NOTE PURCHASE AGREEMENTNote Purchase Agreement |
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SMF ENERGY CORP | H & W Petroleum Company | PHILADELPHIA BROKERAGE CORPORATION | SMF Energy Corporation | SMF Services Inc. RealDealDocs™ contains millions of easily searchable legal documents and clauses from top law firms. Search for free - click here. |
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NOTE PURCHASE AGREEMENT
THIS
NOTE PURCHASE AGREEMENT
(this
“
Agreement ”)
is made and entered into as of the ___
day of July, 2007, between SMF Energy Corporation, a Delaware
corporation (the “
Company ”),
and
the
investors listed on
Attachment A hereto
(each, a “
Purchaser ”
and collectively, the “
Purchasers ”
and, together with the Company, the “
Parties ”)
and
is delivered and executed in connection with the Company’s
sale of Notes (as defined below).
This
Agreement sets forth the terms and conditions under which each
Purchaser will purchase such number of Notes as set forth
opposite such Purchaser’s name on
Attachment A (the
“
Transaction ”).
The minimum purchase per investor is $75,000.
1.
DESCRIPTION OF NOTES.
(a)
Each
Note is an 11½% Senior Secured Convertible Promissory
Note of the Company due December 31, 2009 to be issued in the
form attached as
Attachment B hereto
(the “
Note ”),
that will be collateralized by a first priority security interest
on the Company’s collateral as described below (the
“
Collateral ”).
The Collateral is listed on
Attachment C hereto
and consists of the following:
(i)
all
of H & W Petroleum Company’s (“
H & W ”)
right, title and interest in and to (A) the vehicles that are
listed on
Attachment C hereto
and shown on
Attachment C as
owned by H & W, including future additions, parts, accessories,
attachments, substitutions, repairs, related intangibles and
improvements and replacements to or of any listed vehicle, and (B)
the equipmen t
listed on
Attachment C hereto
and shown on
Attachment C as
owned by H & W, including future additions, parts, accessories,
attachments, substitutions, repairs, related intangibles and
improvements and replacements to or of any such
equipment;
(ii)
all
of the right, title and interest of SMF Services Inc.
(“SSI”) in and to (A) the vehicles listed
on
Attachment C hereto
and shown on
Attachment C as
owned by SSI, including future additions, parts, accessories,
attachments, substitutions, repairs, related intangibles and
improvements and replacements to or of any listed vehicle, (B) the
equipment listed on
Attachment C hereto
and shown on
Attachment C as
owned by SSI, including future additions, parts, accessories,
attachments, substitutions, repairs, related intangibles and
improvements and replacements to or of any such equipment, (C) the
intangible assets listed on
Attachment C hereto
and shown on
Attachment C as
owned by SSI;
(iii)
all
of the Company’s right, title and interest in and to (A)
the vehicles listed on
Attachment C hereto
and shown on
Attachment C as
owned by the Company, including future additions, parts,
accessories, attachments, substitutions, repairs, improvements and
replacements to or of any vehicle, and any proceeds from the sale,
assignment, or other transfer of one or more vehicles, including,
without limitation, proceeds of insurance and (B) certain patents
listed on
Attachment C and
shown on
Attachment C as
owned by the Company; and
(iv)
approximately
$1,141,000 in cash proceeds from prior sales of vehicles and
equipment currently being held in an interest bearing account
by American National Bank in Denver, Colorado, that will be
applied to the purchase of replacement equipment and vehicles
by H& W, SSI and the Company, which newly acquired
vehicles and equipment will thereafter be
Collateral.
(b)
Except
with respect to the Collateral, each Purchaser acknowledges
that the payment of principal and interest on the Notes will
be subordinated (i) to the rights and interests of Wachovia
Bank, National Association, successor by merger to Congress
Financial Corporation (Florida) (“
Wachovia ”)
pursuant to and in connection with, and the payment of all existing
and future amounts owed by the Company to Wachovia under the Loan
and Security Agreement by and between Wachovia and the Company
dated September 26, 2002, as amended (the “
Loan Agreement ”)
and (ii) to any other credit facility into which the Company may
subsequently enter to replace the Loan Agreement requiring that the
lender rank in a senior position to other debt of the Company (the
“
Replacement Facility ”
and, together with the Loan Agreement, the “
Permitted Debt ”).
