EXHIBIT 10.3
SUBSCRIPTION AGREEMENT
_________________, 2006
Ecosphere Technologies, Inc.
0000 X.X. Xxxxxx Xxxxxxx
Xxxxxx, XX 00000
Dear Sir/Madam:
1.1 SUBSCRIPTION. I, the undersigned investor (the "Investor"), hereby
subscribe for and agree to purchase either [MUST INITIAL ONE]:
(a) ______Debt Unit. Each Debt Unit consists of a three-year original
issue discount $250,000 9% convertible debenture (the "Debenture") with attached
warrants to purchase common stock (the "Common Stock") of Ecosphere
Technologies, Inc., a Florida corporation (the "Company") on the terms and
conditions specified in the Securities Purchase Agreement dated _________, 2006
between the Company, Enable Capital Management, LLC and other purchasers (the
"Securities Purchase Agreement"). There is a $250,000 minimum purchase
requirement for a Debt Unit, which results in an investor who makes a $250,000
investment receiving a Debenture with the principal amount of $297,619 (or
approximately a 16% premium for the investor and which also increases the
effective interest rate). The shares of Common Stock issuable upon conversion of
the Debentures and exercise of the warrants shall have the same registration
rights as the institutional investors who execute the Enable Securities Purchase
Agreement. Investors who elect this option must also execute the same agreements
as the institutional investors.
or
(b) ______ Equity Unit. Each Equity Unit consists of:
o $100,000 of Common Stock purchased at a 10% discount to the
closing market price on the day of the closing of the offering,
and
o three-year warrants to purchase an equal amount of Common
Stock exercisable at 110% of the closing market price on the
closing of this offering.
For example: Assume a subscription of $100,000 and a closing price of $0.50. The
investor would receive 222,222 shares of Common Stock determined by dividing
$100,000 by $0.45. (which represents $0.50 x 90%). The investor would also be
entitled to a three-year warrant to purchase an additional 222,222 shares of
Common Stock at an exercise price of $0.55 (which is $0.50 x 110%).
The Debt Units and the Equity Units shall be collectively referred to
as the "Units."
1.2 SUBSCRIPTION PAYMENT. As payment for this subscription, simultaneously
with the execution hereof, I am delivering herewith to the Company a check made
payable to the order of the Company in the amount of
$__________________________.
2.1 INVESTOR REPRESENTATIONS AND WARRANTIES. I acknowledge, represent and
warrant to, and agree with, the Company as follows:
(a) I am aware that my investment involves a high degree of risk;
(b) I acknowledge and am aware that there is no assurance as to the
future performance of the Company;
(c) I am purchasing the Units for my own account for investment and not
with a view to or for sale in connection with the distribution of the Units with
any present intention of selling or otherwise disposing of all or any part of
the Units. I agree that I must bear the economic risk of my investment for an
indefinite period of time because, among other reasons, the Units have not been
registered under the Securities Act of 1933 (the "Securities Act") or under the
securities laws of any states and, therefore, the Units including the Common
Stock cannot be resold, pledged, assigned or otherwise disposed of unless it is
subsequently registered under the Securities Act and under applicable securities
laws of such states or an exemption from such registration is available. I
hereby authorize the Company to place a legend denoting the restriction on the
securities comprising the Units. I acknowledge that no public market will ever
develop for the Units or the Warrants[ ROB YOU HAVE A MENTAL BLOCK WITH THE WORD
DEBENTURES], although one exists for the Common Stock.
(d) I further acknowledge my understanding that the Company's reliance
on such exemptions referred to in subsection (c) above are, in part, based upon
the foregoing representations, warranties, and agreements by me and that the
statutory basis for such exemptions would not be present, if notwithstanding
such representations, warranties and agreements, I were acquiring the Units for
resale on the occurrence or non-occurrence of some pre-determined event. In
order to induce the Company to issue and sell the Units subscribed for hereby to
me, it is agreed that the Company will have no obligation to recognize the
ownership, beneficial or otherwise, of such Units or any part thereof by anyone,
except as set forth herein;
(e) I have the financial ability to bear the economic risk of my
investment in the Company (including its possible total loss), have adequate
means for providing for my current needs and personal contingencies and have no
need for liquidity with respect to my investment in the Company;
(f) I, alone or together with my Purchaser Representative have such
knowledge and experience in financial and business matters as to be capable of
evaluating the merits and risks of an investment in the Units and have obtained,
in my judgment, sufficient information from the Company to evaluate the merits
and risks of an investment in the Company;
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(g) I:
(1) Have carefully read this Subscription Agreement, the Risk
Factors prepared by Ecosphere t and the Term Sheet
Supplement understand and have evaluated the risks of a
purchase of the Units and have relied solely (except as
indicated in subsection (2), (3) and (4) below) on the
information contained in this Subscription Agreement;
(2) I acknowledge the receipt (without exhibits) of the
Company's annual report on Form 10-KSB with respect to the
year ended December 31, 2005, the proxy statement, the
quarterly reports on Form 10-QSB for the quarters ended
March 31 and June 30, 2006, the earnings release dated
November 20, 2006 and the current reports on Form 8-K filed
in 2006 (as well as any other reports) filed prior to the
time the I submit my subscription.
