NOTE AND WARRANT PURCHASE AGREEMENT
DATED MAY 16, 2008
AMONG
THIRD EYE CAPITAL CORPORATION,
AS AGENT
,
THE PURCHASERS FROM TIME TO TIME PARTY HERETO
AND
AE BIOFUELS, INC.,
AS THE COMPANY
LIST OF EXHIBITS
Exhibit
A - Form of Note
Exhibit
B - Form of Warrants
LIST OF SCHEDULES
Disclosure
Schedule
Schedule
A - Purchasers
NOTE AND WARRANT PURCHASE
AGREEMENT
THIS
NOTE AND WARRANT PURCHASE AGREEMENT (this “
Agreement ”)
is made as of May 16, 2008 among
AE BIOFUELS, INC. ,
a Nevada corporation (the “
Company ”),
THIRD EYE CAPITAL CORPORATION ,
an Ontario corporation, as agent (“
Agent ”)
and the
PURCHASERS from
time to time parties hereto.
The
parties hereto agree as follows:
SECTION 1
DEFINITIONS
1.1
Definitions .
For the purposes of this Agreement, the following terms have
the meanings set forth below (such meanings to be applicable
to both the singular and plural forms of the terms
defined):
“
Affiliate ”
of any particular Person means any other Person directly or
indirectly controlling, controlled by or under common control with
such particular Person. The term “
control ”
means the possession, directly or indirectly, of the power to
direct the management and policies of a Person whether through the
ownership of voting securities, by contract or
otherwise.
“
Business Day ”
means any day other than a Saturday, Sunday or public holiday under
the laws of the Toronto, Canada or the State of New York or other
day on which banking institutions are authorized or obligated to
close in Toronto, Canada or New York, New York.
“
Change in Control ’’
means
an event or series of events by which any of the following
occurs:
(a)
Eric
McAfee ceases to be employed as Chief Executive Officer or
Chairman of the Company;
(b)
any
Person is or becomes the beneficial owner, directly or
indirectly, of more than 50% of the total voting power of all
outstanding classes of voting capital stock of the
Company;
(c)
the
adoption of a plan relating to the liquidation or dissolution
of the Company;
(d)
on
any date, a majority of the Company’s Board of Directors
does not consist of Persons (i) who were directors on the
Closing Date (“
Continuing Directors ”)
or (ii) whose election or nomination as directors was approved
by at least 2/3 of the directors then in office who are Continuing
Directors or whose election or nomination was previously so
approved;
(e)
the
Company fails to own, directly or indirectly, 100% of each of
the Significant Subsidiaries (other than Energy Enzymes,
Inc.);
(f)
any
sale of all or substantially all of the Company’s assets
or common stock; or
(g)
the
execution by the Company or any of its Subsidiaries or
Affiliates of any agreement or letter of intent with respect
to any proposed transaction or event or series of transactions
or events that, individually or in the aggregate, may
reasonably be expected to result in any of the events in (a)
through (f) above or the execution of any written agreement
that, when fully performed by the parties thereto, would
result in any of the events in (a) through (f)
above.
“Collateral” means
collectively, all real, personal or mixed property and all types of
tangible or intangible property and all other collateral and/or
security granted and/or securities pledged to Agent, any Purchaser
or any other Person pursuant to the Transaction
Documents.
“
Common Stock ”
means, collectively, the Voting Common Stock and any capital stock
of any class of stock hereafter authorized that is not limited to a
fixed sum or percentage of par or stated value in respect of the
rights of the holders thereof to participate in dividends in the
distribution of assets upon any liquidation, dissolution or winding
up of the Company.
“
Default Rate ”
means that rate of interest per annum equal to 800 basis points per
annum over the Interest Rate applicable to the Note.
“
Dividend ”
means any distribution by a corporation, limited liability company
or other entity with respect to its capital stock, membership
interests or other ownership interests whether in cash, securities
or other property.
“
Environmental Laws ”
means any Law, including any common law, which relates to or
otherwise imposes liability or standards of conduct concerning
discharges, emissions, releases or threatened releases of noises,
odors or any pollutants, contaminants or hazardous or toxic wastes,
substances or materials, into air, water or groundwater, or land,
or otherwise relating to the manufacture, processing, generation,
distribution, use, treatment, storage, disposal, cleanup, transport
or handling of pollutants, contaminants, or hazardous or toxic
wastes, substances or materials, including, but not limited to
CERCLA as amended, the Resource Conservation and Recovery Act of
1976, as amended, the Toxic Substances Control Act of 1976, as
amended, the Federal Water Pollution Control Act Amendments of
1972, the Clean Water Act of 1977, as amended, the Oil Pollution
Act of 1990, as amended, any so-called “Superlien” law,
and any other similar Federal, state or local
statutes.
