February 29, 2008
February
29, 2008
Xx.
Xxxx
X. Xxxxxx
ProEco
Energy Company
P.O.
Box
26
Belle
Fourche, South Dakota 57717
Re: Project
for Ethanol Plants
Dear
Xx.
Xxxxxx:
In
our
previous letter dated January 31, 2008, the parties agreed to revise the
agreements relating to their relationship regarding the 56 million gallons
per
year ethanol plant in South Dakota (the “Potential
Project”).
The
purpose of this letter (this “Letter”)
is to
set forth the binding agreements between O2Diesel Corporation, a Delaware
corporation (“O2Diesel”),
and
ProEco Energy Company, Inc., a South Dakota corporation (“ProEco”),
and
certain selling shareholders of ProEco,
with
respect to the Potential Project. This Letter shall become effective on the
day
it is countersigned by you.
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1.
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Loan
Agreement.
The parties agree to (a) extend the maturity date of the loans made
in
accordance with the terms of the Amended and Restated Term Loan Agreement,
dated as of December 22, 2006, and as amended and restated on September
14, 2007, December 15, 2007 and January 31, 2008 (the “Loan
Agreement”)
from February 29, 2008 to November 30, 2008 (the “Maturity
Date”),
and (b) execute a revised Amended and Term Loan Agreement, as attached
hereto as Exhibit
A.
As of February 28, 2008, there is $1,426,988.08 in principal and
interest
outstanding (the “Loan”).
The Loan is evidenced by the Secured Promissory Note, dated December
26,
2006, as attached hereto as Exhibit
B,
and the Secured Promissory Note, as attached hereto as Exhibit
C.
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2.
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Share
Exchange Agreement.
The parties agree to terminate the Share
Exchange Agreement (the “Exchange
Agreement”),
dated as of January 12, 2007, by and between O2Diesel and ProEco,
pursuant
to Section 6.1(a), effective as of February
29, 2008 and the parties agree they have no further obligations or
rights
pursuant to the Exchange Agreement.
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3.
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Potential
Project.
The parties agree to use their reasonable efforts to obtain financing
for
and complete the Potential Project. If O2Diesel locates a potential
source
of financing for the Potential Project (the “Financing”),
the parties agree to renegotiate O2Diesel’s interest in the Potential
Project to reflect O2Diesel’s time and expense in locating the Financing
on terms mutually agreeable to the parties. Notwithstanding the foregoing,
at any time prior to the Maturity Date, ProEco may repay the Loan
in full.
Upon repayment by ProEco of the Loan and all other outstanding obligations
arising out of and related to the Loan Agreement, all obligations
of each
of ProEco and O2Diesel under the Loan Agreement and any rights that
O2Diesel may have in the Potential Project shall terminate in accordance
with the terms of the Loan Agreement.
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Xx.
Xxxx
X. Xxxxxx
February
29, 2008
Page
2
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4.
|
Guarantee
for Xxxxxx International, Inc.
ProEco acknowledges and agrees that O2Diesel will not guarantee any
additional payments above the $250,000, as set forth in the Letter,
dated
March 27, 2007, from O2Diesel to Xxxxxx International,
Inc.
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5.
|
Release.
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a.
|
O2Diesel
hereby releases and forever discharges ProEco, each partner or affiliate
of ProEco and each of their respective officers, directors, employees
and
agents (the “ProEco
Released Persons”)
from and waives any and all claims, demands, controversies, actions,
causes of action, obligations, damages and liabilities of any nature
whatsoever, whether at law or in equity, known or unknown, suspected
or
unsuspected, absolute or contingent (collectively, “Claims”),
that O2Diesel ever had, now has, or may hereafter have against any
of the
ProEco Released Persons arising out of, resulting from or related
to the
Exchange Agreement, except that nothing contained herein shall release
ProEco from its obligations under this Letter or the Loan Agreement.
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b.
|
ProEco
hereby releases and forever discharges O2Diesel, each of its subsidiaries,
each stockholder or affiliate of O2Diesel, and each of their respective
officers, directors, employees and agents (the “O2Diesel
Released Persons”)
from and waives any and all Claims that ProEco ever had, now has,
or may
hereafter have against any of the O2Diesel Released Persons arising
out
of, resulting from or related to the Exchange Agreement, except that
nothing contained herein shall release O2Diesel from its obligations
under
this Letter or the Loan Agreement.
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Xx.
Xxxx
X. Xxxxxx
February
29, 2008
Page
3
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6.
|
Miscellaneous.
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|
a.
|
Except
as expressly set forth herein, the Loan Agreement remains in full
force
and effect in accordance with its respective
terms.
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b.
|
This
Letter may be executed in any number of counterparts, which taken
together
shall constitute one and the same
document.
|
Please
sign and date this Letter in the space provided below to confirm the binding
agreement and return a copy to the undersigned. We look forward to continuing
working together with you.
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Very
truly yours,
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|
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O2DIESEL
CORPORATION
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By: /s/
Xxxx Xxx
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Xxxx
Xxx, Chief Executive Officer
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Accepted
and agreed.
PROECO
ENERGY COMPANY, INC.
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By:
|
/s/
Xxxx X. Xxxxxx
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|
Xxxx
X. Xxxxxx
|
Date:
March 19, 2008
EXHIBIT
A
AMENDED
AND RESTATED TERM
LOAN AGREEMENT
Dated
as
of December 22, 2006, and as amended and restated on February 29,
2008
between
ProEco
Energy Company (the “Borrower”)
and
Xxxx
X.
Xxxxxx and Xxxxxxx Xxxx, as Pledgors
and
O2Diesel
Corporation (the “Lender” and the “Collateral Agent”)
AMENDED
AND RESTATED TERM
LOAN AGREEMENT
This
Amended and Restated Term Loan Agreement (this “Agreement”), dated as of
December 22, 2006, (the “Effective Date”) and amended and restated as of
February 29, 2008, is entered into by and among ProEco Energy Company, a South
Dakota corporation (the “Borrower”), the Pledgors (as defined herein) and
O2Diesel Corporation, a Delaware corporation as lender (the “Lender”) and as
collateral agent (the “Collateral Agent”).
RECITALS:
WHEREAS,
the Borrower requires capital for the purchase of an option (the “Option”) to
purchase parcels of land (collectively, the “Parcels” and individually, a
“Parcel”) on which a new fuel-grade ethanol plant (the “Potential Project”) is
to be constructed;
WHEREAS,
the Borrower is willing to secure all of its Obligations (as hereinafter
defined) by granting to the Collateral Agent, for the benefit of itself and
the
Lender, security interests in and a lien upon all of its property and assets
now
owned or hereafter acquired by the Borrower;
WHEREAS,
certain stockholders and officers of the Borrower will benefit from the Loans
(as hereinafter defined) made by the Lender to the Borrower and are willing
to
pledge collateral as security for payment and performance of all of the
Obligations of the Borrower and to grant to the Collateral Agent, for the
benefit of itself and the Lender, a security interest in and a lien upon all
shares of the issued and outstanding common stock of the Borrower (the “Common
Stock”) held by such officers;
WHEREAS,
the Lender is willing to provide the Borrower with such capital on the terms
and
conditions hereafter provided; and
WHEREAS,
the Borrower has requested, and the Lender has agreed to provide, (i) an
extension of the Maturity Date of the Loans (as defined below) and (ii) an
increase in the aggregate principal amount of the Delayed Draws (as defined
below) that may be borrowed pursuant to this Agreement.
NOW,
THEREFORE, in consideration of the undertakings set forth herein and other
good
and valuable consideration, the receipt and sufficiency of which hereby is
acknowledged, the parties hereto agree as follows:
ARTICLE
I
DEFINITIONS
As
used
in this Agreement:
“Business
Day” means, with respect to any borrowing or payment, a day other than Saturday
or Sunday on which banks are open for business in the State of
Delaware.
