SECURITIES SUBSCRIPTION AGREEMENT
THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE UNITED STATES
SECURITIES AND EXCHANGE COMMISSION UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "ACT"), OR THE SECURITIES COMMISSION OF ANY STATE UNDER ANY STATE
SECURITIES LAW. THEY ARE BEING OFFERED PURSUANT TO AN EXEMPTION FROM
REGISTRATION UNDER REGULATION D ("REGULATION D") PROMULGATED UNDER THE ACT. THE
SECURITIES MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED UNLESS THE
SECURITIES ARE REGISTERED UNDER THE ACT AND APPLICABLE STATE SECURITIES LAWS, OR
SUCH OFFERS, SALES AND TRANSFERS ARE MADE PURSUANT TO AVAILABLE EXEMPTIONS FROM
THE REGISTRATION REQUIREMENTS OF THE ACT AND THOSE LAWS.
THIS SUBSCRIPTION AGREEMENT DOES NOT CONSTITUTE AN OFFER TO SELL, OR A
SOLICITATION OF AN OFFER TO BUY, ANY OF THE SECURITIES OFFERED HEREBY BY OR TO
ANY PERSON IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION WOULD BE
UNLAWFUL. INVESTMENT IN THESE SECURITIES INVOLVES A HIGH DEGREE OF RISK. IN
MAKING AN INVESTMENT DECISION, INVESTORS MUST RELY ON THEIR OWN EXAMINATION OF
THE COMPANY AND THE TERMS OF THE OFFERING, INCLUDING THE MERITS AND THE RISKS
INVOLVED. THESE SECURITIES HAVE NOT BEEN RECOMMENDED BY ANY FEDERAL OR STATE
SECURITIES COMMISSION OR REGULATORY AUTHORITY. FURTHERMORE, THE FOREGOING
AUTHORITIES HAVE NOT CONFIRMED OR DETERMINED THE ACCURACY OR ADEQUACY OF THIS
DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
This Securities Subscription Agreement (the "AGREEMENT" or the
"SUBSCRIPTION AGREEMENT") is executed by __________________ (the "SUBSCRIBER")
in connection with the subscription by the Subscriber for 9% Convertible
Debentures (the "CONVERTIBLE DEBENTURES") of Environmental Solutions Worldwide,
Inc., a Florida corporation (the "COMPANY"). The Company is offering an
aggregate face amount of a minimum of $2 million and up to a maximum of $3
million (U.S.) of Convertible Debentures convertible into common stock $0.001
par value per share, of the Company ("SHARES"). The terms of the Convertible
Debentures, including the terms on which the Convertible Debentures may be
converted into Shares, are set forth in the form of Convertible Debentures
attached hereto as EXHIBIT A. The solicitation of this Subscription and, if
accepted by the Company, the offer and sale of Convertible Debentures are being
made in reliance upon the provisions of the Securities Act of 1933, as amended
(the "ACT"). The Convertible Debentures and the Shares issuable upon conversion
or exercise thereof are sometimes referred to herein as the "SECURITIES". The
Subscriber wishes to subscribe for the principal amount of the Convertible
Debentures set forth in Section 19 in accordance with the terms and conditions
of this Agreement. It is agreed as follows:
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1. OFFER TO SUBSCRIBE; PURCHASE PRICE
The Subscriber hereby offers to purchase and subscribe for the
principal amount of Convertible Debentures and at the price, set out in Section
19 of this Agreement. The Closing shall be deemed to occur when this Agreement
has been executed by both of the Subscriber and the Company (the "CLOSING") and
payment shall have been made by the Subscriber, by wire transfer, as directed in
writing by the Company on the day so directed, to an escrow agent in accord with
the Escrow Agreement (as defined in Section 6.4), against the Company's delivery
of Convertible Debentures subscribed for. If the Closing does not occur by 5PM
Eastern Daylight Time on March ___, 2010 the funds of the Subscriber shall be
returned immediately from escrow. The terms and conditions of the escrow are set
forth in an Escrow Agreement, the form of which is attached hereto as EXHIBIT B
hereto. The payment shall be made by delivering same day funds in United States
Dollars as designated above.
2. SUBSCRIBER REPRESENTATIONS; ACCESS TO INFORMATION INDEPENDENT
INVESTIGATION
The Subscriber represents and warrants to, and covenants with, the
Company, on its own behalf and on behalf of each person or entity for which the
Subscriber is acting as a fiduciary, as follows:
2.1 EXEMPT TRANSACTION. The Subscriber represents and warrants to the
Company that (i) the Subscriber is an accredited investor as the term is defined
in Rule 501(a) under the Act, (ii) the Subscriber is purchasing the Securities
for its own account and not with a view of reselling the Securities in violation
of the Securities Act, (iii) the Subscriber is not an affiliate of the Company
as the term is defined under the Act, and (iv) subscriber does not possess any
material non-public information about the Company.
