UNIT EXCHANGE AGREEMENT
This
Unit
Exchange Agreement (the “Agreement”)
is
entered into as of August 28, 2006 by and among ORION ETHANOL, LLC (the
“Orion”),
and
each of the members of GATEWAY HOLDCO, L.L.C., a Kansas limited liability
company (“Gateway”)
that
execute this Agreement on the signature page hereto (each a “Member”
and
collectively, the “Members”).
Each
of the parties hereto is referred to as a “Party,”
and
collectively, as the “Parties”.
BACKGROUND
Each
of
the Members is a member of Gateway holding the respective percentage ownership
interest (Profits & Losses) and voting interest in Gateway reflected
opposite each such Member’s name on Schedule
A
attached
hereto as evidenced by the number of Class A and/or Class B Units of Gateway
reflected on Schedule
A
attached
hereto and the related rights of such Member in, and obligations under, the
Operating Agreement of Gateway, dated March 30, 2006 (the “Gateway
Operating Agreement”)
(collectively, the “Gateway
Interests”).
Each
such Member desires to Transfer to Orion its Gateway Interests in exchange
for
the number of membership interests in Orion as specified on Schedule
A
along
with all of the related rights of a member of Orion under the Operating
Agreement of Orion, dated August __, 2006 (the “Orion
Operating Agreement”)
(the
“Orion
Interests”).
Orion
desires to acquire the Gateway Interests from the respective Members and assume
each such Member’s obligations under the Operating Agreement.
Article
7
of the Gateway Operating Agreement provides, among other things, that Members
may Transfer their Gateway Interests as part of a Permitted Transfer. The
Members have obtained the consent of all of the Members and the unanimous
consent of the Board to treat the Transfer contemplated hereby as a Permitted
Transfer under the Gateway Operating Agreement.
Section
7.2 of the Gateway Operating Agreement provides that a transferee of a Member’s
Interest shall become a Substitute Member in place of the transferor of such
Interest if (a) the transferor has stated such intention in a written instrument
of assignment; (b) the Transferee has executed an instrument agreement to be
bound by the terms and conditions of the Gateway Operating Agreement; and (c)
if
required by the Board, the transferor has furnished the Gateway with an opinion
of counsel, satisfactory to the Board, that the proposed Transfer will not
have
any of the consequences described in Section 7.1 of the Gateway Operating
Agreement. The Members desire that Orion become a Substitute Member hereunder
and this Agreement is intended to satisfy the requirements for Orion to become
a
Substitute Member.
The
transactions contemplated hereby are being consummated in furtherance of a
plan
to hereafter effect an exchange of all of the outstanding Equity Securities
(as
defined in the Orion Operating Agreement) of Orion for shares of the common
stock of a company (the “Public
Company”)
that
is obligated to file periodic reports with the US Securities and Exchange
Commission and whose shares are eligible for quotation on the NASD Over-the
Counter Bulletin Board (the “Reverse
Merger Transaction”)
.
AGREEMENT
NOW,
THEREFORE, in consideration of the mutual covenants and agreements hereinafter
set forth, and intending to be legally bound, the parties hereto agree as
follows:
1. Defined
Terms.
Each
capitalized term used but not otherwise defined in this Agreement has the
meaning set forth for such term in the Gateway Operating Agreement or the Orion
Operating Agreement, as applicable.
2. Exchange;
Warrants; Additional Public Company Shares.
(a) Each
Member does hereby sell, assign and transfer unto Orion, all of the right,
title
and interest of such Member in and to such Member’s Gateway Interests, including
without limitation any and all right, title and interest which such Member
may
have (as a result of owning such Member’s Gateway Interests) in and to the
Gateway Operating Agreement, Gateway’s property and capital, distributions of
Gateway’s cash or other property, and allocations of profits, gains, losses and
tax credits made by Gateway with respect to the Gateway Interests or otherwise.
In exchange for such assignment by each such Member of such Member’s Gateway
Interests as aforesaid, Orion hereby grants and issues to each such Member
the
Orion Interests specified opposite such Member’s name on Schedule
A
as
represented by Units of Orion as specified on Schedule
A,
including without limitation any and all right, title and interest which such
Member is entitled to (as a result of owning such Member’s Orion Interests)
under the Orion Operating Agreement, in Orion’s property and capital, in
distributions of Orion’s cash or other property, and in allocations of profits,
gains, losses and tax credits made by Orion with respect to such Member’s Orion
Interests or otherwise.
