-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, OwNYnIKGCV7wXAcDpLoKRQ4nRu5+qKTJ7+FKSC/AQZWDBJcvKbk4jfIKs+Ga2qdT kLLZ7qgQEdWAZT7u/JJViw== 0000905718-02-000390.txt : 20021118 0000905718-02-000390.hdr.sgml : 20021118 20021118164754 ACCESSION NUMBER: 0000905718-02-000390 CONFORMED SUBMISSION TYPE: SC 13D PUBLIC DOCUMENT COUNT: 3 FILED AS OF DATE: 20021118 SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: WORLDWATER CORP CENTRAL INDEX KEY: 0000811271 STANDARD INDUSTRIAL CLASSIFICATION: MALT BEVERAGES [2082] IRS NUMBER: 330123045 STATE OF INCORPORATION: NV FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D SEC ACT: 1934 Act SEC FILE NUMBER: 005-40207 FILM NUMBER: 02831655 BUSINESS ADDRESS: STREET 1: PENNINGTON BUSINESS PARK STREET 2: 55 ROUTE 31 SOUTH CITY: PENNINGTON STATE: NJ ZIP: 08534 BUSINESS PHONE: 6098180700 MAIL ADDRESS: STREET 1: PENNINGTON BUSINESS PARK STREET 2: 55 ROUTE 31 SOUTH CITY: PENNINGTON STATE: NJ ZIP: 08534 FORMER COMPANY: FORMER CONFORMED NAME: GOLDEN BEVERAGE COMPANY DATE OF NAME CHANGE: 19920703 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: TOLEDANO UDI CENTRAL INDEX KEY: 0001025683 FILING VALUES: FORM TYPE: SC 13D BUSINESS ADDRESS: STREET 1: ANDROMEDA ENTERPRISES INC STREET 2: 545 MADISON AVE 8TH FLOOR CITY: NEW YORK STATE: NY ZIP: 10022 BUSINESS PHONE: 2127506410 MAIL ADDRESS: STREET 1: ANDROMEDA ENTERPRISE INC STREET 2: 545 MADISON AVE CITY: NEW YORK STATE: NY ZIP: 10022 SC 13D 1 nov13d.txt FOR MILLENIUM SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 SCHEDULE l3D Under the Securities Exchange Act of 1934 (Amendment No. )* WORLDWATER CORP. - -------------------------------------------------------------------------------- (Name of Issuer) Common Stock, par value $0.001 per share - -------------------------------------------------------------------------------- (Title of Class of Securities) 98155N 10 6 - -------------------------------------------------------------------------------- (CUSIP Number) Udi Toledano with a copy to: c/o Millennium 3 Opportunity Fund, LLC Edward M. Zimmerman, Esq. 4 Becker Farm Road Lowenstein Sandler PC Roseland, New Jersey 07068 65 Livingston Avenue (973) 992-3200 Roseland, New Jersey 07068 (973) 597-2568 - -------------------------------------------------------------------------------- (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications) November 8, 2002 - -------------------------------------------------------------------------------- (Date of Event which Requires Filing of this Statement) If the filing person has previously filed a statement on Schedule l3G to report the acquisition which is the subject of this Schedule 13D, and is filing this schedule because of Rule 13d-1(e), (f) or (g), check the following box [ ]. Note: Schedules filed in paper format shall include a signed original and five copies of the schedule, including all exhibits. See Rule l3d-7(b) for other parties to whom copies are to be sent. *The remainder of this cover page shall be filled out for a reporting person's initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosures provided in a prior cover page. The information required on the remainder of this cover page shall not be deemed to be "filed" for the purpose of Section 18 of the Securities Exchange Act of 1934 ("Act") or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes). - -------------------------------------------------------------------------------- CUSIP NO. 98155N 10 6 - -------------------------------------------------------------------------------- 1) Names of Reporting Persons. I.R.S. Identification Nos. of Above Persons (entities only): Udi Toledano - -------------------------------------------------------------------------------- 2) Check the Appropriate Box if a Member of a Group (See Instructions): (a) (b) - -------------------------------------------------------------------------------- 3) SEC Use Only - -------------------------------------------------------------------------------- 4) Source of Funds (See Instructions):WC - -------------------------------------------------------------------------------- 5) Check if Disclosure of Legal Proceedings is Required Pursuant to Items 2(d) or 2(e): Not Applicable - -------------------------------------------------------------------------------- 6) Citizenship or Place of Organization: United States of America - -------------------------------------------------------------------------------- Number of 7) Sole Voting Power: 0 Shares Beneficially 8) Shared Voting Power: 2,976,215* Owned by Each Reporting 9) Sole Dispositive Power: 0 Person With: 10) Shared Dispositive Power:2,976,215* - -------------------------------------------------------------------------------- 11) Aggregate Amount Beneficially Owned by Each Reporting Person: 2,976,215** - -------------------------------------------------------------------------------- 12) Check if the Aggregate Amount in Row (11) Excludes Certain Shares (See Instructions): Not Applicable - -------------------------------------------------------------------------------- 13) Percent of Class Represented by Amount in Row (11): 5.7%** - -------------------------------------------------------------------------------- 14) Type of Reporting Person (See Instructions): IN - -------------------------------------------------------------------------------- *Thisis a joint filing by Udi Toledano ("Toledano") and Fred S. Fraenkel ("Fraenkel"). Toledano and Fraenkel share voting and investment control over all securities owned by Millennium 3 Opportunity Fund, LLC, a Delaware limited liability company (the "Fund"). The interest of each of Toledano and Fraenkel in the securities described in this Schedule is limited to the extent of his pecuniary interest in the Fund. - -------------------------------------------------------------------------------- **Consists of (i) 1,190,500 shares of Common Stock issuable upon exercise of warrants owned by the Fund and exercisable within 60 days and (ii) 1,785,715 shares of Common Stock issuable upon conversion of the 10% Convertible Notes Due 2005 owned by the Fund and convertible within 60 days. - -------------------------------------------------------------------------------- CUSIP NO. 98155N 10 6 - -------------------------------------------------------------------------------- 1) Names of Reporting Persons. I.R.S. Identification Nos. of Above Persons (entities only): Fred S. Fraenkel - -------------------------------------------------------------------------------- 2) Check the Appropriate Box if a Member of a Group (See Instructions): (a) (b) - -------------------------------------------------------------------------------- 3) SEC Use Only - -------------------------------------------------------------------------------- 4) Source of Funds (See Instructions):WC - -------------------------------------------------------------------------------- 5) Check if Disclosure of Legal Proceedings is Required Pursuant to Items 2(d) or 2(e): Not Applicable - -------------------------------------------------------------------------------- 6) Citizenship or Place of Organization: United States of America - -------------------------------------------------------------------------------- Number of 7) Sole Voting Power: 0 Shares Beneficially 8) Shared Voting Power: 2,976,215* Owned by Each Reporting 9) Sole Dispositive Power: 0 Person With: 10) Shared Dispositive Power: 2,976,215* - -------------------------------------------------------------------------------- 11) Aggregate Amount Beneficially Owned by Each Reporting Person: 2,976,215** - -------------------------------------------------------------------------------- 12) Check if the Aggregate Amount in Row (11) Excludes Certain Shares (See Instructions): Not Applicable - -------------------------------------------------------------------------------- 13) Percent of Class Represented by Amount in Row (11): 5.7%** - -------------------------------------------------------------------------------- 14) Type of Reporting Person (See Instructions): IN - -------------------------------------------------------------------------------- *This is a joint filing by Toledano and Fraenkel. Toledano and Fraenkel share voting and investment control over all securities owned by the Fund. The interest of each of Toledano and Fraenkel in the securities described in this Schedule is limited to the extent of his pecuniary interest in the Fund. - -------------------------------------------------------------------------------- **Consists of (i) 1,190,500 shares of Common Stock issuable upon exercise of warrants owned by the Fund and exercisable within 60 days and (ii) 1,785,715 shares of Common Stock issuable upon conversion of the 10% Convertible Notes Due 2005 owned by the Fund and convertible within 60 days. Item 1. Security and Issuer This statement relates to the common stock, $0.001 par value per share (the "Common Stock"), of WorldWater Corp. (the "Issuer"). The Issuer has principal executive offices located at Pennington Business Center, 55 Route 31 South, Pennington, New Jersey 08534. Item 2. Identity and Background (a) This statement is filed by Toledano and Fraenkel (collectively, the "Reporting Persons"). The Reporting Persons are the member managers of the Fund. (b) The business address of the Reporting Persons is 4 Becker Farm Road, Roseland, New Jersey 07068. (c) The principal occupation of the Reporting Persons is serving as the member managers of the Fund. The principal business of the Fund is to invest in equity and equity-related securities. (d) Neither of the Reporting Persons has, during the past five (5) years, been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors). (e) Neither of the Reporting Persons has, during the past five (5) years, been a party to any civil proceeding of a judicial or administrative body of competent jurisdiction and as a result of such proceeding was or is now subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, federal or state securities laws or finding any violation with respect to such laws. (f) The Reporting Persons are citizens of the United States of America. Item 3. Source and Amount of Funds or Other Consideration The securities referred to in this Schedule were purchased with working capital of the Fund. The aggregate amount of funds used in making the purchases reported on this Schedule 13D was $250,000. Item 4. Purpose of Transaction The securities referred to in this Schedule were acquired for investment purposes and not with the purpose or effect of changing or influencing control of the Issuer. The securities referred to in this Schedule were acquired in the ordinary course of business and the Fund is holding the securities for the benefit of its investors. Pursuant to the terms of a Securities Purchase Agreement dated as of November 8, 2002, between the Issuer and the Fund ("Purchase Agreement"), upon the satisfaction of certain conditions, the Fund will acquire an additional $250,000 in principal amount of 10% Convertible Notes Due 2005, which if fully converted would be convertible into 1,785,715 shares of Common Stock and additional Warrants, which if fully exercised, would be exercisable for 1,190,500 shares of Common Stock, and the Fund has the right to acquire up to an additional $2,000,000 in principal amount of 10% Convertible Notes Due 2005, which if fully converted would be convertible into 14,285,715 shares of Common Stock, and additional Warrants, which if fully exercised would be exercisable for 9,524,000 shares of Common Stock. If the full amount is invested, including amounts already invested, the Fund would own approximately 37.7% of the outstanding shares of Common Stock of the Issuer. Pursuant to the terms of an Investor Rights Agreement dated as of November 8, 2002 among the Issuer, certain existing stockholders of the Issuer, and the Fund (the "Investor Rights Agreement"), the Fund has right, but not the obligation, to designate one member of the Issuer's board of directors, who shall also serve on the Issuer's compensation committee and executive committee. The Reporting Persons have no present intention to designate a director pursuant to the Investor Rights Agreement. Except for the right to acquire additional notes and warrants as set forth above, the Reporting Persons have no present plans or proposals which relate to or would result in any of the transactions required to be described in Item 4 of Schedule 13D. Item 5. Interest in Securities of the Issuer Based upon the Company's Quarterly Report on Form 10-QSB for the quarterly period ended September 30, 2002, as of November 13, 2002, there were 49,271,302 shares of Common Stock issued and outstanding. As of the close of business on November 18, 2002, the Reporting Persons beneficially owned warrants to purchase 1,190,500 shares of Common Stock and 10% Convertible Notes Due 2005 convertible into 1,785,715 shares of Common Stock. This constitutes, assuming the exercise of all of the warrants and conversion of all of the notes beneficially owned by the Fund, an aggregate of approximately 5.7% of the outstanding shares of Common Stock of the Issuer. The Reporting Persons have shared power to vote and dispose of all such shares. Except as is set forth in this Schedule, There were no transactions in the Common Stock by the Reporting Persons in the past sixty days. Other than the Reporting Persons and persons invested in the Fund, no other person is known to have the right to receive or the power to direct the receipt of dividends from, or the proceeds from the sale of, the securities referred to in this Schedule. Item 6. Contracts, Arrangements, Understandings or Relationships with Respect to Securities of the Issuer Pursuant to the Investor Rights Agreement, certain stockholders of the Issuer have agreed with the Fund (i) to vote in favor of the election of the Fund's nominee, if any, to the Issuer's board of directors, (ii) to vote to remove a director nominated by the Fund, if any, at the request of the Fund, and (iii) in the case of the death, resignation, or removal of a director nominated by the Fund, if any, to vote to elect another individual designated by the Fund. Item 7. Material to be filed as exhibits 99.1 Joint Filing Agreement dated as of November 18, 2002, by and between Udi Toledano and Fred S. Fraenkel 99.2 Securities Purchase Agreement dated as of November 8, 2002, between WorldWater Corp. and Millennium 3 Opportunity Fund, LLC. 99.3 Investor Rights Agreement dated as of November 8, 2002, among WorldWater Corp., certain existing stockholders of the Company, and Millennium 3 Opportunity Fund, LLC. SIGNATURE After reasonable inquiry and to the best of the undersigned's knowledge and belief, the undersigned hereby certifies that the information set forth in this statement is true, complete and correct. November 18, 2002 /s/ Udi Toledano Udi Toledano /s/ Fred S. Fraenkel Fred S. Fraenkel ATTENTION: INTENTIONAL MISSTATEMENTS OR OMISSIONS OF FACT CONSTITUTE FEDERAL CRIMINAL VIOLATIONS (SEE 18 U.S.C. 1001). EXHIBIT INDEX 99.1 Joint Filing Agreement dated as of November 18, 2002 by and between Udi Toledano and Fred S. Fraenkel 99.2 Securities Purchase Agreement dated as of November 8, 2002, between WorldWater Corp. and Millennium 3 Opportunity Fund, LLC. 99.3 Investor Rights Agreement dated as of November 8, 2002 among WorldWater Corp., certain existing stockholders of the Company, and Millennium 3 Opportunity Fund, LLC. Exhibit 99.1 JOINT FILING AGREEMENT The undersigned agree that this Schedule 13D filing herewith relating to securities of WorldWater Corp. is filed jointly on behalf of each of the undersigned pursuant to Rule 13d-1(k). Dated: November 18, 2002 /s/ Udi Toledano Udi Toledano /s/ Fred S. Fraenkel Fred S. Fraenkel EX-1 3 purchaseagrmt.txt EXHIBIT 99.2 SECURITIES PURCHASE AGREEMENT THIS SECURITIES PURCHASE AGREEMENT (the "Agreement") is made, as of the 8th day of November, 2002, by and among WorldWater Corp., a Delaware corporation (the "Company"), and the Investors set forth on the signature pages affixed hereto (each an "Investor" and collectively the "Investors"). W I T N E S S E T H: WHEREAS, the Company and the Investors are executing and delivering this Agreement in reliance upon the exemption from securities registration afforded by the provisions of Regulation D ("Regulation D"), as promulgated by the U.S. Securities and Exchange Commission (the "SEC") under the 1933 Act (as defined below); and WHEREAS, subject to the terms and conditions set forth in this Agreement, the Company desires to issue and sell to the Investors, and the Investors desire to acquire from the Company, an aggregate of $2,500,000 principal amount of the Company's 10% Convertible Notes due 2005 (collectively, the "Notes", each of which is a "Note"), in the form of Exhibit A annexed hereto, convertible into shares of the Company's common stock, par value $0.001 per share (the "Common Stock"), along with certain warrants to purchase Common Stock, half of which shall bear an exercise price of $0.20 per share (the "$0.20 Warrants"), in the form of Exhibit B attached to this Agreement, and the other half of which shall have an exercise price of $0.50 per share (the "$0.50 Warrants" and collectively, with the $0.20 Warrants, the "Warrants")), in the form of Exhibit C attached to this Agreement; and WHEREAS, contemporaneously with the sale of the Securities (as defined below), the parties hereto will execute and deliver a Registration Rights Agreement, in the form attached to this Agreement as Exhibit D (the "Registration Rights Agreement"), pursuant to which the Company will agree, among other things, to provide certain registration rights under the 1933 Act, and applicable state securities laws; and WHEREAS, contemporaneously with the sale of the Securities, the parties hereto will execute and deliver an Investor Rights Agreement, in the form attached to this Agreement as Exhibit E (the "Investor Rights Agreement"), pursuant to which the Investor will receive certain approval, preemptive, tag along and other rights; NOW, THEREFORE, in consideration of the mutual promises made herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: ARTICLE I Defined Terms Section 1.1 Definitions. For the purposes of this Agreement, the following terms shall have the meanings herein set forth: "Affiliate" means, with respect to any Person, any other Person which directly or indirectly Controls, is controlled by, or is under common control with, such Person. "Agreement" has the meaning ascribed thereto in the preamble hereof. "Business Day" means any day except a Saturday, Sunday or other day on which commercial banks located in New York, New York are not open for the general transaction of business. "By-Laws" has the meaning ascribed thereto in Section 3.1 hereof. "Certificate of Incorporation" has the meaning ascribed thereto in Section 3.1 hereof. "Change in Control" means any of: (a) any Person or group (within the meaning of Rule 13d-5 promulgated under the 1934 Act) becoming, directly or indirectly, the beneficial owner of shares of voting stock of the Company representing more than 50% of the total voting power of all outstanding classes of voting stock of the Company, or having the power, directly or indirectly, to elect a majority of the board of directors of the Company; (b) the sale, lease, assignment, transfer