Document:

Exhibit 10.1

 

THIRD INCREASE AGREEMENT AND WAIVER

 

THIRD  INCREASE AGREEMENT AND
WAIVER, dated as of August 12, 2009 (this “Agreement”),
prepared pursuant to Section 4.1(b) of the Credit Agreement, dated as
of May 20, 2008 (as amended, supplemented, extended or restated, or
otherwise modified prior to the date hereof including by the First Amendment to
the Credit Agreement dated as of July 18, 2008 (the “First Amendment”)
and the Second Amendment and Increase Agreement dated as of September 15,
2008  (the “Second Amendment”),
and as modified hereby, and as further amended, supplemented or otherwise
modified from time to time, the “Credit Agreement”), among BUCKEYE
ENERGY SERVICES LLC, on behalf of itself and as the surviving entity of the
merger of Farm & Home Oil Company LLC (“F&H”) with and into
Buckeye Energy Services LLC (the “Borrower”), the several Lenders from
time to time parties thereto, and BNP Paribas, as Administrative Agent (the “Administrative
Agent”) and as collateral agent.

 

RECITALS

 

WHEREAS, pursuant to Section 4.1(b)(i) of
the Credit Agreement, the Borrower is requesting that the Lenders concurrently
increase the Commitments so that the Total Commitments equal $250,000,000
following the effectiveness of such increase;

 

WHEREAS, pursuant to Section 4.1(b) of
the Credit Agreement, Barclays Bank PLC (the “New Lender”) has agreed to
join the Credit Agreement and to make Commitments under the Credit Agreement on
the terms and subject to the conditions set forth in this Agreement; and

 

WHEREAS, the Borrower is
requesting that the Lenders hereby waive compliance with the terms and
conditions of Section 4.1(b)(i), (ii) and (iii) of the Credit
Agreement solely with respect to the requirements under each such Section for
the Borrower to deliver notice of a requested increase in Commitments;

 

NOW, THEREFORE, in
consideration of the premises and for other good and valuable consideration,
the receipt and sufficiency of which is hereby acknowledged, the Borrower, the
Administrative Agent, the Existing Lenders and the New Lender hereby agree as
follows:

 

1.                                       Defined Terms. 
Unless otherwise defined herein, terms defined in the Credit Agreement
are used herein as therein defined.

 

1.1                                 Increase Agreement and New Lender
Agreement.  The New Lender hereby agrees to make Loans to
the Borrower or participate in Letters of Credit from time to time until the
Termination Date in an aggregate principal amount at any one time outstanding
not to exceed its Commitment (as set forth in Schedule 1.0), such agreement to
be effective as of the Increase Effective Date (as defined below) upon the
receipt by the Administrative Agent from the New Lender of the amounts required
to be paid by the New Lender pursuant to Section 4.1(b) of the Credit
Agreement, which amounts the New Lender agrees to pay on or before August 12,
2009.  From and after the Increase
Effective Date, the New Lender shall be a party to the Credit Agreement and, to
the extent provided in this Agreement, have the rights and obligations of a
Lender under the Credit Agreement and under the other Loan Documents and shall
be bound by the provisions thereof.

 

3.                                       Commitments; New Lender. 
Effective upon the Increase Effective Date, the Commitments for the New
Lender shall be as set forth in Schedule 1.0 attached hereto.  Schedule 1.0 shall also set forth the
Commitments for the Existing Lenders as of the Increase Effective Date.

 

 

4.                                    Conditions Precedent. 
This Agreement shall become effective (the “Increase Effective Date”)
upon the satisfaction of the following conditions precedent:

 

(a)          Agreement.          The Administrative Agent shall have
received this Agreement, executed and delivered by a duly authorized officer of
the Borrower, the New Lender and the Required Lender.

 

(b)         Secretary’s Certificates. 
The Administrative Agent shall have received, with a counterpart for
each Lender, a certificate of each Loan Party, dated as of the Increase
Effective Date, substantially in the form of Exhibit E to the Credit
Agreement, with appropriate insertions and attachments, satisfactory in form
and substance to the Administrative Agent, executed by the President or any
Vice President and the Secretary or any Assistant Secretary of such Loan Party.

 

(c)          Proceedings of the Loan Parties. 
The Administrative Agent shall have received a copy of the resolutions,
in form and substance satisfactory to the Administrative Agent, of the Board of
Directors (or analogous body) of each Loan Party authorizing (i) the
execution, delivery and performance of this Agreement and the Notes delivered
on the Increase Effective Date, and the reaffirmations of the applicable Loan
Documents to which it is a party, and (ii) the reaffirmation by it of the
Liens created pursuant to the Security Documents, certified by the Secretary or
an Assistant Secretary of such Loan Party, or, if applicable, of the general
partner or managing member or members of such Loan Party as of the Increase
Effective Date, which certification shall be in form and substance reasonably
satisfactory to the Administrative Agent and shall state that the resolutions
thereby certified have not been amended, modified, revoked or rescinded.

