SUBSCRIPTION AND INVESTMENT AGREEMENT (SERIES C) BY AND AMONG BEACON ENERGY CORP. THE INVESTORS IDENTIFIED HEREIN AND METALICO, INC. MAY 15, 2008 SUBSCRIPTION AND INVESTMENT AGREEMENT
Exhibit 10.26
SUBSCRIPTION AND INVESTMENT AGREEMENT
(SERIES C)
(SERIES C)
BY AND AMONG
BEACON ENERGY CORP.
THE INVESTORS IDENTIFIED HEREIN
AND
METALICO, INC.
MAY 15, 2008
THIS SUBSCRIPTION AND INVESTMENT AGREEMENT (this “Agreement”) is made as of May 15, 2008 by
and among BEACON ENERGY CORP., a Delaware corporation (the “Company”), the investors identified on
the signature pages hereto (each, an “Investor” and together, the “Investors”), and METALICO, INC.,
a Delaware corporation (“Metalico”).
RECITALS:
WHEREAS, the Investors, severally and not jointly, have agreed to invest in the Company sums
aggregating to Dollars ($ ) (the “Investment”) in exchange for an
aggregate of shares of the Company’s Series C Common Stock, par value $.001 (the
“Purchased Shares”) and the Company has agreed to issue the Purchased Shares to the Investors in
exchange for the Investment in accordance with the allocations set forth on Schedule 2.1
hereto; and
WHEREAS, the Company and the Investors wish to set forth herein their understandings and
agreements pertaining to this transaction and the ownership by the Investors of the Purchased
Shares; and
WHEREAS, Metalico owns a substantial portion of the outstanding capital stock of the Company
and will obtain material benefits from the Investments;
NOW, THEREFORE, in consideration of the foregoing Recitals and the mutual covenants contained
herein, and for other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the Company, the Investors and Metalico (individually each a “Party” and
collectively, the “Parties”) hereby agree as follows:
ARTICLE I — DEFINITIONS
SECTION 1.1. Defined Terms. As used in this Agreement, the following terms have the
meanings specified below:
“Act” means the U.S. Securities Act of 1933, as amended.
“Aggregate Purchase Price” has the meaning ascribed to such term in Section 2.2.
“Closing Date” means May 15, 2008, or such earlier or later date that the Parties may agree
to.
“Common Stock” has the meaning ascribed to such term in the Company’s Certificate of
Incorporation.
“Investment” has the meaning ascribed to such term in the Recitals.
“Person” means any natural person, corporation, business trust, limited liability company,
joint venture, association, company or partnership.
“Purchase Price” has the meaning ascribed to such term in Section 2.2.
“Purchased Shares” has the meaning ascribed to such term in the Recitals.
“Risk Factors” means the risk factors prepared by the Company and set forth in “Exhibit A”
attached hereto.
“Voting Agreement” means that certain agreement dated as of the date hereof by and among the
Investors, the Company, Metalico and the other parties specified therein.
“Stock Certificate” has the meaning ascribed to such term in Section 2.3.
ARTICLE
II — PURCHASE OF SHARES
SECTION 2.1. Purchase of Shares. On the Closing Date, each of the Investors will
purchase, severally and not jointly, from the Company, and the Company will issue to each Investor,
the Purchased Shares in accordance with the terms and conditions set forth herein and the
allocations set forth on Schedule 2.1 hereto. Each Investor’s obligations under this
Agreement are several and not joint obligations and no Investor shall have any obligation or
liability for the performance or non-performance by any other Investor of such other Investor’s
obligations under this Agreement.
SECTION 2.2. Purchase Price. The purchase price for each Purchased Share is Thirty
Six Dollars ($36.00) (the “Purchase Price”) and the aggregate purchase price for all the Purchased
Shares by the Investors (the “Aggregate Purchase Price”) is Dollars ($ ).
The Purchase Price with respect to each of the Purchased Shares purchased by each Investor is
payable in full by each such Investor to the Company in immediately available funds on the Closing
Date.
