Exhibit 10.11
SUBSCRIPTION AGREEMENT AND INVESTMENT AGREEMENT
EARTH SCIENCES, INC.
THE SECURITIES OFFERED HEREBY HAVE NOT BEEN REGISTERED WITH THE UNITED
STATES SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY
STATE. THESE SECURITIES MAY NOT BE OFFERED OR SOLD UNLESS THE SECURITIES ARE
REGISTERED UNDER THE ACT, OR AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF
THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), IS AVAILABLE. THIS
SUBSCRIPTION AGREEMENT SHALL NOT CONSTITUTE AN OFFER TO SELL NOR A SOLICITATION
OF AN OFFER TO BUY THE SECURITIES IN ANY JURISDICTION IN WHICH SUCH OFFER OR
SOLICITATION WOULD BE UNLAWFUL.
This Subscription Agreement and Investment Agreement (the "Agreement") is
executed by the undersigned (the "Subscriber") in connection with the offer and
the subscription of the undersigned to purchase an aggregate of $1,000,000 of
10% Convertible Debentures (the "Debentures") of Earth Sciences, Inc., a
Colorado corporation (the "Company"), at a price of $1,000,000. The terms and
provisions of the Debentures are set forth in the form of Debenture certificate
attached hereto as Exhibit A. The Debentures are convertible into shares of the
Company's $0.01 par value Common Stock (the "Stock") as provided for in Exhibit
A. The Subscriber, in order to induce the Company to enter into the transaction
contemplated hereby and acknowledging that the Company will rely thereon
represents, warrants and agrees as follows:
1. Offer to Subscribe; Purchase Price. The Subscriber hereby offers to
purchase and subscribes for the Debentures for an aggregate price of
$1,000,000. The closing of the transaction contemplated hereby (the
"Closing") shall be deemed to occur when this Agreement has been executed
by both Subscriber and Company. Payment shall be made at the Closing by
delivering immediately available funds in United States dollars by wire
transfer for simultaneous closing by delivery of securities versus payment.
The Company agrees to deliver certificates representing the Debentures
subscribed for at the Closing. The date on which the Closing occurs is
hereafter referred to as the Closing Date.
2. Subscriber Representations and Warranties. The Subscriber hereby
represents and warrants to the Company as follows:
(a) the Subscriber has a net worth, i.e. total assets in excess
of total liabilities, not less than $2,500,000;
(b) the Subscriber's overall commitment to investments that are
not readily marketable is not disproportionate to the Subscriber's net
worth, and the Subscriber's investment in the Company will not cause
such overall commitment to become excessive;
(c) the Subscriber has the financial ability to bear the economic
risk of this investment, has adequate means of providing for the
Subscriber's current needs and personal contingencies, and has no need
for liquidity in this investment in the Company;
(d) the Subscriber's annual gross income during the last two tax
years and the Subscriber's anticipated annual gross income during the
current tax year are in excess of $150,000;
(e) the Subscriber has the requisite knowledge and experience in
financial and business matters for properly evaluating the risks of an
investment in the Company;
(f) the Subscriber has received:
i. the most recent Form 10-KSB of the Company;
ii. the most recent Form 10-QSB of the Company;
iii. any Form SR's filed by the Company during the one year
prior to this Agreement;
iv. all information reasonably requested by the Subscriber;
and
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(g) the Subscriber has evaluated the risks of investing in the
Company;
(h) the Subscriber has been given the opportunity to ask
questions of, and to receive answers from, the Company concerning the
terms and conditions of the offering and to obtain additional
information necessary to verify the accuracy of the information
contained in the information described in subparagraph (f) above, or
such other information as the Subscriber desired in order to evaluate
an investment in the Company;
(i) the residence of the Subscriber set for below is the true and
correct residence of the Subscriber, the Subscriber has no present
intention of becoming a resident or domiciliary of any other state or
jurisdiction;
(j) in making a decision to invest in the Company, the Subscriber
has relied solely upon independent investigations made by the
Subscriber, and the particular tax consequences arising from an
investment in the Company will depend upon the Subscriber's individual
circumstances;
(k) the Subscriber understands that an investment in the Company
involves certain risks of which the Subscriber has taken full
cognizance, and which risks the Subscriber fully understands;
(l) the Subscriber understands that (i) the Debentures and the
Stock are speculative investments that involve a risk of loss by the
Subscriber; and (ii) the Company and Affiliates of the Company may
perform services on behalf of the Company and may receive substantial
fees, distributions and compensation for performing such services;
(m) the Debentures and the Stock subscribed for in this Agreement
are being acquired by the Subscriber in good faith solely for the
Subscriber's own personal account, for investment purposes only, and
are not being purchased with a view to, or for the resale or
distribution thereof. Further, the Subscriber plans to acquire the