 

(d)         Incumbency Certificates. 
To the extent the following have been amended, restated, supplemented or
otherwise modified since the Closing Date, the Administrative Agent shall have
received, with a counterpart for each Lender, a certificate of each Loan Party,
dated as of the date hereof, as to the incumbency and signature of the officers
of such Loan Party executing this Agreement and the Notes delivered on the Increase
Effective Date, which certificate shall be included in the certificate
delivered in respect of such Loan Party pursuant to Section 4(b) above,
shall be satisfactory in form and substance to the Administrative Agent, and
shall be executed by the President or any Vice President and the Secretary or
any Assistant Secretary of such Loan Party.

 

(e)          Organizational Documents. 
To the extent the following have been amended, restated, supplemented or
otherwise modified since the Closing Date, the Administrative Agent shall have
received, with a counterpart for each Lender, true and complete copies of the
Governing Documents of each Loan Party, certified as of the date hereof as
complete and correct copies thereof by the Secretary or an Assistant Secretary
of such Loan Party, which certification shall be included in the certificate
delivered in respect of such Loan Party pursuant to Section 4(b) above
and shall be in form and substance satisfactory to the Administrative Agent.

 

(f)            Good Standing Certificates. 
The Administrative Agent shall have received, with a copy for each
Lender, certificates dated as of a recent date from the Secretary of State or
other appropriate authority, evidencing the good standing of each Loan Party (i) to
the extent relevant under applicable laws, in the jurisdiction of its
organization and (ii) in each other jurisdiction where its ownership,
lease or operation of property or the conduct of its business requires it to
qualify as a foreign Person except, as to this subclause (ii), where the
failure to so qualify could not have a Material Adverse Effect.

 

2

 

(g)         Consents, Licenses and Approvals. 
The Administrative Agent shall have received, with a counterpart for
each Lender, a certificate of a Responsible Officer of the Borrower either (i) attaching
copies of all consents, authorizations and filings referred to in Section 6.1(i) of
the Credit Agreement, and stating that such consents, licenses and filings are
in full force and effect, and each such consent, authorization and filing shall
be in form and substance satisfactory to the Administrative Agent or (ii) stating
that no such consents, licenses or approvals are so required.

 

(h)         Other Conditions. 
Each of the other conditions to the Increase Effective Date provided in Section 4.1(b) of
the Credit Agreement shall have been satisfied.

 

5.                                       Representations and Warranties. 
To induce the New Lender and the Existing Lenders to enter into this
Agreement, the Borrower hereby represents and warrants to the undersigned
Lenders that, after giving effect to the increase of the Commitments and the
other modifications to the Credit Agreement provided for herein, the
representations and warranties contained in the Credit Agreement and the other
Loan Documents will be true and correct in all material respects as of the date
hereof, except for those representations and warranties that by their terms
were made as of a specified date which shall be true and correct on and as of
such date, and that no Default or Event of Default has occurred and is
continuing.

 

6.                                       Disclaimer.  The New
Lender and each Existing Lender acknowledges and agrees that no Lender party to
the Credit Agreement (i) has made any representation or warranty and
shall  have no responsibility with
respect to any statements, warranties or representations made in or in
connection with the Credit Agreement or the execution, legality, validity,
enforceability, genuineness, sufficiency or value of the Credit Agreement, any
other Loan Documents or any other instrument or document furnished pursuant
thereto; (ii) has made any representation or warranty and shall have no
responsibility with respect to the financial condition of the Borrower or any
other obligor or the performance or observance by the Borrower or any obligor
of any of their respective obligations under the Credit Agreement or any other
Loan Documents or any other instrument or document furnished pursuant hereto or
thereto. The New Lender (i) confirms that it has received a copy of the Credit
Agreement, together with copies of the financial statements delivered pursuant
to Section 6.1 thereof and such other documents and information as it has
deemed appropriate to make its own credit analysis and decision to enter into
this Agreement; (ii) agrees that it will, independently and without
reliance upon the Lenders or the Administrative Agent and based on such
documents and information as it shall deem appropriate at the time, continue to
make its own credit decisions in taking or not taking action under the Credit
Agreement, the other Loan Documents or any other instrument or document
furnished pursuant hereto or thereto; (iii) appoints and authorizes the
Administrative Agent to take such action as agent on its behalf and to exercise
such powers and discretion under the Credit Agreement, the other Loan Documents
or any other instrument or document furnished pursuant hereto or thereto as are
delegated to the Administrative Agent by the terms thereof, together with such
powers as are incidental thereto; and (iv) agrees that it will be bound by
the provisions of the Agreement and will perform in accordance with its terms
all the obligations which by the terms of the Credit Agreement are required to
be performed by it as a Lender.