or other conveyance of all or substantially all of the assets of the Company where the stockholders of the Company before such sale, lease, assignment, transfer or other conveyance do not control, directly or indirectly, at least a majority of the voting interests of the surviving entity after giving effect to such transaction; (c) the liquidation or dissolution of the Company; (d) any reclassification or other change of any stock or recapitalization of the Company which materially adversely changes the terms or conditions of any of the Securities; (e) the consummation of a merger or consolidation by the Company with or into any other entity where the stockholders of the Company before such merger or consolidation do not control, directly or indirectly, at least a majority of the voting interests of the surviving entity after giving effect to such merger or consolidation; or (f) the sale, transfer or other disposition by Quentin T. Kelly of 60% or more of his holdings of the capital stock of the Company (measuring as of the October 31, 2002), other than upon his death, whether in one transaction or a series of transactions. "Closing" has the meaning ascribed thereto in Section 2.2 hereof. "Closing Date" has the meaning ascribed thereto in Section 2.2 hereof. "Common Stock" has the meaning ascribed thereto in the recitals hereof. "Company" has the meaning ascribed thereto in the preamble hereof. "Company's Knowledge" means the actual knowledge of the officers of the Company after due inquiry made in good faith. "Contract" means any agreement, indenture, undertaking, debt instrument, contract, lease, understanding, arrangement, or commitment to which the Company or any of its Subsidiaries is a party or by which any of them may be bound or to which any of their properties may be subject, whether or not in writing. "Control" means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise. "Environmental Laws" has the meaning ascribed thereto in Section 3.17 hereof. "First Funding" has the meaning ascribed thereto in Section 2.2 hereof. "Funding Date" has the meaning set forth in Section 2.2 hereof. "Fundings" has the meaning ascribed thereto in Section 2.2 hereof. "Indemnified Person" has the meaning ascribed thereto in Section 7.3 hereof. "Infringe" has the meaning ascribed thereto in Section 3.15(e) hereof. "Intellectual Property" means all of the following: (a) patents, patent applications, patent disclosures and inventions (whether or not patentable and whether or not reduced to practice); (b) trademarks, service marks, trade dress, trade names, corporate names, logos, slogans and Internet domain names, together with all goodwill associated with each of the foregoing; (c) copyrights and copyrightable works; (d) registrations, applications and renewals for any of the foregoing; (e) trade secrets and know-how (including, but not limited to, ideas, formulae, compositions, manufacturing and production processes and techniques, research and development information, drawings, specifications and designs); and (f) proprietary computer software (including, but not limited to, data, data bases and documentation). "Investor(s)" has the meaning ascribed thereto in the preamble hereof. "Investor Rights Agreement" has the meaning ascribed thereto in the recitals hereof. "Legal Opinion" has the meaning ascribed thereto in Section5.1(a)(viii) hereof. "License Agreement" has the meaning ascribed thereto in Section 3.15(b) hereof. "Losses" has the meaning ascribed thereto in Section 7.2 hereof. "Material Adverse Effect" means a material adverse effect on the assets, liabilities, results of operations, condition (financial or otherwise), business prospects or business of the Company and its Subsidiaries, individually and in the aggregate. "M3" means Millennium 3 Opportunity Fund, LLC. "Notes" has the meaning ascribed thereto in the recitals hereof. "Note Shares" means the shares of Common Stock issuable upon conversion of the Notes. "Person" means an individual, corporation, partnership, limited liability company, trust, business trust, association, joint stock company, joint venture, sole proprietorship, unincorporated organization, governmental authority or any other form of entity not specifically listed herein. "Proposed Transaction" has the meaning ascribed thereto in Section 6.10 hereof. "Purchase Price" means up to an aggregate of Two Million Five Hundred Thousand Dollars ($2,500,000). "Registration Rights Agreement" has the meaning ascribed thereto in the recitals hereof. "Regulation D" has the meaning ascribed thereto in the recitals hereof. "Required Investors" means Investors who hold a majority in principal amount of the Notes and/or a majority of the Shares. "SEC" has the meaning ascribed thereto in the recitals hereof. "SEC Filings" has the meaning ascribed thereto in Section 3.6 hereof. "Second Funding" has the meaning ascribed thereto in Section 2.2 hereof. "Securities" means the Notes, the Warrants and the Shares. "Shares" means the Note Shares and the Warrant Shares. "Subsidiary" has the meaning ascribed thereto in Section 3.1 hereof. "Transaction Documents" means this Agreement, the Registration Rights Agreement, the Investor Rights Agreement, the Warrants and the Notes. "Transfer" means to directly or indirectly, transfer, sell, assign, pledge, encumber, mortgage, hypothecate, give, or otherwise dispose of, whether or not by operation of law and whether voluntarily or involuntarily. "Unit" means (i) a Note with a principal amount of $10,000, (ii) $0.20 Warrants covering 23,810 shares of Common Stock and (iii) $0.50 Warrants covering 23,810 shares of Common Stock. The Note shall initially have a conversion price of $0.14 per share such that the $10,000 Note shall initially be convertible into 71,429 shares of Common Stock. The number of shares of Common Stock issuable upon conversion of the Notes shall be as adjusted pursuant to the terms of the Notes and the number of shares of Common Stock issuable upon exercise of the Warrants shall be as adjusted pursuant to the terms of the Warrants. "Warrants" has the meaning ascribed thereto in the recitals hereof. "Warrant Shares" means the shares of Common Stock issuable upon exercise of the Warrants. "1933 Act" means the Securities Act of 1933, as amended, and the rules and regulations of the SEC promulgated thereunder. "1934 Act" means the Securities Exchange Act of 1934, as amended, and the rules and regulations of the SEC promulgated thereunder. "2001 10-K" has the meaning ascribed thereto in Section 3.6 hereof. ARTICLE II Purchase and Sale Section 2.1 Purchase and Sale of the Securities. Subject to the terms and conditions of this Agreement, each of the Investors shall (severally and not jointly) purchase and the Company shall sell to the Investors the number of Units set forth next to such Investor's name in the chart contained in Section 2.2 hereof in exchange for the Purchase Price to be paid by such Investor as set forth in the chart contained in Section 2.2. Section 2.2 Closing and Fundings Generally. The consummation of the purchase and sale of the Units shall occur in three stages, the first of which shall be the sale of 25 Units for $250,000 (the "First Funding"), the second of which shall be the sale of an additional 25 Units for an additional $250,000 (the "Second Funding") and the third of which shall be the sale of up to an additional 200 Units for up to an additional $2,000,000 million (the "Closing" and collectively with the First Funding and the Second Funding, the "Fundings") as set forth below:
- -------------------- ------------- --------------- --------------- --------------- ------------------- --------------- Principal Number of Number of Amount of $.20 Warrants $.50 Warrants Purchase Price -------- -------- -------------- Stage Units Notes Investor - -------------------- ------------- --------------- --------------- --------------- ------------------- --------------- - -------------------- ------------- --------------- --------------- --------------- ------------------- --------------- First Funding 25 $250,000 595,250 595,250 M3 $250,000 - -------------------- ------------- --------------- --------------- --------------- ------------------- --------------- - -------------------- ------------- --------------- --------------- --------------- ------------------- --------------- Second Funding 25 $250,000 595,250 595,250 M3 $250,000 - -------------------- ------------- --------------- --------------- --------------- ------------------- --------------- - -------------------- ------------- --------------- --------------- --------------- ------------------- --------------- Closing Up to 200 Up to Up to Up to M3 and/or such Up to $2,000,000 4,762,000 4,762,000 other investors $2,000,000 approved by the Company and M3. - -------------------- ------------- --------------- --------------- --------------- ------------------- --------------- - -------------------- ------------- --------------- --------------- --------------- ------------------- --------------- Total Up to 250 Up to Up to Up to Up to $2,500,000 5,952,500 5,952,500 $2,500,000 - -------------------- ------------- --------------- --------------- --------------- ------------------- ---------------
Each of the three (3) Fundings shall take place at the offices of Lowenstein Sandler PC, 65 Livingston Avenue, Roseland, New Jersey 07068, or by transmission by facsimile and overnight courier, on the applicable date set forth in Section 2.3 or on such later date or at such different location as the parties shall mutually agree, but not prior to the date that the applicable conditions set forth in Article V hereof have been satisfied or waived by the appropriate party (each, a "Funding Date"); provided, that the Funding Date on which the Closing occurs shall also be referred to as the "Closing Date." Subject to the conditions set forth in Section 5.1(a), the Closing shall be consummated on or prior to December 31, 2002 (the "Last Closing Date"); provided, that in the event that the Company has not obtained in writing all requisite third party consents or approvals (including the making of any necessary filings), then the Last Closing Date shall be extended to a date selected by the Investors, but not later than January 30, 2003; and provided further, that in the event the Company has not obtained in writing all requisite third party consents or approvals (including the making of any necessary filings) by January 30, 2003, then the Closing shall be extended to a date selected by the Investors in their sole discretion. Notwithstanding the foregoing, in the event the obligation to obtain such third party consent or approval arises solely by request of the Investors and is not related to any pre-existing contractual or legal obligation of the Company, then such extension shall be to a date mutually acceptable to the Company and the Investors. Prior to the Closing, the Company and the Investors shall determine if any other investors shall purchase any Units at the Closing. Section 2.3 Fundings. (a) At the First Funding (which shall occur on the date hereof): (i) Each Investor shall deliver the portion of the Purchase Price set forth next to its name in the chart contained in Section 2.2 hereof (on the row labeled "First Funding") by wire transfer of immediately available funds to accounts designated in writing by the Company; provided that the First Funding shall not exceed $250,000. (ii) The Company shall deliver to each Investor a Note representing the principal amount purchased by such Investor as set forth in the chart contained in Section 2.2 hereof (on the row labeled "First Funding") and the number of $0.20 Warrants and $0.50 Warrants as set forth in the chart contained in Section 2.2 (on the row labeled "First Funding"). (iii) The parties shall execute and deliver each of the documents and take such other actions referred to in Article V hereof to be delivered by such party at the First Funding. (b) At the Second Funding (which shall occur on or before November 15, 2002, which date may be extended by the Investors in their sole discretion): (i) Each Investor shall deliver the portion of the Purchase Price set forth next to its name in the chart contained in Section 2.2 hereof (on the row labeled "Second Funding") by wire transfer of immediately available funds to accounts designated in writing by the Company; provided that the Second Funding shall not exceed $250,000. (ii) The Company shall deliver to each Investor a Note representing the principal amount purchased by such Investor as set forth in the chart contained in Section 2.2 hereof (on the row labeled "Second Funding") and $0.20 Warrants and $0.50 Warrants as set forth in the chart contained in Section 2.2 (on the row labeled "Second Funding") . (iii) The parties shall execute and deliver each of the documents and take such other actions referred to in Article V hereof to be delivered by such party at the Second Funding. (iv) The Registration Rights Agreement shall be effective as of the Second Funding. (c) At the Closing (which shall occur after the conditions to closing set forth in Article V have been satisfied): (i) Each Investor who shall be investing at the Closing shall deliver its respective portion of the Purchase Price in the chart contained in Section 2.2 hereof (on the row labeled "Closing") by wire transfer of immediately available funds to accounts designated in writing by the Company; provided that the Closing shall be for up to $2,000,000, as determined by the Investors in their sole discretion. (ii) The Company shall deliver to each Investor a Note representing the principal amount purchased by such Investor at the Closing and the number of $0.20 Warrants and $0.50 Warrants to be issued to the Investor at the Closing (in each case based upon the amount of Purchase Price paid by such Investor pursuant to paragraph (i) of this subsection (c)). (iii) The Parties shall execute and deliver each of the documents and take such other actions referred to in Article V hereof to be delivered by such party at the Closing. ARTICLE III Company Representations and Warranties Representations and Warranties of the Company. The Company hereby represents and warrants to the Investors as follows: Section 3.1 Organization, Good Standing and Qualification. Each of the Company and its Subsidiaries (as defined below) is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation and has all requisite corporate power and authority to carry on its business as now conducted and to own its properties. Each of the Company and its Subsidiaries is duly qualified to do business as a foreign corporation and is in good standing in each jurisdiction in which the conduct of its business or its ownership or leasing of property makes such qualification or leasing necessary unless the failure to so qualify has not and could not reasonably be expected to have a Material Adverse Effect. The Company's subsidiaries are reflected on Schedule 3.1 hereto (each a "Subsidiary" and collectively the "Subsidiaries"). The Company has furnished to each of the Investors, true and correct copies of the Company's Certificate of Incorporation, as amended and as in effect on the date hereof (the "Certificate of Incorporation"), and the Company's By-Laws, as in effect on the date hereof (the "By-Laws"). Neither the Company nor any Subsidiary is in any material violation of any of the provisions of its respective certificate of incorporation, by-laws or other charter documents. Section 3.2 Authorization. The Company has the requisite corporate power and authority and has taken all requisite corporate action necessary for the: (a) authorization, execution and delivery of the Transaction Documents; (b) authorization of the performance of all obligations of the Company hereunder or thereunder, and (c) authorization, issuance (or reservation for issuance) and delivery of the Notes, the Warrants and the Shares. Each of the Transaction Documents executed and delivered by the Company on the date hereof constitutes, and each of the Transaction Documents to be executed and delivered by the Company on the Second Funding and the Closing will constitute, the legal, valid and binding obligations of the Company, enforceable against the Company in accordance with their respective terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors' rights generally, and to the exercise of judicial discretion as to the availability of equitable remedies such as specific performance and subject, as to enforcement of indemnification provisions, to limitations under applicable securities laws. Section 3.3 Capitalization. (a) Schedule 3.3 sets forth (i) the authorized capital stock of the Company on the date hereof; (ii) the number of shares of capital stock issued and outstanding; (iii) the number of shares of capital stock issuable pursuant to the Company's stock plans; and (iv) the number of shares of capital stock issuable and reserved for issuance pursuant to securities (other than the Securities) exercisable for, or convertible into or exchangeable for any shares of capital stock of the Company. All of the issued and outstanding shares of the Company's capital stock have been duly authorized and validly issued and are fully paid, nonassessable and free of pre-emptive rights and were issued in full compliance with applicable law and any rights of third parties. All of the issued and outstanding shares of capital stock of each Subsidiary have been duly authorized and validly issued and are fully paid, nonassessable and free of pre-emptive rights, were issued in full compliance with applicable law and any rights of third parties and are owned by the Company, beneficially and of record, subject to no lien, encumbrance or other adverse claim. No Person is entitled to pre-emptive or similar statutory or contractual rights with respect to any securities of the Company. Except as set forth on Schedule 3.3, there are no outstanding warrants, options, convertible securities or other rights, agreements or arrangements of any character under which the Company or any of its Subsidiaries is or may be obligated to issue any equity securities of any kind and except as contemplated by this Agreement, neither the Company nor any of its Subsidiaries is currently in negotiations for the issuance of any equity securities of any kind. Except for the Investor Rights Agreement and except as set forth on Schedule 3.3, there are no voting agreements, buy-sell agreements, option or right of first purchase agreements or other agreements of any kind among the Company and any of the securityholders of the Company relating to the securities of the Company held by them. Schedule 3.3 sets forth a true and complete list of the Persons who have been granted the right to require the Company to register any securities of the Company under the 1933 Act, whether on a demand basis or in connection with the registration of securities of the Company for its own account or for the account of any other Person and the Company has not granted any other Person the right to require the Company to register any securities of the Company under the 1933 Act, whether on a demand basis or in connection with the registration of securities of the Company for its own account or for the account of any other Person. All of the Persons set forth