2.2 INDEPENDENT INVESTIGATION. The Subscriber, in offering to subscribe
for the Securities hereunder, has relied upon an independent investigation made
by it and has, prior to the date hereof, been given access to and the
opportunity to examine all books and records of the Company, and all material
contracts and documents of the Company; PROVIDED, that such investigation shall
not affect the Subscriber's ability to rely on the accuracy of the
representations and warranties of the Company set forth herein. The Subscriber
will keep confidential all non-public information regarding the Company that the
Subscriber receives from the Company unless disclosure of such information is
compelled by a court or other administrative body or, in the opinion of the
Subscriber's counsel, to comply with applicable law. In making the investment
decision to purchase the Convertible Debentures the Subscriber is not relying on
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any oral or written representations or assurances from the Company or any other
person or any representation of the Company or any other person other than as
set forth in this Agreement, the public filings of the Company or in a document
executed by a duly authorized representative of the Company making reference to
this Agreement. The Subscriber has such experience in business and financial
matters that it is capable of evaluating the risk of its investment and
determining the suitability of its investment. The Subscriber is a sophisticated
investor, and an accredited investor as defined in Rule 501 of Regulation D. The
Subscriber has obtained and reviewed the copies of the Company's Form 10-K
Annual Report for the most recent year ended December 31, 2008, and Form 10-Q
for the most recent fiscal quarter ended September 30, 2009 and copies of all
Form 8-K Reports from the beginning of the past fiscal year to the date hereof
and is aware that the Company has continued to sustain losses.
2.3 ECONOMIC RISK. The Subscriber understands and acknowledges that an
investment in the Convertible Debentures involves a high degree of risk,
including a possible total loss of investment. The Subscriber represents that it
is able to bear the economic risk of the investment. In making this statement,
the Subscriber hereby represents and warrants that the Subscriber has adequate
means of providing for the Subscriber's current needs and contingencies; the
Subscriber is able to afford to hold the Securities for an indefinite period and
the Subscriber further represents that the Subscriber has such knowledge and
experience in financial and business matters that the Subscriber is capable of
evaluating the merits and risks of the investment in the Securities to be
received by the Subscriber. Further, the Subscriber represents that it has no
present need for liquidity in such Convertible Debentures.
2.4 NO GOVERNMENT RECOMMENDATION OR APPROVAL. The Subscriber
understands that no United States federal or state agency or similar agency of
any other country has passed upon or made any recommendation or endorsement of
the Company, this transaction or the subscription of the Securities.
2.5 NO REGISTRATION. The Subscriber understands that the Securities and
the common stock issuable upon conversion of the Convertible Debentures have not
been registered under the Act and are being offered and sold pursuant to an
exemption from registration contained in the Act based in part upon the
representations of the Subscriber contained herein.
2.6 NO PUBLIC SOLICITATION. Without conducting any independent
investigation, the Subscriber knows of no public solicitation or advertisement
of an offer in connection with the proposed issuance and sale of the Securities.
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2.7 INVESTMENT INTENT. The Subscriber is acquiring the Securities to be
issued and sold hereunder (and the Shares issuable upon conversion or exercise
as the case may be) for the Subscriber's own account (or for beneficiaries'
accounts over which the Subscriber has investment discretion). The Subscriber
has made no predetermined arrangements to sell the Convertible Debentures or
Shares. The Subscriber currently has no short position in the Shares.
2.8 INCORPORATION AND AUTHORITY. The Subscriber has the full power and
authority to execute, deliver and perform this Agreement and to perform its
obligations hereunder. This Agreement has been duly approved by all necessary
action of the Subscriber, has been executed by persons duly authorized by the
Subscriber, and constitutes a valid and legally binding obligation of the
Subscriber, enforceable in accordance with its terms.
2.9 NO RELIANCE ON TAX ADVICE. The Subscriber has reviewed with his,
her or its own tax advisors the foreign, federal, state and local tax
consequences of this investment, where applicable, and the transactions
contemplated by this Agreement. The Subscriber is relying solely on such
advisors and not on any statements or representations of the Company or any of
its agents and understands that the Subscriber (and not the Company) shall be
responsible for the Subscriber own income tax liability that may arise as a
result of this investment or the transactions contemplated by this Agreement.
2.10 INDEPENDENT LEGAL ADVICE. The Subscriber and the Company
acknowledge that each has had the opportunity to review this Agreement and the
transactions contemplated by this Agreement and has consulted with its own legal
counsel, and other advisors prior to execution of the within Agreement.