 

7.                                       No Other Amendments or Waivers. 
Except as expressly amended or waived hereby, the Credit Agreement, the
Notes and the other Loan Documents shall remain in full force and effect in
accordance with their respective terms, without any waiver, amendment or
modification of any provision thereof.

 

8.                                       Reaffirmations.

 

(a)                                   The Borrower hereby reaffirms its
obligations (including the obligations formerly owed by F&H, to which the
Borrower has succeeded by operation of law) under the Security Agreement 

 

3

 

and acknowledges and agrees, after giving effect to the Credit
Agreement (including the amendments and increases thereto, effectuated by the
First Amendment, the Second Amendment and by this Agreement), that the security
interest in the Collateral granted in the Security Agreement is continuing and
in full force and effect in favor of the Collateral Agent on behalf of and for
the ratable benefit of the Secured Parties (as defined in the Security
Agreement).

 

(b)                                 The Borrower hereby reaffirms its
obligations (including the obligations formerly owed by F&H, to which the
Borrower has succeeded by operation of law) under the Guarantee and
acknowledges and agrees, after giving effect to the Credit Agreement (including
the amendments and increases thereto, effectuated by the First Amendment, the
Second Amendment and by this Agreement), that the guarantee contained therein
is continuing and shall remain in full force and effect in favor of the
Collateral Agent on behalf of and for the ratable benefit of the Secured
Parties (as defined in the Security Agreement).

 

(c)                                  The Borrower hereby reaffirms its
obligations (including the obligations formerly owed by F&H, to which the
Borrower has succeeded by operation of law) under the Pledge Agreement and
acknowledges and agrees, after giving effect to the Credit Agreement (including
the amendments and increases thereto, effectuated by the First Amendment, the
Second Amendment and by this Agreement), that the grant of security interest in
the Pledged Collateral (as defined in the Pledge Agreement) granted in the
Pledge Agreement is continuing and in full force and effect in favor of the
Collateral Agent on behalf of and for the ratable benefit of the Secured
Parties (as defined in the Security Agreement).

 

(d)                                 The Borrower hereby reaffirms its
obligations its obligations (including the obligations formerly owed by
F&H, to which the Borrower has succeeded by operation of law) under all of
the other Loan Documents to which it is a party and acknowledges and agrees,
after giving effect to the Credit Agreement (including the amendments and
increases thereto, effectuated by the First Amendment, the Second Amendment and
by this Agreement), that such obligations are continuing and shall remain in
full force and effect.

 

9.                                       Legal Opinions. Within ten days after the Increase
Effective Date, the Borrower shall deliver to the Administrative Agent an
executed legal opinion of Vinson & Elkins LLP, counsel to the
Borrower, in form and substance satisfactory to the Administrative Agent and
covering such matters incident to the transactions contemplated by this
Agreement as the Administrative Agent, the Existing Lenders and the New Lender
may reasonably require; provided that, the Administrative Agent may
extend the deadline for satisfaction of this covenant in its sole discretion.

 

10.                                 Counterparts. 
This Agreement may be executed by one or more of the parties hereto on
any number of separate counterparts and all of said counterparts taken together
shall be deemed to constitute one and the same instrument.

 

11.                                 Waiver.

 

(a)                                  The Borrower hereby makes a written
request to increase the Total Commitments to $250,000,000 and hereby requests
that such increase be effective as of the Increase Effective Date.  The Lenders hereby waive compliance with the
terms and conditions of Section 4.1(b)(i), (ii) and (iii) of the
Credit Agreement solely with respect to the requirements under each such Section for
the Borrower to deliver notice of a requested increase in Commitments.  The Lenders hereby agree and acknowledge that
this Agreement satisfies the notice and approval requirements set forth in such
Sections.

 

(b)                                 The Borrower hereby makes a written
request to increase the Maximum Sub-Limit to $250,000,000 and hereby requests
that such increase be effective as of the Increase Effective 

 

4

 

Date.  The
Lenders hereby waive compliance with the terms and conditions of clause (a)(ii) of
the definition of “Sub-Limit” in the Credit Agreement solely with respect to
the requirements under such clause for the Borrower to deliver a Sub-Limit
Election Notice.  The Lenders hereby
agree and acknowledge that this Amendment satisfies the requirements under the
Credit Agreement to deliver a Sub-Limit Election Notice.

 

12.                                 Applicable Law. 
This Agreement shall be governed by, and construed and interpreted in
accordance with, the Law of the state of New York.

 

[SIGNATURE PAGES
FOLLOW]

 

5

 

IN WITNESS WHEREOF, the
parties hereto have caused this Agreement to be duly executed and delivered as
of the day and year first above written.

