EX-10.8 2 esph_ex10z8.htm FORM OF NOTE PURCHASE AGREEMENT NOTE PURCHASE AGREEMENT
Exhibit 10.8
This NOTE PURCHASE AGREEMENT (this “Agreement”) is entered into as of ____, 2016, among Ecosphere Technologies, Inc., a Delaware corporation (“Ecosphere”), Ecosphere Development Company LLC, a Washington limited liability company (the “Company” or “EDC”), and _________________, a Delaware limited liability company (the “Investor”).
The Company, a wholly-owned subsidiary of Ecosphere, is seeking to engage in the business of developing turn-key growing facilities (each a “Facility”) and intends to lease such facilities to legal, licensed I-502 growers (each a “Grower”) in the State of Washington (the “Business”) and is seeking to raise between one and five million dollars to implement its Business Plan (as defined below) by issuing a series of senior secured promissory notes. The Investor wishes to purchase, and the Company wishes to sell to the Investor, the first $1,000,000 of such notes on the terms and conditions set forth in this Agreement.
ARTICLE I
1.1
“Affiliate” means, with respect to any Person, any Person directly or indirectly controlling, controlled by, or under common control with such Person.
“Ancillary Agreements” means the Note, the Security Agreement, the Business Consulting Agreement and the other agreements entered into by the Company and the Investor or its Affiliates pursuant to or in connection with this Agreement.
“Balance Sheet” means the pro forma opening balance sheet of the Company as of the date hereof.
“Business Consulting Agreement” means the Business Consulting Agreement of even date herewith between the Investor and the Company.
“Business Days” means a day other than a Saturday, Sunday or other day on which commercial banks in New York, New York, are authorized or required to close.
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“Business Plan” means GG’s Business Plan and attached to this Agreement as Exhibit A.
“Code” means the Internal Revenue Code of 1986, as amended.
“Company Material Adverse Effect” means any event, state of facts, circumstance, development, change, effect or occurrence that is or could reasonably be expected to be materially adverse (i) to the business, financial condition, results of operations or prospects of the Company or (ii) to the ability of the Company to timely perform any of its obligations under this Agreement.
“Grower Agreements” means the Sublease Agreement (the “Sublease”), Equipment Lease Agreement, Technology License Agreement and Consulting Services Agreement, each dated June 22, 2016, and between the Company and Galaxy Xxxxxx, LLC, a Washington limited liability company (“GG”), and the other agreements listed on Schedule 5.11 and identified thereon as the Grower Agreements, in each case as amended.
“Lien” means, with respect to any asset, any mortgage, lien, pledge, charge, security interest, restriction or encumbrance of any kind in respect of such asset.
“Note” means the Senior Secured Promissory Note of even date herewith issued by the Company in favor of the Investor.
“Person” means an individual, corporation, partnership, association, trust or other entity or organization, including a government or political subdivision or an agency or instrumentality thereof.
“Security Agreement” means the Security Agreement of even date herewith issued by the Company in favor of the Investor.
“Subsidiary” means, with respect to any Person, any corporation, limited liability company, limited partnership or other entity of which securities or other ownership interests having ordinary voting power to elect a majority of the board of directors or other persons performing similar functions (or, if there are no such voting interests, more than 50% of its equity interests) are at the time, directly or indirectly owned by such Person.
“to the Knowledge of the Company” and words of similar import means the knowledge of Xxxxxx XxXxxxx, Xx., Xxxxxx XxXxxxx, Xx., Xxxxx XxXxxxx, Xxxxxxx Xxxx, Xxxxx Xxxxxx and Xxxxxxxx Xxxxxxxx.
ARTICLE II
2.1
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ARTICLE III
3.1
ARTICLE IV
4.1
4.2
Closing Deliveries. At or before the Closing:
(a)
Ecosphere, the Company and the Investor shall have executed and delivered this Agreement and the Company and the Investor shall have executed and delivered the Note, the Security Agreement and the Business Consulting Agreement.
(b)
The Company will pay the legal fees incurred by the Investor in connection with the transactions being consummated under this Agreement, not to exceed $10,000.
(c)
The Investor shall have received an opinion of counsel with respect to (i) the good standing of Ecosphere and the Company in their respective jurisdictions of organization, (ii) the due authorization, execution and delivery of this Agreement and of each of the Ancillary Agreements by each of Ecosphere and the Company and (iii) the validity and enforceability against Ecosphere and the Company of this Agreement and of each of the Ancillary Agreements in accordance with their terms.