SECTION 2.3. Delivery of Stock Certificate. On the Closing Date, the Company will
issue and deliver to each Investor a complete, original and duly executed stock certificate
representing the Purchased Shares purchased by such Investor (the “Stock Certificate”), free and
clear of any and all mortgages, pledges, liens, claims, encumbrances or security interests of any
kind (“Liens”). Each Stock Certificate shall contain the following legends:
“THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD, OFFERED FOR
SALE, PLEDGED OR HYPOTHECATED EXCEPT PURSUANT TO A REGISTRATION STATEMENT IN EFFECT WITH
RESPECT TO THE SHARES UNDER SUCH ACT OR ANY THEN AVAILABLE EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF SUCH ACT AND ANY APPLICABLE STATE SECURITIES LAWS. IF REQUESTED BY THE
COMPANY, THE HOLDER OF SUCH SHARES MUST PROVIDE TO THE COMPANY AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY THAT ANY SUCH SALE, OFFER FOR SALE, PLEDGE OR HYPOTHECATION OF
THE SHARES DOES NOT REQUIRE REGISTRATION UNDER SUCH ACT AND ANY APPLICABLE STATE SECURITIES
LAWS.”
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SECTION 2.4. Conditions to Closing. The Investors’ obligations hereunder shall be
subject to the consummation by the Company of the transaction contemplated by the Smithfield
Agreement (as defined below); and a $1,000,008 investment by Xx. Xxxxxx and/or entities controlled
by him.
ARTICLE
III — COVENANTS OF THE COMPANY
SECTION 3.1. Financial and Other Reporting by the Company. The Company will deliver
to each Investor with reasonable promptness:
(i) that certain power point presentation and financial model of the Company dated as of April
16, 2008, as amended through the date hereof;
(ii) audited financial statements of the Company as of the end of each fiscal year and
unaudited financial statements at the end of each fiscal quarter;
(iii) notice, after any officer of the Company obtains knowledge or notice, either written or
oral, of any condition or event particular to the Company which could reasonably be expected to
have a material adverse effect on the business, operations, or prospects of the Company; and
(iv) any such other information and data with respect to the Company as from time to time may
be reasonably requested by the Investor.
SECTION 3.2. Use of Proceeds. The Company will use the proceeds of the sale of the
Purchased Shares to fund its acquisition of certain assets of Smithfield Bioenergy pursuant to the
terms and conditions of that certain Asset Purchase Agreement dated February 5, 2008, and amended
by First Amendment to Purchase Agreement dated as of April 15, 2008, attached hereto as Exhibit
3.2 (as further amended, provided that the Investors have been provided a copy of, and
approved, any such amendment(s)) by and between the Company and Smithfield Bioenergy LLC (the
“Smithfield Agreement”), as well as the funding of various and ancillary start-up costs, the
payment of general operating expenses including payroll, and other general corporate purposes.
SECTION 3.3. Business of the Company. The business of the Company shall be to become
a vertically integrated international biofuels production, storage, distribution and marketing
company; to own farmland for the production of biofuels feedstock; and to acquire and operate
existing biofuel production facilities.
SECTION 3.4. Investor Relations Firm. On or before the effective date of the
registration or acceptance for trading of the Company’s stock by a Trading Platform (as defined in
Section 5.1), the Company shall retain an investor relations firm to promote the Company’s stock.
SECTION 3.5. Anti-Dilution. Until the Platform Date (as defined in Section 5.1), the
Company shall not issue any shares of common stock or securities convertible into or exercisable
for shares of common stock at a price per share less than $36.00 (as such may be adjusted to
account for any stock split, reverse stock split, merger or other corporate re-organization),
except for options (and the shares of common stock underlying such options) under a stock option
plan or similar arrangement approved by the Company’s Board of Directors.
SECTION 3.6. Registration Rights. The Company shall not grant demand, piggyback or
any other form of registration rights to any Person unless, prior to or simultaneously with any
such grant, the Investors shall be granted registration rights on terms not less favorable than
those granted to such person with respect to all the Purchased Shares and any and all other shares
of capital stock of the Company then held or thereafter acquired by the Investors.
SECTION 3.7. Public Trading Event. By its execution of this Agreement, the Company
agrees to use its best efforts to cause a Public Trading Event to occur.
SECTION 3.8. Amendment of Stock Agreements. The Company and Metalico agree not to
amend any stock purchase agreements with any other investors without the Investors’ prior written
consent.
ARTICLE
IV — COMPANY REPRESENTATIONS AND WARRANTIES
The Company hereby makes the following representations and warranties to each Investor as of
the Closing Date:
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SECTION 4.1. Organization; Powers. The Company (a) is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware; (b) has all
requisite corporate power and authority to own its property and assets and to carry on its business
as now conducted and as proposed to be conducted; and (c) has the corporate power and authority to
execute, deliver and perform its obligations under this Agreement. The Company does not (i) own of
record or beneficially, directly or indirectly, (A) any shares of capital stock or securities
convertible into capital stock of any other Person, or (B) any participating interest in any
Person, or (ii) control, directly or indirectly, any other Person.