 

 

	
   

  	
  BUCKEYE ENERGY SERVICES LLC,

  
	
   

  	
  as
  Borrower

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  

 

[SIGNATURE PAGE TO THIRD
INCREASE AGREEMENT AND WAIVER]

 

 

	
  BARCLAYS BANK PLC

  
	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  

 

[SIGNATURE PAGE TO THIRD INCREASE AGREEMENT AND
WAIVER]

 

 

	
  BNP PARIBAS, as Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
  BNP PARIBAS, as
  Administrative Agent

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  

 

[SIGNATURE PAGE TO THIRD
INCREASE AGREEMENT AND WAIVER]

 

 

	
  UNIVEST NATIONAL BANK AND TRUST
  CO.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  

 

[SIGNATURE PAGE TO THIRD INCREASE AGREEMENT AND
WAIVER]

 

 

	
  NATIXIS, NEW YORK BRANCH

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  

 

[SIGNATURE PAGE TO T AMENDMENT
AND INCREASE AGREEMENT]

 

 

DZ BANK AG DEUTSCHE
ZENTRAL-GENOSSENSCHAFTSBANK FRANKFURT AM MAIN

 

 

	
  By:
  

  	
  /s/

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  

 

[SIGNATURE PAGE TO THIRD INCREASE AGREEMENT AND
WAIVER]

 

 

	
  RZB FINANCE LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  

 

[SIGNATURE PAGE TO THIRD INCREASE AGREEMENT AND
WAIVER]

 

 

	
  THE BANK OF TOKYO-MITSUBISHI
  UFJ, LTD., NEW YORK BRANCH

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  

 

[SIGNATURE PAGE TO THIRD INCREASE AGREEMENT AND
WAIVER]

 

 

	
  MANUFACTURERS AND TRADERS

  
	
  TRUST COMPANY

  
	
   

  	
   

  
	
  By:

  	
  /s/

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  

 

[SIGNATURE PAGE TO T AMENDMENT AND INCREASE AGREEMENT]

 

 

Schedule 1.0 to

Second Amendment and

Increase
Agreement

 

LENDERS
AND COMMITMENTS

 

	
  New Lender

  	
   

  	
  Applicable Lending Office

  	
   

  	
  Commitment

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Barclays Bank PLC

  	
   

  	
  200 Park Avenue

  New York, NY 10166

  	
   

  	
  $

  	
  75,000,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Manufacturers and Traders Trust Company

  	
   

  	
  One M&T Plaza

  Buffalo, New York 14203-2399

  	
   

  	
  $

  	
  15,000,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Univest National Bank and Trust Co.

  	
   

  	
  14 North Main Street

  Souderton, PA 18964

  	
   

  	
  $

  	
  15,000,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Natixis, New York Branch

  	
   

  	
  1251 Avenue of the
  Americas

  New York, NY 10020

  	
   

  	
  $

  	
  25,000,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  DZ Bank AG Deutsche Zentral-Genossenschaftsbank Frankfurt Am Main

  	
   

  	
  609 Fifth Avenue, 7th Floor

  New York, NY 10017

  	
   

  	
  $

  	
  15,000,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  RZB Finance LLC

  	
   

  	
  1133 Avenue of the
  Americas

  New York, NY 10036

  	
   

  	
  $

  	
  15,000,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  BNP Paribas

  	
   

  	
  787 Seventh Avenue, 30th Floor

  New York, NY 10019

  	
   

  	
  $

  	
  75,000,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  The Bank of Tokyo-Mitsubishi UFJ, Ltd., New York Branch

  	
   

  	
  1251 Avenue of the
  Americas

  New York, NY 10020-1104

  	
   

  	
  $

  	
  15,000,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  TOTAL COMMITMENTS

  	
   

  	
   

  	
   

  	
  $

  	
  250,000,000United States Securities and Exchange Commission Edgar Filing

Exhibit 4.1

THIS WARRANT AND THE UNDERLYING SHARES OF COMMON STOCK HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE “SECURITIES ACT”), OR ANY OTHER SECURITIES LAWS, HAVE BEEN TAKEN FOR INVESTMENT, AND MAY NOT BE SOLD OR TRANSFERRED OR OFFERED FOR SALE OR TRANSFER UNLESS A REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND OTHER APPLICABLE SECURITIES LAWS WITH RESPECT TO SUCH SECURITIES IS THEN IN EFFECT, OR IN THE OPINION OF COUNSEL TO THE ISSUER OF THESE SECURITIES, SUCH REGISTRATION UNDER THE SECURITIES ACT AND OTHER APPLICABLE SECURITIES LAWS IS NOT REQUIRED.

			
	 
	Date: May 5, 2009

	 

WARRANT FOR THE PURCHASE OF SHARES OF

COMMON STOCK OF ECOSPHERE TECHNOLOGIES, INC.