The Purchasers and the Company acknowledge that the Note will be
expressly subject to the terms and conditions of that certain
Subordination Agreement dated July 13, 2007, by and among Wachovia,
the Company and certain other parties as if Purchaser were a
subordinating party thereto. Upon request, each Purchaser will
execute and deliver such other documents and instruments as
Wachovia or any current or subsequent commercial lender may
reasonably request to acknowledge and effect the foregoing
subordination.
2.
OFFER.
(a)
Each
Purchaser, by signing this Agreement, offers to
purchase such
number of Notes, and for the aggregate purchase price, as set
forth opposite such Purchaser’s name on
Attachment A (each
such purchase price, an “
Investment Amount ”
and collectively the “
Investment Amounts ”).
(b)
The
Company shall have the right, in its sole and absolute
discretion, to reject or accept any Purchaser’s offer to
purchase the Notes pursuant to this Agreement. If the Company
accepts Purchaser’s offer, the Company shall execute
this Agreement and return a copy of the Agreement and issue an
original Note to Purchaser. If the Company rejects
Purchaser’s offer, the Company shall return to Purchaser
this Agreement, together with any payment made by Purchaser to
the Company and interest earned on such payment.
3.
CLOSING. The
actual purchase and sale of all Notes (the “
Closing ”)
shall then take place on or at such time (the “
Closing Date ”)
and place as the Company and the Purchasers mutually agree, orally
or in writing. Purchasers must tender the Investment Amounts on or
before the Closing Date in order to participate in the Transaction.
A Purchaser’s tender of the Investment Amounts shall not,
without more, constitute an agreement by the Purchasers to
close.
4.
RECEIPT OF DOCUMENTS. Purchaser
acknowledges receipt of a copy of: (a) this Agreement; (b) form of
the Note; (c) the Indenture between the Company and the indenture
trustee for the holders of the Notes (the “
Trustee ”),
dated of even date herewith (the “
Indenture ”);
(d) the Company’s Annual Report on Form 10-K for the year
ended June 30, 2006 (the “
10-K ”);
(e) the Company’s Quarterly Report on Form 10-Q for the
quarter ended March 31, 2007 (the “
10-Q ”);
(f) the Security Agreement by and between the Company and Trustee,
dated of even date herewith (the “
Security Agreement ”);
(g) the Company’s proxy statement for its December 8, 2006
shareholders meeting (the “
Proxy ”);
and (h) the Company’s Confidential Private Placement
Memorandum dated July 13, 2007 (the “
PPM ”)
(collectively, the “
Documents ”).
The 10-K and 10-Q and the Proxy were furnished as Exhibits A and B,
respectively, to the PPM. Capitalized terms not defined herein
shall have the meaning given to them in the PPM.
-2-
5.
USE OF PROCEEDS; NO REFUNDS. The
Investment Amounts shall be used by the Company to redeem the
remainder of the Company’s previously issued Senior Secured
Notes, which were originally issued on August 29, 2003, January 25,
2005 and September 1, 2005, including payment of outstanding
principal, interest and prepayment penalties, if any, and pay the
costs of the transaction. Upon execution and delivery of this
Agreement by the Company to each Purchaser, the Investment Amounts
shall not, under any circumstances, be refunded to such
Purchaser.
6.
ADDITIONAL DEBT. The
Company agrees that, after the Closing, it shall not issue any new
or replacement debt, except for Permitted Debt, which ranks senior
in any respect to the Notes, without the prior written approval of
the holders of a majority of the principal amount of the Notes.
Nothing herein shall be deemed to impair or prevent the Company
from incurring additional debt after the Closing, provided,
however, that all such future debt must be expressly subordinated
to the Permitted Debt.
7.
CONDITIONS PRECEDENT. Notwithstanding
anything to the contrary contained in this Agreement, the
obligations of the Company to close the Transaction shall be
contingent upon the following:
(a)
the
Company and each Purchaser executing this
Agreement;
(b)
the
Minimum Offering Amount being tendered by the Termination Date
of July 20, 2007;
(c)
each
Purchaser completing, to the Purchaser’s satisfaction,
all business, legal, and accounting due diligence regarding
the Company and the Offering; and
(d)
the
consent of Wachovia to the Offering and the issuance of the
Notes.
8.
COMPANY’S RIGHT TO CANCEL. The
Company, in its sole discretion, may cancel this Agreement with
respect to any or all Purchasers at
any time prior to the Closing Date by delivery of written notice of
cancellation to the affected Purchaser(s) and return of the
Investment Amounts with accrued interest to all affected
Purchasers.
9.
BOUND BY INDENTURE AND SECURITY AGREEMENT.