“
Environmental Lien ”
means any Lien, whether recorded or unrecorded, in favor of any
Governmental Authority, relating to any liability of the Company or
any of its Subsidiaries arising under any Environmental
Laws.
“
ERISA ”
means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and the rules and regulations
promulgated thereunder from time to time in effect.
“
GAAP ”
means generally accepted accounting principles accepted in the
United States of America as promulgated by the Financial Accounting
Standards Board, as in effect from time to time.
“
Governmental Authority(ies)” means
any international, Federal, state, interstate, provincial, local,
foreign court or governmental agency, authority, instrumentality,
agency, bureau, board, commission, department or regulatory
body.
“
Guarantee” means
any guarantee of the payment or per-formance of any Indebtedness or
other obligation and any other arrangement whereby credit is
extended to one obligor on the basis of any promise of another
Person, whether that promise is expressed in terms of an obligation
to (i) pay the Indebtedness or other liabilities of such
obligor, (ii) purchase an obligation owed by such obligor,
(iii) purchase goods and services from such obligor pursuant
to a take-or-pay contract, (iv) maintain the capital, working
capital, solvency or general financial condition of such obligor,
or (v) otherwise assure any creditor of such obligor against
loss (including by way of an agreement to repurchase or reimburse),
whether or not any such arrangement is listed on the balance sheet
of such other Person or referred to in a footnote thereto, but
shall not include endorsements of items for collection in the
ordinary course of business. The amount of any Guarantee shall be
equal to the amount of the obligation so guaranteed or otherwise
supported or, if not a fixed or determined amount, the maximum
amount guaranteed or supported.
“
Hazardous Material ”
means any substances or materials that are, on the Closing Date,
regulated under the Environmental Laws.
“
Indebtedness ”
means at a particular time, without duplication, (i) any
indebtedness for borrowed money or issued in substitution for or
exchange of indebtedness for borrowed money, (ii) any
indebtedness evidenced by any note, bond, debenture or other debt
security, (iii) any indebtedness for the deferred purchase
price of property or services with respect to which a Person is
liable, contingently or otherwise, as obligor or otherwise (other
than trade payables and other current liabilities incurred in the
ordinary course of business), (iv) any commitment by which a
Person assures a creditor against loss (including, without
limitation, contingent reimbursement obligations with respect to
letters of credit), (v) any obligations for which a Person is
obligated pursuant to a Guarantee, (vi) any obligations under
capitalized leases with respect to which a Person is liable,
contingently or otherwise, as obligor, guarantor or otherwise, or
with respect to which obligations a Person assures a creditor
against loss, (vii) any indebtedness secured by a Lien on a
Person’s assets and (viii) any unsatisfied obligation
for “with-drawal liability” to a “multiemployer
plan” as such terms are defined under ERISA.
“
Investment ”
as applied to any Person means (i) any direct or indirect
purchase or other acquisition by such Person of any notes,
obligations, instruments, stock, securities or ownership interest
(including partnership interests, limited liability company
membership interests and joint venture inter-ests) of any other
Person or (ii) any capital contribution by such Person to any
other Person.
“
IRC ”
means the Internal Revenue Code of 1986, as amended, and any
reference to any particular IRC section shall be interpreted to
include any revision of or successor to that section regardless of
how numbered or classified.
“
IRS ’’
means the United States Internal Revenue Service.
“
Law ”
means any federal, state, local or other law, rule, regulation or
governmental requirement of any kind, and the rules, regulations,
written interpretations and orders promulgated
thereunder.
“
Lien ”
or “
Liens ”
mean any mortgage, pledge, security interest, encumbrance, lien or
charge of any kind (including, without limita-tion, any conditional
sale or other title retention agreement or lease in the nature
thereof), any sale of receivables with recourse against the Company
or any Significant Subsidiary or Affiliate of the Company, or any
filing or agreement to file a financing statement as debtor under
the Uniform Commercial Code or any similar statute other than
to reflect ownership by a third party of property leased to the
Company or any of its direct or indirect Significant Subsidiaries
under a lease that is not in the nature of a conditional sale or
title retention agreement, or any subordination arrangement in
favor of another Person (other than any subordination arising in
the ordinary course of business).