(b) In
addition to the number of Units representing the Orion Interests that each
Member will receive pursuant hereto, as a condition to the closing of the
Reverse Merger Transaction, Orion shall cause the Public Company to issue to
each Member a warrant exercisable for a number of shares of the Public Company’s
Common Stock that is equal to the quotient of (i) twenty percent (20%) of such
Member’s original investment in Gateway, divided by the price (the “Investor
Purchase Price”)
paid
by investors for shares of the Public Company’s Common Stock in the next common
stock equity financing round in which the Public Company receives proceeds
of at
least $20 million (the
“PIPE”).
The
warrants will have an exercise price equal to 125% of the Investor Purchase
Price and a term of 3 years following the date of the closing of the PIPE.
For
example, if a Member’s original investment in Gateway was $1,500,000 and the
Investor Purchase Price is $10 per share of Public Company Common Stock, then
such Member would receive a warrant for the purchase of 30,000 shares of Public
Company Common Stock at an exercise price of $12.50. The Warrant would have
a
term of three years from the date of the closing of the PIPE.
(c) As
a
condition to the closing of the Reverse Merger Transaction, the Members of
Orion
Development, LLC shall enter into a Make Whole Agreement with the Members of
Gateway in the form of Exhibit A hereto, pursuant to which such Orion
Development Members shall agree to transfer to the Gateway Members additional
shares of the Public Company Common Stock received by such Orion Development
Members in the Reverse Merger Transaction such that the percentage interest
of
the Members of Gateway in the Public Company shall increase to 62.09 % if the
PIPE does not close by July 31, 2007.
3. Assumption
of Obligations and Agreement to be Bound by Operating Agreement.
As
required by Section 7.2 of the Gateway Operating Agreement, each Member hereby
states its intention that upon the completion of the transfer of the Gateway
Interests to Orion as contemplated hereby, Orion shall become a Substitute
Member under the Gateway Operating Agreement. Orion hereby accepts such
assignment of all of the Gateway Interests being assigned to Orion as reflected
on Schedule
A
and
hereby expressly assumes all of the rights, obligations and liabilities of
the
Members under and with respect to the Gateway Interests and agrees to be bound
by the Gateway Operating Agreement as a member thereunder. Each of the Members
hereby accepts Orion’s grant and issuance of the Orion Interests and agrees to
be bound by the terms of the Orion Operating Agreement as a member
thereunder.
4. Record
of Assignment.
Upon
the execution and effectiveness of this Agreement, the Parties shall notify
Gateway’s Board and request that the assignment of the Gateway Interests to
Orion be recorded in Gateway’s records so that Orion stands in the name of the
Members on the books of Gateway and Orion shall cause the grant and issuance
of
Orion Interests to the Members to be recorded in its records so that the Members
shall become members of Orion thereunder.
5. Schedule
of Members.
The
Members shall cause Exhibit
A,
the
Schedule of Members, to the Gateway Operating Agreement to be amended so as
to
reflect Orion’s ownership of the Gateway Interests and Orion shall amend
Exhibit
A,
the
Schedule of Members, to the Orion Operating Agreement so as to reflect each
Member’s ownership of its Orion Interests as reflected on Schedule
A
hereto.
6. Put/Call
Right.
If the
Reverse Merger Transaction is not consummated within sixty (60) days following
the date hereof (the “Outside
Date”),
then
(a) each Member shall have the right for a period of thirty (30) days following
the Outside Date to cause Orion to redeem such Member’s Orion Interests from
such Member in exchange for the Gateway Interests acquired from such Member
hereunder, and (b) Orion shall have the right for a period of thirty (30) days
following the Outside Date to cause all Members to acquire the Gateway Interests
acquired by Orion hereunder from Orion in exchange for the redemption of such
Member’s Orion Interests.
7. Representations
and Warranties of the Members.
Each
Member hereby represents and warrants to Orion as follows:
(a) Such
Member owns the Gateway Interests set forth opposite such Member’s name on
Schedule
A,
of
record and beneficially, free and clear of all liens, claims, charges, security
interests, and encumbrances of any kind whatsoever.
