AGREEMENT
THIS AGREEMENT is effective the 10th day of January, 2008
AMONG:
GS CLEANTECH CORPORATION, a company formed pursuant to the laws of the
State of Delaware and having an office for business located at Xxx
Xxxx Xxxxx, Xxxxx 0000, Xxx Xxxx, Xxx Xxxx 00000 ("GS CleanTech");
AND:
GS AGRIFUELS CORPORATION, a company formed pursuant to the laws of the
State of Delaware and having an office for business located at Xxx
Xxxx Xxxxx, Xxxxx 0000, Xxx Xxxx, Xxx Xxxx 00000 ("GS AgriFuels");
AND:
YA GLOBAL INVESTMENTS, L.P., having an office for business located at
the 000 Xxxxxx Xxxxxx, Xxxxx 0000, Xxxxxx Xxxx, Xxx Xxxxxx 00000
("Lender").
WHEREAS:
A. GS CleanTech beneficially owns 26,398,992 shares of common stock in GS
AgriFuels, which shares correspond to 90.1% of GS AgriFuels' 29,024,572
issued and outstanding shares of common stock (the "Common Shares").
B. In June 2007, and subject to the satisfaction of GS AgriFuels' outstanding
obligations to Lender, GS AgriFuels agreed to issue to GreenShift
Corporation 1,000,000 shares of Series C Preferred Stock in GS AgriFuels
(the "Preferred Shares"), from which GreenShift agreed to assign 378,653
shares Series C Preferred Stock in GS AgriFuels to a former officer of GS
AgriFuels subject to Lender's first priority security interest in all of
the stock and assets of GS AgriFuels.
C. As of the date hereof (i) GS AgriFuels is indebted to the Lender in an
amount in excess of $20,359,631 in principal plus accrued and unpaid
interest, as evidenced by those secured convertible debentures listed on
Schedule A attached hereto (the "Debentures"), (ii) the Lender is the owner
of those certain warrants to purchase additional shares of common stock of
GS AgriFuels as set forth on Schedule A, and (iii) the Lender and GS
AgriFuels are party to those certain credit and related security and pledge
agreements (the "Transaction Documents") as set forth on Exhibit A.
D. While none of the Preferred Shares were issued because issuance of the
Preferred Shares would have constituted a material breach of GS AgriFuels'
Debentures and Transaction Documents with Lender (collectively, the
"Transaction Documents"), GS AgriFuels' agreement to issue and GreenShift's
agreement to assign the Preferred Shares were made in contravention of both
GS AgriFuels' Transaction Documents and GreenShift's various agreements
with Lender.
E. GS CleanTech desires to transfer its interest in the capital stock of GS
AgriFuels to a wholly-owned subsidiary of GS CleanTech (the "Subsidiary").
The Subsidiary will then merge GS AgriFuels into itself in accordance with
the short-form merger procedures provided in Section 253 of the Delaware
General Corporation Law. All shareholders of GS AgriFuels other than the
Subsidiary will receive a cash payment of $0.50 per share (the "Shareholder
Cash Payment") as a result of the merger, and will cease to be shareholders
of GS AgriFuels. GS CleanTech expects to distribute the cash payments to GS
AgriFuels' shareholders on January 30, 2008. The aforementioned merger and
acquisition of GS AgriFuels shares shall be referred to herein as the "Go
Private Transaction."
F. GS CleanTech desires to obtain Lender's consent to the Go Private
Transaction and Lender desires to herein confirm the terms and conditions
under which Lender is willing to grant such consent.
NOW THEREFORE THIS AGREEMENT WITNESSETH THAT in consideration of the premises
and the mutual covenants, agreements, representations and warranties contained
herein, and other good and valuable consideration, the receipt and sufficiency
of which is hereby acknowledged, the parties hereto hereby agree as follows:
Section 1 Consent to Go Private Transaction
Lender hereby grants its consent to the completion by GS CleanTech, GS AgriFuels
and Subsidiary of the Go Private Transaction.