SECTION 4.2. Authorization; Conflicts. The execution, delivery and performance by the
Company of this Agreement and the Voting Agreement has been duly authorized by all necessary
corporate action on the part of the Company. Except as set forth on Schedule 4.2 hereto:
(a) the Company is not in violation or default of any provision of (i) its Certificate of
Incorporation or By-laws, or (ii) any material contract, agreement, obligation, commitment,
license, indenture, mortgage, deed of trust, loan or credit agreement or any other agreement or
instrument to which the Company is a party or any of its assets are bound; (b) the execution,
delivery and performance of this Agreement, the Voting Agreement and the other agreements required
to consummate the transactions contemplated hereunder and thereunder will not conflict with or,
with or without notice or the lapse of time, result in any default or in any modification of any
provision of the Company’s Certificate of Incorporation or By-laws (except for modifications
necessary to reflect the terms of this Agreement, the Voting Agreement or any other agreement or
document required by the terms hereof) or the terms of any contract, agreement, obligation,
commitment, license, indenture, mortgage, deed of trust, loan or credit agreement or any other
agreement or instrument to which the Company is a party or by which any of its assets are bound, or
result in the creation of any Lien upon any of the properties or assets of the Company, or result
in the loss or adverse modification of any license, permit, franchise, or other authorization
granted to, otherwise held by or used by the Company; and (c) the execution, delivery and
performance of this Agreement, the Voting Agreement or any other agreement or document required by
the terms hereof by the Company will not violate any judgment, decree, order, statute, rule or
regulation of any federal, state or local government or agency having jurisdiction over the Company
or any of the Company’s assets.
SECTION 4.3. Enforceability. This Agreement has been duly executed and delivered by
the Company and constitutes a legal, valid and binding obligation of the Company enforceable in
accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization,
moratorium, fraudulent transfer and other similar laws relating to or affecting creditors’ rights
generally.
SECTION 4.4. Company Ownership. The authorized capital stock of the Company consists
of 1,000,000 shares of common stock, par value $0.001 per share (“Common Stock”), and no shares of
preferred stock, of which 646,986 shares of Common Stock are issued and outstanding. All of the
outstanding shares of capital stock of the Company are or will be, by the Closing Date, validly
issued, fully paid and non-assessable and, to the knowledge and expectation of the Company, are now
owned or will be owned immediately after the Closing, of record and, to the knowledge of the
Company, beneficially, in the amounts and by the persons as set forth in Schedule 4.4 free
and clear of any Liens. The designation, powers, preferences, rights, qualifications, limitations
and restriction in respect of the Purchased Shares are as set forth in the Company’s certificate of
incorporation as it has been or may be amended from time to time and are valid, binding and
enforceable in accordance with all applicable laws. The Purchased Shares, when issued, will be
validly issued, fully paid and non-assessable and with no personal liability attaching to the
ownership thereof and will be free and clear of all Liens. Except as set forth on Schedule
4.4, (i) 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; (ii) there are no
preemptive or participation rights with respect to the issuance or sale of the Company’s capital
stock; and (iii) there are no voting trusts or agreements, stockholders’ agreements, pledge
agreements, buy-sell agreements, rights of first refusal or proxies relating to any securities of
the Company (whether or not the Company is a party thereto).
SECTION 4.5. Financial Statements. The Company has delivered to the Investors: (i)
audited financial statements for the periods ending December 31, 2006 and December 31, 2007, and
(ii) unaudited monthly financials for the months January, February and March, 2008 ((i) and (ii)
collectively, the “Financial Statements”). The Financial Statements have been prepared in
conformity with United States generally accepted accounting principles applied on a consistent
basis throughout the periods involved and present fairly the financial position of the Company as
of the dates indicated and the results of its operations for the periods then ended.
SECTION 4.6. Subsidiaries; Investments. Except as set forth on Schedule 4.6
hereto, the Company does not directly or indirectly control or have any stock ownership or other
proprietary interest in any other corporation, partnership, trust, association, joint venture or
other entity.
SECTION 4.7. Registration Rights. Other than as set forth on Schedule 4.7,
the Company has not granted any rights to demand or require registration of any of its securities
under the Act.
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SECTION 4.8. Securities Exemption. Assuming the relevant representations and
warranties of the Investors are true, the sale and issuance of the Purchased Shares pursuant to
this Agreement is exempt from the registration requirements of the Act and under applicable state
securities laws, and the Company has not and will not take any actions which would cause the sales
contemplated hereunder to be ineligible for such exemption.