THIS IS TO CERTIFY that, for value received, ______________ (the “Holder”), is entitled to purchase, subject to the terms and conditions hereinafter set forth, ________ shares of Ecosphere Technologies, Inc., a Delaware corporation (the “Company”) common stock, $0.01 par value per share (“Common Stock”), and to receive certificates for the Common Stock so purchased.  The exercise price of this Warrant is $0.25 per share, subject to adjustment as provided below (the “Exercise Price”).   

1.

Exercise Period.  This Warrant shall be exercisable at any time by the Holder beginning on the date listed above (the “Issuance Date”), and ending at 5:00 p.m., New York, New York time, five years thereafter (the “Exercise Period”).  This Warrant will terminate automatically and immediately upon the expiration of the Exercise Period.    

2.

Exercise of Warrant; Cashless Exercise.  This Warrant may be exercised, in whole or in part, at any time and from time to time during the Exercise Period.  Such exercise shall be accomplished by tender to the Company of an amount equal to the Exercise Price multiplied by the number of underlying shares being purchased (the “Purchase Price”), either (a) in cash, by wire transfer or by certified check or bank cashier’s check, payable to the order of the Company, or (b) by surrendering such number of shares of Common Stock received upon exercise of this Warrant with an aggregate Fair Market Value (as defined below) equal to the Purchase Price (as described in the following paragraph (a “Cashless Exercise”), together with presentation and surrender to the Company of this Warrant with an executed subscription form in substantially the form attached hereto as Exhibit A (the “Subscription”). Upon receipt of the foregoing, the Company will deliver to the Holder, as promptly as possible, a certificate or 

1

certificates representing the shares of Common Stock so purchased, registered in the name of the Holder or its transferee (as permitted under Section 3 below).  With respect to any exercise of this Warrant, the Holder will for all purposes be deemed to have become the holder of record of the number of shares of Common Stock purchased hereunder on the date a properly executed Subscription and payment of the Purchase Price is received by the Company (the “Exercise Date”), irrespective of the date of delivery of the certificate evidencing such shares, except that, if the date of such receipt is a date on which the stock transfer books of the Company are closed, such person will be deemed to have become the holder of such shares at the close of business on the next succeeding date on which the stock transfer books are open.  Fractional shares of Common Stock will not be issued upon the exercise of this Warrant.  In lieu of any fractional shares that would have been issued but for the immediately preceding sentence, the Holder will be entitled to receive cash equal to the current market price of such fraction of a share of Common Stock on the trading day immediately preceding the Exercise Date.  In the event this Warrant is exercised in part, the Company shall issue a new Warrant to the Holder covering the aggregate number of shares of Common Stock as to which this Warrant remains exercisable for.

If the Holder elects to conduct a Cashless Exercise, the Company shall cause to be delivered to the Holder a certificate or certificates representing the number of shares of Common Stock computed using the following formula:

		
	 
	X = Y (A-B)

A

Where:

X

=

the number of shares of Common Stock to be issued to Holder;

Y

=

the portion of the Warrant (in number of shares of Common 

Stock) being exercised by Holder (at the date of such 

calculation);

A

=

the Fair Market Value (as defined below) of one share of 

Common Stock on the Exercise Date, calculated by taking the

average Fair Market Value over the last 10 trading days (not

including the Exercise Date); and 

B

=

Exercise Price (as adjusted to the date of such calculation).

For purposes of this Warrant, Fair Market Value shall mean:  (i) if the principal trading market for such securities is a national securities exchange (including The Nasdaq Stock Market) or the Over-the-Counter Bulletin Board (or a similar system then in use), the last reported sales price on the principal market the trading day immediately prior to such Exercise Date; or (ii) if  (i) is not  applicable, and if bid and ask prices for shares of Common Stock are reported by the principal trading market or the Pink OTC Markets, Inc. (or successor), the average of the high bid and low ask prices so reported for the trading day immediately prior to such Exercise Date.  Notwithstanding the foregoing, if there is no last reported sales price or bid and ask prices, as the case may be, for the day in question, then Fair Market Value shall be determined as of the latest day prior to such day for which such last reported sales price or bid and ask prices, as the case may be, are available, unless such securities have not been traded on an exchange or in the over-

2

the-counter market for 30 or more days immediately prior to the day in question, in which case the Fair Market Value shall be determined in good faith by, and reflected in a formal resolution of, the board of directors of the Company.

3.

Transferability and Exchange.

(a)

This Warrant, and the Common Stock issuable upon the exercise hereof, may not be sold, transferred, pledged or hypothecated unless the Company shall have been provided with an opinion of counsel reasonably satisfactory to the Company that such transfer is not in violation of the Securities Act of 1933 (“Securities Act”), and any applicable state securities laws.  Subject to the satisfaction of the aforesaid condition, this Warrant and the underlying shares of Common Stock shall be transferable from time to time by the Holder upon written notice to the Company.  If this Warrant is transferred, in whole or in part, the Company shall, upon surrender of this Warrant to the Company, deliver to each transferee a Warrant evidencing the rights of such transferee to purchase the number of shares of Common Stock that such transferee is entitled to purchase pursuant to such transfer.  The Company may place a legend similar to the legend at the top of this Warrant on any replacement Warrant and on each certificate representing shares issuable upon exercise of this Warrant or any replacement Warrants. Only registered Holder may enforce the provisions of this Warrant against the Company.  A transferee of the original registered Holder becomes a registered Holder only upon delivery to the Company of the original Warrant and an original Assignment, substantially in the form set forth in Exhibit B attached hereto.