4.3
Conditions to the Obligations of the Parties at the Closing. The obligations of the Company and the Investor to consummate the transactions contemplated at the Closing are subject to the satisfaction of the following conditions:
(a)
No court, arbitrator or governmental body, agency or official shall have issued any order, and there shall not be any statute, rule or regulation, restraining the effective operation by the Company of the Business after the Closing Date and no proceeding challenging this Agreement or the transactions contemplated hereby or seeking to prohibit, alter, prevent or materially delay the Closing shall have been instituted or threatened by any Person before any court, arbitrator or governmental body, agency or official;
(b)
Each of the parties to this Agreement shall have executed and delivered to the other parties thereto each of the Ancillary Agreements to be entered into by it at the Closing;
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(c)
The parties shall have executed and delivered to the appropriate parties any other instruments, documents and certificates that are required to be delivered pursuant to
this Agreement or as may be reasonably requested by any party in order to consummate the Closing;
(d)
All of the Required Consents as defined in Section 5.2(b), in each case in form and substance reasonably satisfactory to the Company and the Investor, shall have been received and no such consent, authorization or approval shall have been revoked; and
(e)
All sales, use, transfer, stamp, documentary and other similar Taxes and recording and filing fees, if any, incurred in connection with the transactions contemplated by this Agreement shall have been paid or mutually acceptable provisions for their payment shall have been made.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF ECOSPHERE AND THE COMPANY
Except as specifically set forth in the disclosure schedules dated as of the Closing Date and delivered herewith to the Investor (which disclosure schedules identify the section and subsection to which each disclosure therein relates), Ecosphere and the Company hereby jointly and severally represent and warrant to the Investor as of the Closing Date that:
5.1
Organization, Existence and Authorization. (a) Ecosphere is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware and has all corporate powers and all material governmental licenses, authorizations, consents and approvals required to carry on its business as now conducted. The Company is a limited liability company duly organized, validly existing and in good standing under the laws of the State of Washington and has all limited liability company powers and all material governmental licenses, authorizations, consents and approvals required to carry on its business as now conducted, except as provided on Schedule 5.1. Complete, correct and current copies of the Company’s certificate of formation and operating agreement have been delivered to the Investor.
(b) The execution, delivery and performance by Ecosphere and by the Company of this Agreement and any Ancillary Agreement to which Ecosphere and/or the Company is a party and the consummation by Ecosphere and the Company of the transactions contemplated hereby and thereby are within the corporate and/or limited liability company powers of each such entity and have been duly authorized by all necessary action on their part. This Agreement and each Ancillary Agreement to which Ecosphere and/or the Company is a party has been duly executed and delivered by Ecosphere and/or the Company, as applicable, and constitutes its valid and binding agreement, enforceable against it in accordance with its terms, except as may be limited by bankruptcy, insolvency, reorganization, moratorium and other similar laws and equitable principles related to or limiting creditors’ rights generally and by the availability of equitable remedies and defenses.
5.2
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to which it is a party require no action by or in respect of, filing with, or notice to, any governmental body, agency, official or authority.
(b)
Except as set forth in Schedule 5.2, no notice to, consent, approval, waiver or other action (a “Required Consent”) by any Person (other than any governmental body, agency, official or authority referred to in (a) above) under any contract, agreement, indenture, lease, instrument or other document to which Ecosphere and/or the Company is a party or by which it is bound is required or necessary for the execution, delivery and performance by Ecosphere and/or the Company of this Agreement and each Ancillary Agreement to which it is a party, or for the consummation by Ecosphere and/or the Company of the transactions contemplated hereby or thereby.
5.3
5.4
Subsidiaries. The Company has no Subsidiaries.
5.5
Financial Statements and Capital Expenditures. (a) The Company has previously delivered to the Investor a pro-forma Balance Sheet as of the Closing Date, assuming the consummation of the transactions contemplated hereunder.
(b)
The Balance Sheet fairly presents the pro-forma financial position of the Company as of its date.
5.6
Absence of Activity. Except as set forth on Schedule 5.6, the Company has not engaged in any activity since its formation.
5.7
Personal Property. The Company does not own any personal property.
5.8
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(b)
Each of the Lease and the Sublease is valid, binding and enforceable in accordance with its terms (except as may be limited by bankruptcy, insolvency, reorganization, moratorium and other similar laws and equitable principles related to or limiting creditors’ rights or lessees’ rights generally and by the availability of equitable remedies and defenses or by person including a government entity raising the application of the federal laws referred to on Schedule 5.3). There does not exist under the Lease or the Sublease any default by Ecosphere or the Company, or to the Knowledge of Ecosphere or the Company, by any other Person or any event that, with notice or lapse of time or both, would constitute a default by Ecosphere or by any other Person. All rent and other charges currently due and payable under the Lease have been paid.