ARTICLE
V — PUBLIC TRADING EVENT
SECTION 5.1 Public Trading Event. For purposes of this Section 5, “Public Trading
Event” means the occurrence of one of the following
(i) as of April 30, 2008, the Company shall have completed the filing of an appropriate
application and required supporting materials with any of the following national securities
exchanges or listing services providing a platform for public trading in the Company’s common
stock: the American Stock Exchange, the New York Stock Exchange, the NASDAQ market, or the OTC
Bulletin Board (each a “Traditional Trading Platform”) or
(ii) as of July 31, 2008 completed an alternative listing arrangement through a reverse merger
with a public shell, a listing on the Pink Sheets trading system, acquisition by a Special Purpose
Acquisition Company (“SPAC”) or any other similar mechanism deemed appropriate by the Company’s
Board of Directors (each a “Non-Traditional Trading Platform” and, collectively together with the
Traditional Trading Platform each a “Trading Platform”).
“Platform Date” shall mean the earlier to occur of (a) the date as of which a filing
contemplated under clause (i) above of this Section 5.1 is declared “effective” by the Securities
Exchange Commission and (b) the date as of which an arrangement contemplated under clause (ii)
above of this Section 5.1 is completed.
If the Company elects to cause a Public Trading Event to occur by making the filing
contemplated in clause (i) above, the Company shall use its reasonable efforts to have its filed
application, as such may be amended, declared “effective” by the Securities Exchange Commission no
later than September 30, 2008. If the Company fails to have such filed application declared
effective by September 30, 2008, it shall have until December 1, 2008 to complete a listing through
a Non-Traditional Trading Platform.
By its execution of this Agreement, the Company agrees to use its best efforts to cause a
Public Trading Event to occur. By its execution of this Agreement, Metalico agrees to use its best
efforts to seek the authorization of its Board of Directors, to the extent necessary, to cause or
permit any actions by the Company necessary or appropriate to achieve a Public Trading Event and
the effectiveness of any resulting registration or listing, provided that nothing in this
Section 5.1 shall be deemed to obligate Metalico to perform any act in violation of applicable law
or regulation.
SECTION 5.2 Insider Information. Upon the registration or acceptance for trading of
the Company’s stock by a Trading Platform, the Company’s obligations to individual Investors under
Sections 3.1(iii) and (iv) shall automatically terminate unless, with respect to any individual
Investor, such Investor delivers written notice to the Company to the effect that such Investor
wishes to continue receiving the information contemplated thereunder. Each Investor acknowledges
that receipt of such information may subject it to xxxxxxx xxxxxxx restrictions under federal
securities law.
ARTICLE VI — INVESTOR REPRESENTATIONS AND WARRANTIES
Each Investor, severally and not jointly, hereby makes the following representations and
warranties to the Company as of the Closing Date:
SECTION 6.1. Investor Review. Investor has had an opportunity to discuss in detail
the Company’s business, management and financial affairs with the Company’s officers and management
employees and has reviewed all documents and records of the Company which the Company has provided
in response to any request by the Investor.
SECTION 6.2. No Registration. Investor acknowledges that, because the Purchased
Shares have not been registered under the Act, there are substantial restrictions on their
transferability. Investor also acknowledges that (i) the Purchased Shares will not be, and the
Investor has no rights to require that the Purchased Shares be, registered under the Act or under
any other Federal or state securities laws; (ii) there will be no public market for the Purchased
Shares; (iii) Investor will not be able to avail himself, herself, or itself of the provisions of
Rule 144 adopted by the Securities and Exchange Commission under the Act with respect to the resale
of the Purchased Shares, and will only be able to avail himself, herself or itself of the
provisions of such Rule
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144 with respect to the resale of the Purchased Shares pursuant to such Rule; (iv) he, she or it
may have to hold the Purchased Shares indefinitely; and (v) it may not be possible for him, her or
it to liquidate his, her, or its Investment.
SECTION 6.3. Purchase for Account of Investor. The Purchased Shares are being
acquired by the Investor solely for his, her or its own account, for investment, and are not being
purchased with a view to or for the resale, distribution, subdivision or fractionalization thereof;
the Investor has no present plans to enter into any such contract, undertaking, agreement or
arrangement. In order to induce the Company to issue and sell the Purchased Shares subscribed for
hereunder, it is agreed that the Company will have no obligation to recognize the ownership,
beneficial or otherwise, of the Purchased Shares by anyone but the Investor.