(b)

This Warrant is exchangeable upon its surrender by the Holder to the Company for new Warrants of like tenor and date representing in the aggregate the right to purchase the number of shares purchasable hereunder, each of such new Warrants to represent the right to purchase such number of shares as may be designated by the Holder at the time of such surrender (not to exceed the aggregate number of shares underlying this Warrant).

4.

Adjustments to Exercise Price and Number of Shares Subject to Warrant. 

 The Exercise Price and the number of shares of Common Stock purchasable upon the exercise of this Warrant are subject to adjustment from time to time upon the occurrence of any of the events specified in this Section 4.  For the purpose of this Section 4, “Common Stock” means shares now or hereafter authorized of any class of common stock of the Company, however designated, that has the right to participate in any distribution of the assets or earnings of the Company without limit as to per share amount (excluding, and subject to any prior rights of, any class or series of preferred stock).

(a)

In case the Company shall (i) pay a dividend or make a distribution in shares of Common Stock to Holder of shares of Common Stock, (ii) subdivide its outstanding shares of Common Stock into a greater number of shares, (iii) combine its outstanding shares of Common Stock into a smaller number of shares, or (iv) issue by reclassification of its shares of Common Stock other securities of the Company, then the Exercise Price in effect at the time of the record date for such dividend or on the effective date of such subdivision, combination or reclassification, and/or the number and kind of securities issuable on such date, shall be proportionately adjusted so that the Holder of the Warrant thereafter exercised shall be entitled to receive the aggregate number and kind of shares of Common Stock (or such other securities other than Common Stock) of the Company, at the same aggregate Exercise Price, that, if such 

3

Warrant had been exercised immediately prior to such date, the Holder would have owned upon such exercise and been entitled to receive by virtue of such dividend, distribution, subdivision, combination or reclassification.  Such adjustment shall be made successively whenever any event listed above shall occur. 

(b)

In case the Company shall fix a record date for the making of a distribution to all Holder of Common Stock (including any such distribution made in connection with a consolidation or merger in which the Company is the surviving corporation) of cash, evidences of indebtedness or assets, or subscription rights or warrants, the Exercise Price to be in effect after such record date shall be determined by multiplying the Exercise Price in effect immediately prior to such record date by a fraction, the numerator of which shall be the Fair  Market Value  per share of Common Stock on such record date, less the amount of cash so to be distributed or the Fair Market Value (as determined in good faith by, and reflected in a formal resolution of, the board of directors of the Company) of the portion of the assets or evidences of indebtedness so to be distributed, or of such subscription rights or warrants, applicable to one share of Common Stock, and the denominator of which shall be the  Fair Market Value per share of Common Stock.  Such adjustment shall be made successively whenever such a record date is fixed; and in the event that such distribution is not so made, the Exercise Price shall again be adjusted to be the Exercise Price which would then be in effect if such record date had not been fixed.  

(c)

Notwithstanding any provision herein to the contrary, no adjustment in the Exercise Price shall be required unless such adjustment would require an increase or decrease of at least 1% in the Exercise Price; provided, however, that any adjustments which by reason of this Section 4(c) are not required to be made shall be carried forward and taken into account in any subsequent adjustment.  All calculations under this Section 4 shall be made to the nearest cent or the nearest one-hundredth of a share, as the case may be.

(d)  

In the event that at any time, as a result of an adjustment made pursuant to Section 4(a) above, the Holder of any Warrant thereafter exercised shall become entitled to receive any shares of capital stock of the Company other than shares of Common Stock, thereafter the number of such other shares so receivable upon exercise of any Warrant shall be subject to adjustment from time to time in a manner and on terms as nearly equivalent as practicable to the provisions with respect to the shares of Common Stock contained in this Section 4, and the other provisions of this Warrant shall apply on like terms to any such other shares.

(e)

If the Company merges or consolidates into or with another corporation or entity, or if another corporation or entity merges into or with the Company (excluding such a merger in which the Company is the surviving or continuing corporation and which does not result in any reclassification, conversion, exchange, or cancellation of the outstanding shares of Common Stock), or if all or substantially all of the assets or business of the Company are sold or transferred to another corporation, entity, or person, then, as a condition to such consolidation, merger, or sale (any a “Transaction”), lawful and adequate provision shall be made whereby the Holder shall have the right from and after the Transaction to receive, upon exercise of this Warrant and upon the terms and conditions specified herein and in lieu of the shares of the Common Stock that would have been issuable if this Warrant had been exercised immediately before the Transaction, such shares of stock, securities, or assets as the Holder would have 

4

owned immediately after the Transaction if the Holder have exercised this Warrant immediately before the effective date of the Transaction.