2.11 ACKNOWLEDGMENT. The Subscriber understands that the Securities are
being offered and sold to it in reliance of specific exemptions from the
registration requirements of Federal and State Securities laws and that the
Company is relying upon the truth and accuracy of the representations,
warranties, agreements, acknowledgments and understandings of the Subscriber set
forth herein in order to determine the applicability of such exemptions and the
suitability of the Subscriber to acquire the Securities.
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3. RESALES
The Subscriber acknowledges and agrees that the Securities may and will
only be resold (a) pursuant to a Registration Statement under the Act; or (b)
pursuant to an exemption from registration under the Act.
4. LEGENDS; SUBSEQUENT TRANSFER OF SECURITIES
4.1 LEGENDS. The certificate(s) representing the Convertible Debentures
shall bear a legend similar to the legend set forth below and any other legend,
if such legend or legends are reasonably required to comply with state, federal
or foreign law. Assuming that there are no changes in the material facts set
forth in Section 2 of this Agreement or applicable law from the date hereof
until the date of conversion, and subject to the Company's transfer agent's
receipt of a legal opinion from legal counsel, all certificates representing the
Shares into which the Convertible Debentures are converted shall bear a legend.
"THE CONVERTIBLE DEBENTURES OF ENVIRONMENTAL SOLUTIONS
WORLDWIDE, INC. (THE "ISSUER") REPRESENTED BY THIS CERTIFICATE
HAVE BEEN ISSUED PURSUANT TO REGULATION D, PROMULGATED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND HAVE
NOT BEEN REGISTERED UNDER THE ACT OR ANY APPLICABLE STATE
SECURITIES LAWS. THESE SHARES MAY NOT BE OFFERED OR SOLD
EXCEPT WITH AN EFFECTIVE REGISTRATION STATEMENT FOR THE SHARES
OR AN APPLICABLE EXEMPTION UNDER THE SECURITIES ACT."
5. REPRESENTATIONS, WARRANTIES AND COVENANTS OF COMPANY
The Company represents and warrants to, and covenants with, the
Subscriber as follows:
5.1 ORGANIZATION, GOOD STANDING, AND QUALIFICATION. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Florida and has all requisite corporate power and authority to
carry on its business as now conducted and as proposed to be conducted. The
Company and its subsidiaries are duly qualified to transact business and are in
good standing as foreign corporations or other entities in each jurisdiction in
which the nature of the business conducted or property owned by them makes such
qualification necessary, except where the failure to so qualify would not,
individually or in the aggregate, have a material adverse effect on the
business, condition (financial or otherwise), earnings, properties, prospects or
results of operations of the Company or any of its subsidiaries (a "MATERIAL
ADVERSE EFFECT"). The Company and its subsidiaries are not the subject of any
pending or, to their knowledge, threatened investigation or administrative or
legal proceeding by the Internal Revenue Service, the taxing authorities of any
state or local jurisdiction, or the Securities and Exchange Commission (the
"COMMISSION") or any state securities commission which have not been disclosed
in the reports referred to in Section 5.5 below.
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5.2 CORPORATE CONDITION. None of the Company's filings made with the
Commission (such filings, the "SEC REPORTS"), including, but not limited to,
those reports referenced in Section 5.5 below, contains any untrue statement of
a material fact or omits to state a material fact necessary in order to make the
statements made, in light of the circumstances under which they were made, not
misleading. There have been no material adverse changes in the Company's
business, properties, results of operations, condition (financial or otherwise)
or prospects since the date of those reports which have not been disclosed to
the Subscriber in writing; PROVIDED, that the Subscriber is aware that the
Company has continued to sustain losses since the date of the most recent Report
on Form 10-Q for the quarter ended September 30, 2009. Further, all material
non-public information (other than the specific information respecting the sale
of the Securities themselves) respecting the Company, its business and its
financial condition, as the same would be required to be disclosed in an SEC
Report or registration statement (or corresponding prospectus) if the Securities
were otherwise being registered for sale by the Company, has been so publicly
reported or disclosed prior to the sale of the Securities as contemplated
herein.
5.3 AUTHORIZATION. The transaction contemplated by this Agreement and
the Transaction Documents (as hereinafter defined) have been approved by a
majority of disinterested directors. The Company has sufficient shares of Common
Stock on a fully diluted basis for issuance upon conversion of the Convertible
Debenture. The Transaction Documents constitute valid and legally binding
obligations of the Company, enforceable in accordance with their respective
terms. "TRANSACTION DOCUMENTS" means, collectively, this Agreement, the Escrow
Agreement, the Registration Rights Agreement and the Convertible Debentures and
each of the other documents entered into or delivered by the parties hereto in
connection with the transactions contemplated by this Agreement.