“Change
in Control” means (i) the
failure of Xxxx X. Xxxxxx and Xxxxxxx Xxxx to own, beneficially and of record,
the issued and outstanding shares of voting stock of the Borrower held by them
as of the Closing Date (appropriately adjusted to reflect stock splits, stock
dividends, reverse stock splits and similar events), (ii) any merger,
consolidation, reorganization, recapitalization, or other business combination
involving the Borrower, in which the stockholders
of the
Borrower immediately prior thereto do not own, directly or indirectly,
outstanding voting securities representing more than fifty percent (50%) of
the
combined outstanding voting power of the surviving entity in such merger,
consolidation, reorganization, recapitalization or other business combination;
(iii) the
sale
of all, or substantially all, of the assets of the Borrower; or
(iv) the
sale of voting securities of the Borrower in a transaction or a series of
related transactions to any person (or group of persons acting in concert)
that
results in such person (or group of persons) (together with their affiliates)
owning more than fifty percent (50%) of the outstanding voting securities of
the
Borrower; provided that “Change of Control” shall not include any transaction
involving the Lender acquiring voting securities or assets or merging with
the
Borrower.
“Closing
Date” means December 22, 2006, or such later date as may be agreed by the
parties hereto.
“Collateral”
shall have the meaning ascribed to such term in the Security
Agreement.
“Credit
Parties” (each individually, a “Credit Party”) shall mean the Borrower and each
of the Pledgors.
“Disclosure
Schedule” means the disclosure schedule to this Agreement delivered to the
Lender by the Borrower upon execution and delivery of this
Agreement.
“Environmental
Condition” means any contamination or damage to the environment caused by or
relating to the use, handling, storage, treatment, recycling, generation,
transportation, release, spilling, leaching, pumping, pouring, emptying,
discharging, injection, escaping, disposal, dumping or threatened release of
Hazardous Materials by the Borrower or any other Person. With respect to claims
by employees or any other third parties, Environmental Condition shall also
include the exposure of Persons to amounts of Hazardous Materials in amounts
that have been determined to be deleterious to human health.
“Environmental
Laws” means all currently applicable federal, state and local laws, ordinances,
rules and regulations and standards, policies and other governmental
requirements, administrative rulings and court judgments and decrees, including
all amendments, and requirements applicable under common law that relate to
(1)
pollution; (2) the protection of human health and safety; (3) the protection
or
regulation of the environment, including without limitation, air, soils,
wetlands, surface and underground water; (4) aboveground or underground storage
tank regulation or removal; (5) wildlife; (6) protection or regulation of
natural resources; (7) radioactive materials, including without limitation
radon; (8) indoor air quality; and (9) chemicals, pesticides, mold or fungus
or
similar substances. "Environmental Laws" include, without limitation, the
Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C.
Section 9601, et
seq.,
the
Resource Conservation and Recovery Act, 42 U.S.C. Section 6901, et
seq.,
the
Toxic Substance Control Act, 15 U.S.C. Section 2601, et
seq.,
the
Federal Water Pollution Control Act, 33 U.S.C. Section 1251, et
seq.,
the
Hazardous Materials Transportation Act, 49 U.S.C. 5101, et
seq.,
the
Clean Air Act, 42 U.S.C. Section 7401, et
seq.,
the
Safe Drinking Water Act, 42 U.S.C. Section 300f, et
seq.,
the
Occupational Safety and Health Act, 29 U.S.C. Section 651, et
seq.,
the
Emergency Planning and Community Right to Know Act of 1986, 42 U.S.C. 11001,
et
seq.,
the
Atomic Energy Act, 42 U.S.C. Section 2014, et
seq.,
the
National Environmental Policy Act, 42 U.S.C. Section 4321, et
seq.,
the
Endangered Species Act, 16 U.S.C. Section 1531, et
seq.,
the
Federal Insecticide, Fungicide & Rodenticide Act, 7 U.S.C. Section 136,
et
seq.,
and
their state analogs, all applicable state superlien or environmental clean-up
or
disclosure statutes in any state in which the Borrower operates or conducts
any
business, and all similar local laws, and all implementing regulations.
“Environmental
Noncompliance” means any violation of any Environmental Law.
“Hazardous
Materials” shall mean any materials regulated as hazardous or toxic under
applicable Environmental Laws, or any other material regulated, or that could
result in the imposition of liability, under Environmental Laws, including,
without limitation, petroleum, petroleum products, fuel oil, crude oil or any
fraction thereof, derivatives or byproducts of petroleum products or fuel oil,
natural gas, mold, hazardous substances, toxic substances, polychlorinated
biphenyls, any materials containing more than one percent (1%) asbestos by
weight and any other substance determined to present a deleterious effect on
human health or the environment.
“Intellectual
Property” means all of the following as they exist in any jurisdiction
throughout the world, in each case, to the extent owned by, licensed to, or
otherwise used by the Borrower: (a) patents, patent applications and the
inventions, designs and improvements described and claimed therein, patentable
inventions, and other patent rights (including any divisionals, continuations,
continuations-in-part, substitutions, or reissues thereof, whether or not
patents are issued on any such applications and whether or not any such
applications are amended, modified, withdrawn, or refiled) (collectively,
“Patents”); (b) trademarks, service marks, trade dress, trade names, brand
names, Internet domain names, designs, logos, or corporate names (including,
in
each case, the goodwill associated therewith), whether registered or
unregistered, and all registrations and applications for registration thereof
(collectively, “Trademarks”); (c) works of authorship and all copyrights
therein, including all renewals and extensions, copyright registrations and
applications for registration, and non-registered copyrights (collectively,
“Copyrights”); (d) trade secrets, confidential business information,
concepts, ideas, designs, research or development information, processes,
procedures, techniques, technical information, specifications, operating and
maintenance manuals, engineering drawings, methods, know-how, data, mask works,
discoveries, inventions, modifications, extensions, improvements, and other
proprietary rights (whether or not patentable or subject to copyright,
trademark, or trade secret protection) (collectively, “Trade Secrets”); (e) all
domain name registrations, web sites and web pages and related rights, items
and
documentation related thereto (collectively, “Internet Assets”);
(f) computer software programs, including all source code, object code, and
documentation related thereto and all software modules, tools and databases
(“Software”); (g) mask works, and (h) all licenses, and sublicenses,
and other agreements or permissions related to the preceding
property.
“IT
Assets” means computers, computer software (except for “off the shelf” or
“shrink-wrap” software), firmware, middleware, servers, workstations, routers,
hubs, switches, data communication lines, and all other information technology
equipment, and all associated documentation.
“Loan
Documents” means this Agreement, the LOI, the Notes and any Security
Documents.
“LOI”
means that certain letter of intent, dated November 30, 2006, signed by the
Lender and acknowledged by the Borrower.
“Maturity
Date” means November 30, 2008.
“Mortgage”
(or “Mortgages”) means any mortgage, deed of trust, deed to secure debt and
other instrument, from time to time executed by the Borrower for the purpose
of
granting the Collateral Agent, for its benefit and the benefit of the Lender,
a
lien on real property of the Borrower, in form and substance satisfactory to
the
Lender.
“Obligations”
means (i) all current or future unpaid principal of and accrued and unpaid
interest (including without limitation, interest accruing during the pendency
of
any bankruptcy, insolvency, receivership or other similar proceeding, regardless
of whether allowed or allowable in such proceeding) on the Notes when and as
due, whether at maturity, by acceleration, upon one or more dates set for
prepayment or otherwise; (ii) all other monetary obligations, including but
not
limited to, interest, fees, charges; and (iii) the due and punctual performance
of all covenants, agreements, obligations and liabilities of the Borrower now
or
hereafter due arising under or in connection with the Loan Documents, expenses,
indemnities, whether primary, secondary, direct, contingent, fixed or otherwise
(including monetary obligations incurred during the pendency of any bankruptcy,
insolvency, receivership or other similar proceeding, regardless of whether
allowed or allowable in such proceeding) of the Borrower now or hereafter due
under or in connection with the Loan Documents.
“Person”
means any corporation, natural person, firm, joint venture, partnership, trust,
unincorporated organization, enterprise, government or any department or agency
of any government.
“Pledge
Agreement” means that certain Pledge Agreement dated as of the date hereof, by
and among the Pledgors and the Collateral Agent.
“Pledged
Collateral” shall have the meaning ascribed to such term in the Pledge
Agreement.
“Pledgors”
means Xxxx X. Xxxxxx and Xxxxxxx Xxxx.
“Purchase
Agreement” means that any definitive agreement entered into between the Borrower
and the Lender pursuant to which the Lender acquires all or a portion of the
Borrower’s assets or voting securities.
