Exhibit 4.4
LOAN AGREEMENT
THIS LOAN AGREEMENT (the
“Agreement”), is executed as of February 15, 2007, by
and among Better Biodiesel, Inc., a Colorado corporation (the
“Company”), and Sausalito Capital Partners I, LLC, a
Nevada limited liability company (the “Lender”)
(collectively, the “Parties”).
WHEREAS, the Company is seeking to
raise at least Three Million Dollars ($3,000,000.00) through a
private placement or placements of a combination of debt and/or
common stock of the Company (the “Common Stock”) (the
“Private Placement”);
WHEREAS, in order to fund
Company’s operations until the closing of funds from the
Private Placement, Lender advanced One Hundred Thousand Dollars
($100,000.00) to the Company as a short-term bridge loan on or
around November 15, 2006 (the “Effective Date”) (the
“Loan”), with the understanding that the Parties would
negotiate and execute an agreement at a later date to memorialize
the terms and conditions of the Loan;
WHEREAS, in return for the Loan, the
Company agrees to provide Lender with a warrant to acquire Five
Thousand (5,000) shares of Common Stock at a price of Five Dollars
($5.00) per share; and
WHEREAS, the Lender and the
Company now wish to memorialize the terms and conditions of the
Loan, set forth herein.
NOW, THEREFORE, in consideration of
the mutual covenants and agreements set forth herein, and for other
good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the Company and the Lender,
intending to be legally bound, agree as follows:
ARTICLE 1
DEFINITIONS
1.1
Defined terms . Certain capitalized terms used in this
Agreement shall have the specific meanings defined
below:
“ Business Day
” shall mean a day other than a Saturday, Sunday, or other
day on which commercial banks are authorized or required by law to
close.
“ Closing Date ”
shall mean the date of execution of this Agreement.
“ Encumbrance ”
means any lien, charge, security interest, mortgage, deed of trust,
pledge or other encumbrance of any nature whatsoever.
“ Excluded Securities
” shall mean (i) securities issued in connection with the
Private Placement; (ii) securities issued upon conversion of any
securities outstanding on the Closing Date; (iii) securities issued
pursuant to the acquisition of another business or business segment
of any such entity by the Company by merger, purchase of
substantially all the assets or other reorganization whereby the
Company will own more than fifty percent (50%) of the voting power
of such business entity or business segment of any such entity;
(iv) securities issued to employees, consultants, officers,
directors or advisors of the Company pursuant to any stock option,
stock purchase or stock bonus plan, agreement or arrangement
approved by the Board of Directors of the Company; (v) securities
issued in connection with obtaining lease financing, whether issued
to Lender, lessor, guarantor or other person and approved by the
Board of Directors of the Company; (vi) securities issued to
leasing companies, landlords and other providers of goods and
services to the Company and approved by the Board of Directors;
(vii) securities issued in connection with any stock split, stock
dividend or recapitalization of the Company; (viii) securities
issued in connection with strategic transactions involving the
Company and other entities, including (A) joint ventures,
manufacturing, marketing or distribution arrangements or (B)
technology license, transfer or development arrangements; provided
that such strategic transactions and the issuance of shares
therein, have been approved by the Board of Directors of
the Company; and (ix) any right,
option or warrant to acquire any security convertible into the
securities pursuant to subsections (i) through (viii)
above.
“ Proprietary Rights
” means all patents, trademarks, service marks, copyrights,
trade names and all registrations and applications and renewals for
any of the foregoing and all goodwill associated
therewith.
ARTICLE 2
THE LOAN
2.1
Loan . Lender made the Loan with the understanding
that the Loan would be subject to the terms and conditions of this
Agreement. The Loan shall be evidenced by a promissory note
in the form attached hereto as Exhibit A
(“Note”), duly executed on behalf of the Company and
dated as of the Closing Date.
2.2
Interest . The Loan shall bear interest at a rate of
six percent (6%) per annum (“Default Interest Rate”),
compounded annually (“Interest”) from the Effective
Date, as defined in the Note, and continuing until payment in full
of the Loan. Upon the occurrence of a default event
(“Event of Default”) and for so long as such Event of
Default continues, Interest shall accrue on the outstanding Loan
amount at the Default Interest Rate.