“
Material Adverse Effect ”
means (a) a material adverse effect upon the business,
operations, properties, assets or financial condition of the
Company and its Significant Subsidiaries, taken as a whole or
(b) the impairment of the ability of the Company to
perform any of its material obligations under any Transaction
Document to which the Company or any Significant Subsidiary or
Affiliate is a party or of Agent’s or any Purchaser’s
to enforce any Transaction Document or collect any of the
Indebtedness due Agent or any Purchaser. In determining whether any
individual event would result in a Material Adverse Effect,
notwithstanding that such event does not of itself have such
effect, a Material Adverse Effect shall be deemed to have occurred
if the cumulative effect of such event and all other then existing
events would result in a Material Adverse Effect.
“
McAfee Capital Guaranty ”
means the Guaranty from McAfee Capital LLC in favor of Agent for
the benefit of Purchaser.
“
Most Recent Balance Sheet ”
means a true and complete copy of the balance sheets of Borrower
and its Significant Subsidiaries as at March 31, 2008 prepared in
accordance with GAAP.
“
Mortgage ”
means a mortgage, deed of trust, deed to secure debt or similar
instrument creating a Lien on real property of the Company or any
Significant Subsidiary in favor of Agent or Purchaser, as the same
be amended, modified, supplemented or restated from time to
time.
“
Officer’s Certificate ”
means a certificate signed by the Company’s duly authorized
officer on behalf of the Company.
“
Patriot Act” means
the Uniting and Strengthening America by Providing Appropriate
Tools Required to Intercept and Obstruct Terrorism Act of 2001,
P.L. 107-56, as amended.
“
Permit ”
shall mean any license, lease, power, permit, franchise,
certificate, authorization or approval issued by a Governmental
Authority.
“
Permitted Indebtedness ”
means (i) any Indebtedness incurred or permitted pursuant to the
terms of this Agreement, (ii) trade payables and other
accounts payable of the Company and its Significant Subsidiaries
incurred in the ordinary course of business, (iii) lease
obligations and purchase money indebtedness, (iv) Indebtedness
existing on the date hereof and set forth on the Most Recent
Balance Sheet and (v) unsecured Indebtedness to Laird Q.
Cagan.
“
Permitted Liens ”
means:
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i.
|
liens
for taxes, assessments or governmental charges that are not yet due
and payable or which are being contested in good faith by
appropriate proceedings and for which appropriate reserves (in the
good faith judgment of the management of the Company) have been
established in accordance with GAAP consistently
applied;
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ii.
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deposits
or pledges made in connection with, or to secure payment of,
utilities or similar services, workers’ compensation,
unemployment insurance, old age pensions or other social security
obligations;
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iii.
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purchase
money mortgages or liens on any property purchased after the date
of this Agreement to be used by the Company in the normal course of
its business and created or incurred simultaneously with the
acquisition of such property, if such mortgages or liens are
limited to the property so acquired;
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iv.
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interests
or title of a lessor under any lease permitted by this
Agreement;
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v.
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liens
imposed by law which were incurred in the ordinary course of
business, such as carriers’, mechanics’,
materialmen’s or contractors’ liens or encumbrances or
any similar lien or restriction and which (x) do not individually
or in the aggregate materially detract from the value of the
Collateral or (y) are being contested in good faith by appropriate
proceedings;
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vi.
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leases,
subleases, easements, rights-of-way, restrictions and other similar
charges and encumbrances not interfering with the ordinary conduct
of the business of the Company and its Significant Subsidiaries or
materially detracting from the value of the
Collateral;
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vii.
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Liens
outstanding on the date hereof (and renewals and extensions
thereof) which secure Permitted Indebtedness and which are
described in the attached “
Indebtedness Schedule ;”
and
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viii.
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banker’s
liens, rights of setoff and liens of securities intermediaries with
respect to deposit accounts maintained in the ordinary course of
business.
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“
Person ”
means an individual, a partnership, a corpora-tion, a limited
liability company, an association, a joint stock company, a trust,
a joint venture, an unincorporated organization and a governmental
entity or any department, agency or political subdivision
thereof.
“
Purchaser ”
means any of the Persons from time to time named on
Schedule A and
their respective successors and permitted assigns, and
“Purchasers” shall mean all of them
collectively.
“
Qualified Holder ”
means Purchaser as long as it holds any portion of the Notes or
Underlying Common Stock and each other Person holding (i) at
least 10% of the aggregate principal amount of the Notes then
outstanding or (ii) at least 10% of the Underlying Common
Stock then in existence.
“
Release ”
has the meaning set forth in CERCLA.