Section 2 Subsidiary Capitalization After Go Private Transaction
(a) Subsidiary shall have no more than 36,650,630 shares (the "Maximum
Shares") of issued and outstanding common stock on a fully diluted
basis which shall including any shares of common stock underlying any
stock, warrant, option, or other security or debt instrument directly
or indirectly convertible into or exercisable or exchangeable for
common stock ("Common Stock Equivalents") and no shares of preferred
stock issued and outstanding after completion of the Go Private
Transaction. Likewise, except for the shares of common stock or Common
Stock Equivalents issued to Lender, neither GS CleanTech nor
Subsidiary shall cause to be issued any shares of Subsidiary capital
stock until such time as Lender's Debentures have been paid in full
and Lender's security interest has been released (unless Lender
otherwise consents to any such issuance in writing).
(b) Subsidiary shall issue to the Lender 3,329,630 shares of common stock
which shall be issued to Lender as soon as feasible after completion
of the Go Private Transaction but in any event prior to February 15,
2008. The Maximum Shares shall include the issuance of these 3,329,630
shares. Furthermore, the Subsidiary shall issue to the Lender a
warrant in the form attached hereto as Exhibit B (the "Warrant") to
purchase an additional 1,665,000 shares of common stock of the
Subsidiary at an exercise price of $0.001 per share.
Section 3 Independent Valuation
GS CleanTech hereby agrees that it shall use its best efforts in a diligent and
aggressive manner to obtain an independent valuation report (the "Valuation
Report") from an independent valuation firm acceptable to the Lender, the scope
of which report shall be to assess the enterprise value (the "Enterprise Value")
and equity value (the "Equity Value") of GS AgriFuels and its operations as of
the date of the Go Private Transaction (which operations solely include GS
AgriFuels' wholly-owned NextGen Fuel, Inc. ("NextGen") and Sustainable Systems,
Inc. ("Sustainable") subsidiaries).
Section 4 Debenture Conversion
The Conversion Price of all of the Debentures payable by GS AgriFuels to Lender
shall be adjusted to be equal to a per share rate equal to 80% of the equity
value derived in the Valuation Report (the "Conversion Price"), but no more than
$0.255, in either case as may be adjusted pursuant to the anti-dilution terms of
the Debentures; the formula for the calculation of the Conversion Price shall be
as follows:
Conversion Price = (80%) x (Equity Value/36,650,630)
(a) Restriction on Conversion
The 4.99% ownership limitations set forth in Sections 4(b)(i) or
3(a)(ii) of the Debentures (as applicable shall not apply so long as
the common stock of GS AgriFuels is not registered pursuant to Section
12 of the Exchange Act. In the event that that the Common Stock of GS
AgriFuels becomes registered pursuant to Section 12 of the Exchange
Act, the Lender shall not have the right to convert any portion of the
Debentures or receive shares of GS AgriFuels common stock upon
conversion of the Debentures to the extent that after giving effect to
such conversion or receipt of such interest payment, Lender, together
with any affiliate thereof, would beneficially own (as determined in
accordance with Section 13(d) of the Exchange Act and the rules
promulgated thereunder) in excess of 4.99% of the number of shares of
GS AgriFuels common stock outstanding immediately after giving effect
to such conversion or receipt of shares as payment of interest. The
provisions of this Section may be waived by Lender at will upon not
less than 65 days prior notice to GS AgriFuels.
(b) Conversion Price after Go Public Transaction.
If conversions are made after GS Agrifuels becomes publicly traded
then the conversion price at that time will be equal to the lower of
the (i) Conversion Price set forth in Section 4 hereof or (ii) the
price equal to eighty percent (80%) of the lowest daily VWAP of the
Common Stock during the 20 trading days (or such shorter period if 20
trading days have not elapsed from the date GS Agrifuels becomes
publicly traded) immediately prior to the conversion date.
(c) Security.