(b) Such
Member
has not,
since acquiring its Gateway Interests, ever granted to any person an option
or
right to purchase or otherwise acquire its Gateway Interests, by contract of
sale or otherwise.
(c) Such
Member
has full
right, power and authority to execute, deliver and perform this Agreement and
to
carry out the transactions contemplated hereby.
(d) This
Agreement has been duly and validly executed and delivered by such Member and
constitutes a valid, binding obligation of such Member, enforceable against
such
Member in accordance with its terms (except as such enforceability may be
limited by laws affecting creditor’s rights generally).
(e) Such
Member is an “Accredited Investors” as defined in Regulation D promulgated under
the Act.
(f) The
Orion
Interests specified opposite such Member’s name on Schedule
A
are
being acquired by such Member for its own account, for investment purposes
and
not with a view to the sale or distribution of all or any part of the Orion
Interests, except in connection with the Reverse Merger Transaction, nor with
any present intention to sell or in any way distribute the same, as those terms
are used in the Act, and the rules and regulations promulgated thereunder,
except in connection with the Reverse Merger Transaction.
(g) Such
Member has sufficient knowledge and experience in financial matters so as to
be
capable of evaluating the merits and risks of acquiring the Orion
Interests.
(h) Such
Member has reviewed copies of such documents and other information as such
Member has deemed necessary in order to make an informed investment decision
with respect to its acquisition of the Orion Interests.
(i) Such
Member understands that the Orion Interests may not be sold, transferred or
otherwise disposed of without registration under the Act or the availability
of
an exemption therefrom.
(j) Such
Member understands and has the financial capability of assuming the economic
risk of an investment in the Orion Interests for an indefinite period of
time.
(k) Such
Member understands the tax consequences and risks of this transaction, and
will
seek professional assistance in reviewing the tax consequences this transaction
and in the preparation of its tax returns.
8. Representations
and Warranties of Orion.
Orion
hereby represents and warrants to each Member as follows:
(a) The
Orion
Interests, when issued, sold and delivered pursuant to the provisions of this
Agreement, will be duly authorized, validly issued, fully paid and
nonassessable.
(b) Orion
has full
right, power and authority to execute, deliver and perform this Agreement and
to
carry out the transactions contemplated hereby.
(c) This
Agreement has been duly and validly executed and delivered by Orion and
constitutes a valid, binding obligation of Orion, enforceable against Orion
in
accordance with its terms (except as such enforceability may be limited by
laws
affecting creditor’s rights generally).
(d) Orion
is
an “Accredited Investors” as defined in Regulation D promulgated under the
Securities Act of 1933, as amended (the “Act”).
(e) The
Gateway Interests are being acquired by Orion for its own account, for
investment purposes and not with a view to the sale or distribution of all
or
any part of the Gateway Interests, except in connection with the Reverse Merger
Transaction, nor with any present intention to sell or in any way distribute
the
same, as those terms are used in the Act, and the rules and regulations
promulgated thereunder, except in connection with the Reverse Merger
Transaction.
(f) Orion
has
sufficient knowledge and experience in financial matters so as to be capable
of
evaluating the merits and risks of acquiring the Gateway Interests.
(g) Orion
has
reviewed copies of such documents and other information as Orion has deemed
necessary in order to make an informed investment decision with respect to
its
acquisition of the Gateway Interests.
(h) Orion
understands that the Gateway Interests may not be sold, transferred or otherwise
disposed of without registration under the Act or the availability of an
exemption therefrom.
(i) Orion
understands and has the financial capability of assuming the economic risk
of an
investment in the Gateway Interests for an indefinite period of
time.
(j) Orion
understands the tax consequences and risks of this transaction, and will seek
professional assistance in reviewing the tax consequences this transaction
and
in the preparation of its tax returns.
9. Further
Assurances.
Each
Party shall execute and deliver or cause to be executed and delivered from
time
to time, whether prior to or after Closing, such instruments, documents,
agreements, consents and assurances and take such other actions, as may
reasonably be required, to carry out the intent of this Agreement.
10. Successors
and Assigns.
The
provisions of this Agreement shall bind and inure to the benefit of the parties
to this Agreement and their respective successors and assigns.
11. Applicable
Law.
This
Agreement shall be governed by and construed in accordance with the laws of
the
State of Kansas, without regard to conflict of laws principles.
