NOTE PURCHASE AGREEMENT
Exhibit
10.1
THIS NOTE
PURCHASE AGREEMENT (this “Agreement”) entered into as of April 10, 2009, by and
among BEACON ENERGY HOLDINGS, INC. (the “Company”) and the lenders listed on
Schedule A
hereto (the “Lenders”).
For good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as follows:
1. Purchase of Notes and
Warrants. In consideration of the payment by each of the
Lenders of a lump sum in an amount equal to the principal amount set forth
opposite each Lender’s name on Schedule A hereto,
the Company is issuing to each Lender a promissory note in the form of Exhibit 1 hereto in
such respective principal amounts (collectively, the “Notes”) together with a
warrant in the form of Exhibit 2 hereto for
the purchase of up to the number of shares of the Company’s common stock, par
value $0.001 per share (“Common Stock”), at a purchase price equal to $0.01 per
share, as set forth opposite each Lender’s name on Schedule A hereto
(collectively, the “Warrants”, and the shares of Common Stock issuable
thereunder, the “Warrant Shares”), all subject to adjustment as set forth in the
Warrants. Schedule
A may not be amended without the prior written consent of the holders of
at least two-thirds (2/3) of the principal amount of the Notes then outstanding
(the “Requisite Approval”).
2. Liens and
Indebtedness. To secure the Notes, the Company is providing a Deed
of Trust and Security Agreement for the benefit of Holder as of the date hereof
in the form of Exhibit
3 hereto (the “Deed of Trust”). To induce Lenders to purchase
the Notes and Warrants pursuant to this Agreement, the Company hereby covenants
and agrees that, so long as amounts shall remain outstanding under the Notes and
until all of the Company’s obligations under the Notes are paid and satisfied in
full, the Company shall not, without the Requisite Approval, at any time (x)
create, incur, assume or suffer to exist any Liens (other than Permitted Lien
and the lien created by the Deed of Trust) upon or with respect to its assets
and the Property (as defined in the Deed of Trust) or (y) create, incur, or
suffer to exist any Indebtedness (other than under the Notes). For
purposes of this Agreement, “Indebtedness” shall mean (a) all Indebtedness in
respect of money borrowed including, without limitation, Indebtedness which
represents the unpaid amount of the purchase price of any property and is
incurred in lieu of borrowing money or using available funds to pay such amounts
and not constituting an account payable or expense accrual incurred or assumed
in the ordinary course of business of the Company, (b) all Indebtedness
evidenced by a promissory note, bond or similar written obligation to pay money
or (c) all such Indebtedness guaranteed by the Company or for which the Company
is otherwise contingently liable. Furthermore, for purposes of this Agreement,
“Indebtedness” shall mean any obligation of the Company which, under generally
accepted accounting principles in the United Stated (“GAAP”), is required to be
shown on the balance sheet of the Company as a liability. Any obligation secured
by a mortgage, pledge, security interest, encumbrance, lien or charge of any
kind (a “Lien”), shall be deemed to be Indebtedness, even though such obligation
is not assumed by the Company.
3. Representations and
Warranties of the Company. The Company hereby represents and
warrants to the Lenders as follows:
(a) Organization and
Standing. The Company is a corporation duly organized and
validly existing under, and by virtue of, the laws of the State of Delaware and
is in good standing under such laws, and is qualified and in good standing under
the laws of each other jurisdiction in which it is required to be so
qualified. The Company has made available to Lenders true, complete
and correct copies of its certificate of incorporation and bylaws.
(b) Corporate
Power. The Company has all requisite corporate power and
authority to own and operate its properties and assets, and to carry on its
business as presently conducted. The Company has all requisite legal
and corporate power and authority to execute and deliver this Agreement, the
Notes, the Warrants, the Deed of Trust and all other documents evidencing or
securing the Loan or delivered in connection with the making of the Loan
(collectively, the “Loan Documents”) and to carry out and perform its
obligations under the terms of the Loan Documents.
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(c) Authorization;
Validity. The execution, delivery and performance of the Loan
Documents by the Company has been duly authorized by all requisite corporate
action and the Loan Documents constitute the valid and binding obligations of
the Company, enforceable against it in accordance with its terms, except as
limited by general equitable principles and applicable bankruptcy, insolvency,
reorganization, moratorium and other laws of general application affecting
enforcement of creditors’ rights generally. The Warrants are, and the
Warrant Shares when issued shall be, duly authorized, validly issued, fully paid
and nonassessable
(d) Compliance with
Laws. Neither the Company nor any of its subsidiaries are in
material violation of, and neither the execution, delivery nor performance of
any of the Loan Documents has or will result in a violation of, any federal,
state, local or foreign law, rule, regulation, order, judgment or decree
applicable to the Company or any of its subsidiaries.