“Security
Documents” means the Security Agreement, the Pledge Agreement and such other
agreements, instruments, documents, financing statements, warehouse receipts,
bills of lading, notices of assignment of accounts, schedules of accounts
assigned, mortgages and other written matter necessary or reasonably requested
by the Lender to perfect and maintain perfected the Lender’s first priority
security interest in the Collateral.
“Security
Agreement” means that certain Security Agreement, dated as of the date hereof,
by and between the Borrower and the Pledgors as Grantors and the Collateral
Agent.
“Solvent”
means, with
respect to any Person, that (i) the fair value of all of such Person's
properties and assets is in excess of the total amount of its debts (within
the
meaning of the U.S. Bankruptcy Code); (ii) it is able to pay its debts as they
mature; (iii) it does not have unreasonably small capital for the business
in
which it is engaged or for any business or transaction in which it is about
to
engage; and (iv) it is not "insolvent" as such term is defined in Section
101(31) of the U.S. Bankruptcy Code.
“Trains
Project” means the project to build two 50 million gallon trains in connection
with the Potential Project as described in the LOI.
“Transaction”
means the acquisition by the Lender of 80% of the Common Stock of the Borrower
in accordance with the terms and conditions set forth in the Purchase Agreement.
“U.S.
Bankruptcy Code” means Title
11
of the United States Code, 11 U.S.C. Section 101, et seq.
The
words
“herein,” “hereof” and “hereunder” and other words of similar import refer to
this Agreement as a whole, including the Exhibits and Schedules hereto, as
the
same may from time to time be amended, modified or supplemented, and not to
any
particular section, subsection or clause contained in this
Agreement.
Wherever
from the context it appears appropriate, each term stated in either the singular
or plural shall include the singular and the plural, and pronouns stated in
the
masculine, feminine or neuter gender shall include the masculine, the feminine
and the neuter.
ARTICLE
II
THE
LOANS
2.1 Loans.
(a) Subject
to satisfaction of the terms and conditions set forth in this Agreement, the
Lender agrees to make a term loan to the Borrower on the Closing Date in an
aggregate principal amount of $150,000 (the “Initial Loan”), the proceeds of
which shall be used by the Borrower solely to purchase the Option.
(b) The
Borrower may request that the Lender make additional term loans to the Borrower
in an aggregate principal amount of up to $1,250,000 (each a “Delayed Draw”, and
together with the Initial Loan, the “Loans”) by delivering a written request to
the Lender specifying the amount of the Delayed Draw, the Business Day on which
the Borrower wishes to make the Delayed Draw and the proposed use of the funds
provided by the Delayed Draw. The Lender may, in its absolute discretion, agree
to provide a Delayed Draw to the Borrower, in each case in the amount and on
the
Business Day specified in the applicable Borrowing Request, subject to the
conditions set forth in Section 3.2 of this Agreement.
2.2 Repayment.
(a) The
Borrower shall repay the Loans, together with all interest due thereon, and
all
other amounts owing under this Agreement or the Loan Documents in connection
with the Loans in full on the Maturity Date; notwithstanding any of the
foregoing, upon the Lender closing on a transaction to provide financing for
the
Trains Project, all amounts owing under this Agreement or the Loan Documents
in
connection with the Loans shall be converted into an intercompany loan from
the
Lender to the Borrower (the “Intercompany Loan”) evidenced by a promissory note
to be repaid on a date mutually agreed upon by the parties.
(b) The
obligation of the Borrower to repay the principal amount of the Loans, and
any
and all interest which accrues thereon, shall be evidenced by a series of
promissory notes executed and delivered by the Borrower in the form of Exhibit
A
hereto (collectively, the “Notes” and each individually, a “Note”).
(c) In
the
event that the Lender informs the Borrower that the Lender either (i) is unable
to obtain financing for the Trains Project or (ii) chooses to participate in
another opportunity related to an ethanol plant or the ethanol industry, the
parties shall use commercially reasonable efforts to renegotiate mutually
agreeable repayment terms of all amounts then owing under this Agreement or
the
Loan Documents in connection with the Loans.
2.3 Interest.
Interest on the Loans shall accrue at a per annum rate equal to seven percent
(7%) (the “Applicable Rate”), provided, however, during any period in which a
Default (as defined below), shall exist, interest on the Loans shall accrue
at a
rate per annum equal to two percent (2%) above the Applicable Rate. Interest
shall be calculated for actual days elapsed on the basis of a 360-day year.
Interest on the Loans shall not be paid in cash but instead automatically shall
be added to the outstanding principal balance of the Loans on the first
(1st)
Business Day of each calendar month prior to the Maturity Date and shall be
treated in all respects as outstanding principal under the Loans.
2.4 Method
of Payment.
All
payments of principal and fees hereunder shall be made in immediately available
funds in United States Dollars to the Lender at the Lender’s address specified
pursuant to Section 8.11, by noon (local time) on the date the same shall be
due. The Loans may be prepaid in whole or in part without penalty. Amounts
repaid or prepaid with respect to the Loans may not be reborrowed, provided
that
the Borrower shall give the Lender written notice of its intention to prepay
any
of the outstanding amounts, which notice shall specify the amount to be so
prepaid and the date of such prepayment, not less than two (2) Business Days
prior to such prepayment.
ARTICLE
III
CONDITIONS
PRECEDENT
3.1 Conditions
to the Initial Loan.
The
obligation of the Lender to make the Initial Loan shall be subject to the
following conditions precedent:
(a) each
of
the Credit Parties, to the extent applicable to such Credit Party, shall have
furnished to the Lender, or caused to be furnished to the Lender (unless
otherwise waived by Lender in writing), the following, in form and substance
reasonably satisfactory to the Lender and its counsel, each dated as of the
Effective Date (or such other date as shall be acceptable to the Lender):
(i)
each
of the following Loan Documents to which it is a party, duly executed by an
authorized officer and the other parties thereto: this Agreement, a Note in
the
principal amount of $150,000, the Security Agreement and the Pledge Agreement;
(ii)
evidence of all filings of the financing statements with respect to the Security
Agreement and the other Security Documents; searches or other evidence as to
the
absence of any liens on the Collateral; and evidence that all other actions
with
respect to the liens created by the Security Documents have been taken as are
necessary or appropriate to perfect such liens and establish a first priority
security interest in favor of the Lender in the Collateral, including the
Pledged Collateral; and
(iii) such
other documents as the Lender or its counsel may reasonably
request.
(b) the
representations and warranties of each Credit Party made in Article IV of this
Agreement and the other Loan Documents shall be true and correct when made,
and
shall be true in on and as of the Closing Date (except to the extent such
representations and warranties specifically relate to an earlier date, in which
case such representations and warranties shall be true and correct as of such
earlier date);
(c) each
Credit Party shall have performed and complied with all agreements, obligations
and conditions contained in this Agreement that are required to be performed
or
complied with by it on or before the Closing Date; and
(d) the
Lender shall have received an opinion letter, dated as of the Closing Date
and
addressed to the Collateral Agent and the Lender, from counsel to the Borrower,
in a form that is reasonably satisfactory to the Lender.
3.2 Conditions
to Subsequent Drawings.
The
obligation of the Lender to lend additional amounts for any Delayed Draw shall
be subject to the following conditions precedent and solely at the discretion
of
the Lender:
(a) no
Default (as defined below) has occurred or is continuing or would result from
the Delayed Draw;
(b) as
of the
date that the Delayed Draw is made, all of the representations and warranties
of
the Borrower contained in Article IV and in the other Loan Documents shall
be
true and correct (except to the extent such representations and warranties
specifically relate to an earlier date, in which case such representations
and
warranties shall be true and correct as of such earlier date, and except for
changes after the Closing Date which are not prohibited by any Loan Document);
(c) the
Borrower shall have performed and complied with all agreements, obligations
and
conditions contained in this Agreement that are required to be performed or
complied with by it in order to make a Delayed Draw, including the Post-Closing
Conditions Subsequent, if applicable;
(d) the
Lender shall have completed its first level due diligence review of the
Borrower’s business, assets, contracts, prospects and financial condition and
the technical feasibility of the Potential Project, and the Lender shall be
satisfied in all respects with the results of such first level due diligence
review; and
(e) the
Borrower shall have delivered (i) a Note, duly executed by an authorized
officer, in the principal amount of the applicable Delayed Draw and (ii) any
documents related to the proposed use of Funds for the Delayed Draw as the
Lender shall reasonably request.