(c)
Ecosphere is the holder of the lessee’s interest under the Lease and neither has assigned the Lease nor subleased all or any portion of the premises leased thereunder, except pursuant to the Sublease. Ecosphere has not made any alterations, additions or improvements to the premises leased under the Lease that are required to be removed (or of which lessor could require removal) at the termination of the Lease term.
5.9
5.10
5.11
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Company and Ecosphere has fulfilled all of its obligations required pursuant to each Contract referred to above to have been performed by each of them. Neither Ecosphere nor the Company is in default or breach, nor to the Company’s Knowledge is any third party in default or breach, under or with respect to any such Contract.
5.12
5.13
(b)
Schedule 5.13 correctly describes each governmental license, permit, concession or franchise (a “Company Permit”) material to the Company or the Business, together with the name of the governmental agency or entity issuing such Company Permit. The Company Permits have been issued to the Company and are valid and in full force and effect. The Company is not in default of any such Company Permit, and the Company has not committed, and will not commit, any act or omission which would cause any such Company Permit to be revoked.
5.14
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indirect interest in any property, asset or right that is used by the Company in the conduct of the Business and (C) no Interested Person has any contractual relationship (including that of creditor or debtor) with the Company other than such relationships as result solely from being an officer, director or member of the Company.
5.16
5.17
Projections. The financial projections relating to the Company set forth in Schedule 5.17 (the “Projections”) were prepared in good faith and are based on assumptions that were reasonable when made and are reasonable on the date hereof and the Company is not aware of any reason why the Projections would not be attainable.
5.18
5.19
5.20
5.21
I-502 Status. Neither Ecosphere nor the Company nor Xxxxxx XxXxxxx, Xx. is, or will take any action that would cause it to become, a “party in interest”, as that term is defined in WAC 000-00-000 of the laws of the State of Washington.
ARTICLE VI
POST-CLOSING ACTIVITIES OF THE COMPANY
(b) Ecosphere will use all commercially reasonable best efforts to maintain the Grower Agreements in effect through their respective stated termination dates. Ecosphere will not
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initiate any of its enforcement rights under or amend any of the Grower Agreements, or take any action with respect to the Grower Agreements that could reasonably be expected to adversely affect the Investor’s expected financial returns under the Ancillary Agreements, without the prior written consent of the Investor.
(c) The Company covenants that it is conducting and will conduct its business and operations in compliance with all applicable laws, including without limitation the provisions of RCW 69.50 of the laws of the State of Washington and WAC 314-55 of the Regulations of the State of Washington, except as provided on Schedule 6.1(c), and will maintain all Company Permits and not cause a default under any Company Permit.
(d) If the Company fails to make any payment to the Investor required by any agreement between them inluding the Note, the Company covenants that it will not enter into any agreement, loan, lease, royalty agreement or other transaction between the Company and (i) any Interested Person or (iii) any entity in which an Interested Person has any direct or indirect interest, in each case without the prior written consent of the Investor.
(e) If the Company fails to make any payment to the Investor required by any agreement between them inluding the Note, the Company covenants that it will not make or effect, and Ecosphere covenants that it will not accept, any distributions or dividends to Ecosphere or any owner of the Company without the prior written consent of the Investor.
ARTICLE VII
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contemplated by GG’s Business Plan or the Grower Agreements infringes or violates, or constitutes a misappropriation of any Intellectual Property rights of any third party. Neither the negotiation, execution, delivery or performance of this Agreement, the Ancillary Agreements or the Grower Agreements, nor the consummation of the transactions contemplated hereby or thereby, will result in (i) a material breach of or material default under any agreement governing any such Intellectual Property or (ii) the Company or the Grower being obligated to pay any penalty or new or increased royalty or fee to any Person.