“
Restricted Securities means
(i) the Securities issued hereunder, (ii) the Underlying
Common Stock and (iii) any securities issued with respect to
the securities referred to in clauses (i) or (ii) above
by way of a stock dividend or stock split or in connection with a
combination of shares, recapitalization, merger, consolidation or
other reorganization. As to any particular Restricted Securities,
such securities shall cease to be Restricted Securities when they
have (a) been effectively registered under the Securities Act
and disposed of in accordance with the registration statement
covering them, (b) become eligible for sale pursuant to
Rule 144(k) (or any similar provision then in force) under the
Securities Act or (c) been otherwise transferred and new
certificates for them not bearing the Securities Act legend set
forth in Section 8.3 have been delivered by the Company in
accordance with Section 5. Whenever any particular securities
cease to be Restricted Securities, the holder thereof shall be
entitled to receive from the Company, without expense, new
securities of like tenor not bearing a Securities Act legend of the
character set forth in Section 8.3.
“
Security Agreement ”
means any security executed by a Person in favor of Agent or any
Purchaser to secure the Indebtedness under the Notes, as the same
be amended, modified, supplemented or restated from time to
time.
“
Securities ”
has the meaning set forth in Section 2.1 hereof.
“
Securities Act ”
means the Securities Act of 1933, as amended, or any similar
federal law then in force.
“
Securities and Exchange Commission ”
includes any governmental body or agency succeeding to the
functions thereof.
“
Securities Exchange Act ”
means the Securities Exchange Act of 1934, as amended, or any
similar federal law then in force.
“
Significant Subsidiaries ”
mean, collectively, American Ethanol, Inc., a Nevada corporation,
Energy Enzymes, Inc., a Delaware corporation, Sutton Ethanol, LLC,
a Nebraska limited liability company, Biofuels Marketing, Inc., a
Delaware corporation, Danville Ethanol, Inc., an Illinois
corporation and AE Biofuels, Inc., a Delaware
corporation.
“
Subordinated Debt ”
means any Indebtedness of the Company or any of its Significant
Subsidiaries that is unsecured and subordinated by written contract
in right of payment, liens, security and remedies to the
Indebtedness evidenced by the Note.
“
Subsidiary ”
means, with respect to any Person, any corporation, limited
liability company, partnership, association or other business
entity of which (i) if a corporation, a majority of the total
voting power of shares of stock entitled (without regard to the
occurrence of any contingency) to vote in the election of
directors, managers or trustees thereof is at the time owned or
controlled, directly or indirectly, by that Person or one or more
of the other Subsidiaries of that Person or a combination thereof,
or (ii) if a limited liability company, partnership,
association or other business entity, a majority of the limited
liability company, partnership or other similar ownership interest
thereof is at the time owned or controlled, directly or indirectly,
by any Person or one or more Subsidiaries of that Person or a
combination thereof. For purposes hereof, a Person or Persons shall
be deemed to have a majority ownership interest in a limited
liability company, partnership, association or other business
entity if such Person or Persons shall be allocated a majority of
limited liability company, part-nership, association or other
business entity gains or losses or shall be or control any managing
director or general partner of such limited liability company,
partnership, association or other business entity.
“
Transaction Documents ”
means this Agreement, the Note, the Warrants, the McAfee Capital
Guaranty, all Mortgages, any Security Agreement, any environmental
indemnity agreements, any fee letter and all other documents
executed and delivered in connection with any of the
foregoing.
“
Underlying Common Stock ”
means (i) the stock issued or issuable upon exercise of the
Warrants originally issued to Purchaser, or (ii) any Common
Stock issued or issuable with respect to the securities referred to
in clause (i) above by way of stock dividend or stock
split or in connection with a combination of shares,
recapitalization, merger, consolidation or other reorganization.
For purposes of this Agreement and the Warrant, any Person who
holds Warrants shall be deemed to be the holder of the Underlying
Common Stock obtainable upon exercise of the Warrants in connection
with the transfer thereof or otherwise regardless of any
restric-tion or limitation on the exercise of the Warrants, such
Underlying Common Stock shall be deemed to be in existence, and
such Person shall be entitled to exercise the rights of a holder of
Underlying Common Stock hereunder. As to any particular shares of
Underlying Common Stock, such shares shall cease to be Underlying
Common Stock when they have been (a) effectively registered
under the Securities Act and disposed of in accordance with the
registration statement covering them, (b) distributed to the
public through a broker, dealer or market maker pursuant to
Rule 144 under the Securities Act (or any similar provision
then in force) or (c) repurchased by the Company or any of its
Subsidiaries.