5.4 VALID ISSUANCE OF CONVERTIBLE DEBENTURE AND COMMON STOCK. When
executed and delivered in accordance with the terms hereof for the consideration
expressed herein, the Convertible Debentures will have been issued in compliance
with all applicable U.S. federal securities laws. Upon issue, the Subscriber
will acquire good and marketable title to the Convertible Debentures, free and
clear of all liens, claims, encumbrances and pre-emptive rights. The Shares
issuable upon conversion of the Convertible Debentures, when issued in
accordance with the respective terms thereof, shall be duly and validly issued
and outstanding, fully paid and non-assessable, free and clear of any, liens
claims, encumbrances and pre-emptive rights, and will have been issued in
compliance with all applicable U.S. federal securities laws. Subject in part to
the truth and accuracy of the Subscriber's representations set forth in the
Subscription Agreement, the offer, sale and issuance of the Securities
contemplated by this Agreement are exempt from the registration of any
applicable securities laws, and neither the Company nor any authorized agent
acting on its behalf will take any action hereafter that would cause the loss of
such exemption.
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5.5 CURRENT PUBLIC INFORMATION. The Company represents and warrants to
the Subscriber that the Company is a "reporting issuer" and it has a class of
securities registered under Section 12(g) of the Securities Exchange Act of
1934, as amended (the "EXCHANGE ACT"), and has filed all the materials required
to be filed as reports pursuant to the Exchange Act for a period of at least
twelve (12) months preceding the date hereof (or for such shorter period as the
Company was required by law to file such material). All such reports (including,
without limitation, the SEC Reports) complied in all material respects with all
applicable requirements of Federal securities laws and the rules and regulations
promulgated thereunder. The Subscriber has obtained copies of the Company's Form
10-K Annual Report for the most recent year ended December 31, 2008 and Form
10-Q for the most recent fiscal quarter ended September 30, 2009, copies of all
Form 8-K Reports from the beginning of the Company's past fiscal year to the
date of execution of the within Agreement.
5.6 NO DIRECTED SELLING EFFORTS IN REGARD TO THIS TRANSACTION. The
Company has not, and, to the best of the Company's knowledge, neither the
Subscriber nor any distributor, if any, participating in the offering of the
Securities nor any person acting for the Company or any such distributor has
conducted any "directed selling efforts" as that term is defined under the Act.
Such activity includes, without limitation, the making of printed material
available to investors, the holding of promotional seminars, the placement of
advertisements with radio or television stations which discuss the offering of
the Securities.
5.7 NO CONFLICTS. The execution and delivery of this Agreement and the
consummation of the issuance of the Securities and the transactions contemplated
by this Agreement 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
Certificate of Incorporation or bylaws of the Company, or any indenture,
mortgage, deed of trust or other agreement or instrument to which the Company or
any of its subsidiaries is a party or by which it or any of its subsidiaries or
any of its or any of its subsidiaries' properties or assets are bound, or any
existing applicable decree, judgment or order of any court, Federal or State
regulatory body, administrative agency or other governmental body having
jurisdiction over the Company or any of its subsidiaries or any of its or any of
its subsidiaries' properties or assets.
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5.8 ISSUANCE OF SECURITIES. The Company will issue one or more
certificates representing the Convertible Debentures in the name of the
Subscriber in such denominations to be specified by the Subscriber prior to
closing. Upon conversion of the Convertible Debentures in accordance with their
terms, the Company will issue one or more certificates representing Shares in
the name of the Subscriber and in such denominations to be specified by the
Subscriber prior to conversion. The Shares to be issued upon conversion of the
Convertible Debentures shall bear restrictive legends unless subject to an
effective registration or exemption under the Act. Nothing in this section shall
affect in any way the Subscriber's obligations and agreement to comply with all
applicable securities laws upon resale of the Securities.
5.9 NO ACTION. The Company has not taken and will not take any action
that will affect in any way the Subscriber's ability to resell the Securities in
accordance with applicable securities laws.
5.10 COMPLIANCE WITH LAWS. As of the date hereof, the conduct of the
business of the Company and its subsidiaries complies (and has complied) in all
material respects with all material statutes, laws, regulations, ordinances,
rules, judgments, orders or decrees applicable thereto. The Company and its
subsidiaries have not received notice of any alleged violation of any statute,
law, regulations, ordinance, rule, judgment, order or decree from any
governmental authority. The Company shall comply with all applicable securities
laws with respect to the sale of the Securities, including, but not limited to,
the filing of all reports required to be filed in connection therewith with the
Commission or any other regulatory authority. Further, assuming the accuracy of
the representations of the Subscriber, the offer and sale by the Company of the
Securities (including, without limitation, the Shares issuable upon conversion
of the Convertible Debentures) are exempt from registration under the Securities
Act.
5.11 LITIGATION. 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
and its subsidiaries, or any of the Company or its subsidiaries assets or
properties, which could reasonably be expected, individually or in the
aggregate, to have a Material Adverse Effect.
