Document:

esph_ex106.htm

EXHIBIT 10.6

 

Confidential Information has been redacted.  The Confidential Information that has been redacted has been filed separately with the Commission.

 

Side Agreement Relating to the Hydrozonix Agreement

 

This Side Agreement Relating to the Hydrozonix Agreement (this “Agreement”) dated as of March 18, 2011 (the “Effective Date”) is by and among Ecosphere Technologies, Inc., a Delaware corporation (“ETI”), Ecosphere Energy Services, LLC, a Delaware limited liability company (“EES”), Clean Water Partners, LLC, a Delaware limited company (“CWP”), John Kuelbs (“Kuelbs”) and Fidelity National Financial, Inc., a Delaware corporation (“Fidelity”) (collectively, the “Parties”).

 

WHEREAS ETI and EES contemporaneously herewith are entering into that certain Exclusive Product Purchase and Sub-License Agreement (the “Purchase Agreement”) dated effective as of the Effective Date with Hydrozonix LLC (“Hydrozonix”), a copy of the form of which is attached hereto as Exhibit A; and

 

WHEREAS in conjunction therewith the Parties desire to set forth certain understandings among them.

 

NOW THEREFORE, in consideration of the premises and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties hereby agree as follows:

 

	
1.  

	
Definitions.  Capitalized terms not otherwise defined herein shall have the meanings set forth in the Purchase Agreement.

 

	
2.  

	
Amendment to Existing Documents.  Contemporaneously herewith, the Parties agree to execute and deliver (i) an amendment in substantially the form attached hereto as Exhibit B to that certain Contribution Agreement dated as of July 15, 2009 among ETI, EES, CWP and Bledsoe Capital Group, LLC, a Montana limited liability company, as amended (the “Contribution Agreement”) and (ii) an amendment in substantially the form attached hereto as Exhibit C to that certain Amended and Restated Limited Liability Company Agreement of Ecosphere Energy Services, LLC dated as of July 15, 2009 among the Parties, as amended (the “LLC Agreement”).

 

	
3.  

	
Technology License Agreement.  EES hereby grants to ETI such manufacturing and other rights under that certain Technology License Agreement dated as of July 15, 2009 between ETI and EES as may be necessary or advisable to allow ETI to comply with its obligations under the Purchase Agreement.  The rights granted to ETI by EES hereunder shall be non-exclusive and non-assignable and may not be sub-licensed, without the prior written consent of EES.

 

	
4.  

	
Purchase Agreement Communications, Payments.  ETI and EES shall each promptly notify the other upon receipt from Hydrozonix of any notification or instruction that is the obligation of the other Party pursuant to the Purchase Agreement.  EES agrees to promptly notify ETI of all communications, including purchase orders that EES receives from Hydrozonix pursuant to the Purchase Agreement.  EES agrees to pay promptly to ETI the Purchase Price for the Units that EES receives from Hydrozonix under the Purchase Agreement, less and except only (i) the Sub-license Fee, (ii) █████ of the Manufacturing Fee and(iii) applicable taxes and other amounts due from ETI to EES.  If for any reason, ETI is required to repay Hydrozonix for any payment that ETI may have received on behalf of EES, then ETI shall promptly pay such amount to EES for repayment to Hydrozonix.

 

  

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Confidential Information has been redacted.  The Confidential Information that has been redacted has been filed separately with the Commission.

 

	
5.  

	
Obligations under the Purchase Agreement.  Notwithstanding the provisions of the third sentence of Section 7.a. of the Purchase Agreement, as between ETI and EES, the obligations under such sentence shall reside with ETI, and accordingly ETI shall indemnify, defend and hold harmless EES from and against any and all losses, damages, liabilities, and reasonable attorneys’ fees and expenses incurred by EES and all causes of action and claims asserted against EES, in each case to the extent resulting from any failure of ETI to perform such obligations. Subject to the foregoing sentence, the Parties agree that the obligations of ETI and EES as provided in the Purchase Agreement shall remain with the Party named in the Purchase Agreement as having such obligations.  In addition to the foregoing, ETI shall indemnify, defend and hold harmless EES from and against any and all losses, damages, liabilities, and attorneys’ fees and expenses incurred by EES and all causes of action and claims asserted against EES to the extent resulting from or arising out of any defects in the manufacturing of Units or manufacturing-related defaults by the Manufacturer under the Purchase Agreement.