“
Voting Common Stock ”
means the Company’s Common Stock, par value $0.001 per
share.
“
Wholly-Owned Subsidiary ”
means, with respect to any Person, a Subsidiary of which all of the
outstanding capital stock, membership interests or other ownership
interests are owned by such Person or another Wholly-Owned
Subsidiary of such Person.
1.2
Accounting Principles
.
The classification, character and amount of all assets,
liabilities, capital accounts and reserves and of all items of
income and expense to be determined, and any consolidation or
other accounting computation to be made, and the
interpretation of any definition containing any financial
term, pursuant to this Agreement shall be determined and made
in accordance with GAAP consistently applied, unless such
principles are inconsistent with the express requirements of
this Agreement; provided that if because of a change in GAAP
after the date of this Agreement the Company would be required
to alter a previously utilized accounting principle, method or
policy in order to remain in compliance with GAAP, such
determination shall continue to be made in accordance with the
Company’s previous accounting principles, methods and
policies.
SECTION 2
AUTHORIZATION AND CLOSING
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2.1
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Authorization of the Note and Warrant
. (A)
the Company has authorized the issuance and sale to Purchaser of
its 10% Senior Secured Notes in an aggregate principal amount of
$5,000,000, in form and substance as set forth in
Exhibit A attached
hereto (collectively, if more than one, the “Notes”,
and individually, the “Note”), and (B) the Company has
authorized the issuance and sale of its Warrants to acquire an
aggregate of 250,000 shares of Common Stock of the Company in
form and substance as set forth in
Exhibit B attached
hereto (collectively, the “Warrants”, and individually,
a “Warrant”). The Notes and the Warrants are sometimes
collectively referred to herein as the
“Securities.”
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2.2
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-
Purchase and Sale of the Note and Warrant
.
At the Closing, (A) the Company shall sell to Purchaser and,
subject to the terms and conditions set forth herein, Purchaser
shall purchase from the Company one or more Notes in the aggregate
principal amount of $5,000,000 at a price equal to $5,000,000, and
(B) the Company shall sell to Purchaser one or more Warrants to
purchase 250,000 shares of Common Stock for a purchase price equal
to $3.
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2.3
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-
The Closing .
The closing of the purchase and sale of the Note and the Warrants
(the “Closing”) shall take place on May 16, 2008 (the
“Closing Date”). At the Closing, the Company shall
deliver to Purchaser one or more instruments evidencing the Notes
and Warrants to be purchased by Purchaser, issued in the name of
Purchaser or its nominee, upon payment of the purchase price
thereof by wire transfer of immediately available funds as directed
by the Company, in the aggregate amount equal to
$5,000,000.
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SECTION 3
OBLIGATIONS OF THE COMPANY AT THE
CLOSING
The
obligation of Purchaser to purchase and pay for the Securities
at the Closing is subject to the fulfillment as of the Closing
of the following conditions to Agent’s and
Purchaser’s satisfaction in their sole
discretion:
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3.1
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-
Representations and Warranties; Covenants; No Event of
Default .
The representations and warranties contained in Section 6
hereof shall be true and correct at and as of the Closing as though
then made, the Company shall have performed all of the covenants
required to be performed by it hereunder and under the other
documents, agreements and instruments executed in connection
herewith that are to be complied with or performed by the Company
and/or any of its Significant Subsidiaries on or prior to the
Closing and there does not exist any state of facts that would
constitute an Event of Default.
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3.2
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Securities Law Compliance .
The Company shall have made all filings under all applicable
federal and state securities laws necessary to consummate the
issuance of the Note and Warrants pursuant to this
Agreement.
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3.3
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-
Opinions of Counsel .
Agent shall have received from counsel for the Company an opinion,
dated the date of the Closing and in form and substance
reasonably satisfactory to Agent.
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3.4
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-
Closing Documents .
The Company shall have delivered or caused to be delivered to Agent
and Purchaser all of the following documents:
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i.
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a
Note in the principal amount of $5,000,000, duly completed and
executed by the Company;
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ii.
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the
Warrants to purchase 250,000 shares of Common Stock, duly completed
and executed by the Company;
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iii.
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the
McAfee Capital Guaranty, Mortgages for certain real property
located in Nebraska and Illinois, a Security Agreement covering
certain machinery and equipment of Energy Enzyme, Inc.’s
cellulosic ethanol demonstration facility in Montana and an
Environmental Indemnity Agreement.