on Schedule 3.3 have waived their rights to have their securities registered by the Company in the registration statements to be filed by the Company in connection with the registration of the Investors' Securities pursuant to the terms of the Registration Rights Agreement. (b) Schedule 3.3 sets forth a true and complete table setting forth the pro forma capitalization of the Company on a fully diluted basis giving effect to (i) the issuance of the Securities, (ii) any adjustments in other securities resulting from the issuance of the Securities and (iii) the exercise or conversion of all outstanding securities. The issuance and sale of the Securities hereunder will not obligate the Company to issue shares of Common Stock or other securities to any other Person (other than the Investors) and will not result in the adjustment of the exercise, conversion, exchange or reset price of any outstanding security. (c) The Company does not have outstanding stockholder purchase rights or any similar arrangement in effect giving any Person the right to purchase any equity interest in the Company upon the occurrence of certain events. Section 3.4 Valid Issuance. The Notes and the Warrants have been duly and validly authorized. Upon the due conversion of the Notes or the due exercise of the Warrants, as applicable, the Note Shares or the Warrant Shares, as applicable, issuable upon such conversion or exercise will be validly issued, fully paid and non-assessable free and clear of all liens, encumbrances, restrictions and rights of first refusal, except for restrictions on transfer set forth in the Transaction Documents or imposed by applicable securities laws. The Company has reserved a sufficient number of shares of Common Stock for issuance upon the conversion of the Notes and upon exercise of the Warrants, free and clear of all liens, encumbrances, restrictions and rights of first refusal, except for restrictions on transfer set forth in the Transaction Documents or imposed by applicable securities laws. Assuming the accuracy of the Invetors' representations and warranties contained herein, the issuance by the Company of the Securities is exempt from registration under the 1933 Act. Section 3.5 Consents. The execution, delivery and performance by the Company of the Transaction Documents and the offer, issuance and sale of the Securities do not require consent of, action by or in respect of, or filing with, any Person or governmental official other than filings that have been made pursuant to applicable state securities laws and post-sale filings pursuant to applicable state and federal securities laws which the Company undertakes to file within the applicable time periods (including, without limitation, the filing of the registration statements with the SEC as contemplated by the Registration Rights Agreement). The Company has taken all action necessary to exempt the sale of the Notes and the Warrants and the issuance of the Note Shares pursuant to the terms of the Notes and the Warrant Shares pursuant to the terms of the Warrants from (i) the provisions of any anti-takeover or business combination law or statute binding on the Company or to which the Company or any of its assets and properties may be subject, (ii) the Company's Certificate of Incorporation and By-Laws and (iii) any stockholder rights agreement, plan or other arrangement which, in any case, would restrict or limit the ability of the Investors to acquire, vote or dispose of the Securities or to exercise the rights granted to the Investors under the Transaction Documents becoming applicable to the Investors or the Securities. Section 3.6 Delivery of SEC Filings; Business. The Company has provided the Investors with copies of the Company's most recent Annual Report on Form 10-K for the fiscal year ended December 31, 2001 (the "2001 10-K"), and all other reports filed by the Company pursuant to the 1934 Act since the filing of the 2001 10-K and prior to the date hereof (collectively, the "SEC Filings"). The SEC Filings are the only filings required of the Company pursuant to the 1934 Act for such period. The Company and its Subsidiaries are engaged only in the business described in the SEC Filings and the SEC Filings contain a complete and accurate description in all material respects of the business of the Company and its Subsidiaries taken as a whole. Section 3.7 Use of Proceeds. The proceeds of the sale of the Securities hereunder shall be used by the Company primarily to fund pending revenue projects and for current working capital. Section 3.8 No Material Adverse Change. Since December 31, 2001, except as identified and described in the SEC Filings, there has not been: (a) any change in the consolidated assets, liabilities, financial condition or operating results of the Company from that reflected in the financial statements included in the 2001 10-K or the Company's Quarterly Reports on Form 10-Q filed since the 2001 10-K, except for changes in the ordinary course of business which have not or are not reasonably expected to have a Material Adverse Effect, individually or in the aggregate; (b) any declaration or payment of any dividend, or any authorization or payment of any distribution, on any of the capital stock of the Company, or any redemption or repurchase of any securities of the Company; (c) any material damage, destruction or loss, whether or not covered by insurance to any material assets or properties of the Company or its Subsidiaries; (d) any waiver, not in the ordinary course of business, by the Company or any Subsidiary of a material right or of a material debt owed to it; (e) any satisfaction or discharge of any lien, claim or encumbrance or payment of any obligation by the Company or a Subsidiary, except in the ordinary course of business and which is not material to the assets, properties, financial condition, operating results or business of the Company and its Subsidiaries taken as a whole (as such business is presently conducted); (f) any change or amendment to the Company's or any Subsidiary's Certificate of Incorporation or By-Laws, or material change to any material contract or arrangement by which the Company or any Subsidiary is bound or to which any of their respective assets or properties is subject; (g) any material labor difficulties or labor union organizing activities with respect to employees of the Company or any Subsidiary; (h) the loss of the services of any key employee, or material change in the composition or duties of the senior management of the Company or any Subsidiary; (i) the loss or, to the Company's Knowledge, threatened loss of any customer which has had or is reasonably expected to have a Material Adverse Effect; or (j) any other event, transaction or condition of any character that has had or could reasonably be expected to have a Material Adverse Effect. Section 3.9 SEC Filings. (a) At the time of filing thereof, the SEC Filings complied as to form in all material respects with the requirements of the 1934 Act and did not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements made therein, in the light of the circumstances under which they were made, not misleading. (b) During the preceding two (2) years, each registration statement and any amendment thereto filed by the Company pursuant to the 1933 Act and the rules and regulations thereunder, as of the date such statement or amendment became effective, complied as to form in all material respects with the 1933 Act and did not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements made therein, in light of the circumstances under which they were made, not misleading; and each prospectus filed pursuant to Rule 424(b) under the 1933 Act, as of its issue date and as of the closing of any sale of securities pursuant thereto, did not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements made therein, in the light of the circumstances under which they were made, not misleading. Section 3.10 No Conflict, Breach, Violation or Default. (a) The execution, delivery and performance of the Transaction Documents by the Company and the issuance and sale of the Securities will not conflict with or result in a breach or violation of any of the terms and provisions of, or constitute a default under: (i) the Company's Certificate of Incorporation or the Company's By-Laws, both as in effect on the date hereof; (ii) any statute, rule, regulation or order of any governmental agency or body or any court, domestic or foreign, having jurisdiction over the Company, any Subsidiary or any of their respective assets or properties; or (iii) any agreement or instrument to which the Company or any Subsidiary is a party or by which the Company or a Subsidiary is bound or to which any of their respective assets or properties is subject. (b) Neither the Company nor any Subsidiary: (i) is in default under or in violation of any Contract set forth on Schedule 3.16; (ii) is in violation of any order of any court, arbitration or governmental body applicable to it; or (iii) is in violation of any statute, rule or regulation of any governmental authority to which it is subject. The business of the Company and its Subsidiaries is not being conducted in violation of any law, ordinance, rule or regulation of any governmental authority, except where such violations have not resulted or would not reasonably be expected to result, individually or in the aggregate, in a Material Adverse Effect. Neither the Company nor any of its Subsidiaries is in breach of any Contract set forth on Schedule 3.16 where such breach, individually or in the aggregate, is reasonably expected to have a Material Adverse Effect. Section 3.11 Tax Matters. Each of the Company and each Subsidiary has timely prepared and filed all tax returns required to have been filed by the Company or such Subsidiary with all appropriate governmental agencies and timely paid all taxes shown thereon or otherwise owed by it. The charges, accruals and reserves on the books of the Company in respect of taxes for all fiscal periods are adequate in all material respects, and, there are no material unpaid assessments against the Company or any Subsidiary nor, to the Company's Knowledge, any basis for the assessment of any additional taxes, penalties or interest for any fiscal period or audits by any federal, state or local taxing authority except for any assessment which is not material to the Company and its Subsidiaries, taken as a whole. All taxes and other assessments and levies that the Company or any Subsidiary is required to withhold or to collect for payment have been duly withheld and collected and paid to the proper governmental authority or third party when due. There are no tax liens or claims pending or, to the Company's Knowledge, threatened against the Company or any Subsidiary or any of their respective assets or property. There are no outstanding tax sharing agreements or other such arrangements between the Company and any Subsidiary or other corporation or entity. Section 3.12 Title to Properties. The Company and each Subsidiary has good and marketable title to all real properties and all other properties and assets owned by it, in each case free from liens, encumbrances and defects of any kind. Except as disclosed in the SEC Filings, the Company and each Subsidiary holds any leased real or personal property under valid and enforceable leases with no exceptions that would materially interfere with the use currently made thereof by them. Section 3.13 Certificates, Authorities and Permits. The Company and each Subsidiary possess adequate certificates, authorities or permits issued by appropriate governmental agencies or bodies necessary to conduct the business now operated by it, and neither the Company nor any Subsidiary has received any notice of proceedings relating to the revocation or modification of any such certificate, authority or permit that, if determined adversely to the Company or such Subsidiary, could reasonably be expected to have a Material Adverse Effect, individually or in the aggregate. Section 3.14 No Labor Disputes. No material labor dispute with the employees of the Company or any Subsidiary exists or, to the Company's Knowledge, is threatened. Section 3.15 Intellectual Property. (a) Each patent, trademark, service mark, copyright, registered trade name and Internet domain name, and all applications therefor, included within the Intellectual Property of the Company and its Subsidiaries is currently valid and enforceable and in compliance with all legal requirements (including timely filings, proofs and payments of fees), except where the failure to be in such compliance is not reasonably expected to have a Material Adverse Effect. No material patent of the Company or its Subsidiaries has been or is now involved in any interference, reissue, re-examination or opposition proceeding. (b) All of the licenses and sublicenses and consent, royalty or other agreements concerning Intellectual Property which are necessary for the conduct of the Company's and each of its Subsidiaries' respective businesses as currently conducted or as currently proposed to be conducted to which the Company or any Subsidiary is a party or by which any of their assets are bound (other than generally commercially available, non-custom, off-the-shelf software application programs having a retail acquisition price of less than $10,000 per license) (collectively, "License Agreements") are valid and binding obligations of the Company or its Subsidiaries that are parties thereto and, to the Company's Knowledge, the other parties thereto, enforceable in accordance with their terms, except to the extent that enforcement thereof may be limited by bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or other similar laws affecting the enforcement of creditors' rights generally and to the exercise of judicial discretion as to the enforceability of remedies such as specific performance. (c) The Company and its Subsidiaries own or have the valid right to use all of the Intellectual Property necessary for the conduct of the Company's and each of its Subsidiaries' businesses substantially as currently conducted or as currently proposed to be conducted and for the ownership, maintenance and operation of the Company's and its Subsidiaries' properties and assets. (d) The Intellectual Property owned by the Company or its Subsidiaries and that is necessary for the conduct of the Company's and each of its Subsidiaries' respective businesses as currently conducted or as currently proposed to be conducted, is owned free and clear of all liens, encumbrances, adverse claims or obligations to license all such owned Intellectual Property, other than licenses entered into in the ordinary course of the Company's and its Subsidiaries' businesses, except for liens, encumbrances, adverse claims and obligations that are not reasonably expected to have a Material Adverse Effect. (e) The Company and each of its Subsidiaries have taken reasonable steps, including the execution of confidentiality agreements and intellectual property and work product assignments and releases, to maintain, police and protect (i) the Intellectual Property which it owns and which is necessary for the conduct of the Company's and each of its Subsidiaries' respective businesses as currently conducted or as currently proposed to be conducted and the business and marketing plans and customer and supplier lists and related information of the Company. To the Company's Knowledge, the conduct of the Company's and its Subsidiaries' businesses as currently conducted does not infringe or otherwise impair or conflict with (collectively, "Infringe") any Intellectual Property rights of any third party, and, to the Company's Knowledge, the Intellectual Property rights of the Company and its Subsidiaries which are necessary for the conduct of the Company's and each of its Subsidiaries' respective businesses as currently conducted are not being Infringed by any third party. There is no litigation or order pending or outstanding or, to the Company's Knowledge, threatened against the Company, that seeks to limit or challenge or that concerns the ownership, use, validity or enforceability of any Intellectual Property of the Company and its Subsidiaries and the Company's and its Subsidiaries' use of any Intellectual Property owned by a third party. (f) The consummation of the transactions contemplated hereby do not result in the alteration, loss, impairment of or restriction on the Company's or any of its Subsidiaries' ownership or right to use any of the Intellectual Property which is necessary for the conduct of the Company's and each of its Subsidiaries' respective businesses as currently conducted or as currently proposed to be conducted. (g) All software that has been developed by the Company or any of its Subsidiaries, and, to the Company's Knowledge, all software that has been developed by third-parties, that the Company or any of its Subsidiaries sells or licenses to third parties is free from any material defect, bug, virus, or programming, design or documentation error (other than media defects) and conforms in all material respects to the specifications and purposes thereof. (h) The Company and its Subsidiaries have taken reasonable steps to protect the Company's and its Subsidiaries' rights in their confidential information and trade secrets. Each employee, consultant and contractor who has had access to proprietary Intellectual Property which is necessary for the conduct of the Company's and each of its Subsidiaries' respective businesses as currently conducted, or the business and marketing plans and customer and supplier lists and related information of the Company, has executed an agreement to maintain the confidentiality of such Intellectual Property and such other materials and has executed appropriate agreements that are substantially consistent with the Company's standard forms thereof. Except under confidentiality obligations, there has been no material disclosure of any of the Company's or its Subsidiaries' confidential information or trade secrets to any third party. Section 3.16 Contracts. (a) Schedule 3.16 sets forth each of the following Contracts to which the Company or any of its Subsidiaries is a party, by which the Company or any of its Subsidiaries is bound, or to which the properties of the Company or any of its Subsidiaries is subject: (i) any Contract providing for the borrowing or lending of money or the deferred purchase price of property in excess of $75,000 (in either case, whether incurred, assumed, guaranteed or secured by any asset); (ii) any Contract relating to Intellectual Property; (iii) any Contract providing for exclusive dealing or that limits the freedom of the Company or any of its Subsidiaries to compete in any line of business or with any person or in any area or to offer employment to or hire any person; (iv) any compensation, employment, consulting, severance, supplemental retirement, change in control or other similar Contract with any current director, officer, consultant, partner, stockholder, member or employee of the Company or any of its Subsidiaries; (v) any stockholder agreement, voting agreement, voting trust agreement or similar Contract involving the capital stock of the Company or any equity interests of any of its