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5.12 DISCLOSURES. 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 (a) could reasonably be expected,
individually or in the aggregate, to have a Material Adverse Effect or (b) could
reasonably be expected, individually or in the aggregate, to materially and
adversely affect the ability of the Company to perform its obligations pursuant
the Transaction Documents and the issuance of the Convertible Debentures
hereunder.
5.13 CAPITALIZATION. The Company, as of the date of the Closing, will
have authorized the number of shares of Common Stock set forth on EXHIBIT B and
outstanding the number of shares of Common Stock and Convertible Debentures set
forth on EXHIBIT B. All of the issued and outstanding shares of capital stock of
the Company and each of its subsidiaries have been duly authorized and are
validly issued, fully paid and non-assessable. No personal liability attaches to
the registered holders of the Common Stock by reason of their being registered
holders thereof.
Except as set forth on EXHIBIT B, (i) no subscription,
warrant, option, convertible security or other right (contingent or otherwise)
to purchase or acquire any shares of capital stock of the Company or any of its
subsidiaries is authorized or outstanding, (ii) neither the Company nor any of
its subsidiaries has any obligation (contingent or otherwise) to issue any
subscription, warrant, option, convertible security or other such right or to
issue or distribute to holders of any shares of its capital stock or other
equity securities any evidences of indebtedness or assets of the Company or such
subsidiary, (iii) neither the Company nor any of its subsidiaries has any
obligation (contingent or otherwise) to purchase, redeem or otherwise acquire
any shares of its capital stock (or other equity securities) or any interest
therein or to pay any dividend or make any other distribution in respect
thereof, and (iv) there are no outstanding or authorized stock appreciation,
phantom stock or similar rights with respect to the Company or any of its
subsidiaries.
All of the issued and outstanding shares of the Company's and
its subsidiaries' capital stock (or other equity securities) have been offered,
issued and sold by the Company and such subsidiaries in compliance with
applicable federal and state securities Laws.
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5.14. MATERIAL CHANGES. Except as disclosed in the SEC Reports: (i) the
Company and its subsidiaries have not incurred any material liabilities or
obligations, indirect, or contingent, or entered into any material oral or
written agreement or other transaction which is not in the ordinary course of
business or which could reasonably be expected to result in a material reduction
in the future earnings or prospects of the Company and its subsidiaries; (ii)
each of the Company and its subsidiaries have not sustained any material loss or
interference with its businesses or properties from fire, flood, windstorm,
accident or other calamity not covered by insurance; (iii) except as described
in the SEC Reports, the Company and its subsidiaries have not paid or declared
any dividends or other distributions with respect to its capital stock and
neither the Company nor any of its subsidiaries is in default in the payment of
principal or interest on any outstanding debt obligations; (iv) there has not
been any change in the capital stock of the Company or any of its subsidiaries
other than the sale of the Securities hereunder, shares or options issued
pursuant to stock option plans or purchase plans approved by the Company's Board
of Directors and repurchases of shares or options pursuant to repurchase plans
already approved by the Company's Board of Directors, or indebtedness material
to the Company or any of its subsidiaries (other than in the ordinary course of
business); and (v) there has not been any other event or change that would have,
individually or in the aggregate, a Material Adverse Effect.
5.15 FINANCIAL STATEMENTS. The consolidated financial statements of the
Company and the related notes contained in the SEC Reports present fairly, in
accordance with generally accepted accounting principles, the consolidated
financial position of the Company and its subsidiaries as of the dates
indicated, and the results of their operations, cash flows and the changes in
shareholders' equity for the periods therein specified, subject, in the case of
unaudited financial statements for interim periods, to normal year-end audit
adjustments. Such consolidated financial statements (including the related
notes) have been prepared in accordance with generally accepted accounting
principles applied on a consistent basis throughout the periods therein
specified, except that unaudited financial statements may not contain all
footnotes required by generally accepted accounting principles. The Company and
each of its subsidiaries have fully complied with the Xxxxxxxx-Xxxxx Act of
2002; however auditor attestation of the Company's compliance is not currently
required.
5.16 STABILIZATION. Neither the Company nor any of its subsidiaries has
taken, directly or indirectly, any action which was designed to or which has
constituted or which might reasonably be expected to cause or result in
stabilization or manipulation of the price of any security of the Company to
facilitate the sale or resale of the Securities, the Convertible Debentures and
the Shares issuable upon exercise of the Convertible Debentures.
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5.17 BROKERS. The Company has taken no action which would give rise to
any claim by any person for brokerage commissions, finders' fees or similar
payments by the Subscriber relating to this Subscription Agreement or the
transactions contemplated hereby.