(e) Compliance with Other
Instruments. Neither the execution, delivery nor performance
of any of the Loan Documents has or will result in a violation or conflict with
or constitute, with or without the passage of time or giving of notice or both,
either a default under or an event that results in the creation of any Lien
under any provision of the Company’s certificate of incorporation or bylaws or
any agreement, instrument or contract to which it or any subsidiary is a party
or by which it or any subsidiary is bound.
(f) Accurate
Information. All disclosure furnished by or on behalf of the
Company to the Lenders regarding the Company or any subsidiary, its business and
the transactions contemplated hereby, is true and correct in all material
respects.
(g) SEC Documents; Financial
Statements. The Company has timely filed all reports,
schedules, forms, statements and other documents required to be filed by it with
the Securities and Exchange Commission (the “SEC”) pursuant to the reporting
requirements of the Securities Exchange Act of 1934 (all of the foregoing filed
prior to the date hereof and all exhibits included therein and financial
statements, notes and schedules thereto and documents incorporated by reference
therein being hereinafter referred to as the “SEC Documents”). The Company has
delivered to the Lenders or their respective representatives true, correct and
complete copies of each of the SEC Documents not available on the XXXXX system.
As of their respective dates, the SEC Documents complied in all material
respects with the requirements of the Exchange Act and the rules and regulations
of the SEC promulgated thereunder applicable to the SEC Documents, and none of
the SEC Documents, at the time they were filed with the SEC, contained any
untrue statement of a material fact or omitted to state a material fact required
to be stated therein or necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not misleading. As of
their respective dates, the financial statements included in the SEC Documents
complied as to form in all material respects with applicable accounting
requirements and the published rules and regulations of the SEC with respect
thereto as in effect as of the time of filing. Such financial statements have
been prepared in accordance with GAAP, consistently applied, during the periods
involved (except (i) as may be otherwise indicated in such financial statements
or the notes thereto, or (ii) in the case of unaudited interim statements, to
the extent they may exclude footnotes or may be condensed or summary statements)
and fairly present in all material respects the financial position of the
Company as of the dates thereof and the results of its operations and
cash flows for the periods then ended (subject, in the case of unaudited
statements, to normal year-end audit adjustments which will not be material,
either individually or in the aggregate). No other information provided by or on
behalf of the Company to the Lenders which is not included in the SEC Documents
contains any untrue statement of a material fact or omits to state any material
fact necessary in order to make the statements therein not misleading, in the
light of the circumstance under which they are or were made.
(h) Financial
Condition. Lenders have been provided with internal
consolidated financial statements of the Company and its subsidiaries as of and
for the two-month period ended February 28, 2009 (the “Feb-09 Financial
Statements”). The Feb-09 Financial Statements, including the related
notes, have been prepared from the books and records of the Company in
accordance with GAAP consistently applied throughout the periods covered
(subject to normal, recurring year-end adjustments and the absence of notes),
are complete and correct in all material respects and fairly present the results
of operations and financial condition of the Company and the consolidated
entities as of the dates and for the periods covered thereby. Neither
the Company nor any of its subsidiaries is obligated for any liabilities, claims
or obligations, absolute or contingent, of a nature that would be required by
GAAP to be disclosed on a consolidated balance sheet or in the notes related
thereto, except for those liabilities, claims or obligations (i) accrued or
adequately reserved against in the Feb-09 Financial Statements or (ii) incurred
in the ordinary course of business since February 28, 2009 (the “Balance Sheet
Date”).