2.3
Prepayment of the Loan . The Company may from time to
time prepay all or any portion of the Loan without premium or
penalty of any type. The Company shall give the Lender at
least 3 Business Days prior written notice of its intention to
prepay the Loan, specifying the date of payment and the total
amount of the Loan to be paid on such date.
2.4
Maturity Date . Unless the Loan is earlier accelerated
pursuant to the terms hereof, the Loan and all accrued Interest
thereon shall be due and payable in full on the earlier of (a) 12
months following the Closing Date or (b) two (2) days following the
closing of a total of at least Three Million Dollars
($3,000,000.00) from the Private Placement. In the event that
the Private Placement is not consummated within 90 days after the
Closing Date, the Lender may, at the Lender’s option, extend
the Maturity Date on such terms and conditions as determined by the
Lender in its sole discretion.
ARTICLE 3
REPRESENTATIONS AND
WARRANTIES
3.1
Organization, qualification and Authority . The
Company is a corporation duly organized and validly existing under
the laws of the State of Colorado. The Company has the requisite
corporate power and authority to own, lease and operate its
facilities and assets as presently owned, leased and operated, and
to carry on its respective business as it is now being
conducted. The Company owns no capital stock, security,
interest or other right, or any option or warrant convertible into
the same, of any Person. The Company has the requisite or
individual right, power and authority to execute, deliver and carry
out the terms of this Agreement and all documents and agreements
necessary to give effect to the provisions of this Agreement and to
consummate the transactions contemplated hereunder. The execution,
delivery and consummation of this Agreement, and all other
agreements and documents executed in connection herewith by the
Company, have been duly authorized by all necessary action on the
part of the Company. No other action, consent or approval on
the part of the Company or any other Person or entity, is necessary
to authorize the Company’s due and valid execution, delivery
and consummation of this Agreement and all other agreements and
documents executed in connection hereto. This Agreement and
all other agreements and documents executed in connection herewith
by the Company, upon due execution and delivery thereof, shall
constitute the valid and binding obligations of the Company,
enforceable in accordance with its terms, except as enforcement may
be limited by bankruptcy, insolvency, reorganization or similar
laws affecting creditors’ rights generally and by general
principles of equity.
3.2
Capitalization . There are no outstanding obligations
of the Company to repurchase, redeem or otherwise acquire any
securities of the Company or pay any dividend or make any other
distribution in respect thereof. Except as set forth in
Section 3.3, the Company owns no securities of any other entity and
no rights to acquire any securities from any other entity.
All outstanding Company Securities have been duly authorized and
validly issued and are fully paid, non-assessable and free and
clear of all Encumbrances. Upon issuance, the
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Warrant issued to the Lender
pursuant to Section 7.1 will be duly authorized, validly issued,
fully paid, non-assessable and free and clear of all
Encumbrances.
3.3
Subsidiaries . Domestic Energy Partners, LLC, a
Utah limited liability company, is a wholly-owned subsidiary of the
Company.
3.4
Compliance with Laws . The nature and transaction of
the Company’s business and operations and the use of its
properties and assets do not, and during the term of this Agreement
shall not, violate or conflict with in any material respect any
applicable law, statute, ordinance, rule, regulation or order of
any kind or nature.
3.5
Absence of Conflicts . The execution, delivery and
performance by the Company of this Agreement, and the transactions
contemplated hereby, do not constitute a breach or default, or
require consents under, any agreement, permit, contract or other
instrument to which the Company is a party, or by which the Company
is bound or to which any of the assets of the Company is subject,
or any judgment, order, writ, decree, authorization, license, rule,
regulation, or statute to which the Company is subject, and, except
as set forth in the Security Agreement, will not result in the
creation of any lien upon any of the assets of the
Company.
3.6
Litigation and Taxes . There is no litigation or
governmental proceeding pending, or to the best knowledge of the
Company after due inquiry, threatened, against the Company. The
Company has duly filed all applicable income or other tax returns
and has paid all material income or other taxes when due.