(3) Have been provided an opportunity to obtain any additional
information concerning the offering, the Company and all
other information to the extent the Company possesses such
information or can acquire it without unreasonable effort or
expense; and
(4) Have been given the opportunity to ask questions of, and
receive answers from, the Company concerning the terms and
conditions of the offering and other matters pertaining to
this investment. In addition, as required by Section
517.061(11)(a)(3), Florida Statutes and by Rule 3E-500.05(a)
thereunder, I may have, at the offices of the Company, at
any reasonable hour, after reasonable prior notice, access
to the materials set forth in the Rule which the Company can
obtain without unreasonable effort or expense.
[ROB, YOU NEED TO THINK WHEN YOU READ THESE DOCUMENTS. THE OPINION ONLY IS
NEEDED FOR UNACCREDITED INVESTORS]
(h) In making my decision to purchase the Units herein subscribed for,
I have relied solely upon independent investigations made by me;
(i) If the undersigned is a corporation, trust, partnership, employee
benefit plan, individual retirement account, Xxxxx Plan, or other tax-exempt
entity, it is authorized and qualified to become an investor in the Company and
the person signing this Subscription Agreement on behalf of such entity has been
duly authorized by such entity to do so;
(j) No representations or warranties have been made to the undersigned
by the Company, or any of their respective officers, employees, agents,
affiliates or attorneys;
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(k) The information contained in Section 2.2 of this Subscription
Agreement is true and correct including any information which I have furnished
and furnish to the Company with respect to my financial position and business
experience, is correct and complete as of the date of this Subscription
Agreement and if there should be any material change in such information prior
to acceptance of my subscription, I will furnish such revised or corrected
information to the Company;
(l) I hereby acknowledge and am aware that except for any rescission
rights that may be provided under applicable state laws including the two day
rescission rights provided under Pennsylvania law and the three day rights under
Florida law, I am not entitled to cancel, terminate or revoke this subscription,
and any agreements made in connection herewith shall survive my death or
disability;
(m) I am not subscribing for the Units as a result of or subsequent to
any advertisement, articles, notice or other communication published in any
newspaper, television or radio or presented at any seminar or meeting, or any
solicitation of a subscription by a person not previously known to me in
connection with investments in securities generally; and
(o) Where applicable, I agree to be bound by any restrictions on resale
of the Units including the Common Stock required by applicable state laws.
2.2 INVESTOR REPRESENTATIONS AND WARRANTIES CONCERNING SUITABILITY,
ACCREDITED INVESTOR AND ELIGIBLE CLIENT STATUS. I represent and warrant the
following information:
(a) The following information should be provided by the person making
the investment decision whether on his own behalf or on behalf of an entity:
(1) Name of Investor: Age:
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(2) Name of person making investment decision
Age:
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( (Print)
(3) Principal residence address and telephone number:
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(4) Secondary residence address and telephone number:
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I have no present intention of becoming a resident of any
other state or jurisdiction.
(5) Name, address, telephone number and facsimile number of
employer or business:
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(i) Nature of business
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(ii) Position and nature of responsibilities
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(6) Length of employment or in current position
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(7) Prior employment, positions or occupations during the
past five years (and the inclusive dates of each) are
as follows:
Nature of Employment,
or Occupation Position/ Duties From/To
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Attach additional pages to answer any questions in greater
detail, if necessary. Each prospective investor, should
answer the following questions which pertain to income,
tax rate, net worth, liquid assets, and non-liquid assets
by including spousal contribution even though the
investment will be held in single name.
(8) Business or professional education and the degree(s)
received are as follows:
School Degree Year Received
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(B) ACCREDITED INVESTOR REPRESENTATIONS. [MUST INITIAL ONE.]
Initial all appropriate spaces on the following pages
indicating the basis upon which the undersigned qualifies as
an accredited investor (please initial only where
appropriate).