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(i) Capitalization. As
of the date hereof, the authorized capital stock of the Company consists of
70,000,000 shares of Common Stock, of which 31,100,000 shares are issued and
outstanding, and 5,000,000 shares of preferred stock, of which none are issued
and outstanding. The Company has established the 2008 Equity Incentive Plan (the
“Plan”) which allows for up to 3,000,000 shares of the Company’s common stock to
be issued upon the exercise of stock based awards granted to officers,
consultants, board members and certain other employees of the Company and its
subsidiaries from time to time. Except for pursuant to grants under the Plan and
as contemplated by this Agreement, there are no outstanding subscriptions,
warrants, options, calls, commitments or other rights to purchase or acquire, or
securities convertible into or exchangeable for, any capital stock of the
Company, or any obligation of the Company to issue any thereof. There
are no preemptive rights with respect to the issuance or sale of the Company’s
capital stock or other equity interests or Indebtedness. As of the
date hereof, after giving effect to the issuance of the Warrants and the
3,000,000 shares of Common Stock issuable under the Plan, the Warrant Shares
issuable to each Lender under its Warrant shall represent not less than (x) 10%
of the Company’s total issued and outstanding shares of capital stock, on a
fully diluted, as-converted basis (for such purposes, treating as outstanding
all shares of Common Stock issuable upon the conversion or exercise of all
securities so convertible or exercisable, whether vested or unvested),
multiplied by (y) the principal amount of the Note issued to such Lender as set
forth on Exhibit
A hereto, divided by (z) the aggregate principal amount of the
Notes.
4. Representations and
Warranties of the Lenders. Each Lender hereby, severally but
not jointly, represents and warrants to the Company as follows:
(a) Organization and
Standing. If such Lender is an entity, such Lender is an
entity duly organized, validly existing and in good standing under the laws of
the jurisdiction of its organization.
(b) Power. Such
Lender has all requisite power and authority to execute and deliver this
Agreement and to carry out and perform its obligations under the terms of this
Agreement.
(c) Authorization;
Validity. The execution, delivery and performance by such
Lender of the transactions contemplated by this Agreement have been duly
authorized by any necessary corporate or similar action on the part of such
Lender. This Agreement has been duly executed by such Lender and
constitutes the valid and binding obligation of such Lender, enforceable against
it in accordance with its terms, except as limited by general equitable
principles and applicable bankruptcy, insolvency, reorganization, moratorium and
other laws of general application affecting enforcement of creditors’ rights
generally.
(d) Own
Account. Such Lender understands that each of the Note and the
Warrant issued to such Lender is a “restricted security” and has not been
registered under the Securities Act of 1933, as amended (the “Securities Act”)
or any applicable state securities law and is acquiring such Note and Warrant as
principal for its own account and not with a view to or for distributing or
reselling such Note or Warrant or any part thereof in violation of the
Securities Act or any applicable state securities law, has no present intention
of distributing such Note or Warrant in violation of the Securities Act or any
applicable state securities law and has no direct or indirect arrangement or
understandings with any other persons to distribute or regarding the
distribution of such Note or Warrant in violation of the Securities Act or any
applicable state securities law.
(e) Lender
Status. At the time such Lender was offered the Note and
Warrant issued to such Lender, it was, and at the date hereof it is, and on each
date on which it exercises any Warrants it will be, either: (i) an “accredited
investor” as defined in Rule 501(a) under the Securities Act or (ii) a
“qualified institutional buyer” as defined in Rule 144A(a) under the Securities
Act.
(f) Experience of the
Lender. Such Lender, either alone or together with its
representatives, has such knowledge, sophistication and experience in business
and financial matters so as to be capable of evaluating the merits and risks of
the prospective investment in the Note and Warrant issued to such Lender, and
has so evaluated the merits and risks of such investment. Such Lender
is able to bear the economic risk of an investment in the Note and Warrant
issued to such Lender and, at the present time, is able to afford a complete
loss of such investment.
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(g) General
Solicitation. Such Lender is not purchasing the Note or
Warrant issued to such Lender as a result of any advertisement, article, notice
or other communication regarding such Note and Warrant published in any
newspaper, magazine or similar media or broadcast over television or radio or
presented at any seminar or any other general solicitation or general
advertisement.
(h) Confidentiality. Such
Lender has maintained the confidentiality of all disclosures made to it in
connection with this transaction (including the existence and terms of this
transaction).
(i) Information on
Company. Such Lender has been furnished with or has had access
at the XXXXX Website of the SEC to the Company’s periodic reports filed with the
SEC. In addition, such Lender has received in writing from the
Company such other information concerning its operations, financial condition
and other matters as such Lender has requested, and considered all factors such
Lender deems material in deciding on the advisability of investing in the Note
and Warrant issued to such Lender.
5. Covenants. (a)
Until payment in full of all amounts due under the Notes, the Company shall
comply with the covenants set forth on Schedule B
hereto.
(b) Within
thirty (30) days of the closing of the transactions contemplated hereby, the
Company shall obtain a Lender’s policy of title insurance coverage (in form and
substance reasonably acceptable to the Lenders) on the Facility for the maximum
coverage available, up to an amount equal to the principal amount of the
Notes. The Company hereby agrees to take all actions necessary,
including the payment of funds, so that there is clean title to the
Facility.