Debentures and the Stock as an investment and without any intent to
transfer or assign the same to third parties, and the Subscriber will
hold the Debentures and the Stock as an investment;
(n) the Subscriber understands that neither the Debentures nor
the Stock have been registered under the Act and agrees that the Stock
may not be sold, offered for sale, transferred, pledged, hypothecated
or otherwise disposed of except in compliance with the Securities Act
of 1933 (the "Act") and that any certificate representing the
Debentures or the Stock will bear a legend to such effect;
(o) the Subscriber understands that no federal or state agency
has made any finding or determination as to the fairness for
investment, or any recommendation or endorsement, of the Company or of
the Debentures or the Stock;
(p) the Subscriber owns no stock, either of record or
beneficially, of the Company or an affiliate thereof, except as set
forth below. The Subscriber owns 463,666 shares of stock of the
Company;
(q) all of the representations and warranties of the Subscriber
contained in this Agreement and all information furnished by the
Subscriber to the Company are true, correct and complete in all
respects; and
(r) the Subscriber will be the sole party in interest in the
Debentures and the Stock to be acquired by the Subscriber and as such
will be vested with all legal and equitable rights in such
subscription.
The foregoing representations, warranties, agreements, undertakings and
acknowledgments are made by the Subscriber with the intent that they be relied
upon in determining the Subscriber's suitability as a purchaser of the
Debentures and the Stock, and the Subscriber agrees that those representations,
warranties, agreements, undertakings and acknowledgments shall survive this
Agreement. In addition, the Subscriber undertakes to notify the Company
immediately of any change in any representation, warranty or other information
relating to the Subscriber set forth in this Agreement.
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If more than one person is executing this Agreement, each representation,
warranty and undertaking in this Agreement shall be a joint and several
representation, warranty and undertaking of each such person. If the Subscriber
is a partnership, corporation, trust or other entity, the Subscriber further
represents and warrants that (a) the Subscriber has enclosed with this Agreement
appropriate evidence of the authority of the individual executing this Agreement
to act on behalf of the Subscriber, and (b) the Subscriber was not specifically
formed to acquire the Stock subscribed for in this Agreement.
3. The Company Represents, Covenants and Warrants the following:
a) Reporting Company Status. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the
State of Colorado and is duly qualified as a foreign corporation in
all jurisdictions in which the failure to so qualify would have a
material adverse effect on the Company and its subsidiaries taken as a
whole. The Company has registered its Common Stock pursuant to Section
12 of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and the Stock is listed and trades on the NASDAQ Small
Capitalization Market System. The Company has filed all material
required to be filed pursuant to all reporting obligations under
either Section 13(a) or 15(d) of the Exchange Act for a period of at
least twelve (12) months immediately preceding this offer or sale of
the Debentures (or for such shorter period that the Company has been
required to file such material).
(b) Concerning the Debentures. The issuance, sale and delivery of
the Debentures and the shares of Stock issuable upon the conversion
thereof are within the Company's corporate powers and have been duly
authorized by all required corporate action on the part of the Company
and its stockholders and when such securities are issued, sold and
delivered in accordance with the terms hereof and the Debentures for
the consideration expressed herein and in the Debentures, such
securities will be duly and validly issued, fully paid and
nonassessable. There are no preemptive rights of any shareholders of
the Company.
(c) Subscription Agreement. This Agreement has been duly
authorized, validly executed and delivered on behalf of the Company
and is a valid and binding agreement enforceable against the Company
in accordance with its terms, subject to general principles of equity
and to bankruptcy or other laws affecting the enforcement of
creditors' rights generally,
(d) Non-contravention. The execution and delivery of this
Agreement and the consummation of the issuance of the Debentures and
the transactions contemplated by this Agreement and the Debentures do
not and will not conflict with or result in a breach by the Company of
any of the terms or provisions of, or constitute a default under, the
articles of incorporation or by-laws of the Company, or any indenture,
mortgage, deed of trust, or other material agreement or instrument to
which the Company is a party or by which it or any of its properties
or assets are bound, or any existing applicable law, rule or
regulation of the United States of any State there of or any
applicable decree, judgment or order of any Federal or State court,
Federal or State regulatory body, administrative agency or other
United States governmental body having jurisdiction over the Company
or any of its properties or assets.