Subsidiaries; (vi) any Contract or other document filed as an exhibit to any of the Company's SEC Filings; or (vii) any other Contract that is material to the Company or any of its Subsidiaries. (b) Each Contract is a valid and binding agreement of the Company or its Subsidiaries, if any, party thereto and, to the Company's Knowledge, the counterparty or counterparties thereto, and is in full force and effect, and neither the Company nor, to the Company's Knowledge, any other party thereto is in default under any such Contract and there has not occurred any event that, with the lapse of time or the giving of notice or both, would constitute such a default. (c) Except for the Company's engagement letter with Perrin, Holden & Davenport Capital Corp., none of the Company or any of its Subsidiaries is a party to any pending engagement letters, sales agency agreements or other similar agreements. (d) To the Company's Knowledge, no current or former employee or contractor of the Company or any of its Subsidiaries is or was a party to any agreement (directed to non-disclosure, non-compete, non-solicitation, exclusive services obligations or otherwise) that restricts, restricted, forbids or forbade at any time during such employment or engagement the activities or performance of duties of the employee or contractor for or on behalf of the Company, or otherwise in connection with such employment or engagement. Section 3.17 Environmental Matters. Neither the Company nor any Subsidiary is in violation of any statute, rule, regulation, decision or order of any governmental authority or body or any court, domestic or foreign, relating to the use, disposal or release of hazardous or toxic substances or relating to the protection or restoration of the environment or human exposure to hazardous or toxic substances (collectively, "Environmental Laws"), owns or operates any real property contaminated with any substance that is subject to any Environmental Laws, is liable for any off-site disposal or contamination pursuant to any Environmental Laws, or is subject to any claim relating to any Environmental Laws, which violation, contamination, liability or claim has had or could be reasonably expected to have a Material Adverse Effect, individually or in the aggregate; and there is no pending or, to the Company's Knowledge, threatened investigation of any claim relating to any Environmental Laws. Section 3.18 Litigation. There are no pending actions, suits or proceedings against the Company, its Subsidiaries or any of its or their properties that could be reasonably expected to have a Material Adverse Effect; and to the Company's Knowledge, no such actions, suits or proceedings are or have been threatened. There are no pending actions, charges, indictments, information or, to the Company's Knowledge, investigations or threatened investigations of the Company, any Subsidiary or any of their respective directors, officers, employees or agents as such, which are civil in nature or involve allegations of criminal violations of any Federal, state or local law by the Company, any Subsidiary or any of their respective directors, officers, employees or agents acting on behalf of the Company or any Subsidiary. Section 3.19 Financial Statements. The financial statements included in each SEC Filing present fairly (as required by United States generally accepted accounting principles), in all material respects, the consolidated financial position of the Company as of the dates shown and its consolidated results of operations and cash flows for the periods shown, and such financial statements have been prepared in conformity with United States generally accepted accounting principles applied on a consistent basis (except as may be disclosed therein or in the notes thereto, and, in the case of quarterly financial statements, as permitted by Form 10-Q under the 1934 Act and subject to year-end adjustments). Except as set forth in the financial statements of the Company included in the SEC Filings filed prior to the date hereof, neither the Company nor any of its Subsidiaries has incurred any liabilities, contingent or otherwise, except those incurred in the ordinary course of business, consistent (as to amount and nature) with past practices since the date of such financial statements, none of which, individually or in the aggregate, have had or is reasonably expected to have a Material Adverse Effect. Section 3.20 Insurance Coverage. The Company and each Subsidiary maintain in full force and effect insurance coverage, including directors and officers insurance, that is customary for comparably situated companies for the business being conducted and properties owned or leased by the Company and each Subsidiary, and the Company reasonably believes such insurance coverage to be adequate against all liabilities, claims and risks against which it is customary for comparably situated companies to insure. Schedule 3.20 hereto sets forth a complete list of all insurance policies and fidelity bonds relating to the assets, business, operations, employees, officers or directors of the Company and its Subsidiaries, as of the date hereof and immediately prior to the Closing and setting forth the type of coverage, insurance limits, deductibles and insurance carriers. Section 3.21 Brokers and Finders. Except for Perrin, Holden & Davenport Capital Corp., the fees and expenses of which are solely the Company's responsibility, no Person has, as a result of the transactions contemplated by this Agreement, any valid right, interest or claim against or upon the Company, any Subsidiary or an Investor for any commission, fee or other compensation pursuant to any agreement, arrangement or understanding entered into by or on behalf of the Company. Section 3.22 No Directed Selling Efforts or General Solicitation. Neither the Company nor any Person acting on its behalf has conducted any general solicitation or general advertising (as those terms are used in Regulation D) in connection with the offer or sale of any of the Notes. Section 3.23 No Integrated Offering. Neither the Company nor any of its Affiliates, nor any Person acting on its or their behalf has, directly or indirectly, made any offers or sales of any Company security or solicited any offers to buy any security, under circumstances that would adversely affect reliance by the by the Company on Section 4(2) for the exemption from registration for the transactions contemplated hereby or would require registration of the Securities under the 1933 Act. Section 3.24 Investment Company. The Company is not, and is not controlled by or under common control with an Affiliate of an "investment company" within the meaning of the Investment Company Act of 1940, as amended. Section 3.25 Questionable Payments. Neither the Company nor any of its Subsidiaries nor, to the Company's Knowledge, any of their respective current or former stockholders, directors, officers, employees, agents or other Persons acting on behalf of the Company or any Subsidiary, has on behalf of the Company or any Subsidiary or in connection with their respective businesses: (a) used any corporate funds for unlawful contributions, gifts, entertainment or other unlawful expenses relating to political activity; (b) made any direct or indirect unlawful payments to any governmental officials or employees from corporate funds; (c) established or maintained any unlawful or unrecorded fund of corporate monies or other assets; (d) made any intentionally false or fictitious entries on the books and records of the Company or any Subsidiary; or (e) made any unlawful bribe, rebate, payoff, influence payment, kickback or other unlawful payment of any nature. Section 3.26 Internal Accounting Controls. The Company and each of the Subsidiaries maintain a system of internal accounting controls sufficient to provide reasonable assurance that: (a) transactions are executed in accordance with management's general or specific authorizations; and (b) transactions are recorded as necessary to permit preparation of financial statements in conformity with United States generally accepted accounting principles and to maintain asset accountability. Section 3.27 Transactions With Affiliates. The Company has reported, in accordance with law, any transactions with officers, directors or employees of the Company who are parties to any transaction with the Company or any of its Subsidiaries (other than for services as employees, officers and directors), including any contract, agreement or other arrangement providing for the furnishing of services to or by, providing for rental of real or personal property to or from or otherwise requiring payments to or from any officer, director or such employee or, to the Company's Knowledge, any corporation, partnership, trust or entity in which any officer, director or any such employee has a substantial interest or is an officer, director, trustee or partner. Section 3.28 Application to Takeover Protection. The Company and its Board of Directors have taken all necessary action, if any, in order to render inapplicable any control share acquisition, business combination or other similar anti-takeover provision under the Certificate of Incorporation, By-Laws or the laws of the Company's state of incorporation which is or could become applicable to the Investors or the Agreements as a result of the transactions contemplated by the Agreement. None of the transactions contemplated by the Agreements, including the conversion of the Notes into Shares, will trigger any poison pill provisions of any of the Company's stockholders' rights or similar agreements. Section 3.29 Acknowledgment of Dilution. The Company understands and acknowledges the potentially dilutive effect to the Common Stock upon the issuance of the Note Shares upon conversion of the Notes or Warrant Shares upon exercise of the Warrants. The Company further acknowledges that its obligation to issue Shares upon conversion of the Notes or exercise of the Warrants in accordance with this Agreement, the Notes and the Warrants is absolute and unconditional (but subject to the terms and conditions of the Transaction Documents) regardless of the dilutive effect that such issuance may have on the ownership interests of other stockholders of the Company. Section 3.30 Disclosures. No representation or warranty contained in the Agreement contains any untrue statement of a material fact or omits to state a material fact necessary in order to make the statements contained therein, in light of the circumstances under which they were made, not misleading. There is no fact known to the Company that the Company has not disclosed to the Investors which has had or which could be expected to have a Material Adverse Effect on the Company other than with regard to general economic conditions or world events outside the control of the Company. ARTICLE IV INVESTOR'S REPRESENTATIONS AND WARRANTIES Representations and Warranties of the Investors. Each of the Investors hereby severally, and not jointly, makes the following representations and warranties to the Company that: Section 4.1 Organization and Existence. The Investor is a validly existing corporation, limited partnership or limited liability company and has the requisite corporate, partnership or limited liability company authority, as applicable, to execute and deliver the Transaction Documents to which it is a party to and to invest in the Securities pursuant to this Agreement. Section 4.2 Authorization. The execution, delivery and performance by the Investor of the Transaction Documents have been duly authorized and the Transaction Documents each constitute the valid and legally binding obligation of the Investor, enforceable against the Investor in accordance with their respective terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors' rights generally, and to the exercise of judicial discretion as to the availability of equitable remedies such as specific performance and subject, as to enforcement of indemnification provisions, to limitations under applicable securities laws. Section 4.3 Purchase Entirely for Own Account. The Securities to be received by the Investor hereunder will be acquired for the Investor's own account, not as nominee or agent, and not with a view to the resale or other transfer or distribution of any portion thereof or interest therein in violation of the 1933 Act, and the Investor has no present intention of selling, granting any participation in, or otherwise transfering or distributing the Securities or any portion thereof or interest therein in violation of the 1933 Act. The Investor is not a registered broker dealer or an entity engaged in the business of being a broker dealer. Section 4.4 Investment Experience. The Investor acknowledges that it can bear the economic risk and complete loss of its investment in the Securities, and has such knowledge and experience in financial or business matters that it is capable of evaluating the merits and risks of the investment contemplated hereby. Section 4.5 Disclosure of Information. The Investor has had an opportunity to receive all additional information related to the Company requested by it and to ask questions of and receive answers from the Company regarding the Company, its business and the terms and conditions of the offering of the Securities. The Investor acknowledges receipt of copies of the SEC Filings. Neither such inquiries nor any other due diligence investigation conducted by the Investor shall modify, amend or affect the Investor's right to rely on the Company's representations and warranties contained in this Agreement. Section 4.6 Restricted Securities. The Investor understands that the Securities are characterized as "restricted securities" under the U.S. federal securities laws inasmuch as they are being acquired from the Company in a transaction not involving a public offering and that under such laws and applicable regulations such securities may be resold without registration under the 1933 Act only in certain limited circumstances. Section 4.7 Legends. (a) It is understood that, until the earlier of: (a) registration for resale pursuant to the Registration Rights Agreement or (b) the time when any of the Securities may be, may be sold pursuant to Rule 144(k), certificates or agreements evidencing such Securities, as the case may be, may bear the following or any substantially similar legend: "THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE, AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT OR EXEMPTION FROM REGISTRATION UNDER THE FOREGOING LAWS". (b) Upon the earlier of: (i) registration for resale pursuant to the Registration Rights Agreement and receipt by the Company of the Investor's written confirmation that such securities will not be disposed of except in compliance with the prospectus delivery requirements of the 1933 Act; and (ii) Rule 144(k) becoming available, the Company shall, upon an Investor's written request, promptly cause certificates evidencing the Securities to be replaced with certificates which do not bear such restrictive legends. Section 4.8 Accredited Investor. The Investor is an accredited investor as defined in Rule 501(a) of Regulation D. Section 4.9 No General Solicitation. The Investor did not learn of the investment in the Securities as a result of any public advertising or general solicitation. Section 4.10 Brokers and Finders. No Person has, as a result of the transactions contemplated by this Agreement, any valid right, interest or claim against or upon the Company, any Subsidiary or an Investor for any commission, fee or other compensation pursuant to any agreement, arrangement or understanding entered into by or on behalf of the Investor. ARTICLE V CONDITIONS TO THE FUNDINGS Section 5.1 Conditions to the Investors' Obligations. The obligation of the Investors to purchase the requisite Notes and the Warrants at each of the Fundings as set forth in Section 2.2 is subject to the fulfillment to the Investors' satisfaction, on or prior to the respective Funding Date, of the following conditions, any of which may be waived by the Investors agreeing hereunder to purchase a majority in principal amount of the Notes on such Funding Date: (a) At or prior to the First Funding: (i) The representations and warranties made by the Company in Article III hereof shall be true and correct in all material respects as of the date of the First Funding. The Company shall have performed in all material respects all obligations and conditions herein required to be performed or observed by it on or prior to the First Funding. (ii) The Company shall have obtained, in a timely fashion and in writing in a form reasonably satisfactory to the Investors, any and all consents, permits, approvals, registrations and waivers (including waivers of the registration rights set forth on Schedule 3.3 hereto) necessary for consummation of the purchase and sale of the Notes and the Warrants to be purchased by the Investors at the First Funding. (iii) The Company shall have executed and delivered to the Investors the Registration Rights Agreement. (iv) The Company shall have executed and delivered to the Investors the Investor Rights Agreement. (v) No judgment, writ, order, injunction, award or decree of or by any court, or judge, justice or magistrate, including any bankruptcy court or judge, or any order of or by any governmental authority, shall have been issued, and no action or proceeding shall have been instituted by any governmental authority, enjoining or preventing the consummation of the transactions contemplated hereby at the First Funding or in the other Transaction Documents. (vi) The Company shall have delivered a Certificate, executed on behalf of the Company by its Chief Executive Officer or its Chief Financial Officer, dated as of the date of the First Funding, certifying to the fulfillment of the conditions specified in subsections (i), (ii) and (v) of this Section 5.1(a). (vii) The Company shall have delivered a Certificate, executed on behalf of the Company by its Secretary, dated as of the date of the First Funding, certifying the resolutions adopted by the Board of Directors of the Company approving the transactions contemplated by this Agreement, including the transactions to occur at each of the Funding, and the other Transaction Documents and the sale of the Notes and the Warrants and the reservation of the Shares, certifying the current versions of the Certificate of Incorporation and By-Laws of the Company and its Subsidiaries and certifying as to the signatures and authority of persons signing this Agreement and the other Transaction Documents and related documents to be delivered on behalf of the Company at the First Funding. (viii) The Investors shall have received an opinion from Salvo, Russell, Fichter & Landau, the Company's counsel, dated as of the date of the First Funding, in form and substance acceptable to the Investors and addressing such legal matters as the Investors may reasonably request. (ix) The Company shall have executed and delivered such other documents as the Investors may reasonably request. (b) At or prior to the Second Funding: (i) The representations and warranties made by the Company in Article III hereof shall be true and correct in all material respects as of the date of the First Funding