There is no controversy or objection pending, or to the best
knowledge of the Company after due inquiry, threatened in respect
of any tax returns of the Company.
3.7
Intellectual Property . No proceedings have been
instituted or are pending or, to the Company’s knowledge,
threatened which challenge the validity of the ownership by the
Company of any such Proprietary Rights. The Company has not
licensed anyone to use any such Proprietary Rights and, to the
Company’s knowledge, there has been no use or infringement of
any of such Proprietary Rights by any other person.
3.8
Company’s SEC Reports . The Company has timely
filed with the Securities and Exchange Commission (the “
SEC ”) all forms, reports, definitive proxy
statements, schedules and registration statements (the “
Company SEC Reports ”) required to be filed by it with
the SEC pursuant to the Securities Act of 1933, as amended (the
“ Securities Act ”), or the Securities Exchange
Act of 1934, as amended (the “ Exchange Act
”). As of their respective filing dates or, if amended,
as of the date of the last amendment, none of the Company SEC
Reports contained any untrue statement of a material fact or
omitted to state any material fact required to be stated therein or
necessary to make the statements made therein, in the light of the
circumstances under which they were made, not misleading. The
Company SEC Reports (including, without limitation, any financial
statements and schedules included therein) when filed or, if
amended, as of the date of the last amendment, complied in all
material respects with the applicable requirements of the
Securities Act and the Exchange Act.
3.9
No Omissions or Misstatements . None of the
information included in this Agreement, other documents or
information furnished or to be furnished by the Company, or any of
its representations, contains any untrue statement of a material
fact or is misleading in any material respect or omits to state any
material fact. Copies of all documents referred to in herein
have been delivered or made available to the Lender and constitute
true and complete copies thereof and include all amendments,
schedules, appendices, supplements or modifications thereto or
waivers thereunder.
ARTICLE 4
COVENANTS
4.1
Negative Covenants of the Company . The Company
covenants and agrees that, from the Closing Date until the Maturity
Date (and, in any event, during such time as any portion of the
Loan or any Interest thereon is outstanding), without the consent
of the Lender, the Company will not:
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(a)
merge or consolidate with or into any other corporation or sell or
otherwise convey 50% or more of its assets;
(b)
in a single transaction or series of related transactions, effect a
significant acquisition of any business or entity (for purposes
hereof, a “significant” acquisition shall be determined
in accordance with Instructions 2, 3 and 4 or Item 2 of Form 8-K of
the Securities and Exchange Commission); provided, however, that
notwithstanding anything in this Agreement, the Note, or the
Security Agreement to the contrary, the Company shall not be
prohibited from consummating the Merger;
(c)
declare, set aside or pay any dividend or other distribution on any
of its capital stock;
(d)
engage in any transaction with any Affiliate (as such term is
defined in Rule 501(b) of the Securities Act of 1933, as amended)
on terms less favorable to the Company than could be obtained from
an unrelated party; or
(e)
amend its Certificate of Incorporation or Bylaws in any manner that
adversely affects the rights associated with this Agreement, the
Warrant issued to the Lender pursuant to Section 6.1 hereof or the
Common Stock.
The Company will give notice to the
Lender of any default under any provisions of this Agreement within
three business days after the discovery by the Company of such
default.
4.2
Affirmative Covenants of the Company . The Company
covenants and agrees that, from the Closing Date until the Maturity
Date (and, in any event, during such time as any portion of the
Loan or any Interest thereon is outstanding), the Company
shall:
(a)
operate its business only in the ordinary course and maintain its
properties and assets in good repair, working order and
condition;
(b)
cause to be done all things reasonably necessary to maintain,
preserve and renew its corporate existence and all material
licenses, authorizations and permits necessary to the conduct of
its businesses;
(c)
comply with all applicable laws, rules and regulations of all
governmental authorities, the violation of which could reasonably
be expected to have a material adverse effect on its business,
properties or prospects;
(d)
deliver to the Lender the Company’s audited annual financial
statements and the Company’s annual budget, and allow the
Lender reasonable access during normal business hours to visit the
Company and inspect the financial records of the Company;
and
(e)
provide the Lender with at least 10 days’ written notice of
any meeting of the Board of Directors of the Company and permit the
Lender to designate an individual to attend such meeting, including
any adjournment thereof, as an observer. In addition, the
Lender’ designee shall receive all written material
disseminated to the Board of Directors in advance, during or
following any meeting, whether or not the designee was in
attendance. The Lender’ designee shall receive the same
compensation as is paid to the members of the Board of Directors in
connection with such designee’s attendance of meetings of the
Board of Directors.