(e) Litigation. Except as indicated in the SEC Filings, there is
no action, suit or proceeding before or by any court or governmental
agency or body, domestic or foreign, now pending or, to the knowledge
of the Company, threatened, against or affecting the Company, or any
of its properties, which might result in any material adverse change
in the condition (financial or otherwise) or in the earnings, business
affairs or business prospects of the Company, or which might
materially and adversely affect the properties or assets thereof.
(f) No Default. The Company is not in default in the performance
or observance of any material obligation, agreement, covenant or
condition contained in any indenture, mortgage, deed of trust or other
material instrument or agreement to which it is a party or by which it
or its property may be bound; and neither the execution, nor the
delivery by the Company, nor the performance by the Company of its
obligations under this Agreement or the Debentures will conflict with
or result in the breach or violation of any of the terms or provisions
of, or constitute a default or result in the creation or imposition of
any lien or charge on any assets or properties of the Company under,
any material indenture, mortgage, deed of trust or other material
agreement or instrument to which the Company is a party or by which it
is bound or any statute or the Articles of Incorporation or Bylaws of
the Company, or any decree, judgment, order, rule or regulation of any
court or governmental agency or body having jurisdiction over the
Company or its properties.
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(g) SEC Filings. None of the Company's filings with the
Securities and Exchange Commission since January 1, 1996, contains any
untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statement
therein in light of the circumstances under which they were made, not
misleading. The Company has since January 1, 1996 timely filed all
requisite forms, reports and exhibits thereto with the Securities and
Exchange Commission.
(h) Full Disclosure. There is no fact known to the Company (other
than general economic conditions known to the public generally) that
has not been disclosed in writing to the Subscriber that (i) could
reasonably be expected to have a material adverse effect on the
condition (financial or otherwise) or in the earnings, business
affairs, business prospect, properties or assets of the Company or
(ii) could reasonably be expected to materially and adversely affect
the ability of the Company to perform its obligations pursuant to this
Agreement.
4. Covenants of the Company. For so long as any Debentures held by the
Subscriber remain outstanding, the Company covenants and agrees with the
Subscriber that:
(a) It will maintain the listing of its Stock on the NASDAQ Small
Capitalization Market System.
(b) It will permit the Subscriber to exercise its right to
convert the Debentures by telecopying an executed and completed Notice
of Conversion to the Company and delivering the original Notice of
Conversion and the certificate representing the Debentures to the
Company by express courier. Each date on which a Notice of Conversion
is telecopied to and received by the Company in accordance with the
provisions hereof shall be deemed a conversion date. The Company will
transmit the certificates representing shares of Stock issuable upon
conversion of any Debentures (together with the certificates
representing the Debentures not so converted) to the Subscriber via
express courier, by electronic transfer or otherwise within five
business days after the conversion date if the Company has received
the original Notice of Conversion and Debentures certificate being so
converted by such date. In addition to any other remedies which may be
available to the Subscriber, in the event that the Company fails for
any reason to effect delivery of such shares of Common Stock within
such five business day period, the Subscriber will be entitled to
revoke the relevant Notice of Conversion by delivering a notice to
such effect to the Company whereupon the Company and the Subscriber
shall each be restored to their respective positions immediately prior
to delivery of such Notice of Conversion.
5. Reliance on Representations. THE SUBSCRIBER UNDERSTANDS THAT THE
OFFER AND SALE OF THE DEBENTURES OR THE STOCK HAS NOT BEEN REGISTERED UNDER
THE ACT OR UNDER ANY APPLICABLE STATE SECURITIES LAWS. THE DEBENTURES AND
THE STOCK MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION OR QUALIFICATION UNDER THE ACT AND ANY APPLICABLE STATE
SECURITIES LAWS, OR AN OPINION OF COUNSEL, ACCEPTABLE TO THE COMPANY, THAT
SUCH REGISTRATION IS NOT REQUIRED.
NEITHER THE DEBENTURES NOR THE STOCK HAVE BEEN APPROVED OR DISAPPROVED
BY THE SECURITIES AND EXCHANGE COMMISSION. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
6. Resales of Debentures. Subscriber acknowledges and agrees that the
Debentures may only be resold (a) pursuant to a Registration Statement
under the Act; or (b) pursuant to an exemption from registration under the
Act. Subscriber further acknowledges and agrees that the Debentures may not
be resold or otherwise transferred without the express written consent of
the Company, such consent not to be unreasonably withheld or delayed.