GS AgriFuels acknowledges and agrees that the obligations of GS
AgriFuels under the Debentures are secured by certain existing
security agreements, pledge agreements, and guaranty agreements
(collectively, the "Prior Security Documents"), and shall be further
secured by the Global Security Agreement among the Company, the
Lender, and other parties dated on or about the date hereof (the
"Security Agreement"), the Global Pledge Agreement among the Company,
the Lender, and other parties dated on or about the date hereof (the
"Pledge Agreement"), the Global IP Security Agreement among the
Company, the Lender, and other parties dated on or about the date
hereof (the "IP Security Agreement") the Global Guaranty Agreement
among the Company, the Lender, and other parties dated on or about the
date hereof (the "Guaranty Agreement" and along with the Security
Agreement, the Pledge Agreement, and the Prior Security Documents, the
IP Security Agreement, any mortgages granted to the Lender, and all
other documents, instruments, and agreements granted to the Lender to
secure the obligations of the Company to the Lender, the "Security
Documents"). GS AgriFuels further acknowledges, confirms and agrees
that Lender has and shall continue to have valid, enforceable and
perfected liens upon and security interests heretofore granted
pursuant to any and all of the Prior Security Documents and that the
security interests and guaranties granted pursuant to the Security
Agreement, the Guaranty Agreement, the IP Security Agreement, any
mortgages granted to the Lender, and the Pledge Agreement, are
intended to be supplemental to, and not in limitation of, the existing
security interests or guaranties granted to the Lender to secure the
Obligations, whether under the Prior Security Documents or otherwise.
Section 5 Cash Payments
GS AgriFuels shall make cash payments against the principal and accrued interest
payable to Lender pursuant to the Debentures on the basis of the following terms
and conditions:
(a) Monthly Payments; NextGen Cash Receipts
GS AgriFuels shall cause NextGen to pay to Lender cash payments at a
rate equal to 10% of NextGen's cash receipts on a monthly basis (the
"Monthly Payment").
(b) Quarterly Payments; Free Cash Flows
In the event and to the extent that GS AgriFuels produces positive
cash flows after meeting all of its operational, debt service and
other routine requirements, including the Monthly Payments made to
Lender hereunder, GS AgriFuels shall pay to Lender cash payments at a
rate equal to 50% of GS AgriFuels' net cash flows on a quarterly basis
(the "Quarterly Payment").
(c) Application of Payments
The Lender shall have the right to allocate all payments received by
it in respect of the Debentures as it sees fit and shall promptly
notify the GS AgriFuels of such allocations.
Section 6 Payment Milestone
In the event that GS AgriFuels and/or any of its affiliates fails to pay Lender
a minimum of $7,500,000 on or before July 1, 2008, or a minimum of $15,000,000
on or before September 30, 2008, or a minimum of $25,000,000 on or before
December 31, 2008, then, within no more than 60 days of GS CleanTech's receipt
of written notice from Lender, GS CleanTech shall take GS AgriFuels public again
as provided herein (the "Go Public Transaction")
(a) Go Public Transaction
As used herein, the term "Go Public Transaction" shall refer to either
a distribution of GS AgriFuels shares to GS CleanTech's shareholders,
or a reverse-merger with an affiliate of GS CleanTech, or a
reverse-merger with a separate public shell; or, if GS CleanTech fails
to timely complete any of the foregoing transactions, then GS
CleanTech shall be obligated to facilitate a reverse-merger of GS
AgriFuels with a public shell of Lender's choosing, which public shell
may owe Lender up to $2,000,000 in convertible or other debt to be
assumed by GS AgriFuels.
Section 7 Additional Conditions
(a) Cost of Go Private Transaction
The aggregate Shareholder Cash Payment shall not exceed $1,000,000
unless waived by the Lender.
(b) Appraisal Rights
The per share Equity Value as determined by the Valuation Report shall
be equal to or less than 1.2 times the per share Shareholder Cash
Payment, unless waived by the Lender. In the event and to the extent
that the per share Equity Value exceeds the per share Shareholder Cash
Payment, then GS CleanTech shall pay or cause to be paid to GS
AgriFuels' unaffiliated minority shareholders of record as of the date
of the Go Private Transaction an additional per share cash sum equal
to the per share difference between the per share Equity Value and the
per share Shareholder Cash Payment.
(c) Failure to Meet Additional Conditions
In the event that the conditions provided in Section 7(a) and 7(b)
hereof are not met, then, within no more than 60 days of GS
CleanTech's receipt of written notice from Lender, GS CleanTech shall
take GS AgriFuels public again via a qualified Go Public Transaction.
Section 8 Restrictive Covenants
GS AgriFuels further agrees as follows:
(a) No Payment of Management Fees.