and as of the date of the Second Funding as though made on and as of the date of the Second Funding (except that representations and warranties that by their terms speak only as of the date of this Agreement or some other date need be true and correct only as of such date). The Company shall have performed in all material respects all obligations and conditions herein required to be performed or observed by it on or prior to the Second Funding. (ii) The Company shall have obtained, in a timely fashion and in writing in a form reasonably satisfactory to the Investors, any and all consents, permits, approvals, registrations and waivers (including waivers of the registration rights set forth on Schedule 3.3 hereto) necessary for consummation of the purchase and sale of the Notes and the Warrants to be purchased by the Investors at the Second Funding. (iii) No judgment, writ, order, injunction, award or decree of or by any court, or judge, justice or magistrate, including any bankruptcy court or judge, or any order of or by any governmental authority, shall have been issued, and no action or proceeding shall have been instituted by any governmental authority, enjoining or preventing the consummation of the transactions contemplated hereby at the Second Funding or the Closing or in the other Transaction Documents. (iv) The Company shall have delivered a Certificate, executed on behalf of the Company by its Chief Executive Officer or its Chief Financial Officer, dated as of the date of the Second Funding, certifying to the fulfillment of the conditions specified in subsections (i), (ii) and (iii) of this Section 5.1(b). (v) The Company shall have delivered a Certificate, executed on behalf of the Company by its Secretary, dated as of the date of the Second Funding, certifying the current versions of the Certificate of Incorporation and By-Laws of the Company and its Subsidiaries and certifying as to the signatures and authority of persons signing the Notes and the Warrants and related documents to be delivered on behalf of the Company at the Second Funding. (vi) The Investors shall have received an opinion from Salvo, Russell, Fichter & Landau, the Company's counsel, dated as of the date of the Second Funding, in the form of Exhibit F annexed hereto.. (vii) The Company shall have paid the fees and expenses of the Investors and their counsel pursuant to Section 8.5. (viii) The Company shall have executed and delivered such other documents as the Investors may reasonably request, including, without limitation, the delivery of the schedules to the Purchase Agreement not delivered at the First Funding. (c) At or prior to the Closing: (i) The representations and warranties made by the Company in Article III hereof shall be true and correct in all material respects as of the date of the First Funding, the Second Funding and as of the date of the Closing as though made on and as of the date of the Closing (except that representations and warranties that by their terms speak only as of the date of this Agreement or some other date need be true and correct only as of such date). The Company shall have performed in all material respects all obligations and conditions herein required to be performed or observed by it on or prior to the Closing. (ii) The Company shall have obtained, in a timely fashion and in writing in a form reasonably satisfactory to the Investors, any and all consents, permits, approvals, registrations and waivers (including waivers of the registration rights set forth on Schedule 3.3 hereto) necessary for consummation of the purchase and sale of the Notes and the Warrants to be purchased by the Investors at the Closing. (iii) No judgment, writ, order, injunction, award or decree of or by any court, or judge, justice or magistrate, including any bankruptcy court or judge, or any order of or by any governmental authority, shall have been issued, and no action or proceeding shall have been instituted by any governmental authority, enjoining or preventing the consummation of the transactions contemplated hereby at the Closing or in the other Transaction Documents. (iv) The Company shall have delivered a Certificate, executed on behalf of the Company by its Chief Executive Officer or its Chief Financial Officer, dated as of the Closing, certifying to the fulfillment of the conditions specified in subsections (i), (ii) and (iii) of this Section 5.1(b). (v) The Company shall have delivered a Certificate, executed on behalf of the Company by its Secretary, dated as of the date of the Closing, certifying the current versions of the Certificate of Incorporation and By-Laws of the Company and its Subsidiaries and certifying as to the signatures and authority of persons signing the Notes and the Warrants and related documents to be delivered on behalf of the Company at the Closing. (vi) The Investors shall have received an opinion from Salvo, Russell, Fichter & Landau, the Company's counsel, dated as of the date of the Closing, in the form of Exhibit F annexed hereto. (vii) The Investors shall have completed their investigation of the Company and its Subsidiaries and the Investors shall be satisfied in their sole discretion with the condition of the Company and its Subsidiaries and their future prospects. (viii) The Company shall have executed and delivered such other documents as the Investors may reasonably request. Section 5.2 Conditions to Obligations of the Company. The Company's obligation to sell and issue the Notes and the Warrants at each of the Fundings as set forth in Section 2.2 is subject to the fulfillment to the satisfaction of the Company on or prior to the respective Funding Date of the following conditions, any of which may be waived by the Company: (a) At or prior to the First Funding: (i) The representations and warranties made by the Investors in Article IV hereof, shall be true and correct in all material respects as of the date of the First Funding. All of the Investors shall have performed in all material respects all obligations and conditions herein required to be performed or observed by them on or prior to the date of the First Funding. (ii) The Investors shall have executed and delivered to the Company the Registration Rights Agreement. (iii) The Investors shall have executed and delivered to the Company the Investor Rights Agreement. (iv) The Company shall have obtained any and all consents, permits, approvals, registrations and waivers necessary for consummation of the purchase and sale of the Notes and the Warrants to be sold to the Investors at the First Funding. (v) No judgment, writ, order, injunction, award or decree of or by any court, or judge, justice or magistrate, including any bankruptcy court or judge, or any order of or by any governmental authority, shall have been issued, and no action or proceeding shall have been instituted by any governmental authority, enjoining or preventing the consummation of the transactions contemplated hereby at the First Funding or in the other Transaction Documents. (vi) The Investors shall have executed and delivered such other documents as the Company may reasonably request. (b) At or prior to the Second Funding: (i) The representations and warranties made by the Investors in Article IV hereof, shall be true and correct in all material respects as of the date of the First Funding and as of the date of the Second Funding as though made on and as of the date of the Second Funding (except that representations and warranties that by their terms speak only as of the date of this Agreement or some other date need be true and correct only as of such date). All of the Investors shall have performed in all material respects all obligations and conditions herein required to be performed or observed by them on or prior to the date of the Second Funding. (ii) No judgment, writ, order, injunction, award or decree of or by any court, or judge, justice or magistrate, including any bankruptcy court or judge, or any order of or by any governmental authority, shall have been issued, and no action or proceeding shall have been instituted by any governmental authority, enjoining or preventing the consummation of the transactions contemplated hereby at the Second Funding or in the other Transaction Documents. (iii) The Investors shall have executed and delivered such other documents as the Company may reasonably request. (c) At or prior to the Closing: (i) The representations and warranties made by the Investors in Article IV hereof, shall be true and correct in all material respects as of the date of the First Funding, the Second Funding and as of the date of the Closing as though made on and as of the date of the Closing (except that representations and warranties that by their terms speak only as of the date of this Agreement or some other date need be true and correct only as of such date) All of the Investors shall have performed in all material respects all obligations and conditions herein required to be performed or observed by them on or prior to the date of the Closing. (ii) No judgment, writ, order, injunction, award or decree of or by any court, or judge, justice or magistrate, including any bankruptcy court or judge, or any order of or by any governmental authority, shall have been issued, and no action or proceeding shall have been instituted by any governmental authority, enjoining or preventing the consummation of the transactions contemplated hereby at the Closing or in the other Transaction Documents. (iii) The Investors shall have executed and delivered such other documents as the Company may reasonably request. ARTICLE VI COVENANTS AND AGREEMENTS OF THE COMPANY Section 6.1 Conduct of Business Pending Closing. Between the date of this Agreement and the earlier of (i) the Closing or (ii) the Company's receipt of written notice from the Investors that the Investors will not consummate the third Funding pursuant to the terms of this Agreement, the Company shall maintain its existence and shall conduct its business in the customary and ordinary course of business consistent with past practice. Section 6.2 Negative Covenants of the Company Between the date of this Agreement and the earlier of (i) the Closing or (ii) the Company's receipt of written notice from the Investors that the Investors will not consummate the third Funding pursuant to the terms of this Agreement, without the prior written approval of the Investors, the Company shall not and shall cause its Subsidiaries not to: (a) cause or permit to occur any of the events or occurrences described in Section 3.8 (No Material Adverse Change) of this Agreement; (b) dissolve, merge with or into any other entity, or otherwise alter their formation; (c) enter into any contract or agreement with any union or other collective bargaining representative representing any employees; (d) issue any equity securities or any other securities convertible into or exercisable for equity securities of the Company or any of its Subsidiaries, except for the grant of options and the issuance of securities upon exercise of options granted pursuant to any equity incentive plan of the Company in effect on October 29, 2002; (e) sell any of the assets of the Company and its Subsidiaries other than in the ordinary course of business and consistent with past practices; or (f) make any changes to its or any of Subsidiary's Certificate of Incorporation or By-Laws. Section 6.3 Affirmative Covenants. Between the date of this Agreement and the earlier of (i) the Closing or (ii) the Company's receipt of written notice from the Investors that the Investors will not consummate the third Funding pursuant to the terms of this Agreement, the Company shall and shall cause its Subsidiaries to: (a) maintain their assets in substantially the same state of repair, order and condition as on the date hereof, reasonable wear and tear excepted; (b) maintain in full force and effect the insurance policies and binders currently in effect; (c) utilize their reasonable efforts to preserve intact the business organization of the Company and its Subsidiaries; (d) maintain all of their books and records in accordance with their past practices; (e) comply in all material respects with all provisions of the Contracts listed in Schedule 3.16 and comply in all material respects with the provisions of all material laws, rules and regulations applicable to the Company and its Subsidiaries; (f) cause to be paid when due, all taxes, assessments and charges or levies imposed upon it or on any of its properties or which it is required to withhold and pay over; and (g) promptly advise the Investors in writing of the threat or commencement against the Company or any of its Subsidiaries of any claim, action, suit or proceeding, arbitration or investigation or any other event that could reasonably be expected to have a Material Adverse Effect. Section 6.4 Additional Negative Covenant. Between the date of this Agreement and the date on which a Registration Statement (as defined in the Registration Rights Agreement) registering all of the Registrable Securities (as defined in the Registration Rights Agreement) is declared effective by the SEC, the Company shall not, without the prior written consent of the Investors in their sole discretion: (i) grant any Person the right to require the Company to register any securities of the Company under the 1933 Act, whether on a demand basis or in connection with the registration of securities of the Company, for its own account or for the account of any other Person and (ii) shall not file any registration statement (other than a Registration Statement pursuant to the terms of the Registration Rights Agreement) registering any of the Company's securities with the SEC. Section 6.5 Stop Transfer Instruction. The Company may not make any notation on its records or give instructions to any transfer agent of the Company which enlarge the restrictions on transfer set forth in Section 4.7. Section 6.6 Integration. The Company shall not sell, offer for sale or solicit offers to buy or otherwise negotiate in respect of any security (as defined in Section 2 of the 1933 Act) that would be integrated with the offer or sale of the Notes or the Shares in a manner that would require the registration under the 1933 Act of the sale of the Notes or the Shares to any Investor or cause the offering of such securities to be integrated with any other offering of securities by the Company. Section 6.7 Listing and Reservation of Shares. (a) The Company shall: (i) promptly following each Funding, but not later than five (5) Business Days thereafter, prepare and file with the OTC Bulletin Board (as well as on any other national securities exchange or market on which the Common Stock is then listed) additional shares listing applications or letters acceptable to the OTC Bulletin Board (as well as on any other national securities exchange or market on which the Common Stock is then listed) covering and listing a number of shares of Common Stock which is at least equal to the maximum number of Shares then issuable; (ii) take all steps necessary to cause the Shares to be approved for listing on the OTC Bulletin Board (as well as on any other national securities exchange or market on which the Common Stock is then listed) as soon as possible thereafter; (iii) maintain, so long as any other shares of Common Stock shall be so listed, such listing of all such Shares; and (iv) provide to the Investors evidence of such listing. Neither the Company nor any of its Subsidiaries shall take any action that would result in the delisting or suspension of the Common Stock on the OTC Bulletin Board (as well as on any other national securities exchange or market on which the Common Stock is then listed) except in connection with a merger or consolidation of the Company where the Company is not the survivor thereof. The Company shall promptly provide to each Investor copies of any notices it receives from the OTC Bulletin Board (as well as on any other national securities exchange or market on which the Common Stock is then listed) regarding the continued eligibility of the Common Stock for listing on such system, so long as such notice does not include material, nonpublic information. (b) The Company at all times shall reserve a sufficient number of shares of its authorized but unissued Common Stock to provide for the full conversion of the outstanding Notes and exercise of the outstanding Warrants. The Shares of Common Stock reserved for issuance upon conversion of the Notes and exercise of the Warrants shall be allocated pro rata to each of the Investors in accordance with the principal amount of Notes and the number of Warrants issued and delivered to such Investors collectively at the Fundings. If at any time the number of shares of Common Stock authorized and reserved for issuance is insufficient to cover the number of Shares issued and issuable upon conversion of the Notes (based on the Conversion Price (as defined in the Notes)) and upon exercise of the Warrants (based on the Exercise Price (as defined in the Warrants)) in effect from time to time without regard to any limitation on conversions or exercises, the Company will promptly take all corporate action necessary to authorize and reserve such number of shares of Common Stock, including, without limitation, calling a special meeting of stockholders to authorize additional shares to meet the Company's obligations under this Section 6.6, in the case of an insufficient number of authorized shares, and use its best efforts to obtain stockholder approval of an increase in such authorized number of shares. In addition, if on the actual date of an adjustment of the Conversion Price pursuant to the Notes, the registration statements are insufficient to register such number of shares of Common Stock, the Company shall file a registration statement sufficient to register such additional shares of Common Stock in accordance with the terms of the Registration Rights Agreement. All calculations of the above amounts shall be made without regard to any limitation on conversions of Notes or the Warrants. Section 6.8 Use of Proceeds. The Company shall use the proceeds from the sale of the Securities to the Investors hereunder primarily to fund pending revenue projects and for current working capital. Section 6.9 Transfer Agent Instructions. At the Closing the Company shall issue irrevocable instructions to its transfer agent (and shall issue to any subsequent transfer agent as required), to issue certificates, registered in the name of each such Investor or its respective nominee(s), for the Shares in such amounts, in accordance with the terms of the Notes, the Warrants and this Agreement, as specified from time to time by each Investor to the Company in a form acceptable to such Investor (the "Irrevocable Transfer Agent Instructions"). The Company warrants that no instruction other than the Irrevocable Transfer Agent Instructions referred to in this Section 6.9, and stop transfer instructions to give effect to Section 4.7 hereof (in the case of the Shares, prior to registration of the Shares under the 1933 Act) will be given by the Company to its transfer agent and that the Warrants and the Shares shall otherwise be freely transferable on the books and records of the Company as and to the extent provided in