5.18 CONSENTS. Except as to filings which may be required under
applicable state securities regulations, no consent, authorization, approval,
order, license, certificate, or permit of or from, or declaration or filing
with, any federal, state, local, or other governmental authority or of any court
or other tribunal is required by the Company or any of its subsidiaries in
connection with the transactions contemplated hereby. No consent of any party to
any contract, agreement, instrument, lease, license, arrangement, or
understanding to which the Company or any of its subsidiaries is a party, or by
which any of its properties or assets is bound, is required for the execution,
delivery, or performance by the Company of the transactions contemplated by the
Transaction Documents.
5.19 INTELLECTUAL PROPERTY. To the Company's knowledge, the Company or
its subsidiaries own, or have the right to use, all patents, trademarks, service
marks, trade names, copyrights, licenses, trade secrets or other proprietary
rights necessary to their business as now conducted without conflicting with or
infringing upon the right or claimed right of any person under or with respect
to any of the foregoing. Except for hardware and software licenses entered into
in the ordinary course of business, the Company and its subsidiaries are not
bound by or a party to any options, licenses or agreements of any kind with
respect to patents, trademarks, service marks, trade names, copyrights,
licenses, trade secrets or other proprietary rights of any other person or
entity. The Company and its subsidiaries have not received any communications
alleging that the Company or any of its subsidiaries have violated the patents,
trademarks, service marks, trade names, copyrights or trade secrets or other
proprietary rights of any other person or entity. The Company and its
subsidiaries are not aware of any violation by a third party of any of the
Company's or its subsidiaries patents, trade marks, service marks, trade names,
copyrights, trade secrets or other proprietary rights.
5.20 FOREIGN CORRUPT PRACTICES ACT. Neither the Company or any of its
subsidiaries nor any director, officer, agent, or other person acting on behalf
of the Company or any of its subsidiaries has, in the course of his or its
actions for or on behalf of the Company or any of its subsidiaries violated any
provision of the United States Foreign Corrupt Practices Act of 1977, as
amended, or the regulations there under.
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5.21 OTHER SUBSCRIPTION AGREEMENTS. The Company may simultaneously,
with the execution of this Subscription Agreement, enter into one or more
subscription agreements with other purchasers of Securities (the "OTHER
PURCHASERS") with substantially the same terms and conditions as this
Subscription Agreement; and no Other Purchaser is subscribing for any securities
of the Company on the Closing with terms and conditions different from the terms
and conditions of this Subscription Agreement.
5.22 DILUTIVE EFFECT. The Company understands and acknowledges that the
number of Shares issuable upon conversion of the Convertible Debentures will
increase in certain circumstances. Except as provided in the Convertible
Debentures, the Company further acknowledges that its obligation to issue Shares
upon conversion of the Convertible Debentures in accordance with this Agreement
and the Convertible Debentures is not conditioned on the dilutive effect that
such issuance may have on the ownership interests of other shareholders of the
Company.
6. ADDITIONAL COVENANTS OF COMPANY
6.1 CORPORATE EXISTENCE AND TAXES. For as long as any Convertible
Debentures remain outstanding, the Company and its subsidiaries shall, maintain
their corporate existence in good standing, and shall pay all taxes when due
except for taxes which the Company or its subsidiaries dispute in good faith and
for which adequate reserves are established on the Company's or its subsidiaries
books and records.
6.2 RESERVED SHARES AND LISTINGS; EXCHANGE ACT. For so long as
any Convertible Debentures remain outstanding:
(a) the Company will reserve adequate shares of Common Stock,
par value $0.001 per share ("COMMON STOCK"), to permit the conversion in full of
the outstanding principal and interest amount of Convertible Debentures (unless
the appropriate Standstill Agreements are in place); and
(b) the Company will maintain the listing of its Shares on the
Over the Counter Bulletin Board or other exchange or automated quotation system;
and
(c) the Company shall timely file all reports required to be
filed with the Commission pursuant to the Exchange Act and the Company shall not
terminate its status as an issuer required to file reports under the Exchange
Act even if the Exchange Act or the rules and regulations thereunder would
permit such termination.
6.3 USE OF PROCEEDS. The Company and/or its subsidiaries shall use all
of the net proceeds from the sale of all Securities for general corporate
purposes and to repay existing short term debt.
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6.4 ESCROW ACCOUNT. The Company shall not take any action to cause the
release of any monies from the escrow account until the Company has received net
proceeds into the escrow account established with Xxxxxxx, Xxxxxxx & Xxxxxx (the
"ESCROW AGENT") pursuant to the terms of the Escrow Agreement (the "ESCROW
AGREEMENT"), among the Company, the Subscriber and Xxxxxxx, Xxxxxxx & Xxxxxx of
a minimum of an aggregate of $2,000,000.