GS AgriFuels shall not make any payments of (i) salaries, management
fees, commissions or any other remuneration to officers or directors
of the Company or any person or entity that is an "affiliate" of any
such person or entity (the "Management Group") other than in the
ordinary course of business or (ii) on any notes, accounts payable or
other obligations or liabilities owed to any member of Management
Group other than in the ordinary course of business.
(b) No Merger or Sale of Business.
For so long as the Debentures are outstanding, GS AgriFuels hereby
agrees that it will not merge or consolidate with any person or
entity, or sell, lease or otherwise dispose of its assets other than
in the ordinary course of business involving an aggregate
consideration of more than ten percent (10%) of the book value of its
assets on a consolidated basis in any 12 month period, or liquidate,
dissolve, recapitalize or reorganize.
(c) No Indebtedness.
For so long as the Convertible Debenture is outstanding, GS AgriFuels
shall not incur any indebtedness for borrowed money or become a
guarantor or otherwise contingently liable for any such indebtedness
except for trade payables or purchase money obligations incurred in
the ordinary course of business, other than to the Lender.
(d) Capital Structure of the Company.
Except as set forth herein, GS AgriFuels shall not change or modify
its capital structure without the written consent of the Lender.
Section 6 Miscellaneous
(a) Expenses
Each of the Parties hereto shall pay its own fees and expenses
(including the fees of any attorneys, accountants, or others engaged
by such Party) in connection with this Agreement and the transactions
contemplated hereby whether or not the transactions contemplated
hereby are consummated.
(b) Paragraph Headings and Language Interpretations
The paragraph headings contained herein are for reference only and
shall not be considered substantive provisions of this Agreement. The
use of a singular or plural form shall include the other form, and the
use of a masculine, feminine or neuter gender shall include the other
genders, as applicable.
(c) Notices
All notices, claims, demands, and other communications hereunder shall
be in writing and shall be deemed given upon (a) confirmation of
receipt of a facsimile transmission, (b) confirmed delivery by a
standard overnight carrier or when delivered by hand, or (c) the
expiration of five (5) business days after the day when mailed by
registered or certified mail (postage prepaid, return receipt
requested), addressed to the respective parties at the following
addresses (or such other address for a party as shall be specified by
like notice) noted in the preamble hereto.
(d) Assignments
This Agreement and all of the provisions hereof shall be binding upon
and inure to the benefit of the Parties hereto and their respective
successors and permitted assigns; provided, however, that neither this
Agreement nor any of the rights, interests, or obligations hereunder
may be assigned by any of the Parties hereto without the prior written
consent of the other Party, except that this Agreement and such
rights, interests and obligations may be assigned by Purchaser to one
(1) or more Affiliates. Purchaser agrees that any such assignment
shall not relieve Purchaser of its obligations hereunder.
(e) Entire Agreement
This Agreement (including the Schedules and any Exhibits hereto)
embodies the entire agreement and understanding of the Parties with
respect to the transactions contemplated hereby and supersedes all
prior written or oral commitments, arrangements, understandings and
agreements with respect thereto. There are no restrictions,
agreements, promises, warranties, covenants or undertakings with
respect to the transactions contemplated hereby other than those
expressly sat forth herein.
(f) Modifications, Amendments and Waivers
At any time prior to the Closing, to the extent permitted by law, (i)
Purchaser and Seller may, by written agreement, modify, amend or
supplement any term or provision of this Agreement and (ii) any term
or provision of this Agreement may be waived in writing by the Party
which is entitled to the benefits thereof.
(g) Counterparts
This Agreement may be executed in two (2) or more counterparts, all of
which shall be considered one (1) and the same agreement and each of
which shall be deemed an original. Each Party shall receive a fully
signed copy of this Agreement.
(h) Governing Law
This Agreement shall be governed by the laws of the State of New
Jersey and the United States of America (regardless of the laws that
might be applicable under principles of conflicts of law or
international law) as to all matters including, but not limited to,
matters of validity, construction, effect and performance.
(i) Accounting Terms
All accounting terms used herein which are not expressly defined in
this Agreement shall have the respective meanings given to them in
accordance with generally accepted accounting principles on the date
hereof.