3.3 Post-Closing
Conditions Subsequent.
(a) Within
thirty (30) days following the Closing Date, the Borrower shall enter into
an
executed account control agreement, in a form reasonably satisfactory to the
Lender, with respect to each account maintained by the Borrower.
(b) Within
ten (10) days following the Closing Date, the Borrower shall deliver to the
Lender evidence in a form acceptable to the Lender that the Borrower has used
the funds advanced in the Initial Loan to make a payment toward the purchase
of
the Option.
ARTICLE
IV
REPRESENTATIONS
AND WARRANTIES
Except
as
set forth on the Disclosure Schedule delivered by the Borrower to the Lender,
each section of which shall only qualify the representation or warranty in
the
correspondingly numbered Section of this Agreement, each Credit Party, as
applicable, represents and warrants to the Lender that on the date
hereof:
4.1 Organization
and Qualification.
The
Borrower is a corporation duly organized, validly existing and in good standing
under the laws of the state of South Dakota, is qualified to transact business
in the jurisdictions listed on the Disclosure Schedule and has the requisite
corporate power and authority and legal capacity to own and operate its
properties and assets, to conduct its business as now conducted and as currently
proposed to be conducted in the future, to enter into, execute and deliver
this
Agreement and the Loan Documents, to issue the Notes and to perform its
obligations under this Agreement and the Loan Documents and any other agreement
to which the Borrower is a party, the execution and delivery of which are
contemplated hereby. The Borrower is duly qualified to transact business and
is
in good standing, if applicable, in each jurisdiction in which the failure
to so
qualify would have a material adverse effect on its business, condition, results
or operations, assets or liabilities (a “Material Adverse Effect”).
4.2 Authorization;
Enforceable Obligations.
Except
as set forth on the Disclosure Schedule, the execution, delivery and performance
by the Borrower of each of the Loan Documents, to the extent it is a party
thereto, and the creation of all liens provided for herein and therein:
(a) have been and will be duly authorized by all necessary or proper
action; (b) are not in contravention of any provision of the Borrower’s
by-laws or charter; (c) will not violate any law or regulation, or any
order or decree of any court or governmental instrumentality; (d) will not
conflict with or result in the breach or termination of, constitute a default
under, or accelerate any performance required by, any indenture, mortgage,
deed
of trust, lease, agreement or other instrument to which the Borrower is a party
or by which the Borrower or any of its property is bound (except for such
conflict, breach, termination, default or acceleration as could not reasonably
be expected to have a Material Adverse Effect); (e) will not result in the
creation or imposition of any lien upon any of the property of the Borrower
other than those in favor of the Lender, all pursuant to the Loan Documents;
and
(f) do not require the consent or approval of any governmental body,
agency, authority or any other Person, except such consents as have been
obtained. Each of the Loan Documents delivered in connection herewith at such
time shall have been duly executed and delivered for the benefit of or on behalf
of the Borrower, and each shall then constitute a legal, valid and binding
obligation of the Borrower, enforceable against it in accordance with its terms.
4.3 No
Default.
The
Borrower is not, and after giving effect to this Agreement shall not be, in
default in the payment or performance of any contractual obligation where such
default could have a material adverse effect on the business, properties,
assets, liabilities or condition (financial or otherwise) on the
Borrower.
4.4 Financial
Information; Minute Books, Solvency.
(a) All
balance sheets, all statements of operations, stockholders’ equity and cash
flows, and all other financial information of the Borrower which have been
or
shall hereafter be furnished by or on behalf of the Borrower to the Lender
for
the purposes of or in connection with this Agreement or any transaction
contemplated hereby, have been prepared in accordance with GAAP consistently
applied throughout the periods involved and present fairly in all material
respects the matters reflected therein subject, in the case of unaudited
statements, to changes resulting from normal year-end audit adjustments and
except as to the absence of footnotes. As of the date here, the Borrower has
no
material contingent liabilities or material liabilities for taxes, long-term
leases or forward or long-term commitments except as set forth on the Disclosure
Schedule.
(b) The
Borrower is Solvent and, after giving effect to the borrowings under this
Agreement, will be Solvent.
4.5 Investment
Company Act.
No
Credit Party is, or after giving effect to the transactions contemplated by
the
Loan Documents will be, an “investment company” or an “affiliated person” or
“promoter” of, or “principal underwriter” of or for, an “investment company,”
within the meaning of the Investment Company Act of 1940, as amended, or any
other federal or state law limiting its ability to incur debt or to execute,
deliver or perform the Loan Documents to which it is a party.
4.6 Intellectual
Property.
(a) The
Disclosure Schedule sets forth a true and complete list of (i) all Intellectual
Property owned by the Borrower, indicating for each item that is registered
the
registration or application number and the applicable filing jurisdiction and
(ii) all Intellectual Property contracts (other than licenses for commercial
“off-the-shelf” or “shrink-wrap” software that are not material to the business,
operations, financial condition or performance of the Borrower, taken as a
whole). The Borrower exclusively owns (beneficially, and of record where
applicable) all right, title and interest in and to all Intellectual Property
set forth on the Disclosure Schedule (the “Scheduled Intellectual Property”)
free and clear of all liens not otherwise permitted in this Agreement, exclusive
licenses and non-exclusive licenses not granted in the ordinary course of
business. The Scheduled Intellectual Property is not subject to any outstanding
order, judgment, decree, or agreement adversely affecting the use thereof by
the
Borrower or its rights thereto, and is valid, subsisting and enforceable. The
Borrower does not, and has not in the past five years, infringed or otherwise
violated the Intellectual Property rights of any third party. The Borrower
has
sufficient rights to use all Intellectual Property used in its business as
presently conducted, all of which rights shall survive the consummation of
the
transactions contemplated by this Agreement unchanged There is no litigation,
opposition, cancellation, proceeding, objection, or claim pending, asserted,
or
threatened against the Borrower concerning the ownership, validity,
registerability, enforceability, infringement, use of, or licensed right to
use
any Intellectual Property, except as set forth on the Disclosure Schedule.
To
the knowledge of the Borrower, no valid basis exists for any such litigation,
opposition, cancellation, proceeding, objection, or claim. To the Borrower’s
knowledge, no person is violating any Scheduled Intellectual Property right
that
the Borrower holds exclusively.
(b) The
Scheduled Intellectual Property that is registered has been duly registered
with, filed in, or issued by, as the case may be, the United States Patent
and
Trademark Office or such other filing offices, domestic or foreign, as
applicable, and such registration, filings, issuances, and other actions remain
in full force and effect, and are current and unexpired. The Borrower has
properly executed and recorded all documents necessary to perfect its title
to
all Scheduled Intellectual Property, and has filed all documents and paid all
taxes, fees, and other financial obligations required to maintain in force
and
effect all such items.
(c) The
Borrower has taken all reasonable measures to protect the confidentiality and
value of all Trade Secrets that are owned, used, or held by the Borrower, and,
to the Borrower’s knowledge, such Trade Secrets have not been used, disclosed
to, or discovered by any person except pursuant to valid and appropriate
non-disclosure and/or license agreements that have not been breached. All
current and prior employees of the Borrower have executed valid intellectual
property and confidentiality agreements for the benefit of the Borrower, and
to
the Borrower’s knowledge, no current or prior employee is in default or breach
of any term of any such agreement.
(d) The
IT
Assets operate and perform in all material respects in accordance with their
documentation and functional specifications and otherwise as required by the
Borrower in connection with its business, and have not materially malfunctioned
or failed within the past three (3) years. To the Borrower’s knowledge, no
person has gained unauthorized access to the IT Assets. The Credit Parties
have
implemented reasonable backup and disaster recovery technology consistent with
industry practices.
4.7 Insurance.
All
policies of insurance in effect of any kind or nature owned by or issued to
the
Borrower, (a) as of the Closing Date are listed on the Disclosure Schedule,
(b)
are in full force and effect, and (c) are of a nature and provide such coverage
as is customarily carried by companies engaged in similar businesses as the
Borrower. The Borrower does not provide any of its insurance through
self-insurance.