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iv.
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an
Officer’s Certificate, dated the date of the Closing, stating
that the conditions specified in this Section 3 have been fully
satisfied;
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v.
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certified
copies of the resolutions duly adopted by the Company’s and
each other Significant Subsidiary’s and McAfee Capital
LLC’s board of directors or board of managers, as applicable,
authorizing the execution, delivery and performance of the
Transaction Documents to which such entity is a party and each of
the other agreements contemplated hereby and thereby, the issuance
and sale of the Securities, the reservation for issuance upon
exercise of the Warrants, and the consummation of all other
transactions contemplated by this Agreement, as
applicable;
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vi.
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a
certificate of the secretary or manager of the Company and/or each
Significant Subsidiary and/or McAfee Capital LLC, as the case may
be, certifying the names and the signatures of the officers of such
entity authorized to sign this Agreement, the Note, the Warrants,
the Guaranty and each of the other agreements, documents and
instruments contemplated hereby to which such entity is a
party;
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vii.
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certified
copies of the Certificate of Incorporation, Certificate of
Formation, Limited Liability Company Agreement or Operating
Agreement and bylaws, as applicable, of the Company and each
Significant Subsidiary and McAfee Capital LLC, as applicable, each
as in effect at the Closing;
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viii.
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a
certificate of good standing of the Company and each Significant
Subsidiary and McAfee Capital LLC, dated not more than ten days
prior to the Closing, issued by from each such entity’s state
of incorporation or organization;
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ix.
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copies
of all third party and governmental consents, approvals and filings
required in connection with the consummation of the transactions
hereunder (including, without limitation, all blue sky law filings
and waivers of all preemptive rights (except for preemptive rights
granted in the Transaction Documents) and rights of first
refusal);
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x.
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insurance
certificates naming Agent and Purchaser as additional insured and
first loss payee on all property and liability insurance policies
of the Company and its Significant Subsidiaries pertaining to the
Collateral;
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xi.
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such
other documents relating to the transactions contemplated by this
Agreement or any other Transaction Documents as Agent or its
special counsel may reasonably request.
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3.5
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-
Proceedings .
All corporate and other proceedings taken or required to be taken
by the Company in connection with the transactions contemplated
hereby to be consummated at or prior to the Closing and all
documents incident thereto shall be reasonably satisfactory in
form and substance to Agent and its special
counsel.
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3.6 |
Closing Fees and Expenses .
The Company shall have (i) paid to Agent and Purchaser the
fees set forth in a fee letter of even date herewith from Agent to
the Company, and (ii) reimbursed Purchaser for fees and
expenses as provided in Section 8.1 hereof.
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3.7
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-
Compliance with Applicable Laws .
The purchase of the Note and Warrants by Purchaser hereunder shall
not be prohibited by any applicable law or governmental rule or
regulation and shall not subject Purchaser to any penalty,
liability or, in Purchaser’s sole judgment, other onerous
condition under or pursuant to any applicable law or governmental
rule or regulation, and the purchase of the Note and Warrants by
Purchaser hereunder shall be permitted by laws, rules and
regulations of the jurisdictions and Governmental Authorities and
agencies to which Purchaser is subject.
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SECTION 4
PAYMENT OF THE NOTES
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4.1
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Interest Rate .
The interest rate on the principal balance of the Note outstanding
from time to time shall accrue at the rate of ten percent (10%) per
annum or (if less) at the highest rate then permitted under
applicable law (computed on the basis of a 365-day year and the
actual number of days elapsed in any year) (the “Interest
Rate”) on the unpaid principal amount of the Note outstanding
from time to time from and including the Closing Date until the
date paid.
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4.2
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Payment of Interest .
The Company shall pay to the holder of the Note accrued interest on
the first Business Day of each calendar quarter (each an
“Interest Payment Date”), beginning June 1, 2008, at
the Interest Rate. On the Maturity Date (defined below) interest on
the principal balance of the Note outstanding from the immediately
preceding Interest Payment Date through and including the Maturity
Date shall be payable at the Interest Rate. Interest shall accrue
on any principal payment due under this Note and, to the extent
permitted by applicable law, on any interest that has not been paid
on the date on which it is due and payable until such time as
payment therefor is actually delivered to the holder of the
Note.
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4.3
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Payment at Maturity .
On May 15, 2009 (the “Maturity Date”), the Company will
pay the entire then outstanding principal amount of the Notes
together with all accrued and unpaid interest thereon.
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| 4.4 |
Optional Prepayments .