(j) Severability
If any one (1) or more of provisions of this Agreement shall be held
to be invalid, illegal or unenforceable, the validity, legality or
enforceability of the remaining provisions of this Agreement shall not
be affected thereby. To the extent permitted by applicable law, each
party waives any provision of law which renders any provision of this
Agreement invalid, illegal or unenforceable in any respect.
(k) Specific Performance
Purchaser and Seller recognize that any breach of the terms this
Agreement may give rise to irreparable harm for which money damages
would not be an adequate remedy, and accordingly agree that any
non-breaching party shall be entitled to enforce the terms of this
Agreement by a decree of specific performance without the necessity of
proving the inadequacy as a remedy of money damages. If specific
performance is elected as a remedy hereunder, the electing Party shall
be deemed to have waive any claim for other damages, except reasonable
attorneys fees, costs of suit and expenses related to the enforcement
of specific performance.
(l) Consent to Jurisdiction
Seller and Purchaser hereby submit and consent to the exclusive venue
and jurisdiction of the Supreme Court of the State of New York in
respect of the interpretation and enforcement of the provisions of
this Agreement, and hereby waive and agree not to assert as a defense
in any action, suit or proceeding for the interpretation or
enforcement of this Agreement, that it is not subject thereto or that
such action, suit or proceeding may not be brought or is not
maintainable in said courts or that this Agreement may not be enforced
in or by said courts or that its property is exempt or immune from
execution, that the suit, action or proceeding is brought in an
inconvenient forum, or that the venue of the suit, action or
proceeding is improper. Seller and Purchaser agree that service of
process may be made in any manner permitted by the laws of the State
of New York or the federal laws of the United States in any such
action, suit or proceeding against Seller or Purchaser with respect to
this Agreement. Service of process upon such authorized agent shall be
deemed, in every respect, effective service of process upon Seller or
Purchaser and shall remain effective until Seller or Purchaser shall
appoint another agent for service or process acceptable to the other
Party. Seller and Purchaser agree that final judgment (with all right
of appeal having expired or been waived) against it in any such
action, suit or proceeding shall be conclusive and that the other
Party is entitled to enforce such judgment in any other jurisdiction
by suit on the judgment, a certified copy of which shall be conclusive
evidence of the fact and amount of indebtedness arising from such
judgment.
(m) Binding Effect
This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective heirs, successors, legal
representatives and assigns.
(n) Force Majeure
Neither Party hereto shall be liable for failure to perform any
obligation under this Agreement if such failure to perform is caused
by the occurrence of any contingency beyond the reasonable control of
such Party, including, without limitation, fire, flood, strike or
other industrial disturbance, failure of transport, accident, war,
riot, insurrection, act of God or order of governmental agency or act
of terrorism. Performance shall be resumed as soon as is possible
after cessation of such cause. However, if such inability to perform
continues for more than Ninety (90) days, the other Party may
terminate this Agreement without penalty and without further notice.
(n) Obligations
All amounts owed, together with interest accrued and accruing thereon,
and fees, costs, expenses and other charges (collectively, the
"Obligations") now or hereafter payable by GS AgriFuels to the Lender
under the Debentures and all other agreements, contracts, instruments
or other items delivered in connection therewith are unconditionally
owing by GS AgriFuels to Lender, without offset, setoff, defense or
counterclaim of any kind, nature or description whatsoever.
IN WITNESS WHEREOF the parties have executed this Agreement effective as of the
day and year first above written.
GS CLEANTECH CORPORATION
By: /s/ Xxxxx Xxxxxxxx
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Xxxxx Xxxxxxxx
Chairman
GS AGRIFUELS CORPORATION
By: /s/ Xxxxx Xxxxxxxx
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Xxxxx Xxxxxxxx
Chairman
GS ENERGY CORPORATION
By: /s/ Xxxxx Xxxxxxxx
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Xxxxx Xxxxxxxx
Chairman
YA GLOBAL INVESTMENTS, L.P.
By: Yorkville Advisors, LLC
Its: Investment Manager
By: /s/ Xxxx Xxxxx
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Name: Xxxx Xxxxx
Title: Senior Managing Director