4.8 Environmental
Matters.
Except
as set forth on the Disclosure Schedule, the Borrower has not received any
written, or to the knowledge of any Credit Party oral, claim or notice alleging
that the Borrower is not in compliance with or is in violation of any
Environmental Law, or has liability or responsibility under any Environmental
Law. There are no pending or, to the knowledge of any Credit Party threatened,
investigations, inquiries, administrative proceedings, actions, suits, claims,
charges, complaints, demands, notices or legal proceedings against the Borrower,
the Borrower’s business or assets, under Environmental Laws, including those
that involve or relate to Environmental Conditions, Environmental Noncompliance
or the release, use, disposal or arranging for disposal of any Hazardous
Materials on or from any real property used, leased or owned by the Borrower.
Except as set forth on the Disclosure Schedule, the Borrower has not released
any Hazardous Materials on, under or about any real property used, leased or
owned by the Borrower in quantities that are required to be reported under
or
that requires investigation or remediation pursuant to Environmental Law or
that
otherwise is in violation of any requirement of any Environmental Law. The
Borrower is in compliance with Environmental Laws. The Borrower has not
generated, stored, treated, handled, disposed of, or arranged to dispose of,
Hazardous Materials in a manner or to a location that could reasonably be
expected to result in liability to the Borrower under Environmental Laws. The
Borrower has not exposed any employee or other individual to any Hazardous
Materials or conditions that could reasonably be expected to form the basis
for
any present or future action, suit, proceeding, hearing, investigation, charge,
complaint, claim, or demand for damage to, or investigation and remediation
of,
any site, location or body of water (surface or subsurface), or any illness
of
or personal injury to any employee or individual.
4.9 Accounts.
The
Disclosure Schedule lists all accounts, whether a deposit account or a
securities account, of the Borrower.
4.10 Additional
Representations and Warranties.
All
representations and warranties made in the Security Agreement are true, correct
and complete as of the Effective Date, except to the extent such representations
and warranties are specifically made as of a particular date (in which case
such
representations and warranties are true and correct as of such particular
date).
ARTICLE
V
COVENANTS
For
so
long as the Loans remain outstanding under this Agreement, unless the Lender
shall otherwise consent in writing, each Credit Party covenants and agrees,
as
applicable, that from, and after the date hereof (except as otherwise provided
in this Agreement, or unless the Lender has given its prior written
consent):
5.1 Notices.
It
shall give the Collateral Agent prompt written notice of any (a) Default (as
defined below), (b) any notice received related to any environmental matter
described in Section 4.8 of this Agreement, (c) any material amendment to the
Borrower’s bylaws or charter, or (d) the occurrence of any event, condition or
other circumstance that, singly or in the aggregate, could reasonably be
expected to result in a Material Adverse Effect, in each case accompanied by
copies of all notices given or received by such Credit Party with respect to
such event or condition.
5.2 Maintenance
of a Perfected, First Priority Security Interest.
It
shall execute all documents and take all actions necessary to perfect and
maintain at all times the Lender’s first priority security interest in all of
the Collateral (including the Pledged Collateral as defined in the Pledge
Agreement), now owned or acquired at any later date by such Credit Party.
5.3 Real
Estate.
If the
Borrower shall acquire a fee or leasehold interest in real estate, the Borrower
will execute a first priority Mortgage, in form and substance reasonably
satisfactory to the Lender, in favor of the Collateral Agent, for its benefit
and the benefit of the Lender, and shall deliver to the Collateral Agent such
title insurance policies, surveys and landlords’ estoppel agreements with
respect thereto as the Collateral Agent or the Lender shall reasonably
request.
5.4 Deposit
Accounts.
The
Borrower shall not maintain any account without an effective account control
agreement, in form and substance reasonably satisfactory to the Lender.
5.5 Execution
of Supplemental Instruments.
It
shall execute and deliver to the Lender from time to time, upon demand, such
supplemental agreements, statements, assignments and transfers, or instructions
or documents relating to the Collateral, and such other instruments as the
Lender may request, in order that the full intent of this Agreement may be
carried into effect.
5.6 Corporate
Name; Xxxxxxxx.
The
Borrower shall not amend or modify its Articles of Incorporation to change
its
corporate name. No Credit Party shall change its domicile without providing
at
least ten (10) Business Days’ prior written notice to the Collateral
Agent.
5.7 Change
of Control.
No
Change of Control shall occur.
ARTICLE
VI
DEFAULTS
The
occurrence of any one or more of the following events shall constitute a default
hereunder (each, a “Default”):
6.1 Any
representation or warranty made in this Agreement by any Credit Party to the
Lender shall be materially false on the date as of which the same is
made.
6.2 Nonpayment
of any amount of principal or accrued, unpaid interest due under any Note as
and
when the same is due and payable.
6.3 The
breach by the Borrower of any of the covenants contained in Article V
hereof.
6.4 The
occurrence of any default or event of default under any of the other Loan
Documents.
6.5 The
Borrower shall (i) have an order for relief entered with respect to it under
the
federal bankruptcy laws as now or hereafter in effect, (ii) make an assignment
for the benefit of creditors, (iii) apply for, seek, consent to, acquiesce
in,
or have appointed for it or any substantial portion of its property a receiver,
custodian, trustee, examiner, liquidator or similar official for it or any
substantial part of its property, (iv) institute any proceeding seeking an
order
for relief under the Federal bankruptcy laws as now or hereafter in effect
or
seeking to adjudicate it a bankrupt or insolvent, or seeking dissolution,
winding up, liquidation, reorganization, arrangement, adjustment or composition
of it or its debts under any law relating to bankruptcy, insolvency or
reorganization or relief of debtors or fail to file an answer or other pleading
denying the material allegations of any such proceeding filed against it, or
(v)
take any corporate action to authorize or effect any of the foregoing actions
set forth in this Section 6.5.
ARTICLE
VII
ACCELERATION,
WAIVERS, AMENDMENTS AND REMEDIES
7.1 Acceleration.
If any
Default described in Section 6.5 occurs with respect to the Borrower, the
Obligations shall immediately become due and payable without any election,
notice or action on the part of the Lender. If any other Default occurs, the
Lender may declare the Obligations to be due and payable, whereupon the
Obligations shall become immediately due and payable, without presentment,
demand, protest or notice of any kind, all of which the Borrower hereby
expressly waives.
7.2 Amendments.
The
Lender and the Credit Parties may enter into written agreements supplemental
hereto for the purpose of adding or modifying any provisions to the Loan
Documents or changing in any manner the rights of the Lender or any Credit
Party
hereunder or waiving any Default hereunder. To be effective, any such amendment
or waiver must be in writing and signed by the Lender and each Credit
Party.
7.3 Preservation
of Rights, No Adverse Impact.
No
delay or omission of the Lender or the Collateral Agent to exercise any right
under this Agreement or any of the Loan Documents shall impair such right or
be
construed to be a waiver of any Default or an acquiescence therein. Any single
or partial exercise of any such right shall not preclude other or further
exercise thereof or the exercise of any other right, and no waiver, amendment
or
other variation of the terms, conditions or provisions of the Loan Documents
whatsoever shall be valid unless in writing signed by the Lender, and then
only
to the extent in such writing specifically set forth. All remedies contained
in
the Loan Documents, or by law afforded shall be cumulative and all shall be
available to the Lender until the Obligations have been paid in
full.
7.4 Remedies.
(a) Upon
the
occurrence and during the continuance of a Default, the Lender may proceed
to
protect and enforce to the Lender’s rights by suit in equity, action of law
and/or other appropriate proceeding either for specific performance of any
covenant or condition contained in this Agreement, any Loan Document or in
any
instrument or document delivered to the Lender pursuant hereto, or in the
exercise of any rights, remedies or powers granted in this Agreement, any Loan
Document and/or any such instrument or document. The Lender may proceed to
declare the obligations under this Agreement or any Loan Document to be due
and
payable pursuant to Section 7.1 hereof and the Lender may proceed to enforce
payment of such documents as provided herein, or in any Loan Document, and
may
offset and apply toward the payment of such amount any indebtedness of any
Credit Party to the Borrower.