(f)

In case any event shall occur as to which the other provisions of this Section 4 are not strictly applicable but the failure to make any adjustment would not fairly protect the purchase rights represented by this Warrant in accordance with the essential intent and principles hereof, then, in each such case, the Company shall effect such adjustment, on a basis consistent with the essential intent and principles established in this Section 4, as may be necessary to preserve, without dilution, the purchase rights represented by this Warrant.

5.

Registration Rights.  

(a)

No Registration Under the Securities Act. The Warrant has not been registered under the Securities Act.  When exercised, the stock certificates shall bear the following legend unless one year has elapsed since the date of issuance of this Warrant and the shares of Common Stock are issued in a cashless exercise pursuant to Section 2 hereof.

 “The securities represented by this certifi­cate have not been registered under the Securities Act of 1933 (the “Securities Act”), and may not be offered for sale or sold except pursuant to (i) an effective registration statement under the Securities Act, or (ii) an opinion of counsel to the issuer of these securities that an exemption from registration under the Securities Act is available”.

(b)

Registration.  The Holder is not entitled to registration rights.

6.

Reservation of Shares.  The Company agrees at all times to reserve and hold available out of its authorized but unissued shares of Common Stock the number of shares of Common Stock issuable upon the full exercise of this Warrant.  The Company further covenants and agrees that all shares of Common Stock that may be delivered upon the exercise of this Warrant will, upon delivery, be fully paid and nonassessable and free from all taxes, liens and charges with respect to the purchase thereof hereunder.

7.

Notices to Holder.  Upon any adjustment of the Exercise Price (or number of shares of Common Stock issuable upon the exercise of this Warrant) pursuant to Section 4, the Company shall promptly thereafter cause to be given to the Holder written notice of such adjustment.  Such notice shall include the Exercise Price (and/or the number of shares of Common Stock issuable upon the exercise of this Warrant) after such adjustment, and shall set forth in reasonable detail the Company’s method of calculation and the facts upon which such calculations were based.  Where appropriate, such notice shall be given in advance and included as a part of any notice required to be given under the other provisions of this Section 7. 

In the event of (a) any fixing by the Company of a record date with respect to the Holder of any class of securities of the Company for the purpose of determining which of such Holder are entitled to dividends or other distributions, or any rights to subscribe for, purchase or otherwise acquire any shares of capital stock of any class or any other securities or property, or to receive any other right, (b) any capital reorganization of the Company, or reclassification or recapitalization of the capital stock of the Company or any transfer of all or substantially all of the assets or business of the Company to, or consolidation or merger of the Company with or into, any other entity or person, or (c) any voluntary or involuntary dissolution or winding up of 

5

the Company, then and in each such event the Company will give the Holder a written notice specifying, as the case may be (i) the record date for the purpose of such dividend, distribution, or right, and stating the amount and character of such dividend, distribution, or right; or (ii) the date on which any such reorganization, reclassification, recapitalization, transfer, consolidation, merger, conveyance, dissolution, liquidation, or winding up is to take place and the time, if any is to be fixed, as of which the Holder of record of Common Stock (or such capital stock or securities receivable upon the exercise of this Warrant) shall be entitled to exchange their shares of Common Stock (or such other stock securities) for securities or other property deliverable upon such event.  Any such notice shall be given at least 10 days prior to the earliest date therein specified.

8.

No Rights as a Stockholder.  This Warrant does not entitle the Holder to any voting rights or other rights as a stockholder of the Company, nor to any other rights whatsoever except the rights herein set forth. Provided, however, the Company shall not enter into any merger agreement in which it is not the surviving entity, or sell all or substantially all of its assets unless the Company shall have first provided the Holder with 20 days’ prior written notice.

9.

Additional Covenants of the Company.  For so long as the Common Stock is listed for trading or trades on any national securities exchange including The Nasdaq Stock Market, the Company shall, upon issuance of any shares for which this Warrant is exercisable, at its expense, promptly obtain and maintain the listing or qualifications for trading of such shares.

The Company shall comply with the reporting requirements of Sections 13 and 15(d) of the Securities Exchange Act of 1934 for so long as and to the extent that such requirements apply to the Company.

The Company shall not, by amendment of its Certificate of Incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issuance or sale of securities, or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant.  Without limiting the generality of the foregoing, the Company (a) shall comply with Section 6 of this Agreement and have available sufficient shares of Common Stock to be issued from time to time upon exercise of this Warrant, (b) will not increase the par value of any shares of Common Stock issuable upon exercise of this Warrant above the amount payable therefor upon such exercise, and (c) will take all such actions as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable stock. 