12. Construction.
This
Agreement has been negotiated and prepared jointly by all parties hereto, has
been reviewed by legal counsel to each Party, and, as such, shall not be
construed against or in favor of any Party by reason of the drafting of any
provision by any Party or by legal counsel thereto.
13. Counterparts.
This
Agreement may be executed in one or more counterparts and on telecopy
counterparts, each of which when so executed shall be deemed to be an original,
but all of which take together shall constitute one and the same
agreement.
14. Headings.
The
headings, captions, and arrangements used in this Agreement are for convenience
only, and shall not affect the interpretation of this Agreement.
15. Amendment.
This
Agreement may only be amended by a written agreement signed by each of the
parties hereto.
[Signature
Pages Follow]
[Orion
Board Signature Page]
The
Board
of Orion hereby authorizes and approves the foregoing Agreement, consents to
all
of the terms and conditions stated therein and authorizes the officer of Orion
that has executed the Agreement above to so execute the Agreement. The Board
hereby approves the admittance of the Members executing the Agreement as Members
of Orion pursuant to Section 4.2 of the Orion Operating Agreement. If the
Put/Call right provided for in Section 8 of the Agreement is exercised as
contemplated thereby, then the Board shall be deemed to have approved such
transaction through this written consent.
| DIRECTOR | ||
| |
|
|
| By: | /s/ Xxxxxxx X. Xxxxxx | |
|
Xxxxxxx X. Xxxxxx |
||
[Orion
Signature Page]
IN
WITNESS WHEREOF, the parties have caused this Agreement to be executed effective
as of the date first above written.
| ORION: | ||
| ORION ETHANOL, LLC | ||
| |
|
|
| By: | /s/ Xxxxxxx Xxxxxx | |
|
Name: Xxxxxxx Xxxxxx |
||
| Title: President | ||
[Member
Signature Page]
IN
WITNESS WHEREOF, the parties have caused this Agreement to be executed effective
as of the date first above written.
| MEMBER: | ||
| GATEWAY INVESTORS, LLC | ||
|
Print Name of Member Above |
||
| |
|
|
| By: | /s/ Gateway Investors, LLC | |
|
Name: |
||
| Title: | ||
|
Address: 000 X. Xxxx Xxxx
|
||
|
Xxxxxx,
XX 00000
|
||
[Member
Signature Page]
IN
WITNESS WHEREOF, the parties have caused this Agreement to be executed effective
as of the date first above written.
| MEMBER: | ||
| X. XXXXXX XXXXXX | ||
|
Print Name of Member Above |
||
| |
|
|
| By: | /s/ X. Xxxxxx Xxxxxx | |
|
Name: |
||
| Title: | ||
|
Address: 000 X. Xxxxxxxx Xxxxxx
|
||
|
Xxxxx,
XX 00000
|
||
[Member
Signature Page]
IN
WITNESS WHEREOF, the parties have caused this Agreement to be executed effective
as of the date first above written.
| MEMBER: | ||
| CARGILL BIOFUELS INVESTMENTS, LLC | ||
|
Print Name of Member Above |
||
| |
|
|
| By: | /s/ Cargill Biofuels Investments, LLC | |
|
Name: |
||
| Title: | ||
|
Address: 00000 XxXxxxx Xxxx Xxxx
|
||
|
Xxxxx
Xxxxx, XX 00000
|
||
EXHIBIT
A
Form
of Make Whole Agreement
(See
Attached)
Schedule
A
|
Name
of Member
|
Percentage
Ownership (Profits & Losses) in Gateway being transferred to
Orion
|
Percentage
Voting Interest in Gateway being transferred to
Orion
|
Number
of Class A/ Class B Units in Gateway being transferred to
Orion
|
Number
of Units of Orion being Issued to Member in Exchange for Member’s Gateway
Interests
|
|
Wildcat
Holdco, LLC
|
45.498%
|
45.455%
|
9600
|
7,365
|
|
Gateway
Investors, LLC
|
7.109%
|
7.102%
|
1500
|
1,151
|
|
X.
Xxxxxx Xxxxxx
|
2.369%
|
2.367%
|
500
|
384
|
|
Cargill
Biofuels Investments, LLC
|
7.109%
|
7.102%
|
1500
|
1,151
|
|
TOTAL
|
62.085%
|
62.026%
|
13,100
|
10,051
|