The Company may, at any time and from time to time upon not less
than 120 days’ prior written notice to Agent, prepay all or
any portion (in whole number multiples of $100,000 only) of the
outstanding principal amount of the Note (if more than one Note is
outstanding, pro rata among the holders of the Notes on the basis
of the outstanding principal amount of the Note held by each
holder). In connection with each prepayment of principal under the
Note, the Company shall also pay all accrued and unpaid interest on
the principal amount of the Note being repaid.
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| 4.5 |
Mandatory Prepayments .
On the Maturity Date, upon a Change of Control or upon the
occurrence and during the continuation beyond all applicable grace
or cure periods of an Event of Default (as hereinafter defined),
the Company shall (a) prepay all of the Note s
for an amount equal to the then outstanding principal balance plus
all accrued but unpaid interest thereon, and (b) pay
in
full all of the other obligations owing to Agent and Purchaser
under or in connection with this Agreement, which amount shall be
calculated on the date of prepayment and be payable in cash on
demand in immediately available funds on such date.
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COVENANTS
5.1
Financial Statements .
The Company shall deliver to Agent as
soon as available and in any event within fifteen (15) calendar
days after the end of each calendar month, unaudited consolidated
financial statements of the Company consisting of a balance sheet
and statements of income, retained earnings and cash flows and
owners’ equity as of the end of such calendar month, all
certified on behalf of the Company by an authorized officer as
being complete and correct and fairly presenting, in accordance
with GAAP, the financial position and the results of operations of
the Company, subject to normal year-end adjustments and the absence
of footnote disclosure.
5.2
Inspection of Property .
The Company and each of its Subsidiaries shall permit any
representatives designated by any Qualified Holder, upon reasonable
notice and during normal business hours and at such other times as
any such holder may reasonably request, to (i) visit and
inspect any of the properties of the Company or any of its
Subsidiaries and (ii) examine the corporate and financial
records of the Company and its Subsidiaries and make copies thereof
or extracts therefrom;
provided ,
however ,
so long as no Event of Default has occurred and is continuing, the
Company shall only be responsible for payment of the expenses and
costs of one such visit, inspection and examination per
year.
5.3
[Intentionally Omitted
] .
5.4
Note Restrictive Covenants .
So long as all or any portion of the Note remains outstanding, the
Company shall not:
(i)
create,
incur, assume or suffer to exist, or permit any Significant
Subsidiary to create, incur, assume or suffer to exist, any
Indebtedness other than Permitted Indebtedness;
(ii)
sell,
lease or otherwise dispose of, or permit any of its
Significant Subsidiaries to sell, lease or otherwise dispose
of, in any way, any Collateral;
(iii)
permit
any Liens on any Collateral other than Liens in favor of
Purchaser and Permitted Liens;
(iv)
change
or alter the use of the Collateral or permit the Collateral to
waste or permit any Collateral or portion thereof to be leased
or to assign or permit the assignment of any of the
Company’s or any Significant Subsidiary’s right,
title or interest in and to any rents or profits arising,
directly or indirectly, from the Collateral;
(v)
directly
or indirectly declare or pay any Dividends by the Significant
Subsidiaries;
(vi)
directly
or indirectly make, or permit the Company to directly or
indirectly redeem, purchase or make, or permit any of its
Significant Subsidiaries to redeem, purchase or make, any
payments with respect to any stock appreciation rights,
phantom stock plans or similar rights or plans or set aside
funds for any of the foregoing;
(vii)
make
any loans or advances to, or Guarantees for the benefit of,
any Person, except for (i) reasonable advances to
employees and reasonable extensions of credit to suppliers and
other trade creditors, in each case only in the ordinary
course of business and consistent with past practices,
(ii) Permitted Indebtedness, (iii) Investments
having a stated maturity no greater than one year from the
date the Company makes such Investment in (1) obligations
of the United States government or any agency thereof or
obligations guaranteed by the United States government,
(2) certificates of deposit of commercial banks having
combined capital and surplus of at least $50 million,
(3) commercial paper with a rating of at least
“Prime-1” by Moody’s Investors Service,
Inc., (4) U.S. Treasury Bills subject to repurchase
agreements, (5) short-term obligations issued by or
guaranteed by the U.S. Government or an agency thereof,
(6) investments in open-end diversified investment
Company of recognized financial standing investing solely in
short-term money market instruments consisting of securities
issued or guaranteed by the U.S. Government or its agencies or
instrumentalities, time deposits and certificates of deposit
issued by domestic banks or London branches of domestic banks,
bankers’ acceptances, repurchase agreements, high grade
commercial paper and the like, or (7) accounts, chattel
paper and notes receivable created by the Company in the
ordinary course of business;
(viii)
merge
or consolidate with any Person, permit any of its Significant
Subsidiaries to merge or consolidate with any Person, except
that any Wholly-Owned Subsidiary may be merged or consolidated
with or into the Company or another Wholly-Owned Subsidiary;
or acquire, or permit any of its Significant Subsidiaries to
acquire, all or any substantial part of the assets or
properties of any Person; or otherwise alter, or permit any of
its Significant Subsidiaries to alter, its legal
status;
(ix)
liquidate,
dissolve or effect a recapitalization or reorganization in any
form of transaction (including, without limitation, any
reorganization after which the Company becomes a Subsidiary of
another Person);
(x)
enter
into, become subject to, amend, modify or waive any agreement
or instrument which by its terms would (under any
circumstances) restrict (i) the repayment of any
Indebtedness evidenced by the Note or (ii) the
Company’s or any Significant Subsidiary’s right to
perform the provisions of any of the Transaction
Documents or the Securities;
(xi)
change
its fiscal year;
(xii)
prepay
any principal or interest on any Indebtedness other than the
Indebtedness evidenced by the Notes.