For Individual Investors Only:
(1) I certify that I am an accredited investor because I have an
individual net worth, or my spouse and I have combined net worth, in
excess of $1,000,000. For purposes of this question, "net worth" means
the excess of total assets at fair market value, including home, home
furnishings and automobiles, over total liabilities.
(2a) I certify that I am an accredited investor because I had
individual income (exclusive of any income attributable to my spouse)
of more than $200,000 in 2004 and 2005 and I reasonably expect to have
an individual income in excess of $200,000 in 2006.
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(2b) Alternatively, my spouse and I have joint income in excess of
$300,000 in each applicable year.
(3) I am a director or executive officer of the Company.
Other Investors:
(4) The undersigned certifies that it is one of the following: any bank
as defined in Section 3(a)(2) of the Securities Act whether acting in
its individual or fiduciary capacity; any broker or dealer registered
pursuant to section 15 of the Securities Exchange Act of 1934;
insurance company as defined in Section 2(13) of the Securities Act;
investment company registered under the Investment Company Act of 1940
or a business development company as defined in Section 2(a)(48) of
that Act; Small Business Investment Company licensed by the U.S. Small
Business Administration under Section 301(c) or (d) of the Small
Business Investment Act of 1958; any plan established and maintained by
a state, its political subdivisions, or any agency or instrumentality
of a state or its political subdivisions, for the benefit of its
employees, if such plan has total assets in excess of $5,000,000;
employee benefit plan within the meaning of Title I of the Employee
Retirement Income Security Act of 1974, if the investment decision is
made by a plan fiduciary, as defined in Section 3(21) of such Act,
which is either a bank, savings and loan association, insurance
company, or registered investment advisor, or if the employee benefit
plan has total assets in excess of $5,000,000, or if a self-directed
plan, with investment decisions made solely by persons that are
accredited investors.
(5) The undersigned certifies that it is a private business development
company as defined in Section 202(a)(22) of the Investment Advisors Act
of 1940.
(6) The undersigned certifies that it is a organization described in
Section 501(c)(3) of the Internal Revenue Code, corporation,
Massachusetts or similar business trust or partnership, not formed for
the specific purpose of acquiring the securities offered, with total
assets in excess of $5,000,000.
(7) The undersigned certifies that it is a trust, with total assets in
excess of $5,000,000, not formed for the specific purpose of acquiring
the securities offered, whose purchase is directed by a sophisticated
person as described in Rule 506(b)(2)(ii) of the Securities Act.
(8) The undersigned certifies that it is an entity in which all of
the equity owners are accredited investors.
2.3 PROHIBITION ON NET SHORT POSITIONS. From and including the date of
this Agreement, I have not, and if I elect the Debt Unit option, I agree that I
will not maintain a Net Short Position in the Common Stock until it is permitted
in the documents relating to that offering. "Net Short Provision" shall mean
that the aggregate number of shares of any Common Stock held in a short position
by me exceeds the number of shares of Common Stock actually owned by me at such
time.
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3. INDEMNIFICATION. I hereby agree to indemnify and hold harmless the
Company, its officers, directors, shareholders, employees, agents and attorneys
against any and all losses, claims, demands, liabilities and expenses (including
reasonable legal or other expenses) incurred by each such person in connection
with defending or investigating any such claims or liabilities, whether or not
resulting in any liability to such person) to which any such indemnified party
may become subject under the Securities Act, under any other statute, at common
law or otherwise, insofar as such losses, claims, demands, liabilities and
expenses (a) arise out of or are based upon any untrue statement or alleged
untrue statement of a material fact made by me and contained in this
Subscription Agreement, or (b) arise out of or are based upon any breach of any
representation, warranty or agreement contained herein.
4. ARBITRATION. Any controversy, dispute or claim against the Company,
its officers, directors or employees arising out of or relating to this
Subscription Agreement, or its interpretation, application, implementation,
breach or enforcement which the parties are unable to resolve by mutual
agreement, shall be settled by submission by either party of the controversy,
claim or dispute to binding arbitration in Xxxxxx County, Florida (unless the
parties agree in writing to a different location) before one arbitrator in
accordance with the rules of the American Arbitration Association then in
effect. In any such arbitration proceeding, the parties agree to provide all
discovery deemed necessary by the arbitrator. The decision and award made by the
arbitrator shall be final, binding and conclusive on all parties to any
arbitration proceeding for all purposes, and judgment may be entered thereon in
any court having jurisdiction thereof.
5. SEVERABILITY. In the event any parts of this Subscription Agreement
are found to be void, the remaining provisions of this Subscription Agreement
shall nevertheless be binding with the same effect as though the void parts were
deleted.