(c) Following
the closing of the transactions contemplated hereby, the Company shall file with
the SEC within the required time period a Current Report on Form 8-K relating to
the transactions.
(d) The
Company shall not issue (or agree to issue) any shares of its capital stock, or
securities convertible into or exchangeable for capital stock, in satisfaction
of (whether by conversion, exchange, cancellation or otherwise) any obligations
owed by the Company or any of its subsidiaries to any affiliate (as defined in
Rule 12b-2 under the Securities Exchange Act of 1934) of the Company at any time
prior to January 1, 2010. Further, from and after January 1, 2010,
the Company may only so issue such shares or other securities to its affiliates
at not less than fair value.
(e) Within
thirty (30) days of the closing of the transactions contemplated hereby, the
Company shall obtain an ALTA survey with respect the Facility in form and
substance reasonably acceptable to the Lenders.
6. Grant of Security
Interest. (a) On the date hereof, the Company shall grant to
the Lenders a first lien on the Company’s biodiesel production facility located
in Cleburne, Texas (the “Facility”) pursuant to the Deed of Trust, in order to
secure the payment and performance in full of all obligations of the Company now
or hereafter existing under the Note and the Deed of Trust. Upon the
payment and performance in full of all such obligations, each Lender shall
release the lien of the Deed of Trust.
(b) The
Company agrees that the security interest granted pursuant to Section 6(a) shall
be a first priority security interest in the Facility, prior in payment to all
other indebtedness and obligations of the Company to third parties; provided, however, that such
security interest shall be pari passu with the security interest of the holders
of all the Notes.
(c) On
the date hereof, the Company shall also grant to the Lenders a first priority
security interest in the Company’s accounts receivable (the “Receivables”), in
order to secure clear title on the Facility. Upon the receipt by the
Company of title insurance on the Facility, each Lender shall release the
security interest on the Receivables.
(d) The
Company shall file any and all UCC financing statements or other documents and
instruments necessary to perfect the security interests granted
herein. In addition, the Lenders are authorized to prepare and file
any UCC financing statements and other such instruments, without the Company’s
signature to the extent permitted by law.
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(e) Within
fifteen (15) days of the closing of the transactions contemplated hereby, the
Company shall take all actions necessary to remove any existing liens on the
Facility.
7. Amendments, Waivers,
Consents and Remedies. This Agreement may not be amended or
modified or the provisions hereof waived (either generally or in a particular
instance and either retroactively or prospectively) without the prior written
consent of the party against whom such amendment, modification, or waiver is
sought to be enforced; provided, however that with respect to
the Lenders, amendments, modifications and waivers must be consented to by the
Requisite Approval then outstanding and upon such approval, such amendment,
modification and waiver shall be binding upon each Lender. The
exercise of any remedies under this Agreement may be made, only with the
Requisite Approval.
8. Miscellaneous.
(a) Use of
Proceeds. The Company shall use the net proceeds from the sale
of the Notes and Warrants for general corporate and working capital purposes,
including for the direct expenses of the operation of the Company’s biodiesel
production facility in Cleburne, Texas; provided, however, that the proceeds
shall not be used (i) in connection with the operation of any other production
facilities and (ii) to make payments to any affiliates of the
Company.
(b) Expenses. The
Company shall reimburse the Lenders for their reasonable legal fees and expenses
incident to the negotiation, preparation, execution, delivery and performance of
the Loan Documents; provided that such reimbursement shall not exceed an
aggregate of $10,000.
(c) Severability. In case
any one or more of the provisions contained in this Agreement should be invalid,
illegal or unenforceable in any respect, the validity, legality and
enforceability of the remaining provisions contained herein shall not in any way
be affected or impaired thereby.
(d) Notices and
Addresses. All notices, offers, acceptances and any other acts
under this Agreement (except payment) shall be in writing, and shall be
sufficiently given if delivered to the addressee in person, by FedEx or similar
receipted delivery, by facsimile delivery or, if mailed, postage prepaid, by
certified mail, return receipt requested, as follows:
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To
any Lender:
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the
address set forth opposite such Lender’s name on Schedule A
hereto
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To
the Company:
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000
Xxxxx Xxxxxx Xxxx
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Xxxxxxxx,
Xxx Xxxxxx 00000
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Attn: Xxxxxx
X. Xxxxxx
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Fax:
(000) 000-0000
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With
a copy to:
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Sichenzia
Xxxx Xxxxxxxx Xxxxxxx LLP
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00
Xxxxxxxx, 00xx
Xxxxx
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Xxx
Xxxx, Xxx Xxxx 00000
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Attn: Xxxxxx
Xxxxxx, Esq.