7. Confidentiality. Each of the Company and the Subscriber agrees to
keep confidential and not to disclose to or use for the benefit of any
third party the terms of this Agreement or any other information which at
any time is communicated by the other party as being confidential without
the prior written approval of the other party; provided, however, that this
provision shall not apply to information which, at the time of disclosure,
is already part of the public domain (except by breach of this Agreement)
and information which is required to be disclosed by law.
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8. Indemnification. Each of the Company and the Subscriber agrees to
indemnify the other and to hold the other harmless from and against any and
all losses, damages, liabilities, costs and expenses (including reasonable
attorneys' fees) which the other may sustain or incur in connection with
the breach by the indemnifying party of any representation, warranty or
covenant made by it in this Agreement.
9. Registration. The Company agrees to file, at its expense, a
registration statement with respect to the offering and sale or other
disposition of the shares of Stock underlying the Debentures within six (6)
months after the conversion of all the Debentures into Stock and shall use
its best efforts to cause such registration statement to become effective
as soon as practicable thereafter. Such best efforts shall include, but not
be limited to, promptly responding to all comments received from the staff
of the Securities and Exchange Commission, providing Subscriber's counsel
with a contemporaneous copy of all written communications from and to the
staff of the Securities and Exchange Commission with respect to such
registration statement and promptly preparing and filing amendments to such
registration statement which are responsive to the comments received from
the staff of the Securities and Exchange Commission. Once declared
effective by the Securities and Exchange Commission, the Company shall
cause such registration statement to remain effective until the earlier of
(i) the sale by the Subscriber of all shares of Common Stock so registered
or (ii) 360 days after the effective date of such registration statement.
10. Notices. Any notice to be given or to be served upon any party to
this Agreement in connection with this Agreement must be in writing and
will be deemed to have been given and received upon confirmed receipt, if
sent by facsimile, or two (2) days after it has been submitted for delivery
by Federal Express or an equivalent carrier, charges prepaid and addressed
to the following addresses with a confirmation of delivery:
If to the Company, to:
Earth Sciences, Inc.
000 00xx Xxxxxx
Xxxxxx, Xxxxxxxx 00000
Attention: Xx. Xxxx X. XxXxxxxxx
Chief Executive Officer
Phone No: (000)000-0000
Fax No: (000)000-0000
If to the Subscriber, to:
Tectonic Construction Co.
000 Xxxxxx
Xxxxxx, XX 00000
Attention: Xxxxx X. Xxxxxxxxxx
Phone No: (000) 000-0000
Fax No: (000)000-0000
Any party may, at any time by giving notice to the other party,
designate any other address in substitution of an address established
pursuant to the foregoing to which such notice will be given.
11. Multiple Counterparts. This Agreement may be executed in several
counterpart, each of which will be deemed to be an original but all of
which will constitute one in the same instrument. However, in enforcing any
party's rights under this Agreement it will be necessary to produce only
one copy of this Agreement signed by the party to be charged.
12. Governing Law. This Agreement will be construed and enforced in
accordance with and governed by the laws of the State of Colorado, except
for matters arising under the Act, without reference to principles of
conflicts of law. Each of the parties consents to the jurisdiction of the
federal courts whose districts encompass any part of the State of Colorado
or the state courts of the State of Colorado in connection with any dispute
arising under this Agreement and hereby waives, to the maximum extent
permitted by law, any objection, including any objection based on forum non
conveniens to the bringing of any such proceeding in such jurisdictions.
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Each party hereby agrees that if another party to this Agreement obtains a
judgment against it in such a proceeding, the party which obtained such
judgment may enforce same by summary judgment in the courts of any country
having jurisdiction over the party against whom such judgment was obtained,
and each party hereby waives any defenses available to it under local law
and agrees to the enforcement of such a judgment. Each party to this
Agreement irrevocably consents to the service of process in any such
proceeding by the mailing of copies thereof by registered or certified
mail, postage prepaid, to such party at its address set forth herein.
Nothing herein shall affect the right of any party to serve process in any
other manner permitted by law.
The undersigned acknowledges that this Agreement shall not be effective
unless and until accepted by the Company as indicated below.
Dated this 12th day of June, 1997.
Tectonic Construction Company
By:/s/Xxxxxx X. Xxxxxxxxxx
----------------------------------
Name: Xxxxxx X. Xxxxxxxxxx
Title: President
THIS SUBSCRIPTION IS ACCEPTED BY THE COMPANY ON THE 12th DAY OF JUNE, 1997.
EARTH SCIENCES, INC.
By:/s/ Xxxx X. XxXxxxxxx
-----------------------------------
Name: Xxxx X. XxXxxxxxx
Title: President
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