 

	
6.  

	
$2,000,000 Note.  The Parties agree that any amounts received by EES from Hydrozonix pursuant to Section 6.g. of the Purchase Agreement (net of taxes) or received by EES from a sale or lease to any of the Existing Customers of any water treatment units currently being used by EES for such Existing Customers shall be promptly applied by EES to the prepayment of any amounts remaining outstanding under that certain Replacement Secured Note (the “Note”) dated July 1, 2009 in the original principal amount of $2,000,000 among EES and EES Operating, LLC as makers and CWP as holder.

 

	
7.  

	
Preferential Rights.  If at any time, Hydrozonix loses its Preferential Rights (as defined in the Purchase Agreement) or the Purchase Agreement is terminated for any reason, the holders of the Class B Units and Class C Units (“B and C Unitholders”) shall have a 60 day period following the B and C Unitholders’ receipt of written notification of the above occurrences to notify ETI and EES in writing that they desire to assume Hydrozonix’s rights, including, without limitation, the Preferential Rights, and obligations under the Purchase Agreement.  If the B and C Unitholders timely provide this written notice, which is optional and not required, then the parties agree to work together within the next 60 days to assign the Purchase Agreement to the B and C Unitholders or enter into a mirror agreement with the B and C Unitholders, subject to any remaining rights of Hydrozonix under the purchase agreement.

 

	
8.  

	
Continuation of Existing Documents.  Except to the extent modified as herein provided, the obligations of the Parties under the Contribution Agreement, the LLC Agreement, the Technology License Agreement, the Amended and Restated Credit Agreement (as defined in the Contribution Agreement, as subsequently amended by a First Amendment dated December 8, 2010), and the Note shall continue.

 

	
9.  

	
Miscellaneous.  This Agreement (i) shall be governed by and construed in accordance with the laws of the State of Delaware, excluding its principles of conflicts of law, (ii) shall inure to the benefit of the Parties hereto and their successors and permitted assigns and (iii) may be executed in multiple counterparts and by facsimile signature, with each of such counterparts constituting one and the same agreement and with any such facsimile signatures having the effect of original signatures.

 

[Signature Page Follows]

 

  

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Witness the execution hereof effective as of the Effective Date.

 

	 	ECOSPHERE TECHNOLOGIES, INC. 

 

By:  ___________________________

Title:  _________________________

Date:  _________________________

 

ECOSPHERE ENERGY SERVICES, LLC

 

By:  ___________________________

Title:  _________________________

Date:  _________________________

 

CLEAN WATER PARTNERS, LLC

 

By:  ___________________________

Title:  _________________________

Date:  _________________________

 

FIDELITY NATIONAL FINANCIAL, INC.

 

By:  ___________________________

Title:  _________________________

Date:  _________________________

 

 

_______________________________

 

JOHN KUELBS

 

 

 

3esph_ex107.htm

Exhibit 10.7

 

 

Confidential Information has been redacted.  The Confidential Information that has been redacted has been filed separately with the Commission.