10.

Successors and Assigns.  This Agreement shall be binding upon and inure to the benefit of the Company, the Holder and their respective successors and permitted assigns.

11.

Notices.  The Company agrees to maintain a ledger of the ownership of this Warrant (the “Ledger”).  Any notice hereunder shall be given by Federal Express or other overnight delivery service for delivery on the next business day if to the Company, at its principal executive office and, if to the Holder, to their address shown in the Ledger of the Company; provided, however, that either the Company or the Holder may at any time on three days’ written notice to the other designate or substitute another address where notice is to be given.  Notice shall be deemed given and received after a Federal Express or other overnight delivery service is delivered to the carrier. 

6

12.

Severability.  Every provision of this Warrant is intended to be severable. If any term or provision hereof is illegal or invalid for any reason whatsoever, such illegality or invalidity shall not affect the remainder of this Warrant.

13.

Governing Law.  This Warrant shall be governed by and construed in accordance with the laws of the State of Delaware.

14.

Attorneys’ Fees.  In any action or proceeding brought to enforce any provision of this Warrant, the prevailing party shall be entitled to recover reasonable attorneys’ fees in addition to its costs and expenses and any other available remedies.

15.

Entire Agreement.  This Warrant (including the Exhibits attached hereto) constitutes the entire understanding between the Company and the Holder with respect to the subject matter hereof, and supersedes all prior negotiations, discussions, agreements and understandings relating to such subject matter.

IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by its duly authorized officer as of the date first set forth above.

	
	Ecosphere Technologies, Inc.  

By: _________________________

       Patrick Haskell

       Chief Executive Officer

7

Exhibit A

SUBSCRIPTION FORM

(To be Executed by the Holder to Exercise the Rights To Purchase Common Stock Evidenced by the Within Warrant)

The undersigned hereby irrevocably subscribes for _______ shares of the Common Stock (the “Stock”) of Ecosphere Technologies, Inc.  (the “Company”) pursuant to and in accordance with the terms and conditions of the attached Warrant (the “Warrant”), and hereby makes payment of $_______ therefore by [tendering cash, wire transferring or delivering a certified check or bank cashier’s check, payable to the order of the Company] [surrendering _______ shares of Common Stock received upon exercise of the Warrant, which shares have an aggregate fair market value equal to such payment as required in Section 2 of the Warrant].  The undersigned requests that a certificate for the Stock be issued in the name of the undersigned and be delivered to the undersigned at the address stated below.  If the Stock is not all of the shares purchasable pursuant to the Warrant, the undersigned requests that a new Warrant of like tenor for the balance of the remaining shares purchasable thereunder be delivered to the undersigned at the address stated below.

In connection with the issuance of the Stock, I hereby represent to the Company that I am acquiring the Stock for my own account for investment and not with a view to, or for resale in connection with, a distribution of the shares within the meaning of the Securities Act of 1933, as amended (the “Securities Act”). 

I understand that if at this time the Stock has not been registered under the Securities Act, I must hold such Stock indefinitely unless the Stock is subsequently registered and qualified under the Securities Act or is exempt from such registration and qualification. I shall make no transfer or disposition of the Stock unless (a) such transfer or disposition can be made without registration under the Securities Act by reason of a specific exemption from such registration and such qualification, or (b) a registration statement has been filed pursuant to the Securities Act and has been declared effective with respect to such disposition.  I agree that each certificate representing the Stock delivered to me shall bear substantially the same as set forth on the front page of the Warrant.

I further agree that the Company may place stop transfer orders with its transfer agent same effect as the above legend.  The legend and stop transfer notice referred to above shall be removed only upon my furnishing to the Company of an opinion of counsel (reasonably satisfactory to the Company) to the effect that such legend may be removed.

		
	Date:_______________________________

	Signed: _______________________________

Print Name:____________________________

Address:______________________________

	 
	 

	Date:_______________________________

	Signed: _______________________________

Print Name:____________________________

Address:______________________________

Exhibit B

ASSIGNMENT

(To be Executed by the Holder to Effect Transfer of the Attached Warrant)

For Value Received __________________________ hereby sells, assigns and transfers to _________________________ the Warrant attached hereto and the rights represented thereby to purchase _________ shares of Common Stock in accordance with the terms and conditions hereof, and does hereby irrevocably constitute and appoint ___________________________ as attorney to transfer such Warrant on the books of the Company with full power of substitution.

					
	Dated:

	 
	 
	Signed:

	 

	Please print or typewrite

name and address of

assignee:

	 
	Please insert Social Security

or other Tax Identification

Number of Assignee:

					
	Dated:

	 
	 
	Signed:

	 

	Please print or typewrite

name and address of

assignee:

	 
	Please insert Social Security

or other Tax Identification

Number of Assignee:

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