6.5 FURTHER FINANCINGS. If within twelve (12) months from the date of
Closing, the Company enters into or closes another financing or other
transaction (which for securities law purposes would be integrable with the
offer and sale of the Securities) on terms and conditions more favorable to
another purchaser than this Subscription Agreement, and the Convertible
Debentures (in each case, such determination to be made by the Subscriber), then
the terms and conditions of this Offering shall be adjusted to reflect the more
favorable terms to such purchaser (including, at the Subscriber's option, the
issuance of additional Securities or other securities of the Company). The
foregoing shall apply to successive financings or successive other transactions
within twelve (12) months of the date of the Closing.
6.6 PUBLICITY. Except as may be required by applicable law or
regulation, the Company shall not use, directly or indirectly, the Subscriber's
name or the name of any of its affiliates in any advertisement, announcement,
press release or other similar communication unless it has received the prior
written consent of the Subscriber for the specific use contemplated or as
otherwise required by applicable law or regulation.
7. CONDITIONS TO CLOSING; DELIVERIES AT CLOSING
7.1 CONDITIONS TO SUBSCRIBER'S OBLIGATIONS TO CLOSE. The
obligations of the Subscriber to purchase the Convertible Debentures offered
hereunder are conditioned on the fulfillment or waiver of the following:
(a) the execution and delivery of the Transaction Documents by
the Company and the execution and delivery of such other documents, opinions,
certificates and instruments that the Subscriber may reasonably request;
(b) all the representations and warranties of the Company in
this Agreement as of the date hereof shall be true and correct at the Closing as
if made on such date, and the Company shall have performed all actions required
hereunder;
(c) the Company and its subsidiaries shall have performed in
all material respects all agreements which the Transaction Documents provide
shall be performed on or before the date of the Closing;
(d) no event shall have occurred and be continuing or would
result from the consummation of the transactions contemplated by the Transaction
Documents which would, individually or in the aggregate, constitute a Material
Adverse Effect;
(e) no order, judgment or decree of any court, arbitrator or
governmental authority shall enjoin or restrain the Subscriber from purchasing
the Securities or consummating the transactions contemplated by the Transaction
Documents and there shall not be existing, or, to the knowledge of the Company,
threatened, any action, suit, proceeding, governmental investigation or
arbitration against or affecting the Company or any of its subsidiaries which
would reasonably be expected to result in such an order, judgment or decree; and
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(f) the Company shall not have defaulted on any long-term debt
(including, but not limited to, any other series of convertible debentures or
the Convertible Debentures).
7.2 CONDITIONS TO THE COMPANY'S OBLIGATIONS TO CLOSE. The obligations
of the Company to issue the Convertible Debentures offered hereunder are
conditioned on the fulfillment or waiver of the following:
(a) the execution and delivery of this Agreement and the
Escrow Agreement by the Subscriber;
(b) all representations and warranties of the Subscriber made
in this Agreement as of the date hereof shall be true and correct at the Closing
as if made on such date, and the Subscriber shall have performed all actions
required hereunder; and
8. GOVERNING LAW
This Agreement shall be governed by and construed in accordance with
the laws of the State of New York, applicable to agreements made in and wholly
to be performed in that jurisdiction without regard to the choice of law rules
of such state, except for matters arising under the Act or the Exchange Act
which matters shall be construed and interpreted in accordance with such laws.
Any action brought to enforce, or otherwise arising out of, this Agreement shall
be heard and determined in either a Federal or state court sitting in the County
of New York, State of New York, and the parties consent to jurisdiction in the
State of New York.
9. ENTIRE AGREEMENT; AMENDMENT
This Agreement, the Transaction Documents and the other documents
delivered pursuant hereto constitute the full and entire understanding and
agreement between the parties hereto with regard to the subject matter hereof
and thereof, and no party hereto shall be able or bound to any other party
hereto in any manner by any warranties, representations or covenants except as
specifically set forth herein or therein. Except as expressly provided herein,
neither this Agreement nor any term hereof may be amended, waived, discharged or
terminated other than by a written instrument signed by the party hereto against
whom enforcement of any such amendment, waiver, discharge or termination is
sought.
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10. NOTICES, ETC.
Any notice, demand or request required or permitted to be given by
either the Company or the Subscriber pursuant to the terms of this Agreement
shall be in writing and shall be deemed given when delivered personally or by
facsimile, with a hard copy to follow by two day courier addressed to the
intended recipient thereof at the addresses of the parties hereto set forth at
the end of this Agreement or such other address as a party hereto may request
by notifying the other in writing.