6. COUNTERPARTS. This Subscription Agreement may be executed in one or
more counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument. The execution of this
Subscription Agreement may be by actual or facsimile signature.
7. BENEFIT. This Subscription Agreement shall be binding upon and inure
to the benefit of the parties hereto and their legal representatives, successors
and assigns.
8. NOTICES AND ADDRESSES. All notices, offers, acceptance and any other
acts under this Subscription Agreement (except payment) shall be in writing, and
shall be sufficiently given if delivered to the addressees in person, by Federal
Express or similar next business day delivery or by facsimile delivery followed
by Federal Express or similar next business day delivery, as follows:
Investor: At the address designated
in Section 2.2 of this
Subscription Agreement
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The Company: Ecosphere Technologies, Inc.
0000 X.X. Xxxxxx Xxxxxxx
Xxxxxx, XX 00000
Facsimile: (000) 000-0000
Attention: Xx. Xxxxx X. Xxxxxxx III
or to such other address as either of them, by notice to the other may designate
from time to time. The transmission confirmation receipt from the sender's
facsimile machine shall be conclusive evidence of successful facsimile delivery.
Time shall be counted to, or from, as the case may be, the delivery in person or
by mailing.
9. GOVERNING LAW. This Subscription Agreement and any dispute,
disagreement, or issue of construction or interpretation arising hereunder
whether relating to its execution, its validity, the obligations provided
therein or performance shall be governed or interpreted according to the laws of
the state where the Company is incorporated at the time of interpretation.
10. ORAL EVIDENCE. This Subscription Agreement constitutes the entire
Subscription Agreement between the parties and supersedes all prior oral and
written agreements between the parties hereto with respect to the subject matter
hereof. Neither this Subscription Agreement nor any provision hereof may be
changed, waived, discharged or terminated orally, except by a statement in
writing signed by the party or parties against which enforcement or the change,
waiver discharge or termination is sought.
11. SECTION HEADINGS. Section headings herein have been inserted for
reference only and shall not be deemed to limit or otherwise affect, in any
matter, or be deemed to interpret in whole or in part any of the terms or
provisions of this Subscription Agreement.
12. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS. The
representations, warranties and agreements contained herein shall survive the
delivery of, and payment for, the Units.
13. ACCEPTANCE OF SUBSCRIPTION. The Company may accept this
Subscription Agreement at any time for all or any portion of the Units
subscribed for by executing a copy hereof as provided and notifying me within a
reasonable time thereafter.
FLORIDA LAW PROVIDES THAT WHEN SALES ARE MADE TO FIVE OR MORE PERSONS IN
FLORIDA, ANY SALE MADE IN FLORIDA IS VOIDABLE BY THE PURCHASER WITHIN THREE DAYS
AFTER THE FIRST TENDER OF CONSIDERATION IS MADE BY SUCH PURCHASER TO THE
COMPANY, AN AGENT OF THE COMPANY OR AN ESCROW AGENT OR WITHIN THREE DAYS AFTER
THE AVAILABILITY OF THAT PRIVILEGE IS COMMUNICATED TO SUCH PURCHASER, WHICHEVER
OCCURS LATER. THIS SALE IS BEING MADE IN FLORIDA. PAYMENTS FOR TERMINATED
SUBSCRIPTIONS VOIDED BY PURCHASERS AS PROVIDED FOR IN THIS PARAGRAPH WILL BE
PROMPTLY REFUNDED WITHOUT INTEREST. NOTICE SHOULD BE GIVEN TO THE COMPANY TO THE
ATTENTION OF XXXXX X. XXXXXXX III AT THE ADDRESS SET FORTH ON THE COVER PAGE OF
THIS SUBSCRIPTION AGREEMENT.
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INDIVIDUAL INVESTORS
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Social Security Number Print Name of Investor No. 1
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Signature of Investor No. 1
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Social Security Number Print Name of Investor No. 2
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Signature of Investor No. 2
Manner in which the Units are to be held:
_____ Individual Ownership _____ Partnership
_____ Tenants-in-Common _____ Trust
_____ Joint Tenant With Right of Survivorship _____ Corporation
_____ Community Property _____ Employee Benefit Plan
_____ Separate Property _____ Other (please indicate)
CORPORATE OR OTHER ENTITY
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Federal ID Number Print Name of Entity
By:
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Signature, Title
DATED: _______________, 2006
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By signing below, the undersigned accepts the foregoing subscription
and agrees to be bound by its terms.
Ecosphere Technologies, Inc.
By: Dated: , 2006
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Xxxxx X. Xxxxxxx III
Chief Financial Officer