(b) Upon
the
occurrence and during the continuance of a Default, the Lender may apply as
any
Credit Party’s attorney-in-fact for any Intellectual Property rights, and sell,
lease or license the Collateral to third persons or associations without being
liable to such Credit Party on account of any losses, damage or depreciation
that may occur as a result thereof so long as the Lender shall act reasonably
and in good faith; and at the Lender’s option and without notice to such Credit
Party (except as specifically herein provided) the Lender may sell, license,
assign and deliver the whole or any part of the Collateral, or any substitute
therefor or any addition thereto, at public or private sale, for cash, upon
credit, or for future delivery, at such prices and upon such terms as the Lender
deems advisable. The Lender shall give the applicable Credit Party at least
ten
(10) Business Days’ by hand delivery at or by United States first-class mail,
postage prepaid (in which event notice shall be deemed to have been given when
so deposited in the mail), to the address specified herein, of the time and
place of any public or private sale or other disposition.
(c) If
any
Default described in Section 6.2 occurs with respect to the Borrower, the Lender
may, at its absolute discretion, exercise the Option to purchase the Parcels
or
any Parcel.
7.5 Application
of Proceeds.
Any and
all proceeds of any Collateral realized or obtained by the Lender upon exercise
of its rights and remedies hereunder, shall be applied to the amounts
outstanding under this Agreement or any other Loan Document, after payment
of
any and all costs and expenses, fees and commission and taxes of such sale,
collection or other realization, in accordance with the following:
(a) Any
and
all proceeds of any Collateral shall first be applied to the payment of any
and
all expenses, charges or other amounts which may be due and owing under this
Agreement or the other Loan Documents; and
(b) Any
and
all proceeds of any Collateral remaining after application as provided in
paragraph (a) above shall be applied to the payment of principal, interest
or
charges outstanding with respect to the Loans or under any Note or the other
Loan Documents; and
(c) Any
surplus remaining after application as provided in paragraphs (a) and (b) above,
shall be paid to the Borrower, or its successors or assigns, or to whomsoever
may be lawfully entitled to receive the same.
ARTICLE
VIII
GENERAL
PROVISIONS
8.1 Survival
of Representations.
All
representations and warranties of the Borrower contained in this Agreement
shall
survive delivery of any Note and the making of the Loans herein
contemplated.
8.2 Termination
of Security Interest and Related Obligations.
In the
event that the Loans are converted to an Intercompany Loan as provided for
in
Section 2.2 of this Agreement, the covenants set forth in Sections 5.2
through 5.4 of this Agreement and any and all obligations of the Credit Parties
to provide security under or arising out of any other Loan Document shall
terminate and the Collateral Agent will release the Collateral pursuant to
the
terms of the applicable Security Documents, except that any indemnities provided
to the Lender in its capacity as “Lender” or as “Collateral Agent” shall survive
the termination of any provisions of this Agreement or any Loan
Document.
8.3 Headings.
Section
headings in this Agreement are for convenience of reference only, and shall
not
govern the interpretation of any of the provisions of this
Agreement.
8.4 Entire
Agreement.
The
Loan Documents embody the entire agreement and understanding between the Credit
Parties and the Lender and supersede all prior agreements and understandings
between the Credit Parties and the Lender relating to the subject matter
thereof.
8.5 No
Third Party Beneficiary.
This
Agreement shall not be construed so as to confer any right or benefit upon
any
Person other than the parties to this Agreement and their respective successors
and assigns.
8.6 Expenses.
Upon
the occurrence of a Default, and so long as a Default is continuing, the Credit
Parties shall pay to the Lender on demand all expenses reasonably incurred
in
connection with the collection and enforcement of all Obligations under the
Loan
Documents including, without limitation, all reasonable attorneys’ fees, and all
reasonable costs incurred by the Lender in connection with the collection and
enforcement of the Obligations and in connection with any proceeding commenced
by or against the Borrower under the U.S. Bankruptcy Code.
8.7 Severability
of Provisions.
Any
provision in this Agreement that is held to be inoperative, unenforceable,
or
invalid in any jurisdiction shall, as to that jurisdiction, be inoperative,
unenforceable, or invalid without affecting the remaining provisions in that
jurisdiction or the operation, enforceability, or validity of that provision
in
any other jurisdiction, and to this end the provisions of this Agreement are
declared to be severable.
8.8 Nonliability
of the Lender.
The
relationship between the Borrower and the Lender shall be solely that of
borrower and lender, and that between the Pledgors and the Lender shall be
solely that of pledgor and secured creditor. The Lender shall have no fiduciary
responsibilities to any Credit Party. The Lender undertakes no responsibility
to
any Credit Party to review or inform the any Credit Party of any matter in
connection with any phase of any Credit Party’s business or
operations.
8.9 CHOICE
OF LAW.
THIS
AGREEMENT AND THE LOAN DOCUMENTS (OTHER THAN THOSE CONTAINING A CONTRARY EXPRESS
CHOICE OF LAW PROVISION) SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN
ACCORDANCE WITH THE LAWS (AND NOT THE LAW OF CONFLICTS) OF THE STATE OF
DELAWARE.
8.10 Jurisdiction/Jury
Trial Waiver/Other Matters.
(a) The
Lender and each Credit Party acknowledge and agree that any controversy which
may arise under this Agreement or the relationship of such Credit Party and
the
Lender established hereby, would be based upon difficult and complex issues.
Accordingly, to the fullest extent permitted by law, each Credit Party and
the
Lender hereby waive trial by jury in any action or proceeding of any kind or
nature in any court in which an action may be commenced by or against such
Credit Party arising out of this Agreement or by reason of any other cause
or
dispute whatsoever between such Credit Party and the Lender of any kind or
nature.
(b) Each
Credit Party and the Lender agree that the United States District Court for
Delaware or any state court located in the State of Delaware shall have
jurisdiction to hear and determine any claims or disputes between such Credit
Party and the Lender pertaining directly or indirectly to this Agreement or
to
any matter arising herefrom. Each Credit Party expressly submits and consents
in
advance to such jurisdiction in any action or proceeding commenced in such
court. Each Credit Party and the Lender waive any objection that they may now
or
hereafter have to the venue of any proceeding in any such court or that such
proceeding was brought in an inconvenient forum and each agrees not to plead
or
claim the same.
(c) Each
Credit Party hereby waives personal service of any summons and complaint, or
other process or papers issued therein, and agrees that service of such summons
and complaint, or other process or papers may be made by United States mail,
postage prepaid addressed to such Credit Party at the address set forth below
his or her signature hereto. Should such Credit Party fail to appear or answer
any summons, complaint, process or papers so served within thirty days after
the
mailing thereof, he or she shall be deemed in default and an order and/or
judgment may be entered against him or her or her as prayed for in such summons,
complaint, process or papers.
8.11 Further
Assurances.
Each
Credit Party at its own expense, shall do, make, execute and deliver all such
additional and further acts, deeds, assurances, documents, instruments and
certificates as the Lender may reasonably require, including, without
limitation, (a) executing, delivering and filing financing statements and
continuation statements under the Uniform Commercial Code of the State of
Delaware, (b) obtaining governmental and other third party consents and
approvals, and (c) obtaining waivers from mortgagees and
landlords.
8.12 Successors
and Assigns.
The
terms and provisions of this Agreement and the Loan Documents shall be binding
upon and inure to the benefit of the Credit Parties and the Lender and their
respective successors and assigns, except that the Credit Parties shall not
have
the right to assign its rights or obligations under the Loan Documents and
any
assignment in violation thereof shall be null and void.
8.13 Giving
Notice.
All
notices and other communications provided to any party hereto under this
Agreement or any other Loan Document shall be in writing or by facsimile and
addressed or delivered to such party at their addresses as follows (unless
designated in writing to the other parties): (i) if to any Credit Party, at
the
address set forth below such Credit Party’s name on the signature page hereto
and (ii) if to the Lender, at the address set forth the Lender’s name on the
signature page hereto. Any notice, if mailed and properly addressed with postage
prepaid, shall be deemed given three (3) Business Days after being sent; any
notice, if transmitted by facsimile, shall be deemed given when
transmitted.