the Agreements. The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Investors by violating the intent and purpose of the transaction contemplated hereby. Accordingly, the Company acknowledges that the remedy at law for a breach of its obligations under this Section 6.9 will be inadequate and agrees, in the event of a breach or threatened breach by the Company of the provisions of this Section 6.9, that the Investors, shall be entitled, in addition to all other available remedies, to an order and/or injunction restraining any breach and requiring immediate issuance and transfer, without the necessity of showing economic loss and without any bond or other security being required. Section 6.10 Press Release; Filing of Form 8-K. Subject to the provisions of Section 8.7 hereof, on or before the fifth (5th) Business Day following each of the Fundings, the Company shall: (a) issue a press release in form and substance reasonably acceptable to the Investors (except as otherwise required by law); and (b) file a Current Report on Form 8-K with the SEC describing the terms of the transaction contemplated by the Agreements in the form required by the 1934 Act. Section 6.11 Exclusivity. From and after the date hereof to the first to occur of (a) December 31, 2002 and (b) the Closing (unless such period is extended pursuant to Section 2.2 hereof, absent the Investors' express prior written consent, the Company shall not, directly or indirectly (and shall cause its officers, directors, employees, equityholders, and agents to not) initiate contact with, solicit, entertain, encourage, negotiate or enter into any agreement or understanding (written or oral) with any person or entity (other than the Investors) in connection with any actual or proposed investment in or acquisition of the Company or its equity securities (collectively, "Proposed Transactions"). The Company shall notify in writing the Investors within 48 hours of the commencement of any discussions (orally or in writing) regarding or constituting a Proposed Transaction. ARTICLE VII Survival and Indemnification Section 7.1 Survival. All representations, warranties, covenants and agreements contained in this Agreement shall be deemed to be representations, warranties, covenants and agreements as of the date hereof and shall survive the execution and delivery of this Agreement for the longer of (a) the period that any of the Notes or the Warrants are outstanding, and (b) three (3) years from the date of this Agreement. Section 7.2 Indemnification. The Company agrees to indemnify and hold harmless each Investor and its Affiliates and their respective directors, officers, employees and agents from and against any and all losses, claims, damages, liabilities and reasonable expenses (including without limitation reasonable attorney fees and disbursements and other expenses incurred in connection with investigating, preparing or defending any action, claim or proceeding, pending or threatened and the costs of enforcement hereof) (collectively, "Losses") to which such Person may become subject as a result of any breach of representation, warranty, covenant or agreement made by or to be performed on the part of the Company under the Agreements, and will reimburse any such Person for all such amounts as they are incurred by such Person. Section 7.3 Conduct of Indemnification Proceedings. Promptly after receipt by any Person (the "Indemnified Person") of notice of any demand, claim or circumstances which would or might give rise to a claim or the commencement of any action, proceeding or investigation in respect of which indemnity may be sought pursuant to Section 7.2 hereof, such Indemnified Person shall promptly notify the Company in writing and the Company shall assume the defense thereof, including the employment of counsel reasonably satisfactory to such Indemnified Person, and shall assume the payment of all fees and expenses to the extent such fees and expenses constitute Losses; provided, however, that the failure of any Indemnified Person so to notify the Company shall not relieve the Company of its obligations hereunder except to the extent that the Company is materially prejudiced by such failure to notify. In any such proceeding, any Indemnified Person shall have the right to retain its own counsel, but the fees and expenses of such counsel shall be at the expense of such Indemnified Person unless: (a) the Company and the Indemnified Person shall have mutually agreed to the retention of such counsel; or (b) in the reasonable judgment of counsel to such Indemnified Person representation of both parties by the same counsel would be inappropriate due to actual or potential material differing interests between them. The Company shall not be liable for any settlement of any action, proceeding or investigation effected without its written consent, but if settled with such consent, or if there be a final judgment for the plaintiff, the Company shall indemnify and hold harmless such Indemnified Person from and against any loss or liability (to the extent stated above) by reason of such settlement or judgment. Without the prior written consent of the Indemnified Person, which consent shall not be unreasonably withheld, the Company shall not effect any settlement of any pending or threatened action, proceeding or investigation in respect of which any Indemnified Person is or could have been a party and indemnity could have been sought hereunder by such Indemnified Party, unless such settlement includes an unconditional release of such Indemnified Person from all liability arising out of such action, proceeding or investigation. ARTICLE VIII Miscellaneous Section 8.1 Successors and Assigns. This Agreement may not be assigned by a party hereto without the prior written consent of the Company or the Required Investors, as applicable, provided, however: an Investor may assign its rights and delegate its duties hereunder or any of the Securities acquired hereunder in whole or in part to an Affiliate, or to any of its or its Affiliates officers directors, members or managers without the prior written consent of the Company or the other Investors, after notice duly given by such Investor to the Company and the other Investors, provided, that no such assignment or obligation shall affect the obligations of such Investor hereunder. 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. 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. Section 8.2 Counterparts; Faxes. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. This Agreement may also be executed via facsimile, which shall be deemed an original. Section 8.3 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. Section 8.4 Notices. All notices and other communications required or permitted to be given pursuant to this Agreement shall be in writing signed by the sender, and shall be deemed duly given (i) on the date delivered if personally delivered, (ii) on the date sent by telecopier with automatic confirmation by the transmitting machine showing the proper number of pages were transmitted without error, (iii) on the Business Day after being sent by Federal Express or another recognized overnight mail service which utilizes a written form of receipt for next day or next business day delivery, or (iv) two (2) Business Days after mailing, if mailed by United States postage-prepaid certified or registered mail, return receipt requested, in each case addressed to the applicable party at the address set forth below; provided that a party hereto may change its address for receiving notice by the proper giving of notice hereunder: If to the Company to: WorldWater Corp. 55 Route 31 South Pennington, NJ 08543 Fax: (609) 818-0720 Attn: Quentin T. Kelly With a copy (which shall not constitute notice) to: Salvo, Russell, Fichter & Landau 510 Township Line Road Suite 150 Blue Bell, Pennsylvania 19422 Fax: (215) 653-0383 Attn: Stephen Salvo, Esq. If to the Investors, to the address set forth on the signature page hereto. A copy (which shall not constitute notice) must also be sent to: Lowenstein Sandler PC, 65 Livingston Avenue, Roseland, New Jersey 07068, Attention: Edward M. Zimmerman, Esq., Telecopier No.: (973) 597-2400; Telephone No.: (973) 597-2500. Section 8.5 Expenses. The parties hereto shall pay their own costs and expenses in connection herewith, except that at the Second Funding and thereafter as incurred by the respective party, the Company shall pay the reasonable fees and expenses of Lowenstein Sandler PC, the attorneys for the Investors incurred in connection with the transactions contemplated hereby up to a maximum of $35,000 (in addition to the fees and expenses to be paid to such firm pursuant to the terms of the Registration Rights Agreement), and the costs and expenses of the Investors incurred in connection with the transactions contemplated hereby and in conducting due diligence on the Company. Section 8.6 Amendments and Waivers. Any term of this Agreement may be amended and the observance of any term of this Agreement may be waived (either generally or in a particular instance and either retroactively or prospectively), only with the written consent of the Company and the Required Investors. Any amendment or waiver effected in accordance with this section shall be binding upon each holder of any Notes and/or Shares issued under this Agreement at the time outstanding, each future holder of all such securities, and the Company. Section 8.7 Publicity. No public release or announcement concerning the transactions contemplated hereby shall be issued by the Company or the Investors without the prior consent of the other party (which consents shall not be unreasonably withheld or delayed). Section 8.8 Severability. Any provision of this Agreement that is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof but shall be interpreted as if it were written so as to be enforceable to the maximum extent permitted by applicable law, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. To the extent permitted by applicable law, the parties hereby waive any provision of law which renders any provision hereof prohibited or unenforceable in any respect. Section 8.9 Entire Agreement. This Agreement, including the Exhibits and the Schedules, and the other Transaction Documents, and amendments thereto, constitute the entire agreement among the parties hereof with respect to the subject matter hereof and thereof and supersede all prior agreements and understandings, both oral and written, between the parties with respect to the subject matter hereof and thereof. Section 8.10 Further Assurances. The parties shall execute and deliver all such further instruments and documents and take all such other actions as may reasonably be required to carry out the transactions contemplated hereby and to evidence the fulfillment of the agreements herein contained. Section 8.11 Governing Law; Consent to Jurisdiction. This Agreement and any and all matters arising directly or indirectly herefrom ("Agreement Matters") shall be governed by and construed and enforced in accordance with the internal laws of the State of New Jersey applicable to agreements made and to be performed entirely in such state, without giving effect to the conflict of law principles thereof. Each of the parties hereto hereby (i) irrevocably consents and submits to the sole exclusive jurisdiction of the United States District Court for the District of New Jersey and any state court in the State of New Jersey (and of the appropriate appellate courts from any of the foregoing) in connection with any suit, arbitration, mediation, action or other proceeding (each a "Proceeding") directly or indirectly arising out of or relating to any Agreement Matter; provided that a party to this Agreement shall be entitled to enforce an order or judgment of a such court in any United States or foreign court having jurisdiction over the other party hereto, (ii) irrevocably waives, to the fullest extent permitted by law, any objection that it may now or hereafter have to the laying of the venue of any such Proceeding in any such court or that any such Proceeding which is brought in any such court has been brought in an inconvenient forum, (iii) waives, to the fullest extent permitted by law, any immunity from jurisdiction of any such court or from any legal process therein, and (iv) agrees that service of any summons, complaint, notice or other process relating to such Proceeding may be effected in the manner provided for the giving of notice hereunder. [SIGNATURES BEGIN ON NEXT PAGE] IN WITNESS WHEREOF, the parties hereto have executed this Securities Purchase Agreement or caused their duly authorized officers to execute this Securities Purchase Agreement as of the date first above written. The Company: WORLDWATER CORP. By:/s/Quentin Kelly ______________________________ Name:Quentin Kelly Title:Chief Executive Officer The Investors: Millennium 3 Opportunity Fund, LLC By:/s/Udi Toledano _______________________________ Name:Udi Toledano Title:Member Manager Address for Notice: Millennium 3 Opportunity Fund, LLC 4 Becker Farm Road Roseland, New Jersey 07068 EX-99 4 investorrights13d.txt INVESTOR RIGHTS AGREEMENT EXHIBIT 99.3 INVESTOR RIGHTS AGREEMENT This Investor Rights Agreement (the "Agreement") is made as of November 8, 2002 among WorldWater Corp., a Delaware corporation (the "Company"), certain existing stockholders of the Company listed on Exhibit A attached hereto (the "Existing Stockholders") and the persons and entities listed on Exhibit B attached hereto (the "Investors"). The Existing Stockholders and the Investors are hereinafter collectively referred to as the "Stockholders." BACKGROUND WHEREAS, the Company is issuing and selling to the Investors an aggregate of up to $2 million of 10% convertible promissory notes (the "Notes"), and warrants to purchase Common Stock (the "Warrants"), pursuant to the terms of a Securities Purchase Agreement dated the date hereof, among the Investors and the Company (the "Purchase Agreement"); and WHEREAS, the parties hereto desire to enter into this Agreement to govern their respective rights, duties and obligations after consummation of the transactions contemplated by the Purchase Agreement. NOW, THEREFORE, in consideration of the covenants and agreements set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows: ARTICLE I DEFINITIONS Section 1.1 Definitions. As used in this Agreement, unless the context otherwise requires, the following terms shall have the respective meanings set forth below: "Affiliate" shall mean, with respect to any Person, any other Person who directly or indirectly, through one or more intermediaries, Controls, is Controlled by, or is under common Control with, such Person. "Board" shall mean the Board of Directors of the Company. "Business Day" shall mean any day except a Saturday, Sunday or other day on which commercial banks located in New York, New York are not open for the general transaction of business. "Common Stock" shall mean the Common Stock, par value $.001 per share, of the Company and any other securities into which or for which such Common Stock may be converted or exchanged pursuant to a plan of recapitalization, reorganization, merger, consolidation, sale of assets or other similar transaction. "Control" shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise, and the terms "controlled" and "controlling" have meanings correlative thereto. "Convertible Securities" shall mean all securities of a corporation which, directly or indirectly, are convertible into or are exercisable or exchangeable for common stock of a corporation, including without limitation, stock appreciation rights, options, warrants, convertible debt instruments, convertible preferred stock, and other rights to directly or indirectly purchase, subscribe for or acquire shares of common stock, whether or not such Convertible Securities have then vested or are then exercisable or exchangeable. "Co-Sale Stockholder" shall mean Mr. Quentin T. Kelly and any Person who subsequently becomes a Co-Sale Stockholder by reason of being a Transferee of Co-Sale Securities pursuant to Article III hereof. "Existing Option Plan" means the Company's equity incentive plan as such plan was in effect on October 29, 2002, and with the shares reserved for issuance thereunder as of October 29, 2002. "Family Members" shall mean, with respect to a Person, such Person's spouse, direct descendants (including adopted children and stepchildren, if any), siblings, parents, mother- and father- in-law, brothers- and sisters- in-law, aunts, uncles, nieces and nephews. "Five Percent Stockholder" shall mean, as of the time measured, any Person who is the "beneficial owner" (as that term is defined in Rule 13d-3 promulgated under the Securities Exchange Act of 1934, or any successor or replacement rule thereof) of Common Stock which represents five percent (5%) or more of the Common Stock then outstanding. "Fully-Diluted Basis" shall mean, with respect to measuring a number of shares of capital stock of a corporation or a percentage of shares of capital stock of a corporation, measuring based on all of the common stock then outstanding, assuming the conversion into common stock of all Convertible Securities then outstanding. "GAAP" shall mean United States generally accepted accounting principles as in effect from time to time. "Person" shall mean an individual, corporation, partnership, joint stock company, limited liability company, joint venture, trust or unincorporated organization, or a governmental authority or any agency or political subdivision thereof, or any other business entity. "Subsidiary" or "Subsidiaries" or "subsidiary" or "subsidiaries" shall mean at any date, any Person of which securities or other ownership interests representing more than 50% of the ordinary voting power or, in the case of a partnership, more than 50% of the general partnership interests or in the case of a partnership or limited liability company more than 50% of the profits or losses of which are, as of such date, owned, controlled or held by the Company or one or more subsidiaries of the Company. Section 1.2 Certain Other Definitions. The following terms are defined in the following sections of this Agreement: Term Section 1934 Act Section 5.1(b) Agreement Lead-in Agreement Matters Section 8.5 Existing Stockholders Lead-in Company Lead-in Company Securities Section 2.1 Co-Sale Securities Section 3.1 Exempt Issuances Section 2.3 Investor Director Section 4.1(a) Investors Lead-in New Issuance Section 2.1 New Tag-Along Exercise Notice Section 3.3 New Tag-Alone Notice Section 3.3 Notes Lead-in Offer Notice Section 2.1 Offer Period Section 2.1 Price Section 3.1 Proceeding Section 8.5 Proposed Number Section 3.1 Purchase Agreement Lead-in Representative Section 4.1(c) SEC Section 5.1(b) Shares Section 8.11 Stockholders Lead-in Tag-Along Exercise Notice Section 3.1 Tag-Along Notice Section 3.1 Transfer Section 3.1 Warrant Lead-in ARTICLE II PREEMPTIVE RIGHTS Section 2.1 Notice of Proposed Issuance. Except with respect to Exempt Issuances (as defined in Section 2.3 below), in the event that the Company proposes to issue any (i) shares of Common Stock, (ii) warrants, options or other rights to acquire shares of Common Stock or (iii) any notes, debentures or other securities