SECTION 6.4. Experience of Investor/Risk Factors. The Investor (i) has substantial
experience in investing in and evaluating investment opportunities in privately-held companies,
(ii) is capable of evaluating the risks and merits of its investment in the Company, (iii) has the
capacity to protect his, her or its own interests and (iv) acknowledges that the Purchased Shares
are speculative investments. In addition, Investor has read and understands all of the Risk
Factors as set forth in Exhibit A, and understand that the Risk Factors are not intended to
be exclusive.
SECTION 6.5. Accredited Investor. Investor is an “Accredited Investor” within the
definition set forth in Rule 501(a) of the Act. The Investor (i) has adequate means of providing
for his, her or its current needs and possible personal contingencies, and has no need for
liquidity of the Investment; (ii) has a net worth sufficient to, and can bear the economic risk of,
losing the entire Investment; and (iii) does not have an overall commitment to non-readily
marketable investments which is disproportionate to his, her or its net worth and the Investment
subscribed for herein will not cause such overall commitment to become excessive.
SECTION 6.6. Organization; Powers. Each Investor is a limited partnership, duly
organized, validly existing and in good standing under the laws of the State of Delaware and has
all requisite limited partnership power and authority to execute, deliver and perform its
obligations under this Agreement.
SECTION 7.2. Authorization. This Agreement has been duly authorized by all necessary
limited partnership action on each Investor’s part and has been duly executed and delivered by each
Investor’s duly authorized officers and constitutes each Investor’s legal, valid and binding
obligations, enforceable against it in accordance with its terms, subject to applicable bankruptcy,
insolvency, reorganization, moratorium, fraudulent transfer and other similar laws relating to or
affecting creditors’ rights generally.
ARTICLE
VII — REPRESENTATIONS AND WARRANTIES OF METALICO
Metalico hereby makes the following representations and warranties to each Investor:
SECTION 7.1. Organization; Powers. Metalico is duly organized, validly existing and in
good standing under the laws of the State of Delaware and has all requisite corporate power and
authority to execute, deliver and perform its obligations under this Agreement.
SECTION 7.2. Authorization. This Agreement has been duly authorized by all necessary
corporate action on Metalico’s part and has been duly executed and delivered by Metalico’s duly
authorized officers and constitutes Metalico’s legal, valid and binding obligations, enforceable
against it in accordance with its terms, subject to applicable bankruptcy, insolvency,
reorganization, moratorium, fraudulent transfer and other similar laws relating to or affecting
creditors’ rights generally.
ARTICLE VII — MISCELLANEOUS
SECTION 8.1 Notices.
(a) Notices and other communications provided for herein shall be in writing and shall be
delivered by hand or overnight courier service, mailed by certified or registered mail or by
overnight express mail or sent by facsimile, as follows:
(i) if to the Company, to Beacon Energy Corp., 000 Xxxxx Xxxxxx Xxxx, 0xx Xxxxx, Xxxxxxxx, XX
00000 (Facsimile No. (000) 000-0000), with a copy to Xxxxxxxx X. Xxxxxx, Xxxxxxxx & Xxxx LLP, Xxx
Xxxxxx Xxxxx, Xxxxxx, XX 00000 (Facsimile No. (617) 557-5999).
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(ii) if to any of the Investors, to such Investor, c/o The Argentum Group, 00 Xxxxxxx Xx.,
Xxxxx 000, Xxx Xxxx, XX 00000, Attention: Xxxxxx Xxxxxxxxxxx (Facsimile No. (000) 000-0000), with a
copy to Xxxxxx X. Xxxxxx, Esq., Golenbock Xxxxxxx Assor Xxxx & Xxxxxx LLP, 000 Xxxxxxx Xxxxxx, Xxx
Xxxx, XX 00000 (Facsimile No. (000) 000-0000);
(iii) if to Metalico, to Metalico, Inc., 000 Xxxxx Xxx. Xxxx , Xxxxxxxx, XX 00000, Attn:
Xxxxxx X. Xxxxxx, President (Facsimile No. (000) 000-0000), with a copy to Metalico, Inc., 000
Xxxxx Xxx. Xxxx , Xxxxxxxx, XX 00000 , Attn: Xxxxxx X. Xxxxxx, Executive Vice President and General
Counsel (Facsimile No. (000) 000-0000).
or to such other addresses and to the attention of such other individuals as any party shall have
designated to the other parties by notice given in the foregoing manner.