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Fax: (000)
000-0000
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or to
such other address as any of them, by notice to the others may designate from
time to time. Time shall be counted to, or from, as the case may be, the
delivery in person or five (5) business days after mailing.
(e) Governing
Law. This Agreement and any dispute, disagreement, or issue of
construction or interpretation arising hereunder, whether relating to its
execution, its validity, the obligations provided therein or performance, shall
be governed and interpreted according to the law of the State of New York,
without regard to principals of conflicts of law.
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(f)
Binding Effect;
Assignment. This Agreement and the various rights and
obligations arising hereunder shall inure to the benefit of and be binding upon
the parties hereto and their respective successors and permitted
assigns. Neither this Agreement nor any of the rights, interests or
obligations hereunder shall be transferred or assigned (by operation of law or
otherwise) by the parties hereto without the prior written consent of the other
party. Any transfer or assignment of any of the rights, interests or obligations
hereunder in violation of the terms hereof shall be void and of no force or
effect.
(g) Jurisdiction and
Venue. The parties (i) agree that any legal suit, action or
proceeding arising out of or relating to this Agreement shall be instituted
exclusively in the courts of the State of New York, County of New York, (ii)
waive any objection to the venue of any such suit, action or proceeding and the
right to assert that such forum is not a convenient forum, and (iii) irrevocably
consent to the jurisdiction of the courts of the State of New York, County of
New York, in any such suit, action or proceeding, and further agree to accept
and acknowledge service of any and all process which may be served in any such
suit, action or proceeding and agree that service of process upon them mailed by
certified mail to their respective addresses shall be deemed in every respect
effective service of process upon them in any such suit, action or
proceeding.
(h) Section
Headings. Section headings herein have been inserted for
reference only and shall not be deemed to limit or otherwise affect, in any
manner, or be deemed to interpret in whole or in part any of the terms or
provisions of this Agreement.
[SIGNATURE
PAGE FOLLOWS]
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IN
WITNESS WHEREOF, the parties have caused this Note Purchase Agreement to be made
and entered into as of the date specified above.
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By:
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Xxxxxx
X. Xxxxxx
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Chairman
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SCHEDULE
A
Lenders
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Name
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Address
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Principal Amount
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Number of Warrant Shares
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$ | 1,500,000 | 3,788,888 | |||||||||
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SCHEDULE
B
Covenants
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1.
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Reporting
Requirements. The Company shall deliver to the Holder
the following:
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(a)
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Annual
audited consolidated financial statements, within 120 days of the
Company’s fiscal year end;
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(b)
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Quarterly
consolidated and consolidating financial statements within 60 days of each
quarter end;
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(c)
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A
copy of all management letters or drafts of all management letters, if
prepared by the Company’s auditors, within 30 days after receipt of the
audited statements; and
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(d)
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The
Company’s consolidated annual budget to be provided prior to the start of
each fiscal year, prepared on a monthly basis (including balance sheets,
income statements and cash flows).
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2.
Leverage Ratio.
The Company’s total outstanding indebtedness (including the Notes and any and
all other Indebtedness or capital leases), divided by EBITDA, shall not exceed
3.5 to 1. This covenant shall be tested quarterly. EBITDA shall be based on
the last four quarters annualized, beginning with the September 2010 fiscal
quarter.
3. Preemptive
Rights. Upon any issuance by the Company of (i) Indebtedness,
(ii) shares of its capital stock or (iii) securities that are convertible or
exercisable for shares of its capital stock, for cash consideration in whole or
in part (a “Subsequent Financing”), the Lenders shall have the right, but not
the obligation, to participate in whole or in part in the Subsequent Financing
on the same terms, conditions and price provided for in the Subsequent
Financing; provided, however, that Lenders shall not have such preemptive right
in connection with Indebtedness from commercial lenders that has been approved
by the necessary approval of holders of two-thirds of the principal amount of
Notes.
4. Auditors. The
Company shall retain, and cause its annual consolidated financial statements for
FYE 2009 and beyond to be audited by, an independent auditing firm (Xxxxxxxx LLC
or equivalent) reasonably acceptable to the Lenders.
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