convertible into, exercisable for or exchangeable for shares of Common Stock (collectively, "Company Securities"), the Company will deliver to the Investors a written notice (the "Offer Notice") prior to effecting any such issuance (the "New Issuance"), informing each Investor of such New Issuance and advising the Investors that upon notice to the Company given within thirty (30) days after the Offer Notice is deemed to have been given to the Investors hereunder (the "Offer Period"), they will have the right to purchase for cash (assuming the New Issuance is completed) at an amount equal to the price or other consideration (the value of which to be determined in good faith by the Board) for which such securities are proposed to be issued and on the same terms and conditions as the Company is offering such Company Securities to third-parties, a number of such securities so that, after giving effect to such New Issuance (and the conversion, exercise and exchange into or for (whether directly or indirectly) shares of Common Stock of all such Company Securities), such Investor will continue to maintain its same proportionate equity ownership in the Company on a Fully Diluted Basis as of the date of the Offer Notice (treating each Investor, for the purpose of such computation, as the holder of the number of shares of Common Stock which would be issuable to such Investor upon conversion, exercise and exchange of all securities, assuming the like conversion, exercise and exchange of all such other securities held by other Persons). The Offer Notice shall describe in reasonable detail the securities proposed to be issued by the Company and specify the number, price, payment terms, whether the offering is to the public or to a specific purchaser or purchasers, and, if to a specific purchaser or purchasers, the name(s) of such purchaser or purchasers. Section 2.2 Right to Purchase Company Securities. (a) Each Investor may indicate its desire to purchase the full number of Company Securities to which it is entitled pursuant to Section 2.1 or any lesser number, by providing written notice thereof to the Company prior to the expiration of Offer Period. The giving of such a written notice (which notice shall specify the number (or amount) of Company Securities which such Investor wishes to purchase up to such Investor's proportionate equity ownership in the Company on a Fully Diluted Basis as of the date of the Offer Notice) shall constitute an irrevocable offer of such Investor to purchase, at the price and on the terms specified in the Offer Notice, the number (or amount) of Company Securities specified in such Investor's written notice to the Company. If prior to 5:00 p.m., New York, New York time, on the last day of the Offer Period any Investor shall not have exercised its rights to purchase Company Securities pursuant to this ARTICLE II, such Investor shall be deemed to have waived any and all of its rights under this ARTICLE II with respect to the purchase of such Company Securities pursuant only to that specific Offer Notice. (b) The Company shall have sixty (60) days from the expiration of the Offer Period to consummate, if it so elects, the proposed issuance of any or all of such Company Securities that the Investors have not elected to purchase, at the price and upon terms that are not less favorable to the Company than those specified in the Offer Notice and, if a purchaser or purchasers was or were specified in such Offer Notice, then only to such purchaser or purchasers; provided that, if such issuance is subject to regulatory approval, such sixty (60) day period shall be extended until the expiration of five (5) Business Days after all such approvals have been received, but in no event later than one hundred and eighty (180) days from the date the Offer Notice is deemed to have been given to the Investors hereunder. If the Company elects to consummate such issuance, each Investor purchasing Company Securities pursuant to this Section 2.2 shall deliver a subscription agreement or purchase agreement to the Company and such other documents reasonably requested by the Company (in each case on the same terms and conditions as all other purchasers and as set forth in the Offer Notice), and at the consummation of the proposed issuance, the Company shall issue certificates representing the Company Securities to be purchased by each Investor purchasing such Company Securities registered in the name of such Investor, against payment by such Investor of the purchase price for such Company Securities. If the Company proposes to issue any class of Company Securities after the period described in the first sentence of this subparagraph (b), the Company must again comply with the procedures set forth in this ARTICLE II. Section 2.3 Exempt Issuances. For purposes of this ARTICLE II, "Exempt Issuances" shall mean issuances of Company Securities (i) as a dividend, stock split or other distribution payable pro rata to all holders of Common Stock, (ii) to employees, officers, directors or consultants of the Company pursuant to the Existing Option Plan and, only in the event that the Company has validly increased its authorized Common Stock above 100 million shares such that there are authorized shares of Common Stock available to expand the Existing Option Pool after reserving for issuance all shares of Common Stock underlying all Notes and all Warrants issuable to the Investors pursuant to the Purchase Agreement and otherwise measuring the Company's outstanding securities on a Fully-Diluted Basis, then up to an additional 3 million shares of Common Stock to be issued pursuant to the Company's then-effective equity incentive plan, (iii) in connection with the conversion or exercise of the Notes, Warrants, or any options, warrants or other rights to purchase Common Stock (A) outstanding on the date hereof, (B) issued in accordance with the foregoing clause (ii) or (C) which constitute a prior New Issuance with respect to which the Company complied with the provisions of this ARTICLE II, (iv) solely in consideration for the acquisition (by merger or otherwise) by the Company or any Subsidiary of the Company of assets or equity interests of another entity approved by a majority of the Board, which majority includes the Investor Director (if an Investor Director has been designated by the Investors), (v) Company Securities issued in a transaction approved by Investors holding in the aggregate a majority of the outstanding Shares (on a Fully-Diluted Basis) then held by all of the Investors, or (vi) to C. J. Lanktree for up to 70,000 shares of Common Stock. ARTICLE III CO-SALE RIGHTS Section 3.1 Subject Transfers; Exercise. If any Co-Sale Stockholder proposes, directly or indirectly, to transfer, sell, assign, pledge, encumber, mortgage, hypothecate, give, or otherwise dispose of, whether or not by operation of law and whether voluntarily or involuntarily (collectively, "Transfer"), to any Person an aggregate number (the "Proposed Number") of shares of Common Stock ("Co-Sale Securities") in one transaction or a series of related transactions, such Co-Sale Stockholder shall give written notice to the Investors as soon as practicable but in no event later than thirty (30) days prior to the consummation of such Transfer, which notice shall specify the name and address of the proposed Transferee, the Proposed Number of Co-Sale Securities to be Transferred, the amount and form of consideration ("Price"), and, in reasonable detail, the other terms and conditions of the proposed Transfer, and shall be accompanied by a copy of any written agreement (whether in draft or definitive form at such time) or offer relating to such Transfer (a "Tag-Along Notice"). Each Investor shall either elect or decline to participate in the proposed Transfer by delivering a written notice (a "Tag-Along Exercise Notice") to the Co-Sale Stockholder who gave the Tag-Along Notice within fifteen (15) days after the Tag-Along Notice is deemed to have been given to the Investors. If an Investor desires to participate in the proposed Transfer upon the same terms and conditions (including at the same Price per share), then that Investor shall specify in its Tag Along Exercise Notice the number of shares of Common Stock that the Investor shall desire to so Transfer. Notwithstanding the foregoing, the provisions of this Section 3.1 shall not apply to any Transfer by any Co-Sale Stockholder of any Co-Sale Securities in any of the following circumstances, if and only if each Transferee of such Co-Sale Securities shall, immediately prior to and as a condition of such Transfer, become a party to this Agreement as both an Existing Stockholder and a Co-Sale Stockholder: (i) by gift, (ii) as collateral security for any indebtedness of such Co-Sale Stockholder, (iii) to a Family Member of such Co-Sale Stockholder, or (iv) to a trust, the sole beneficiaries of which, or to a corporation, partnership or limited liability company, the sole stockholders, partners or members, as the case may be, of which, include only such Co-Sale Stockholder and the Family Members of such Co-Sale Stockholder. Section 3.2 Cut-Back. If the proposed Transferee does not agree to purchase all of the securities specified in each Tag-Along Exercise Notice delivered by the Investors in addition to the Proposed Number of shares of Common Stock, no Co-Sale Stockholder shall sell any Co-Sale Securities to the proposed Transferee unless the extent to which the Investors and the Co-Sale Stockholder participate in the proposed Transfer is proportionately reduced in the manner described in the immediately following sentence. The Investors and Co-Sale Stockholder shall be entitled to Transfer a number of shares (determined on a Fully-Diluted Basis) equal to the number of shares which such Transferee has agreed to purchase from the Investors and the Co-Sale Stockholder multiplied by a fraction, the numerator of which is the number of shares (determined on a Fully Diluted Basis) owned by the Investors or Co-Sale Stockholder, as the case may be, on the last day of the fifteen (15) day Tag-Along Exercise Notice period, and the denominator of which is the total number of shares (determined on a Fully-Diluted Basis) owned by all of the Co-Sale Stockholders participating in such Transfer and the Investors on the last day of the fifteen (15) day Tag-Along Exercise Notice period. If, after any such calculation, any Investor or any Co-Sale Stockholder shall no longer desire to participate to the full extent as calculated in the immediately preceding sentence, then the Investors shall be entitled to proportionately increase their respective participation in such manner as shall be reasonably agreed upon by the remaining participating Investors. Section 3.3 Increases. If, after delivery of a Tag-Along Notice, but before the closing of the transactions pursuant thereto, the proposed Transferee offers to purchase from the Co-Sale Stockholder(s) an additional number of Co-Sale Securities and/or increases the Price to be paid (or otherwise improves (from the perspective of the sellers) the terms and conditions of the proposed purchase), then, within fifteen (15) days after such offer the participating Co-Sale Stockholder(s) shall give a new Tag-Along Notice ("New Tag-Along Notice") to the Investors in accordance with the provisions set forth above in Section 3.1 for Tag-Along Notices. The Investors shall either elect or decline to participate in such offer by giving a new Tag-Along Exercise Notice (a "New Tag-Along Exercise Notice") to the Co-Sale Stockholders who gave such notice within fifteen (15) days after the New Tag-Along Notice is deemed to have been given to the Investors hereunder. All of the provisions of ARTICLE III shall apply to any Transfers subject to any New Tag-Along Notice. Section 3.4 Survival. If, within 120 days after the Tag-Along Notice (or New Tag-Along Exercise Notice, if applicable) is deemed to have been given to the Investors hereunder, the Co-Sale Stockholders have not completed the sale of their Co-Sale Securities in accordance with the terms described in the Tag-Along Notice (or New Tag-Along Notice, if applicable) and this ARTICLE III, then such shares shall once again be subject to this ARTICLE III. ARTICLE IV CORPORATE GOVERNANCE Section 4.1 Board of Directors. (a) The Investors, as a group shall have the right, but not the obligation, to designate one (1) member for election to the Board (the "Investor Director"). If the Board is comprised of classes of directors, when and if designated by the Investors, the Investor Director shall become a member the class of directors most recently elected by the stockholders. So long as the Investors have the right to designate an Investor Director pursuant to this Section 4.1 and actually designate an Investor Director, the Company will use its best efforts to ensure that such person is included in the proxy solicitation materials for the Company's annual meeting and that such person is duly elected to the Board. The Investor Director shall also serve on the compensation committee of the Board and if formed, the executive committee of the Board. The Investor Director shall be entitled to the same perquisites, including stock options, reimbursement of expenses and other similar rights in connection with such person's membership on the Board, as each other non-executive member of the Board. (b) The Investors as a group shall have the right, but not the obligation, to designate two members of the Company's Advisory Board. The Company shall, promptly after designation by the Investors, cause such designee(s) to be appointed to the Company's Advisory Board. (c) The Investors as a group shall have the right, but not the obligation, to have one representative (the "Representative") attend as an observer all meetings of the Board (and each committee meeting thereof), provided that in the case of telephonic meetings conducted in accordance with the Company's by-laws and applicable law, the Representative shall be given the opportunity to participate in such telephonic meetings. The Company shall give the Representative written notice of every meeting of its Board (and any committee meeting thereof) at the same time and in the same manner as notice is given to the directors of the Company. The Representative shall be entitled to receive all written materials and other information given to the directors of the Company in connection with such meetings or otherwise at the same time such materials and information are given to the directors. The Representative shall be entitled to consult with and advise the Board on significant business issues with respect to the Company and its Subsidiaries. The Representative shall not be permitted to vote at any meeting of the Company's Board of Directors or be counted for purposes of determining whether there is sufficient quorum for the Company's Board of Directors to conduct its business. The parties hereto hereby acknowledge and agree that the Representative shall not owe any fiduciary or other duties to the Company or the stockholders of the Company or otherwise have any directorial or other duties or liabilities to the Company or its stockholders. Investors owning at least a majority of the Shares owned by all Investors shall designate, and may replace, the Representative with or without cause in their sole discretion by providing written notice to the Company at least five (5) Business Days prior to the taking of any such action. Section 4.2 Election and Removal of Directors; Filling of Vacancies. For so long as the Investors collectively hold, on a Fully-Diluted Basis, 5% or more of the Company's outstanding Common Stock, (a) each of the Existing Stockholders hereby agrees to promptly vote all of the Shares held by such Existing Stockholder and entitled to vote thereon in favor of the Investor Director at each election of directors, (b) subject to the provisions of the Company's Certificate of Incorporation, as amended or amended and restated from time to time, each Existing Stockholder shall take all action necessary to remove forthwith the Investor Director when (and only when) such removal is requested for any reason, with or without cause, by Investors owning at least a majority of the Shares (on a Fully-Diluted Basis) then owned by all Investors, and (c) in the case of the death, resignation or removal as herein provided of an Investor Director, each Existing Stockholder shall promptly vote all Shares owned by that Person to elect another individual designated by the Investors. Section 4.3 Meetings of the Board. The Company will cause the Board to meet at least four times each year and at least once each quarter. Section 4.4 Conflicting Provisions in Certificate of Incorporation or Bylaws. Each Existing Stockholder agrees to promptly vote its Shares or execute proxies or written consents, as the case may be, and to take all other actions necessary or desirable to ensure that the Company's Certificate of Incorporation and Bylaws do not at any time conflict with any provision of this Agreement. Section 4.5 Expenses. The Company shall promptly reimburse each of the Investors, the Investor Director, the Representative and/or any Person designated by the Investors to the Company's Advisory Board, for any and all out-of-pocket expenses incurred by such Person in connection with conducting Company-business. ARTICLE V COVENANTS OF THE COMPANY Section 5.1 Affirmative Covenants. The Company agrees as follows: (a) The Company will retain regionally or nationally recognized independent public accountants as selected by the Board, which independent public accountants shall certify the Company's financial statements at the end of each fiscal year. (b) If at any time the Company shall cease to be required to make filings of reports and other documents with the Securities Exchange Commission (the "SEC") under the Securities Exchange Act of 1934, as amended (the "1934 Act"), the Company will deliver in writing the following to each Investor or permitted transferee of such Investor: (i) Within forty-five (45) days after the end of each quarter in each fiscal year, a consolidated balance sheet of the Company as of the end of such quarter and a consolidated statement of operations of the Company for the period from the beginning of the fiscal year to the end of such quarter and for the comparable periods of the immediately preceding fiscal year, in each case unaudited but prepared in accordance with GAAP and accompanied by a statement of the Chief Financial Officer or other senior executive officer of the Company to the effect that the quarterly financial statements are true, complete and correct in all material respects and have been prepared in accordance with GAAP, subject to normal year-end adjustments and the omission of notes; (ii) Within ninety (90) days after the end of each fiscal year of the Company, a consolidated balance sheet of the Company as of the end of such fiscal year and the related consolidated statements of operations, changes in Stockholders' equity and cash flows for the fiscal year then ended and for the immediately preceding fiscal year, prepared in accordance with GAAP and audited by the Company's independent public accountants, together with such firm's report thereon; (iii) Such other information regarding the