[Remainder
of page intentionally left blank; signature page follows]
IN
WITNESS WHEREOF, the parties hereto have executed this Loan Agreement as of
the
date first above written.
|
PROECO
ENERGY COMPANY
|
|
|
By:
|
/s/
Xxxx X. Xxxxxx
|
|
Name:
|
Xxxx
X. Xxxxxx
|
|
Title:
|
President
|
|
Address:
|
P.O.
Box 261
|
|
Belle
Fourche, South Dakota 57717
|
|
|
Telephone:
|
|
|
Facsimile:
|
|
|
O2DIESEL
CORPORATION
|
|
|
By:
|
/s/
Xxxxx X. Xxxxxxx
|
|
Name:
|
Xxxxx
X. Xxxxxxx
|
|
Title:
|
Chief
Financial Officer
|
|
Address:
|
000
Xxxxxxxx Xxxxx, Xxxxx 000
|
|
Newark,
Delaware 19713
|
|
|
Telephone:
|
(000)
000-0000
|
|
Facsimile:
|
(000)
000-0000
|
|
PLEDGORS:
|
|
XXXX
X. XXXXXX
|
|
/s/
Xxxx X. Xxxxxx
|
|
Address:
|
|
Telephone:
|
|
Facsimile:
|
|
XXXXXXX
XXXX
|
|
/s/
Xxxxxxx Xxxx
|
|
Address:
|
|
Telephone:
|
|
Facsimile:
|
EXECUTION
COPY
EXHIBIT
B
SECURED
PROMISSORY NOTE
|
$150,000
|
Newark,
Delaware
|
|
December
26, 2006
|
ProEco
Energy Company, Inc.,
a South
Dakota corporation (the “Company”),
FOR
VALUE RECEIVED, hereby unconditionally promises to pay to the order of O2Diesel
Corporation (“O2Diesel”
or
the
“Holder”),
in
U.S. dollars in immediately available funds, the principal amount of One
Hundred
Fifty Thousand and NO/100 ($150,000) (the “Principal
Amount”),
together with interest on the unpaid principal balance of this Secured
Promissory Note (the “Note”)
outstanding from time to time from the date hereof, at the rate provided
in the
Loan Agreement (as defined below). The books and records of the Holder shall
be
conclusive as to the unpaid principal amount of this Note at any time
outstanding, absent manifest error.
This
Note
is issued pursuant to the terms of the Loan Agreement, dated December 22,
2006
(as such agreement may from time to time be amended, restated, modified or
supplemented, the “Loan
Agreement”)
to
which the Company and the Holder are parties, to which reference is hereby
made
for a statement of all of the terms and conditions applicable to the Loan
evidenced, hereby. Capitalized terms used but not otherwise defined herein
shall
have the meanings ascribed to such terms in the Loan Agreement.
1. Loan.
The
Holder hereby loans to the Company on the date hereof the sum of the Principal
Amount. The principal amount of the indebtedness evidenced hereby shall be
due
and payable on the dates specified in the Loan Agreement. Interest thereon
shall
be paid until such principal amount is paid in full in accordance with and
at
such interest rates and at such times as are specified in the Loan
Agreement.
2. Default.
Upon
the occurrence and during the continuance of a Default, this Note may, as
provided in the Loan Agreement, and without demand, notice or legal process
of
any kind (other than notices expressly provided for in the Loan Documents),
be
declared, and immediately shall become, due and payable. In addition, the
Holder
shall have the right to exercise other remedies as provided in the Loan
Agreement. This Note is secured by the Security Documents.
3. Waivers.
(a) The
Company hereby waives presentment, demand for payment, notice of dishonor,
notice of protest, and protest in connection with the delivery, acceptance,
performance, or default of this Note.
(b) No
delay
by the Holder in exercising any power or right hereunder shall operate as
a
waiver of any power or right, nor shall any single or partial exercise of
any
power or right preclude other or further exercise thereof, or the exercise
of
any other power or right hereunder or otherwise. No waiver or modification
of
the terms hereof shall be valid unless set forth in writing by the Holder.
4. Secured
Obligations.
In
order to induce the Holder to loan to the Company the Principal Amount of
this
Note, the Company has delivered, or caused to be delivered, to O2Diesel,
as
collateral agent for the Holder and any other holder of Notes (the “Collateral
Agent”), the Security Documents, pursuant to which the Pledgors (as defined in
that certain Security Agreement, dated as of December 22, 2006, by and among
the
Borrower, the Pledgors and the Secured Creditor and Collateral Agent (the
“Security
Agreement”))
has
granted to the Collateral Agent, on behalf of the Holder and any other holder
of
Notes, as security and collateral for the payment and performance of its
obligations hereunder, a first priority security interest in all of the property
and assets of the Company and certain assets of each of the Pledgors, whether
now existing or hereafter arising, and all as more specifically described,
and
on the terms and conditions set forth in, the Security Agreement.
5. General.
(a) Successors:
Assignment.
This
Note and the obligations and rights of the Company hereunder shall be binding
upon and inure to the benefit of the Company and the Holder and their respective
successors. The Company may not assign this Note or any obligations hereunder
without the prior written consent of the Holder.
(b) Changes.
Changes
in or additions to this Note may be made, or compliance with any term, covenant,
agreement, condition or provision set forth herein, may be omitted or waived
(either generally or in a particular instance and either retroactively or
prospectively) upon written consent of the Holder.
(c) Notices.
All
notices, demands or other communications to be given or delivered under or
by
reason of the provisions of this Note shall be in writing and shall be deemed
to
have been given when delivered personally to the recipient, faxed with
confirmation of receipt, sent to the recipient by reputable overnight courier
service (charges prepaid) or mailed to the recipient by certified or registered
mail, return receipt requested and postage prepaid. Such notices, demands
and
other communications shall be sent to the Holder at the address indicated
below:
O2Diesel
Corporation
000
Xxxxxxxx Xxxxx, Xxxxx 000
Newark,
Delaware 19713
Attn:
Xxxxx Xxxxxxx, Chief Financial Officer
Tel: (000)
000-0000
Fax: (000)
000-0000
With
a
copy to:
Xxxxxx
& Xxxxxx LLP
0000
Xxxxxx Xxxxxxxxx, Xxxxx 000
McLean,
Virginia 22102
Attn:
Xxxxx X. Xxxxx, Esq.
Tel: (000)
000-0000
Fax: (000)
000-0000
and
to
the Company at the address indicated below:
ProEco
Energy Company.
P.O.
Box
261
Belle
Fourche, South Dakota 57717
Attn:
Xxxx X. Xxxxxx
Tel: (605)
Fax: (605)
With
a
copy to:
Xxxxxxxxxx
Law Offices, PC
P.O.
Box
726
Belle
Fourche, South Dakota 57717
Attn:
Xxxxxx X. Xxxxxxxxxx
Tel: (000)
000-0000
Fax: (000)
000-0000
or
to
such other address or to the attention of such other person as the recipient
party has specified by prior written notice to the sending party.
(d) Severability.
If any
term or provision of this Note shall be held invalid, illegal or unenforceable,
the validity of all other terms and provisions hereof shall in no way be
affected thereby.
6. Governing
Law.
(a)
This
Note
shall be construed and enforced in accordance with, and the rights of the
parties shall be governed by, the laws of the State of Delaware, without
regard
to choice of law principles.
(b) The
parties hereto hereby submit to the jurisdiction of the state and federal
courts
located in the State of Delaware for the purposes of any suit, action or
other
proceeding relating to any dispute under this Note. The Company hereby waives
any right it may have to transfer or change the venue of any litigation between
itself and the Holder in accordance with this sub-section.
(c) THE
COMPANY HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHT
TO
TRIAL BY JURY IN ANY ACTION OR PROCEEDING WHICH IN ANY MANNER ARISES OUT
OF OR
IN CONNECTION WITH OR IS IN ANY WAY RELATED TO THIS NOTE OR ANY OF THE
TRANSACTIONS CONTEMPLATED HEREIN.