(b) All notices and other communications given to any Party hereto in accordance with the
provisions of this Agreement shall be deemed to have been given (i) two business days after being
sent by registered or certified mail, return receipt requested, postage prepaid or (ii) one
business day after being sent via a reputable nationwide overnight courier service guaranteeing
next business day delivery or (iii) on the date on which it is sent by facsimile transmission with
acknowledgement of receipt at the number to which it is required to be sent in each case to the
intended recipient as set forth above.
SECTION 8.2 Survival of Agreement; Indemnification. (a) All covenants, agreements,
representations and warranties made by the Company and/or Metalico shall be considered to have been
relied upon by each of the Investors and shall survive the Closing. All covenants, agreements,
representations and warranties made by the Investors shall be considered to have been relied upon
by each of the Company and/or Metalico and shall survive the Closing.
(b) The Company agrees to indemnify and hold the Investors, Metalico and their respective
partners, officers, directors, employees and advisors harmless against and in respect of any and
all damages, losses, liabilities, obligations, costs and expenses (including reasonable attorneys’
fees) that the Investors may suffer or incur arising out of or in connection with:
(i) a breach of any of the representations, warranties, covenants or agreements made by
the Company set forth herein, in the Voting Agreement or any Schedules or Exhibits hereto
(notwithstanding any investigations or verifications made by or on behalf of the Investors);
(ii) (A) any matter, claim or litigation where the Company is a party, (B) the
Investors’ participation in management or business decisions or actions of or dealings with
the Company or the service of any of the Investors or their designees as officers or directors
of the Company, or (C) any third party claim or litigation arising out of or connected with
the execution of this Agreement, the Voting Agreement or the consummation of the transactions
contemplated hereby or referred to herein or the Investors’ investment in the Company,
including, without limitation, any claim in respect of any fees, commissions or compensation
of or by finders, consultants, investment bankers or placement agents, provided that there is
no indemnification of the Investors under (A), (B) or (C) to the extent such matter, claim or
litigation arises out of or is connected to a misrepresentation or breach by an Investor in
this Agreement, the Voting Agreement, or in the consummation of the transactions contemplated
hereby or referred to herein;
(iii) any and all actions, suits, proceedings, claims, demands, assessments, judgments,
costs and expenses, including, without limitation legal fees and expenses, incident to any of
the foregoing or incurred in investigating or attempting to avoid the same or to oppose the
imposition thereof, or in enforcing any such indemnity.
(b) The Investors agree, severally and not jointly, to indemnify and hold the Company,
Metalico and their respective partners, officers, directors, employees and advisors harmless
against and in respect of any and all damages, losses, liabilities, obligations, costs and expenses
(including reasonable attorneys’ fees) that any of them may suffer or incur arising out of or in
connection with:
(i) a breach of any of the representations, warranties, covenants or agreements made by
the Investors set forth herein, in the Voting Agreement or any Schedules or Exhibits hereto;
and
(ii) any and all actions, suits, proceedings, claims, demands, assessments, judgments,
costs and expenses, including, without limitation legal fees and expenses, incident to any of
the foregoing or incurred in investigating or attempting to avoid the same or to oppose the
imposition thereof, or in enforcing any such indemnity.
SECTION 8.3 Binding Effect. This Agreement shall become effective when it shall have
been executed by both Parties.
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SECTION 8.4 Successors and Assigns.
(a) Whenever in this Agreement any of the Parties hereto is referred to, such reference shall
be deemed to include the permitted successors and assigns of such Party; and all covenants,
promises and agreements by or on behalf of the Company, Metalico or any Investor that are contained
in this Agreement shall bind and inure to the benefit of their respective successors and assigns.
(b) Neither the Company nor Metalico shall assign or delegate any of their respective rights
or duties hereunder without the prior written consent of the Investors, and any attempted
assignment or delegation without such consent shall be null and void.
SECTION 8.5 Expenses. The Company will pay directly all legal fees incurred by the
Investors in connection with the preparation of this Agreement and all other related documents in
connection therewith as well as any amendments, modifications or waivers of the provisions hereof
or thereof.
SECTION 8.6 Applicable Law. This Agreement and the rights and obligations of the
parties hereunder shall be enforced, governed and construed in all respects in accordance with the
internal substantive laws of the State of Delaware (without reference to principles of conflicts or
choice of law that would cause the application of the internal laws of any other jurisdiction).
Each Party hereby irrevocably submits and consents to the jurisdiction of Delaware with respect to
any dispute, controversy, legal action or other proceeding that arises from, concerns or touches
this Agreement or the Investment and acknowledges that he, she or it will accept service of process
by registered or certified mail or the equivalent directed to his, her or its address set forth
herein or by whatever other means are permitted by such courts. Each Party hereby acknowledges
that said courts have jurisdiction over any such dispute, controversy, legal action or other
proceeding and that he, she or its hereby waives any objection to personal jurisdiction or venue in
these courts or that such courts are an inconvenient forum.