ARTICLE VIII
(i)
enter into, engage in, carry on, be or have any interest in, render services to or be employed by or consult with any business substantially similar to or directly or indirectly competitive with the Business;
(ii)
actively induce any Grower, supplier or any other party with whom the Company does business to refuse to do business with the Company;
(iii)
actively solicit for engagement or employment, or hire, engage or employ, or assist any company or business organization by which he/she is employed or which is directly or indirectly controlled by him/her to hire, engage or employ, any GG employee or intentionally interfere with or disrupt the contract or relationship between the Company and/or GG and any Company or GG employee; provided, however, Xxxxxx XxXxxxx Xx. may continue working as an employee of or work as a consultant to Ecosphere and EDC as long as it does materially interfere with his duties for GG; or
(iv)
engage in any conduct that involves the making or publishing of written or oral statements or remarks (including, without limitation, the repetition or distribution of derogatory rumors, allegations, negative reports or comments) that are disparaging, deleterious or damaging to the integrity, reputation or good will of the Company, the Investor or their respective officers, directors and members.
Provided, however, nothing contained in this Section 8.1 shall affect the ability of Ecosphere, Xxxxxx XxXxxxx, Xx., or the Company to enter into agreements with third-parties to provide services similar to or engage in business competitive with the Business on other facilities which are not financed by the Investor under this Agreement, so long as such activities do not adversely affect the Company’s performance of its obligations under this Agreement or the Ancillary Agreements.
8.2
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or is required to be disclosed by applicable law. In the event that Ecosphere, Xxxxxx XxXxxxx Xx. or the Company is required by law or regulation or requested by any governmental agency or other regulatory authority or in connection with any legal proceedings to disclose any such confidential information, it will take reasonable efforts to promptly advise the Investor of any inquiry or demand for such information, unless such notification shall be prohibited by applicable law or legal process, so that the Investor may seek an appropriate protective order or other appropriate remedy and/or waive compliance with the provisions of this Section. If, in the absence of a protective order, Ecosphere, Xxxxxx XxXxxxx Xx. or the Company is nonetheless legally compelled to disclose such confidential information, it will furnish only that portion of the confidential information which is legally required; provided, however, that Ecosphere, Xxxxxx XxXxxxx Xx. or the Company, as applicable, shall give the Company written notice of the information to be disclosed as far in advance of its disclosure as is practicable and use all reasonable efforts to obtain assurances that confidential treatment will be accorded to such information. Nothing contained in this Section 8.2 shall prevent Ecosphere from publicly disclosing the transactions contemplated by this Agreement and Ancillary Agreements or filing such agreements with the Securities and Exchange Commission, in each case to the extent required by law.
8.3
(a) In the event any court of competent jurisdiction determines that the specified time period or geographical area set forth in Sections 8.2 is unenforceable because such time period or geographical area is unreasonable, arbitrary or against public policy, then a lesser time period or geographical area that is determined by the court to be reasonable, non-arbitrary and not against public policy shall be enforced.
(b)
In the event Ecosphere, Xxxxxx XxXxxxx Xx. or the Company violates any legally enforceable provision of Section 8.1(a) as to which there is a specific time period during which it is prohibited from taking certain actions or engaging in certain activities, then, in such event, the violation will toll the running of such time period from the date of the violation until the violation ceases.
8.4
(b) In the event the Company or Ecosphere seeks to raise capital to engage in a business similar to the Business which will operate on the six acre parcel located in Xxxxxx County,
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Washington leased to the Company, it will provide reasonable notification to the Investor of such activity and an opportunity for the Investor to participate in such capital raise if it should desire to do so.
8.5
Mutual Covenants. The parties hereto agree that:
(a)
Reasonable Best Efforts. Subject to the terms and conditions of this Agreement, each party will use its commercially reasonable best efforts to take, or cause to be taken, all actions and to do, or cause to be done, all things necessary or desirable under applicable laws and regulations to consummate the transactions contemplated by this Agreement and the Ancillary Agreements. Each party hereto agrees to execute and deliver such other documents, certificates, agreements and other writings and to take such other actions as may be necessary or desirable in order to consummate or implement expeditiously the transactions contemplated by this Agreement.
(b)
(c)
ARTICLE IX
9.1
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certificate or other writing delivered pursuant hereto or in connection herewith shall survive the Closing so long as they have applicability.
9.2
(i)
any misrepresentation or breach of a representation or warranty made by Ecosphere and/or the Company pursuant to the provisions of this Agreement or any Ancillary Agreement;
(ii)
any breach of any covenant or agreement made by Ecosphere, and/or the Company pursuant to this Agreement or any Ancillary Agreement; and/or
(iii)
Ecosphere’s and/or the Company’s fraud or intentional misstatements.
9.3
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Indemnified Party upon delivery of a notice of such claim from the Indemnified Party to the Indemnifying Party.