(xiii)
issue
or sell any membership interests or other equity interests, or
rights to acquire shares of the capital stock or other equity
interests, of any of its Significant Subsidiaries to any
Person other than the Company or a Wholly-Owned
Subsidiary;
(xiv)
make
any amendment to its Articles or Certificate of Incorporation,
or bylaws, as applicable, which violate or breach any of the
provisions thereof.
5.5
Affirmative Covenants .
The Company shall, and the Company shall cause each of its
Significant Subsidiaries to:
a)
Preservation of Existence, etc .
Cause to be done all things reasonably necessary to maintain,
preserve and renew its corporate or limited liability company
existence, rights, franchises, privileges and qualifications and
all material licenses, authorizations and permits necessary to the
conduct of its businesses, except that any Wholly-Owned Subsidiary
may be merged or consolidated with or liquidated into the Company
or another Wholly-Owned Subsidiary.
b)
-
Maintenance of Properties .
Maintain and keep its material properties, including without
limitation all Collateral, in good repair, working order and
condition (ordinary wear, tear and obsolescence excepted), and from
time to time make all necessary or desirable repairs, renewals and
replacements, so that its businesses may be properly and
advantageously conducted in all material respects at all
times.
c)
-
Payment of Taxes .
Pay and discharge when payable all taxes, assessments and
governmental charges imposed upon its properties or upon it or its
income or profits (in each case before the same becomes delinquent
and before penalties accrue thereon) and all material claims for
labor, materials or supplies which if unpaid would by law become a
Lien upon any of its property, unless and to the extent that the
same are being contested in good faith and by appropriate
proceedings and adequate reserves (as determined in accordance with
GAAP consistently applied) have been established on its books with
respect thereto and such contest acts to suspend collection of
same.
d)
-
Compliance with Obligations .
Comply with all other material obligations which it incurs pursuant
to any contract or agreement, whether oral or written, express or
implied, as such obligations become due, unless and to the extent
that the same are being contested in good faith and by appropriate
proceedings and adequate reserves (as determined in accordance with
GAAP consistently applied) have been established on its books with
respect thereto or except to the extent that such failure to comply
could not reasonably be expected to result in a Material Adverse
Effect.
e)
Compliance with Laws; Permits .
Comply with all applicable laws, rules and regulations of all
Governmental Authorities, including, without limitation,
maintaining and preserving in full force and effect all Permits,
the violation of which would reasonably be expected to have a
Material Adverse Effect.
f)
-
Environmental Matters .
Comply in all material respects with all Environmental Laws and all
permits, licenses or other authorizations issued thereunder;
respond immediately to any unlawful Release or threatened Release
of any Hazardous Material, substance or waste in a manner which
complies in all material respects with all applicable Environmental
Laws and reasonably mitigates any risk to human health or the
environment: and provide such documents or information, or conduct
at its own cost such studies or assessments, relating to matters
arising under the Environmental Laws as any Purchaser may
reasonably request.
g)
-
Maintenance of Insurance: Payment of Proceeds
.
Apply for and continue in force with good and responsible insurance
Company adequate insurance covering risks of such types and
covering casualties, risks and contingencies of such types and in
such amounts as are customary for prudent corporations of similar
size engaged in similar lines of busin
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