SECTION 8.7 Waivers; Amendment. No failure or delay of an Investor in exercising any
power or right hereunder shall operate as a waiver thereof nor shall any single or partial exercise
of any such right or power, or any abandonment or discontinuance of steps to enforce such a right
or power, preclude any other or further exercise thereof or the exercise of any other right or
power. The rights and remedies of the Investors hereunder are cumulative and are not exclusive of
any rights or remedies that it would otherwise have.
SECTION 8.8. Further Assurances. The Company, Metalico and each Investor each agree
that they will execute any and all further documents, agreements and instruments, and take all
further action that may be required (and that an Investor may reasonably request from time to time)
in order to effectuate the transactions contemplated by this Agreement.
SECTION 8.9 Severability. In the event any one or more of the provisions contained
in this Agreement should be held invalid, illegal or unenforceable in any way, the validity,
legality and enforceability of the remaining provisions contained herein and therein shall not in
any way be affected or impaired thereby (it being understood that the invalidity of a particular
provision in a particular jurisdiction shall not in and of itself affect the validity of such
provision in any other jurisdiction).
SECTION 8.10 Counterparts. This Agreement may be executed in counterparts (and by
different parties hereto on different counterparts), each of which shall constitute an original but
all of which when taken together shall constitute a single contract and shall become effective.
Delivery of an executed signature page to this Agreement by facsimile transmission shall be as
effective as delivery of a manually signed counterpart of this Agreement.
[Signature page is the next page]
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IN WITNESS WHEREOF, the Parties hereto have caused this Subscription Agreement to be duly
executed by their respective authorized officers as of the day and year first above written.
| BEACON ENERGY CORP. |
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| By: | ||||
| Name: | Xxxxxx X. Xxxxxx | |||
| Title: | Chairman | |||
| [INVESTOR] |
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| By: | ||||
| Name: | ||||
| Title: | ||||
| METALICO, INC. |
||||
| By: | ||||
| Name: | Xxxxxx X. Xxxxxx | |||
| Title: | President | |||
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Exhibit A
IMPORTANT: Investment in the securities offered hereunder involves a high degree of risk.
Prospective investors should carefully consider, among other things, the factors set forth below,
together with the other information provided to them, before making a decision to purchase the
Purchased Shares offered hereby. If any of the following risks actually occurs, we may not be able
to conduct our business as currently planned, and our financial condition and operating results
could be seriously harmed. In that case, the value of our common stock could decline, and you
could lose all or part of your investment.
We caution you that the following list of important factors is not exclusive. Additional risks and
uncertainties not presently known to us, or risks that we currently consider immaterial, may also
impair our operations or results. You should carefully consider the factors below and other
uncertainties and events, as well as the risks identified in the biofuel business generally.
We have incurred losses and anticipate continued losses and negative cash flow.
The Company currently generates no income and has never been profitable. We expect to continue to
incur net losses and generate negative cash flow until we can produce sufficient revenues to cover
our costs. We may never become profitable. Even if we do achieve profitability, we may be unable
to sustain or increase our profitability in the future. Although there are none currently planned,
it is highly likely that additional offerings will be required that will have the effect of
diluting your investment. Adequate funds for the Company’s long term goals, whether through
financial markets or collaborative or other arrangements with corporate partners or from other
sources may not be available when needed. The Company has no commitments to obtain any additional
funds and there can be no assurance that additional funds can be obtained on terms acceptable to
the Company, if at all.
Our results will be highly dependent on commodity prices, which are subject to significant
volatility and uncertainty, and the availability of supplies, so our results could fluctuate
substantially.
The Company’s results are substantially dependent on many different commodity prices,
especially prices for feedstock, biodiesel, petroleum diesel and materials used in the construction
of a biodiesel plant. As a result of the volatility of the prices for these items, our results may
fluctuate substantially and the Company may experience periods of declining prices for our products
and increasing costs for our raw materials, which could result in operating losses.