ARTICLE 5
DEFAULT
5.1
Events of Default . The occurrence of any of the
following events (each an “ Event of Default ”),
not cured in the applicable cure period, if any, shall constitute
and Event of Default of the Company:
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(a)
a breach of any representation, warranty, covenant or other
provision of this Agreement, the Note, or the Security Agreement,
which, if capable of being cured, is not cured within three days
following notice thereof to the Company;
(b)
the failure to make when due any payment described in this
Agreement or the Note, whether on or after the Maturity Date, by
acceleration or otherwise; and
(c)
(i) the application for the appointment of a receiver or custodian
for the Company or the property of the Company, (ii) the entry of
an order for relief or the filing of a petition by or against the
Company under the provisions of any bankruptcy or insolvency law,
(iii) any assignment for the benefit of creditors by or against the
Company, or (iv) the Company becomes insolvent.
5.2
Effect of Default . Upon the occurrence of any Event
of Default that is not cured within any applicable cure period, the
Lender may elect, by written notice delivered to the Company, to
take any or all of the following actions: (i) declare this
Agreement terminated and the outstanding amounts under the Note to
be forthwith due and payable, whereupon the entire unpaid Loan,
together with accrued and unpaid Interest thereon (including the
Default Interest Rate), and all other cash obligations hereunder,
shall become forthwith due and payable, without presentment,
demand, protest or any other notice of any kind, all of which are
hereby expressly waived by the Company, anything contained herein
or in any of the Note to the contrary notwithstanding, and (ii)
exercise any and all other remedies provided hereunder or available
at law or in equity upon the occurrence and continuation of an
Event of Default. In addition, during the occurrence of any
Event of Default, the Company shall not pay make any payment on any
other outstanding indebtedness of the Company (other than
indebtedness of the Company to which the Lender has agreed in
writing to subordinate this Agreement and the Note
hereunder).
ARTICLE 6
ISSUANCE OF STOCK
6.1
Issuance of Warrant . On the Closing Date, the Company
shall issue to the Lender a cash or cashless warrant to purchase in
the aggregate 5,000 shares of the Common Stock, in the form
attached hereto as Exhibit B (the “ Warrant
”). The Warrant shall be immediately exercisable by the
Lender (and its assignee) at an exercise price of Five Dollars
($5.00) per share. The right to exercise the Warrant shall
expire on the date that is two years following the Effective
Date.
6.2
Registration of Common Stock Underlying the Warrant
.
(a)
Lender shall be entitled to “piggy-back” registration
rights for (i) the Common Stock on all registrations of the
Company, except for registrations filed on Form S-4 or Form S-8, or
on any demand registrations of any other investor subject to the
right, however, of the Company and its underwriters to reduce the
number of shares proposed to be registered pro rata in view of
market conditions. The Company shall bear registration
expenses (exclusive of underwriting discounts and commissions) of
all such demands, piggy-backs, and S-3 or SB-2
registrations.
(b)
All expenses incident to the filing of any registration statement
required by Section 6.2, including without limitation all
registration and filing fees, fees and expenses of compliance with
securities or blue sky laws, printing expenses, messenger and
delivery expenses, and fees and disbursements of counsel for the
Company and all independent certified public accountants,
underwriters (excluding discounts and commissions) and other
professionals retained by the Company will be borne by the
Company. In no event shall the Company be obligated to pay
any discounts or commissions with respect to the shares sold by any
holder of Registrable Securities. In connection with any
registration statement, the Company shall reimburse the holders of
Registrable Securities covered by such registration for the
reasonable fees and disbursements of one counsel chosen by the
holders of a majority of the Registrable Securities initially
requesting such registration.
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ARTICLE 7
MISCELLANEO