[SIGNATURE
PAGE FOLLOWS]
IN
WITNESS WHEREOF,
this
Note has been executed and delivered on the date first above written by the
undersigned duly authorized representative of the Company.
|
PROECO
ENERGY COMPANY, INC.
|
|
|
By:
|
/s/
Xxxx Xxxxxx
|
|
Name:
|
Xxxx
Xxxxxx
|
|
Title:
|
President
|
EXECUTION
COPY
EXHIBIT
C
SECURED
PROMISSORY NOTE
Newark,
Delaware
ProEco
Energy Company, Inc.,
a South
Dakota corporation (the “Company”),
FOR
VALUE RECEIVED, hereby unconditionally promises to pay to the order of O2Diesel
Corporation (“O2Diesel”
or
the
“Holder”),
in
U.S. dollars in immediately available funds, the Principal Amount (as defined
below) together with interest on the unpaid principal balance of this Secured
Promissory Note (the “Note”)
outstanding from time to time from the date hereof, at the rate provided
in the
Loan Agreement (as defined below). The books and records of the Holder shall
be
conclusive as to the unpaid Principal Amount of this Note at any time
outstanding, absent manifest error.
This
Note
is issued pursuant to the terms of the Loan Agreement, dated December 22,
2006
(as such agreement may from time to time be amended, restated, modified or
supplemented, the “Loan
Agreement”)
to
which the Company and the Holder are parties, to which reference is hereby
made
for a statement of all of the terms and conditions applicable to the Loan
evidenced, hereby. Capitalized terms used but not otherwise defined herein
shall
have the meanings ascribed to such terms in the Loan Agreement.
1. Loan.
The
Holder hereby loans to the Company on the date hereof the sum of the Principal
Amount. As used in this Note, the “Principal
Amount”
means
the aggregate amount loaned to the Company by the Holder as reflected on
Schedule
A
to this
Note. Schedule
A
reflects
all amount loaned to the Company by the Holders as of December 15, 2007.
The
Company shall amend Schedule
A
to
include any such loans to the Company by the Holder or any of its affiliates
made after such date. The Principal Amount of the indebtedness evidenced
hereby
shall be due and payable on the dates specified in the Loan Agreement. Interest
thereon shall be paid until such Principal Amount is paid in full in accordance
with and at such interest rates and at such times as are specified in the
Loan
Agreement.
2. Default.
Upon
the occurrence and during the continuance of a Default, this Note may, as
provided in the Loan Agreement, and without demand, notice or legal process
of
any kind (other than notices expressly provided for in the Loan Documents),
be
declared, and immediately shall become, due and payable. In addition, the
Holder
shall have the right to exercise other remedies as provided in the Loan
Agreement. This Note is secured by the Security Documents.
3. Waivers.
(a) The
Company hereby waives presentment, demand for payment, notice of dishonor,
notice of protest, and protest in connection with the delivery, acceptance,
performance, or default of this Note.
(b) No
delay
by the Holder in exercising any power or right hereunder shall operate as
a
waiver of any power or right, nor shall any single or partial exercise of
any
power or right preclude other or further exercise thereof, or the exercise
of
any other power or right hereunder or otherwise. No waiver or modification
of
the terms hereof shall be valid unless set forth in writing by the Holder.
4. Secured
Obligations.
In
order to induce the Holder to loan to the Company the Principal Amount of
this
Note, the Company has delivered, or caused to be delivered, to O2Diesel,
as
collateral agent for the Holder and any other holder of Notes (the “Collateral
Agent”), the Security Documents, pursuant to which the Pledgors (as defined in
that certain Security Agreement, dated as of December 22, 2006, by and among
the
Borrower, the Pledgors and the Secured Creditor and Collateral Agent, as
such
agreement may from time to time be amended, restated, modified or supplemented
(the “Security
Agreement”))
has
granted to the Collateral Agent, on behalf of the Holder and any other holder
of
Notes, as security and collateral for the payment and performance of its
obligations hereunder, a first priority security interest in all of the property
and assets of the Company and certain assets of each of the Pledgors, whether
now existing or hereafter arising, and all as more specifically described,
and
on the terms and conditions set forth in, the Security Agreement.
5. General.
(a) Successors:
Assignment.
This
Note and the obligations and rights of the Company hereunder shall be binding
upon and inure to the benefit of the Company and the Holder and their respective
successors. The Company may not assign this Note or any obligations hereunder
without the prior written consent of the Holder.
(b) Changes.
Changes
in or additions to this Note may be made, or compliance with any term, covenant,
agreement, condition or provision set forth herein may be omitted or waived
(either generally or in a particular instance and either retroactively or
prospectively), upon written consent of the Holder.
(c) Notices.
All
notices, demands or other communications to be given or delivered under or
by
reason of the provisions of this Note shall be in writing and shall be deemed
to
have been given when delivered personally to the recipient, faxed with
confirmation of receipt, sent to the recipient by reputable overnight courier
service (charges prepaid) or mailed to the recipient by certified or registered
mail, return receipt requested and postage prepaid. Such notices, demands
and
other communications shall be sent to the Holder at the address indicated
below:
O2Diesel
Corporation
000
Xxxxxxxx Xxxxx, Xxxxx 000
Newark,
Delaware 19713
Attn:
Xxxxx Xxxxxxx, Chief Financial Officer
Tel: (000)
000-0000
Fax: (000)
000-0000
With
a
copy to:
Xxxxxx
& Xxxxxx LLP
0000
Xxxxxx Xxxxxxxxx, Xxxxx 000
McLean,
Virginia 22102
Attn:
Xxxxx X. Xxxxx, Esq.
Tel: (000)
000-0000
Fax: (000)
000-0000
and
to
the Company at the address indicated below:
ProEco
Energy Company.
P.O.
Box
261
Belle
Fourche, South Dakota 57717
Attn:
Xxxx X. Xxxxxx
Tel: (605)
Fax: (605)
With
a
copy to:
Xxxxxxxxxx
Law Offices, PC
P.O.
Box
726
Belle
Fourche, South Dakota 57717
Attn:
Xxxxxx X. Xxxxxxxxxx
Tel: (000)
000-0000
Fax: (000)
000-0000
or
to
such other address or to the attention of such other person as the recipient
party has specified by prior written notice to the sending party.
(d) Severability.
If any
term or provision of this Note shall be held invalid, illegal or unenforceable,
the validity of all other terms and provisions hereof shall in no way be
affected thereby.
6. Governing
Law.
(a)
This
Note
shall be construed and enforced in accordance with, and the rights of the
parties shall be governed by, the laws of the State of Delaware, without
regard
to choice of law principles.
(b) The
parties hereto hereby submit to the jurisdiction of the state and federal
courts
located in the State of Delaware for the purposes of any suit, action or
other
proceeding relating to any dispute under this Note. The Company hereby waives
any right it may have to transfer or change the venue of any litigation between
itself and the Holder in accordance with this sub-section.
(c) THE
COMPANY HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHT
TO
TRIAL BY JURY IN ANY ACTION OR PROCEEDING WHICH IN ANY MANNER ARISES OUT
OF OR
IN CONNECTION WITH OR IS IN ANY WAY RELATED TO THIS NOTE OR ANY OF THE
TRANSACTIONS CONTEMPLATED HEREIN.
[SIGNATURE
PAGE FOLLOWS]
IN
WITNESS WHEREOF,
this
Note has been executed and delivered on the date first above written by the
undersigned duly authorized representative of the Company.
|
PROECO
ENERGY COMPANY, INC.
|
|
|
By:
|
/s/
Xxxx Xxxxxx
|
|
Name:
|
Xxxx
Xxxxxx
|
|
Title:
|
President
|
SCHEDULE
A
|
Date
|
Amount
|
|
1/17/2007
|
125,000.00
|
|
3/14/2007
|
125,000.00
|
|
4/25/2007
|
75,000.00
|
|
5/14/2007
|
65,000.00
|
|
5/30/2007
|
65,000.00
|
|
6/12/2007
|
65,000.00
|
|
6/27/2007
|
65,000.00
|
|
7/10/2007
|
65,000.00
|
|
7/25/2007
|
65,000.00
|
|
8/15/2007
|
65,000.00
|
|
9/07/2007
|
65,000.00
|
|
10/01/2007
|
65,000.00
|
|
10/15/2007
|
65,000.00
|
|
10/25/2007
|
40,000.00
|
|
11/01/2007
|
65,000.00
|
|
11/15/2007
|
40,000.00
|
|
11/30/2007
|
40,000.00
|
|
12/14/2007
|
40,000.00
|
|
1/18/2008
|
10,000.00
|
|
Total:
|
$1,210,000.00
|