(b)
In the event an Indemnified Party should have a claim for indemnification that does not involve a claim or demand being asserted by a third party, the Indemnified Party shall promptly send notice of such claim to the party from which indemnification is sought. If the Indemnifying Party does not dispute such claim within fifteen (15) days, the Indemnifying Party shall pay such claim in full within fifteen (15) days. If the Indemnifying Party disputes such claim, such dispute shall be resolved by agreement of the parties or in accordance with Section 10.11.
9.4
ARTICLE X
10.1
if to the Investor, to:
________________
________________
________________
with a copy to
________________
________________
if to Ecosphere, Xxxxxx XxXxxxx Xx. or the Company, to:
Ecosphere Technologies, Inc.
0000 X.X. Xxxxxx Xxxxxxx
Xxxxxx, XX 00000
Attn: Xxxxxx XxXxxxx, Xx.
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with a copy to (which shall not constitute notice):
Xxxxx Xxxxxx Xxxxxx Xxxxx & Xxxxx, P.A.
0000 XXX Xxxxxxxxx, Xxxxx 000
Xxxx Xxxxx Xxxxxxx, XX 00000
Attn: Xxxxxxx X. Xxxxxx, Esq.
Email: xxxxxxx@xxxxxxxxxxx.xxx
Such information may be changed, from time to time, by means of a notice given in the manner provided in this Section 10.1.
10.2
(b)
No failure or delay by any party hereto in exercising any right, power or privilege hereunder shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided by law.
10.3
10.4
10.5
10.6
Governing Law. This Agreement and the Ancillary Agreements shall be construed in accordance with and governed by the law of the State of Washington, without regard to the conflicts of law rules of such state.
10.7
10.8
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10.9
10.10
Jurisdiction. Any action or proceeding seeking to enforce any provision of, or based on any right arising out of, this Agreement may be brought against any of the parties in the Washington State Courts located within Seattle, Washington, or in the United States District Court located therein, and each of the parties hereby irrevocably agrees to the jurisdiction of such courts (and of the appropriate appellate courts) in any such action or proceeding and waives any objection to venue laid therein. Process in any such action or proceeding may be served on any party anywhere in the world, whether within or without the state in which the action is brought.
10.11
(b)
The parties shall attempt in good faith to resolve any dispute arising out of or relating to this Agreement promptly by negotiation between individuals who have authority to settle the controversy. Either party may give the other party written notice of any dispute. Within ten (10) Business Days after delivery of the notice, the receiving party shall submit to the other a written response. The notice and response shall include (i) a statement of each party’s position and a summary of arguments supporting that position, and (ii) the name and title of the individual who will represent that party and of any other persons who will participate in the dispute resolution. Within ten (10) Business Days after delivery of the disputing party’s notice, the identified representatives of both parties shall meet at a mutually acceptable time and place, and thereafter as often as they reasonably deem necessary to attempt to resolve the dispute. All reasonable requests for information made by one party to the other will be honored. All negotiations pursuant to this clause are confidential and shall be treated as compromise and settlement negotiations for purposes of the Federal Rules of Evidence and state rules of evidence. If the matter has not been resolved within thirty (30) Business Days of the disputing party’s notice, or if the parties fail to meet within ten (10) Business Days of such notice, unless mutually agreed between the parties to extend such terms, either party may initiate mediation of the controversy or claim as provided hereinafter.
(c)
If the dispute resolution procedures provided for in subsection (b) do not result in a mutually agreed upon resolution of the dispute, the parties hereby agree to attempt to resolve the dispute through nonbinding mediation, within a period of thirty (30) Business Days after either party requests mediation, in accordance with The Center for Public Resources Mediation Procedure then in effect, except where that procedure conflicts with the provisions of this Section, in which case these provisions control. Each party shall have the right to meet and interview the potential mediator(s) for no more than one hour each prior to the selection of a
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mediator. The mediation shall be conducted in Xxx Xxxx, Xxx Xxxx, Xxxx Xxxx Xxxxx, Xxxxxxx, or another mutually agreed upon location and shall be attended by individuals with authority to resolve the dispute from each party. If the parties have submitted the dispute to mediation and are unable to resolve the dispute through mediation within sixty (60) days after the commencement of mediation, the parties shall be free to pursue their judicial remedies.
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| Ecosphere Technologies, Inc. | |
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| Name: | Xxxxxx XxXxxxx, Xx. |
| Title: | President |
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| Ecosphere Development Company LLC | |
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| Name: | Xxxxxx XxXxxxx CEO of the sole member |
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| Xxxxxx XxXxxxx, Xx. | |
| (Solely with respect to Article VIII) |
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