By
delivering a counterpart signature page to this Agreement,
Purchaser agrees that it shall be bound by the terms and conditions
of the Indenture and the Security Agreement.
-3-
10.
REGISTRATION OF SHARES. The
Company agrees to use reasonable commercial efforts to cause a
registration statement on Form S-3 or similar form (“
Registration Statement ”)
relating to the resale of the shares of common stock into which the
Notes are or may be convertible (the “
Shares ”)
to be filed with the Securities and Exchange Commission in
accordance with the Registration Rights Agreement attached hereto
as Attachment D, the terms of which are incorporated by reference
and made a part of this Agreement. Subject to the terms in
Attachment D, the Company further agrees to make all reasonable
commercial efforts to cause the Registration Statement to be filed
within 60 days following the Closing Date and to cause such
Registration Statement to become effective within 120 days of the
Closing Date.
11.
REPRESENTATIONS AND WARRANTIES OF PURCHASER.
Each
Purchaser represents and warrants to the Company as
follows:
(a)
Purchaser,
either alone or through Purchaser’s representative, as
that term is defined under Rule 501(h)
of
Regulation D
(“
Regulation D ”)
under the Securities Act ( the
“
Purchaser’s
Representative ”),
if any, has had an opportunity to ask questions of, and receive
answers from, duly designated representatives
of
the Company concerning the terms and conditions of this Agreement
and has been afforded an opportunity to examine such documents and
other information which Purchaser or Purchaser’s
Representative, if any, has requested for the purpose of answering
any question Purchaser or Purchaser’s Representative, if any,
may have concerning the business and affairs of the
Company.
(b)
Purchaser’s
principal residence or domicile is located in the State
or
other jurisdiction set forth opposite such Purchaser’s
name on
Attachment A .
Purchaser has received and reviewed this Agreement and the
Documents and acknowledges that the Company made available to
Purchaser and Purchaser’s Representative, if any, at a
reasonable time prior to the execution of this Agreement, the
opportunity to ask questions and receive answers concerning the
business and affairs of the Company and the terms and conditions of
the sale of the Notes
as
contemplated by this Agreement and to obtain any additional
information (which the Company possesses or can acquire without
unreasonable effort or expense) as may be necessary to verify the
accuracy of information furnished to Purchaser or Purchaser’s
Representative, if any. Purchaser (i)
is
able to bear the loss of its entire investment without any material
adverse effect on its economic stability, and (ii)
has,
alone or together with Purchaser’s Representative, such
knowledge and experience in financial and business matters that it
is capable of evaluating the merits and risks of the investment to
be made by Purchaser pursuant to this Agreement.
(c)
Purchaser
and Purchaser’s Representative, if any, understand that
the Notes are being offered and sold only to “accredited
investors” (as that term is defined under Rule 501(a) of
Regulation D), and Purchaser represents that Purchaser is an
accredited investor. Purchaser and Purchaser’s
Representative, if any, understand the Company is relying on
Purchaser with respect to the accuracy of this representation.
Purchaser has completed and returned a copy of
Attachment E ,
and Purchaser represents that the statements made therein are
complete and accurate.
(d)
Purchaser
and Purchaser’s Representative, if any, acknowledge that
they were encouraged by the Company to request all
additional information
which
might be material or important in order for Purchaser to make
an informed investment decision with respect to the purchase
of Notes.
-4-
(e)
The
Notes
are being purchased for investment purposes only for such
Purchaser’s own account and not with the view to, or for
resale in connection with, any distribution or public
offering. Purchaser and Purchaser’s Representative, if
any, understand that the Notes have not been registered under
the Securities Act or any state securities
laws
by reason of their contemplated issuance in transactions
exempt from the registration requirements of the
Securities
Act
and applicable state securities laws, and that the reliance of
the Company and others upon these exemptions is predicated in
part upon the representation by Purchaser.
(f)
Purchaser
and Purchaser’s Representative, if any, have carefully
read this Agreement, the Documents and the other information
furnished to Purchaser by the Company in connection with this
Agreement.
(g)
Purchaser
was not solicited to purchase the Notes by any means of
general solicitation, including, but not limited to, the
following: (i)
any
advertisement, article, notice or other communication
published in any newspaper, magazine, or similar media, or
broadcast over television or radio; or
(ii) any
meeting where attendees were invited by any general
solicitation or general advertising.