The price of feedstock is influenced by market demand, the Company, other conditions, animal
processing and rendering plant decisions, factors affecting crop yields, xxxxxx planting decisions
and general economic, market and regulatory factors. These factors include government policies and
subsidies with respect to agriculture and international trade, and global and local demand and
supply. The significance and relative effect of these factors on the price of feedstock is
difficult to predict. Any event that tends to negatively affect the supply of feedstock, such as
increased demand, adverse weather or crop disease, could increase feedstock prices and potentially
harm our business and make it unprofitable to operate. In addition, the Company may also have
difficulty, from time to time, in physically sourcing feedstock on economical terms due to supply
shortages. Such a shortage could require us to suspend operations until feedstock is available at
economical terms, which would have a material adverse effect on our business, results of operations
and financial position. Existing and additional biodiesel facilities will compete in the
procurement of feedstock which could result in shortages and/or increases in price, which would
negatively impact the Company. In addition, there are alternative uses for many of the biodiesel
feedstocks which could also result in shortages and/or price increases.
Biodiesel fuel is a commodity whose price is determined based on the price of petroleum
diesel, world demand, supply and other factors, all of which are beyond our control. World prices
for biodiesel fuel have fluctuated widely in recent years. The Company expects that prices will
continue to fluctuate in the future. Price fluctuations will have a significant impact upon our
revenue, the return on our investment in biodiesel plants and on our general financial condition.
Price fluctuations for biodiesel fuel may also impact the investment market, and our ability to
raise investor capital. Although market prices for biodiesel fuel rose to near-record levels during
2007 and have remained near those levels since then, there is no assurance that these prices will
remain at high levels. Future decreases in the prices of biodiesel or petroleum diesel fuel may
have a material adverse effect on our financial condition and future results of operations.
Reliance on Key Personnel
The Company’s success is, and will continue to be, substantially dependent upon the continued
services of its current management. The inability or unwillingness of existing management to
continue to operate in their respective capacities would materially and adversely affect the
Company’s operating results and the ability of the Company to manage its operations.
Competition
The Company is still relatively small, and it faces competition from larger, well capitalized
companies that develop their own products and systems, similar to the products and systems that the
Company is developing. Competition could adversely affect the overall profitability of the
Company.
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Exhibit A
Lack of Liquidity in Investment
The Purchased Shares have not been registered under the Securities Act of 1933, or any state
securities laws and, unless and until so registered, will be subject to significant restrictions on
resale. The Company does not intend to register any of its securities or to list any of its
securities on any national securities exchange or to seek the admission thereof to trading on any
NASDAQ market or electronic bulletin board. Prior to this Offering, there has been no public
market for any of the Company’s securities.
Substantial Control by Officers, Directors and Founders
Currently, the Company is controlled by a very small group of stockholders who will and, subsequent
to this offering, will continue to control and influence the operation of the Company.
Accordingly, subscribers to this offering will have no control or influence over the day-to-day
activities of the Company by virtue of their investment.
The U.S. biodiesel industry is highly dependent upon myriad federal and state legislation and
regulation.
The production of biodiesel is made significantly more competitive by federal and state tax
incentives. The federal excise tax incentive program for biodiesel was originally enacted as part
of the American Jobs Creation Act of 2004 and the current federal program provides fuel blenders,
generally distributors, with a one cent tax credit for each percentage point of vegetable oil
derived biodiesel blended with petroleum diesel. For example, distributors that blend soybean
derived biodiesel with petroleum diesel into a B20 blend would receive a twenty cent per gallon
excise tax credit. The program also provides blenders of recycled oils, such as yellow grease from
restaurants, with a one-half cent tax credit for each percentage point of recycled oil derived
biodiesel blended with petroleum diesel. For example, distributors that blend recycled oil derived
biodiesel with petroleum diesel into a B20 blend would receive a ten cent per gallon excise tax
credit.
In addition, a number of states provide mandates, programs and other incentives to increase
biodiesel production and use, such as mandates for fleet use or for overall use within the state,
tax credits, financial grants, tax deductions, financial assistance, tax exemptions and fuel rebate
programs. These incentives are meant to lower the cost of biodiesel in comparison to petroleum
diesel. The elimination or significant reduction in the federal excise tax incentive program or
state incentive programs benefiting biodiesel may have a material and adverse effect on the
Company’s results of operation and financial condition.
Forward Looking Statements And Uncertainty Of Financial Projections
Statements that are not based on historical fact, including without limitation statements
containing the words “believes,” “anticipates,” “intends,” “expects,” and words of similar import,
or references to strategy, constitute “forward looking statements” within the meaning of the
Private Securities Litigation Reform Act of 1995. Potential investors should consider all
financial forecasts previously provided by the Company in light of the underlying assumptions to
reach their own conclusions as to the reasonableness of those assumptions and to evaluate the
projections on the basis of that analysis. The Company does not make any representation or warranty
as to the accuracy or completeness of any projections.
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