 

SECOND AMENDMENT TO AMENDED AND RESTATED

LIMITED LIABILITY COMPANY AGREEMENT

OF

ECOSPHERE ENERGY SERVICES, LLC

This Second Amendment to Amended and Restated Limited Liability Company Agreement of Ecosphere Energy Services, LLC (this “Amendment”) is made and entered into effective as of the 18th day of March, 2011, by and among Ecosphere Energy Services, LLC, a Delaware limited liability company (the “Company”), Ecosphere Technologies, Inc., a Delaware corporation (“ETI”), as the sole holder of the Class A Units, Clean Water Partners, LLC, a Delaware limited liability company (“CWP”), as the sole holder of the Class B Units, Fidelity National Financial, Inc., a Delaware corporation (“Fidelity”), as a holder of Class C Units, and John Kuelbs (“Kuelbs”) as a holder of Class C Units.  Capitalized terms not otherwise defined herein shall have the meanings set forth in the LLC Agreement (as defined below).

WITNESSETH:

WHEREAS, the Company, ETI and CWP entered into that certain Amended and Restated Limited Liability Company Agreement of Ecosphere Energy Services, LLC dated July 15, 2009, as amended by that certain First Amendment to Amended and Restated Limited Liability Company Agreement of Ecosphere Energy Services, LLC among the members of the Company dated November 9, 2009  (collectively, the “LLC Agreement”);

WHEREAS, pursuant to that certain Exclusive Product Purchase and Sub-license Agreement dated as of the date hereof by and among Hydrozonix LLC, a Florida limited liability company, ETI and the Company (the “Purchase Agreement”), Hydrozonix was granted a sub-license and rights to purchase certain equipment from the Company; and

WHEREAS, in conjunction with the execution and delivery of the Purchase Agreement, the members of the Company desire to make certain changes in the LLC Agreement.

NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:

	
1.  

	
Amendments. The LLC Agreement is hereby amended as follows:

 

A. Section 6.1(b). Section 6.1(b) of the LLC Agreement shall be deleted in its entirety and replaced with the following:

 

(b)           Subject to the provisions of Sections 6.1(d), 6.1(e) and 6.1(f), the Board shall have sole discretion to determine the timing of any distribution and the aggregate amounts available for such distribution. Subject to Section 6.1(b)(iv), each distribution made by the Company, regardless of the source or character of the assets to be distributed, shall be made to the Members in accordance with the following order and priority.

 

US 807408v.5

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Confidential Information has been redacted.  The Confidential Information that has been redacted has been filed separately with the Commission.

 

(i)           First, subject to Section 6.1(b)(iv) and 6.1(f), to the extent cash is received under the Purchase Agreement and any of the resulting cash is distributed hereunder, to the Members in accordance with their Percentage Interests until the cumulative total amount of all prior and current distributions to Members holding Class B Units and Members holding Class C Units under this Section 6.1(b)(i) and under Section 6.1(f) equals $11,350,000 (in furtherance of this Section 6.1(b)(i), the Company shall segregate on its books and records cash receipts under the Purchase Agreement to enable the Board to make a determination whether any distribution under this Section 6.1(b) is derived from cash receipts under the Purchase Agreement or from other sources);

(ii)           Second, to the Members holding the Class A Units and the Members holding the Class C Units in the following percentages:

(A)           78.4973% to the Members holding Class A Units, pro rata based upon their respective Percentage Interests, and

(B)           21.5027% to the Members holding Class C Units, pro rata based upon their respective Percentage Interests,

until the cumulative total amount of all prior and current distributions to Members holding Class A Units under this Section 6.1(b)(ii) equals $7,575,758 (including any distributions made pursuant to Section 12.2 by reference to this Section 6.1(b)(ii));

(iii)           Third, subject to Section 6.1(b)(iv), to the Members in accordance with their Percentage Interests; and

(iv)           In the event of an Inside Significant Event, the order and priority of any distribution of the net proceeds from the Inside Significant Event shall be as follows:

(A)           First, to the Members holding the Class A Units and the Members holding the Class C Units in the following percentages:

(1)           78.4973% to the Members holding Class A Units, pro rata based upon their respective Percentage Interests, and

(2)           21.5027% to the Members holding Class C Units, pro rata based upon their respective Percentage Interests,

until the cumulative total amount of all prior and current distributions to Members holding Class A Units under Section 6.1(b)(ii) and this Section 6.1(b)(iv)(A) equals $7,575,758;

 

  

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Confidential Information has been redacted.  The Confidential Information that has been redacted has been filed separately with the Commission.

