective successors and, in the case of the Holder, permitted assigns. Nothing herein, express or implied, is intended to or shall confer upon any other Person any legal or equitable right, benefit or remedy of any nature whatsoever, under or by reason of this Warrant.

 

16. Headings. The headings in this Warrant are for reference only and shall not affect the interpretation of this Warrant.

 

17. Amendment and Modification; Waiver. Except as otherwise provided herein, this Warrant may only be amended, modified or supplemented by an agreement in writing signed by each party hereto. No waiver by the Company or the Holder of any of the provisions hereof shall be effective unless explicitly set forth in writing and signed by the party so waiving. No waiver by any party shall operate or be construed as a waiver in respect of any failure, breach or default not expressly identified by such written waiver, whether of a similar or different character, and whether occurring before or after that waiver. No failure to exercise, or delay in exercising, any rights, remedy, power or privilege arising from this Warrant shall operate or be construed as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege.

 

  

19

  

 

18. Severability. If any term or provision of this Warrant is invalid, illegal or unenforceable in any jurisdiction, such invalidity, illegality or unenforceability shall not affect any other term or provision of this Warrant or invalidate or render unenforceable such term or provision in any other jurisdiction.

 

19. Governing Law. This Warrant shall be governed by and construed in accordance with the internal laws of the State of Delaware without giving effect to any choice or conflict of law provision or rule (whether of the State of Delaware or any other jurisdiction) that would cause the application of laws of any jurisdiction other than those of the State of Delaware.

 

20. Submission to Jurisdiction. Any legal suit, action or proceeding arising out of or based upon this Warrant or the transactions contemplated hereby may be instituted in the federal courts of the United States of America or the courts of the State of Delaware in each case located in the city of Wilmington, and each party irrevocably submits to the exclusive jurisdiction of such courts in any such suit, action or proceeding. Service of process, summons, notice or other document by certified or registered mail to such party’s address set forth herein shall be effective service of process for any suit, action or other proceeding brought in any such court. The parties irrevocably and unconditionally waive any objection to the laying of venue of any suit, action or any proceeding in such courts and irrevocably waive and agree not to plead or claim in any such court that any such suit, action or proceeding brought in any such court has been brought in an inconvenient forum.

 

21. Waiver of Jury Trial. Each party acknowledges and agrees that any controversy which may arise under this Warrant is likely to involve complicated and difficult issues and, therefore, each such party irrevocably and unconditionally waives any right it may have to a trial by jury in respect of any legal action arising out of or relating to this Warrant or the transactions contemplated hereby.

 

22. Counterparts. This Warrant may be executed in counterparts, each of which shall be deemed an original, but all of which together shall be deemed to be one and the same agreement. A signed copy of this Warrant delivered by facsimile, e-mail or other means of electronic transmission shall be deemed to have the same legal effect as delivery of an original signed copy of this Warrant.

 

23. No Strict Construction. This Warrant shall be construed without regard to any presumption or rule requiring construction or interpretation against the party drafting an instrument or causing any instrument to be drafted.

 

[SIGNATURE PAGE FOLLOWS]

 

  

20

  

 

The Company has duly executed this Warrant on the Original Issue Date.

 

 

	 	 	
MIDWEST ENERGY EMISSIONS CORP.

	 
	 	 	 	 
	 	
 

	 	By:	
 

	 
	 	 	 	Name:	 	 
	 	 	Title:	 	 
	 	 	 	 	 
	Accepted and agreed,	 	 	 	 
	 	 	 	 	 	 
	[HOLDER NAME]	 	 	 	 
	 	 	 	 	 
	By:	 	 	 	 	 
	Name:	 	 	 	 	 
	Title:	 	 	 	 	 
	SSN or EIN: ____________________________________________	 	 	 	 

 

  

21

  

EXHIBIT A:

EXERCISE AGREEMENT

 

(to be signed only on exercise of Warrant)

 

TO: MIDWEST ENERGY EMISSIONS CORP.

 

The undersigned, pursuant to the provisions set forth in the attached Warrant (No._______), hereby irrevocably elects to purchase _______ shares of the Common Stock covered by such Warrant.

 

The undersigned herewith makes payment of the full purchase price for the shares at the price per share provided for in the Warrant of $0.50 per share, for an Aggregate Exercise Price of $______, by delivery to the Company of a certified or official bank check payable to the order of the Company or by wire transfer of immediately available funds to an account designated in writing by the Company, in the amount of the Aggregate Exercise Price (if cashless exercise, insert “cashless”).

 

The undersigned requests that the certificates for such shares be issued in the name of, and delivered to ________________________________ whose address is ______________________________.

 

 

	 	 	 	 
	 	 	
(Signature must conform to name of holder as

specified on the face of the Warrant)

	 
	 	 	 	 
	 	 	 	 
	 	 	(Address)	 

 

  

22

  

 

EXHIBIT B:

 

ASSIGNMENT

 

(To be signed only on transfer of Warrant)

 

For value received, the undersigned hereby sells, assigns, and transfers unto the person(s) named below under the heading “Transferees” the right represented by the within Warrant to purchase the number of shares of Common Stock of MIDWEST ENERGY EMISSIONS CORP. to which the within Warrant relates specified under the headings “Percentage Transferred” and “Number Transferred,” respectively, opposite the name(s) of such person(s) and appoints each such person Attorney to transfer its respective right on the books of MIDWEST ENERGY EMISSIONS CORP. with full power of substitution in the premises.

 

	
Transferees

	
Number Transferred

	  	  
	  	  
	  	  

	Dated: ____________________, ______	 	 	 
	 	 	
Signature must conform to name of holder as 

specified on the face of the Warrant)

	 
	Signed in the presence of:	 	 	 
	 	 	 	 
	 	 	 	 
	(Name)	 	 	 
	 	 	 	 
	 	 	(Address)	 
	 	 	 	 
	ACCEPTED AND AGREED:	 	 	 
	[TRANSFEREE]	 	 	 
	 	 	 	 
	 	 	 	 
	(Name)	 	 	 
	 	 	(Address)	 

23

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00234-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00234-of-00352.parquet"}]]