11. INDEMNIFICATION
11. 1 COMPANY INDEMNIFICATION. In consideration of the Subscriber's
execution and delivery of the Transaction Documents to which it is a party and
acquiring the Securities hereunder and thereunder and in addition to all of the
Company's other obligations under the Transaction Documents to which it is a
party, the Company shall defend, protect, indemnify and hold harmless the
Subscriber and each other holder of the Securities and all of their
shareholders, trustees, partners, members, officers, directors, employees and
direct or indirect investors and any of the foregoing persons' agents or other
representatives (including, without limitation, those retained in connection
with the transactions contemplated by this Agreement) (collectively, the
"SUBSCRIBER INDEMNITEES") from and against any and all actions, causes of
action, suits, claims, losses, costs, penalties, fees, liabilities and damages
(other than consequential damages), and expenses in connection therewith
(irrespective of whether any such Subscriber Indemnitee is a party to the action
for which indemnification hereunder is sought), and including reasonable
attorneys' fees and disbursements (the "SUBSCRIBER INDEMNIFIED LIABILITIES"),
incurred by any Subscriber Indemnitee as a result of, or arising out of, or
relating to (a) any misrepresentation or breach of any representation or
warranty made by the Company in the Transaction Documents, (b) any breach of any
covenant, agreement or obligation of the Company contained in the Transaction
Documents, or (c) any cause of action, suit or claim brought or made against
such Subscriber Indemnitee by a third party (including for these purposes a
derivative action brought on behalf of the Company) and arising out of or
resulting from (i) other than those arising from or resulting from a
misrepresentation or breach of any representation or warranty made by such
Subscriber Indemnitee contained in the Transaction Documents to which it is a
party, the execution, delivery, performance or enforcement of the Transaction
Documents, (ii) any transaction financed or to be financed in whole or in part,
directly or indirectly, with the proceeds of the issuance of the Securities, or
(iii) the status of the Subscriber or holder of the Securities as an investor in
the Company.
11.2 CONTRIBUTION; MECHANICS AND PROCEDURES. To the extent
that the foregoing undertaking by the Company may be unenforceable for any
reason, the Company shall make the maximum contribution to the payment and
satisfaction of each of the Indemnified Liabilities which is permissible under
applicable law.
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12. NO STRICT CONSTRUCTION
The language used in this Agreement will be deemed to be the language
chosen by the parties hereto to express their mutual intent, and no rules of
strict construction will be applied against any party hereto.
13. NO THIRD PARTY BENEFICIARIES
This Agreement is intended for the benefit of the parties hereto and
their respective permitted successors and assigns, and is not for the benefit
of, nor may any provision hereof be enforced by, any other person or entity.
14. SURVIVAL
All covenants, agreements, representations and warranties made by the
Company and the Subscriber herein and in the Transaction Documents shall survive
the execution of this Subscription Agreement, the delivery to the Subscriber of
the Convertible Debentures being purchased and the payment therefor.
15. SUCCESSORS AND ASSIGNS
This Agreement shall be binding upon and inure to the benefit of the
parties and their respective successors and assigns, including any purchasers of
the Convertible Debentures. The Company shall not assign this Agreement or any
rights or obligations hereunder without the prior written consent of the
Subscriber, including by merger or consolidation, except in accordance with the
applicable provisions of the Convertible Debentures with respect to which the
Company is in compliance. The Subscriber may assign, without the consent of the
Company, some or all of its rights hereunder to any person to whom the
Subscriber assigns or transfers Securities, or the right to acquire Securities,
in accordance herewith; PROVIDED, that such transferee agrees in writing to be
bound with respect to the transferred Securities to the provisions hereof that
apply to the transferring Subscriber, in which event such assignee shall be
deemed to be a Subscriber hereunder with respect to such assigned rights.
16. COUNTERPARTS
This Agreement may be executed in two or more identical counterparts,
all of which shall be considered one and the same agreement and shall become
effective when counterparts have been signed by each party hereto and delivered
to the other party hereto; PROVIDED, that a facsimile signature shall be
considered due execution and shall be binding upon the signatory thereto with
the same force and effect as if the signature were an original, not a facsimile
signature.
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17. HEADINGS
The headings of this Agreement are for convenience of reference and
shall not form part of, or affect the interpretation of, this Agreement.
18. SEVERABILITY
If any provision of this Agreement shall be invalid or unenforceable in
any jurisdiction, such invalidity or unenforceability shall not affect the
validity or enforceability of the remainder of this Agreement in that
jurisdiction or the validity or enforceability of any provision of this
Agreement in any other jurisdiction.
19. AMOUNT
The undersigned Subscriber hereby subscribes for a Convertible
Debenture in the principal amount of $-------------.
The undersigned Subscriber acknowledges that this subscription shall
not be effective unless accepted by the Company as indicated below.
This Subscription Is Accepted by the Company on the [ ] day of March, 2010.
Environmental Solutions Worldwide, Inc.
By: ______________________________
Print Name: _______________________
Title: _____________________________
Subscriber:
--------------------
----------------------------------
Name:
Title:
Address for Notice:
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