business, prospects, financial condition, operations and affairs of the Company and its Subsidiaries as such Investor may reasonably request. To such end, except when necessary to preserve the confidentiality of information or to avoid real or apparent conflicts of interest, the Company will permit such Investor or transferee or such Person's authorized representatives to visit and inspect the properties and records of the Company and to discuss its business, prospects, financial condition, operations and affairs with directors, officers and employees of the Company, during normal business hours and upon reasonable notice, as often as may be reasonably requested. (c) The Company shall use the proceeds from the sale of the Notes and Warrants as follows: for pending revenue projects, for current working capital, and the payment of expenses pursuant to the Purchase Agreement. (d) The Company shall at all times reserve and keep available out of its authorized but unissued shares of Common Stock, such number of its duly authorized shares of Common Stock as shall be sufficient to effect the conversion of the Notes and the Warrants. If at any time the number of authorized but unissued shares of Common Stock shall not be sufficient to effect the conversion of all of the outstanding Notes and the Warrants, the Company shall use its best efforts to, as soon as reasonably practical, take such corporate action, subject to such approvals as may be required by applicable law, as may be necessary to increase its authorized but unissued shares of Common Stock to such number of shares as shall be sufficient for such purposes. The Company will use its best efforts to obtain promptly any authorization, consent, approval or take any other action or make any filing with any court or administrative body that may be required under applicable state securities laws in connection with the issuance of shares of Common Stock upon conversion of the Notes and Warrants. Section 5.2 Negative Covenants. The Company shall not, without the prior written consent of Investors owning at least a majority of the Shares (on a Fully-Diluted Basis) then owned by all Investors: (a) amend the Certificate of Incorporation or Bylaws of the Company or any of its Subsidiaries, if such amendment would change any of the rights, preferences or privileges of the Investors under the Notes or the Warrants; (b) take any action or permit any Subsidiary to take any action which the Company is precluded from taking by this Agreement, the Purchase Agreement or the Company's Certificate of Incorporation, as amended or restated from time to time; (c) make any loans, enter into any contracts or engage in other transactions with or permit any of its Subsidiaries to make any loans, enter into any contracts or engage in other transactions with, any of the Company's officers, directors, or any Person who, at the time, is a Five Percent Stockholder (or any Affiliates of any of the foregoing) in an amount equal to or in excess of $25,000 alone or when aggregated with other transactions with such Person in any rolling twelve (12) month period (other than employment agreements in effect on October 29, 2002, awards to employees, consultants, officers and directors of the Company under an equity incentive plan but only to the extent that such awards would be deemed to be "Exempt Issuances" under Section 2.3 hereof, and obligations of the Company reflected on its books and records as of October 29, 2002); or (d) agree to any of the foregoing. ARTICLE VI COVENANTS OF THE INVESTORS Section 6.1 No Open Market Purchases. During the period commencing on the Closing Date (as defined in the Purchase Agreement) and running for three (3) years thereafter, the Investors shall not purchase any shares of the Company's Common Stock in open market transactions, unless such purchase is approved by the Board. ARTICLE VII COVENANTS OF THE EXISTING STOCKHOLDERS Section 7.1 Over Issuances. If at any time the number of authorized but unissued shares of Common Stock shall not be sufficient to effect the conversion of all of the outstanding Notes and the Warrants, each of the Existing Stockholders hereby agrees to promptly vote all of their Shares entitled to vote thereon to grant such approvals as may be required by applicable law to increase the amount of the Company's authorized but unissued shares of Common Stock to such number of shares as shall be sufficient for such purposes. ARTICLE VIII MISCELLANEOUS Section 8.1 Notices. All notices and other communications required or permitted to be given pursuant to this Agreement shall be in writing signed by the sender, and shall be deemed duly given (i) on the date delivered if personally delivered, (ii) on the date sent by telecopier with automatic confirmation by the transmitting machine showing the proper number of pages were transmitted without error, (iii) on the Business Day after being sent by Federal Express or another recognized overnight mail service which utilizes a written form of receipt for next day or next business day delivery, or (iv) two (2) Business Days after mailing, if mailed by United States postage-prepaid certified or registered mail, return receipt requested, in each case addressed to the applicable party at the address set forth below; provided that a party hereto may change its address for receiving notice by the proper giving of notice hereunder: If to the Company to: WorldWater Corp. 55 Route 31 South Pennington, NJ 08543 Fax: (609) 818-0720 Attn: Quentin T. Kelly With a copy (which shall not constitute notice) to: Salvo, Russell, Fichter & Landau 510 Township Line Road Suite 150 Blue Bell, Pennsylvania 19422 Fax: (215) 653-0383 Attn: Stephen Salvo, Esq. If to the Investors, to the address set forth on the signature page to the Purchase Agreement. A copy (which shall not constitute notice) must also be sent to: Lowenstein Sandler PC, 65 Livingston Avenue, Roseland, New Jersey 07068, Attention: Edward M. Zimmerman, Esq., Telecopier No.: (973) 597-2400; Telephone No.: (973) 597-2500. Section 8.2 Entire Agreement. This Agreement and the other Transaction Documents, and the exhibits and schedules hereto and thereto, contains, and is intended to be, a complete statement of all the terms of the arrangements between or among the parties hereto with respect to the matters set forth herein, and supersedes any previous agreements, understandings and discussions between the parties hereto with respect to those matters. There are no promises, representations, warranties, covenants or undertakings other than those set forth herein and in the other Transaction Documents, and the exhibits and schedules hereto and thereto Section 8.3 Modifications and Amendments. This Agreement may not be amended or modified without the written consent of the Company and Investors owning at least a majority of the outstanding Shares (on a Fully-Diluted Basis) then owned by all Investors; provided, that any amendment or modification of any provision hereof requiring the consent, approval or other action by a greater percentage of the outstanding Shares owned by all Investors, shall require the written consent of such greater percentage of such Investors. Section 8.4 Benefit; Assignability. This Agreement shall be binding on and shall inure to the benefit of the parties hereto and their respective heirs, successors, permitted assigns and legal representatives and is not intended, nor shall be construed, to give any Person, other than the parties hereto and their respective heirs, successors, assigns and legal representatives, any legal or equitable right, remedy or claim hereunder. The Common Stock, the Notes and the Warrants (together with the rights of the Investors relating to the Common Stock, the Notes and the Warrants) shall be transferable and assignable by each Investor to any investors in, and officers, directors, members, managers and partners of, an Investor, and any Affiliate (and each of its officers, directors, members, managers and partners) or heirs, personal representatives, or successors, of any of the foregoing. Section 8.5 Governing Law; Jurisdiction. This Agreement and any and all matters arising directly or indirectly herefrom ("Agreement Matters") shall be governed by and construed and enforced in accordance with the internal laws of the State of New Jersey applicable to agreements made and to be performed entirely in such state, without giving effect to the conflict of law principles thereof. Each of the parties hereto hereby (i) irrevocably consents and submits to the sole exclusive jurisdiction of the United States District Court for the District of New Jersey and any state court in the State of New Jersey (and of the appropriate appellate courts from any of the foregoing) in connection with any suit, arbitration, mediation, action or other proceeding (each a "Proceeding") directly or indirectly arising out of or relating to any Agreement Matter; provided that a party to this Agreement shall be entitled to enforce an order or judgment of a such court in any United States or foreign court having jurisdiction over the other party hereto, (ii) irrevocably waives, to the fullest extent permitted by law, any objection that it may now or hereafter have to the laying of the venue of any such Proceeding in any such court or that any such Proceeding which is brought in any such court has been brought in an inconvenient forum, (iii) waives, to the fullest extent permitted by law, any immunity from jurisdiction of any such court or from any legal process therein, and (iv) agrees that service of any summons, complaint, notice or other process relating to such Proceeding may be effected in the manner provided for the giving of notice hereunder. Section 8.6 Severability. Any provision of this Agreement that is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. To the fullest extent permitted by applicable law, the parties hereby waive any provision of law which renders any provisions hereof prohibited or unenforceable in any respect. If it is ever held that any restriction hereunder is too broad to permit enforcement of such restriction to its fullest extent, such restriction shall be enforced to the maximum extent permitted by applicable law. Section 8.7 Interpretation. (a) Article, Section, and Subsection headings are not to be considered part of this Agreement, are included solely for convenience of reference and are not intended to be full or accurate descriptions of the contents thereof. (b) Use of the terms "herein," "hereunder," "hereof," and like terms shall be deemed to refer to this entire Agreement and not merely to the particular provision in which the term is contained, unless the context clearly indicates otherwise. (c) Use of the word "including" or a like term shall be construed to mean "including, but not limited to." (d) Words importing a particular gender shall include every other gender, and words importing the singular shall include the plural and vice-versa, unless the context clearly indicates otherwise. Section 8.8 No Waiver of Rights, Powers and Remedies. No failure or delay by a party hereto in exercising any right, power or remedy under this Agreement, and no course of dealing among the parties hereto, shall operate as a waiver of any such right, power or remedy of the party. No single or partial exercise of any right, power or remedy under this Agreement by a party hereto, nor any abandonment or discontinuance of steps to enforce any such right, power or remedy, shall preclude such party from any other or further exercise thereof or the exercise of any other right, power or remedy hereunder. The election of any remedy by a party hereto shall not constitute a waiver of the right of such party to pursue other available remedies. No notice to or demand on a party not expressly required under this Agreement shall entitle the party receiving such notice or demand to any other or further notice or demand in similar or other circumstances or constitute a waiver of the rights of the party giving such notice or demand to any other or further action in any circumstances without such notice or demand. Section 8.9 Counterparts; Facsimile. This Agreement may be executed in one or more counterparts, and by different parties hereto on separate counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument and shall be effective upon delivery of counterpart signatures by all parties hereto. Execution and delivery of this Agreement by facsimile transmission shall constitute execution and delivery of this Agreement for all purposes, with the same force and effect as execution and delivery of an original manually signed copy hereof. Section 8.10 No Jury Trial. Each party acknowledges and agrees that any controversy which may arise under this Agreement is likely to involve complicated and difficult issues. Accordingly, each such party hereby irrevocably and unconditionally waives any right such party may have to a trial by jury in respect to any litigation directly or indirectly arising out of or relating to this Agreement or the transactions contemplated by this Agreement. Each party certifies and acknowledges that (i) no other party has represented, expressly or otherwise, that such other party would not, in the event of litigation, seek to enforce the foregoing waiver, (ii) each such party understands and has considered the implications of this waiver, (iii) each such party makes this waiver voluntarily, and (iv) each such party has been induced to enter into this Agreement by, among other things, the waivers and certifications in this Section 8.10. Section 8.11 Shares Subject to this Agreement. The Stockholders expressly agree that the terms and restrictions of this Agreement shall apply to all shares of capital stock of the Company which any of them now owns or hereafter acquires by any means, including without limitation by purchase, assignment or operation of law, or as a result of any stock dividend, stock split, reorganization, reclassification, whether voluntary or involuntary, or other similar transaction, and to any shares of capital stock of any successor in interest of the Company, whether by sale, merger, consolidation or other similar transaction, or by purchase, assignment or operation of law (the "Shares"). Section 8.12 Legend. Each certificate representing the Shares held of record or beneficially owned by the Stockholders shall bear a legend in substantially the following form, until such time as the shares of capital stock represented thereby are no longer subject to the provisions hereof: "THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE TERMS AND CONDITIONS OF AN INVESTOR RIGHTS AGREEMENT AMONG THE COMPANY AND CERTAIN OF ITS STOCKHOLDERS DATED AS OF NOVEMBER 8, 2002, AS AMENDED OR AMENDED AND RESTATED FROM TIME TO TIME, A COPY OF WHICH AGREEMENT IS AVAILABLE FOR INSPECTION AT THE OFFICES OF THE COMPANY OR MAY BE OBTAINED AT NO COST BY WRITTEN REQUEST TO THE SECRETARY OF THE COMPANY." IN WITNESS WHEREOF, the parties hereto have executed this Investor Rights Agreement or caused this Investor Rights Agreement to be executed by their duly authorized representatives, as of the date first written above. WORLDWATER CORP. By: /s/Quentin Kelly ---------------------------------------- Name: Quentin Kelly Title:Chief Executive Officer MILLENNIUM 3 OPPORTUNITY FUND, LLC By: /s/Udi Toledano ---------------------------------------- Name: Udi Toledano Title: Member Manager JOINDER SIGNATURE PAGE FOR "EXISTING STOCKHOLDERS" TO INVESTOR RIGHTS AGREEMENT DATED AS OF NOVEMBER 8, 2002 The undersigned hereby agrees to be bound as an "Existing Stockholder" and as a "Co-Sale Stockholder" by the Investor Rights Agreement dated as of November 8, 2002 among WorldWater Corp. (the "Company"), a Delaware corporation, certain existing stockholders of the Company listed on Exhibit A attached thereto and the persons and entities listed on Exhibit B attached thereto, and agrees that such undersigned's signature below shall constitute execution of the Investor Rights Agreement. Dated: /s/Quentin Kelly Quentin Kelly JOINDER SIGNATURE PAGE FOR "EXISTING STOCKHOLDERS" TO INVESTOR RIGHTS AGREEMENT DATED AS OF NOVEMBER 8, 2002 The undersigned hereby agrees to be bound as an "Existing Stockholder" by the Investor Rights Agreement dated as of November 8, 2002 among WorldWater Corp. (the "Company"), a Delaware corporation, certain existing stockholders of the Company listed on Exhibit A attached thereto and the persons and entities listed on Exhibit B attached thereto, and agrees that such undersigned's signature below shall constitute execution of the Investor Rights Agreement. Dated: /s/Davinder Sethi ------------------------------------------------ Davinder Sethi JOINDER SIGNATURE PAGE FOR "EXISTING STOCKHOLDERS" TO INVESTOR RIGHTS AGREEMENT DATED AS OF NOVEMBER 8, 2002 The undersigned hereby agrees to be bound as an "Existing Stockholder" by the Investor Rights Agreement dated as of November 8, 2002 among WorldWater Corp. (the "Company"), a Delaware corporation, certain existing stockholders of the Company listed on Exhibit A attached thereto and the persons and entities listed on Exhibit B attached thereto, and agrees that such undersigned's signature below shall constitute execution of the Investor Rights Agreement. Dated: /s/Lange Schermerhorn ---------------------------------------- Lange Schermerhorn JOINDER SIGNATURE PAGE FOR "EXISTING STOCKHOLDERS" TO INVESTOR RIGHTS AGREEMENT DATED AS OF NOVEMBER 8, 2002 The undersigned hereby agrees to be bound as an "Existing Stockholder" by the Investor Rights Agreement dated as of November 8, 2002 among WorldWater Corp. (the "Company"), a Delaware corporation, certain existing stockholders of the Company listed on Exhibit A attached thereto and the persons and entities listed on Exhibit B attached thereto, and agrees that such undersigned's signature below shall constitute execution of the Investor Rights Agreement. Dated: /s/Rolf Frauendelder ------------------------------------ Rolf Frauenfelder JOINDER SIGNATURE PAGE FOR "EXISTING STOCKHOLDERS" TO INVESTOR RIGHTS AGREEMENT DATED AS OF NOVEMBER 8, 2002 The undersigned hereby agrees to be bound as an "Existing Stockholder" by the Investor Rights Agreement dated as of November 8, 2002 among WorldWater Corp. (the "Company"), a Delaware corporation, certain existing stockholders of the Company listed on Exhibit A attached thereto and the persons and entities listed on Exhibit B attached thereto, and agrees that such undersigned's signature below shall constitute execution of the Investor Rights Agreement. Dated: /s/Terri Harris ---------------------------------------- Terri Harris JOINDER SIGNATURE PAGE FOR "EXISTING STOCKHOLDERS" TO INVESTOR RIGHTS AGREEMENT DATED AS OF NOVEMBER 8, 2002 The undersigned hereby agrees to be bound as an "Existing Stockholder" by the Investor Rights Agreement dated as of November 8, 2002 among WorldWater Corp. (the "Company"), a Delaware corporation, certain existing stockholders of the Company listed on Exhibit A attached thereto and the persons and entities listed on Exhibit B attached thereto, and agrees that such undersigned's signature below shall constitute execution of the Investor Rights Agreement. Dated: /s/Rolf Haefeli ------------------------------- Rolf Haefeli -----END PRIVACY-ENHANCED MESSAGE-----