 

(B)           Second, unless an Outside Significant Event (as defined in the Contribution Agreement) has occurred and ETI has received a payment of $4,000,000 pursuant to Section 5.8(b) of the Contribution Agreement, to the Members holding the Class A Units and the Members holding the Class C Units in the following percentages:

(1)           78.4973% to the Members holding Class A Units, pro rata based upon their respective Percentage Interests, and

(2)           21.5027% to the Members holding Class C Units, pro rata based upon their respective Percentage Interests,

until the sum of cumulative total amount of all prior and current distributions to Members holding Class A Units under this Section 6.1(b)(iv)(B) equals $12,121,212; and

(C)           Third, to the Members in accordance with their Percentage Interests.

B. Section 6.1(e)(ii).  The words “Section 6.1(b)(ii)” in the first sentence of Section 6.1(e) of the LLC Agreement shall be deleted in their entirety and replaced with the words “Section 6.1(b)(iii)”.

 

C. Section 6.1(f).  Section 6.1(f) shall be inserted immediately following Section 6.1(e) of the LLC Agreement as follows:

 

(f)           The Members agree that, for so long as and to the extent the EBIT-based royalty (as EBIT is defined in the Purchase Agreement and used herein) payable to the Company pursuant to the Purchase Agreement remains at ███ and is actually paid to the Company, the Company shall, promptly following its receipt of EBIT-based royalties under the Purchase Agreement, make special distributions from such royalty amounts the Company receives to the holders of Class B Units and Class C Units, pro rata based upon their respective Percentage Interests, from time to time in an amount equal to ███ of EBIT, and such distributions shall be separate from, and shall not be made in accordance with, the general distributions to Members pursuant to Section 6.1(b).

 

D. Exhibit A - Defined Terms.  The following language shall be inserted in Exhibit A to the LLC Agreement immediately following the definition of the term “Proposal Notice”:

 

“Purchase Agreement” means that certain Exclusive Product Purchase and Sub-license Agreement dated as of March 18, 2011 by and among Hydrozonix LLC, a Florida limited liability company, ETI and the Company.

 

2.           Continuation of LLC Agreement.  Except to the extent modified as herein provided, the obligations of the Members under the LLC Agreement shall continue.

 

 

3.           Miscellaneous.  This Amendment (i) shall inure to the benefit of the parties hereto and their successors and permitted assigns and (ii) may be executed in multiple counterparts and by facsimile signature, with each of such counterparts constituting one and the same agreement and with any such facsimile signatures having the effect of original signatures.

 

  

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IN WITNESS WHEREOF, the Members have duly executed this Amendment effective as of the date set forth above.

 

 

	 	COMPANY:
	 	 
	 	ECOSPHERE ENERGY SERVICES, LLC
	 	 
	 	 
	 	By:________________________________________________
	 	Name:______________________________________________
	 	Title:_______________________________________________
	 	 
	 	 
	 	CLASS A MEMBER:
	 	 
	 	ECOSPHERE TECHNOLOGIES, INC.
	 	 
	 	 
	 	By:_________________________________________________
	 	Name:_______________________________________________
	 	Title:________________________________________________
	 	 
	 	 
	 	CLASS B MEMBER:
	 	 
	 	CLEAN WATER PARTNERS, LLC
	 	 
	 	 
	 	By:_________________________________________________
	 	Name:_______________________________________________
	 	Title:________________________________________________
	 	 
	 	 
	 	CLASS C MEMBER:
	 	 
	 	FIDELITY NATIONAL FINANCIAL, INC.
	 	 
	 	 
	 	By:_________________________________________________
	 	Name:_______________________________________________
	 	Title:________________________________________________
	 	 
	 	____________________________________________________
	 	JOHN A. KUELBS
	 	 

 

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