(h)
Purchaser
and Purchaser’s Representative, if any, are aware that
the placement agent for the Transaction, Philadelphia
Brokerage Corporation (the “Placement Agent”),
will receive as compensation for its efforts in advising the
Company with respect to the Transaction a cash commission
equal to 5.25%
of
the proceeds of the Offering.
(i)
Purchaser
and Purchaser’s Representative, if any, hereby
acknowledge that the Notes, including the Shares, are and will
be, when issued, “restricted securities,”
as
that term is defined in Rule 144 of the rules and regulations
promulgated under the Securities Act unless and until the
Company is successful in causing the Registration Statement to
become effective. Purchaser and Purchaser’s
Representative,
if any, are aware of the applicable limitations on the resale
of the Shares in the absence of a successful registration of
those securities, including but not limited to Rule 144. Rule
144 only permits sales of “restricted securities”
held for at least one year and in transactions which otherwise
comply with the requirements of such Rule. Purchaser and
Purchaser’s Representative, if any, also acknowledge
that (1) the trading market for the Shares on the Nasdaq Stock
Market is volatile, so that the trading volume and price of
Shares are subject to substantial and unpredictable variations
and (2) while the Company currently meets the public
information requirements of Rule 144, there is no guarantee
that it will do so at any time in the future.
(j)
Purchaser
and Purchaser’s Representative, if any, acknowledge and
warrant that, in making this investment decision, they have
made their own independent assessment of the merits and risks
of an investment in the Notes based on their examination and
evaluation of the Company, its business, operations, financial
condition, future prospects and the skills and qualifications
of its officers, directors and employees. Purchaser and
Purchaser’s Representative, if any, have consulted
Purchaser’s own attorney, business or tax advisors for
legal, business or tax advice concerning an investment in the
Notes and have not relied on the Company, the Placement Agent
or their respective agents or representatives.
-5-
(k)
Purchaser
and Purchaser’s Representative, if any, represent and
warrant that, except as set forth in this Agreement and in the
Documents, no representations or warranties have been made to
the Purchaser or Purchaser’s Representative, if any, by
the Company or any agent, employee, representative or
affiliate of the Company and that, in entering into this
transaction and subscribing for Notes, neither the Purchaser
nor the Purchaser’s Representative, if any, is relying
on any information other than that contained in this
Agreement, the Documents, and other written information
obtained from the Company in the course of the independent
investigation by Purchaser or Purchaser’s
Representative, if any.
(l)
Purchaser
and Purchaser’s Representative, if any, acknowledge that
an investment in the Company involves substantial risks,
including, without limitation, those described in the
Documents, including but not limited to the PPM, the 10-K and
the 10-Q.
12.
INDEMNIFICATION BY PURCHASER. Purchaser
agrees that it shall indemnify and hold harmless the Company and
its officers, directors, employees, agents and professional
advisors from and against any and all loss, damage, liability, or
expense, including costs and reasonable attorneys’ fees, that
any one or more of the foregoing may incur by reason of, or in
connection with, any (i) misrepresentation, inaccurate statement or
material omission or (ii) breach of any warranties or failure to
fulfill any covenants, agreements or obligations, by Purchaser or
Purchaser’s Representative, if any, in this
Agreement.
13.
AUTHORIZATION. To
the extent reasonably required by the Company to satisfy any
applicable law or regulation, including without limitation the
PATRIOT Act, Purchaser hereby authorizes (i) the Company and its
officers, employees and agents to investigate Purchaser’s
personal and business background including, without limitation,
communication with any employer, former employer, business
associate, government agency, bank or other credit reference,
provided that the Company agrees to use any such information only
to the extent required to comply with applicable law or regulation,
and otherwise maintains the confidentiality of any such information
not generally available to the public with at least the same care
as the Company's own proprietary and confidential information, and
causes each of its officers, employees and agents to do the same,
and (ii) authorizes any person, organization or entity that may
have any knowledge or information concerning Purchaser’s
personal or business background to provide such information to the
Company as the Company may reasonably request in connection with
the foregoing.
14.
NO BROKERS OR
FINDERS
. Other
than the Company’s obligation to compensate Philadelphia
Brokerage Corporation for its services as placement agent, no
person, firm or corporation has or will have, as a result of any
act or omission by such Purchaser, any right, interest or valid
claim against Purchaser or the Company for any commission, fee or
other compensation as a finder
or
broker, or in any similar capacity, in connection with the
transactions contemplated by this Agreement.
-6-
15.
MISCELLANEOUS
.
(a)
This
Agreement shall be governed by, and construed in accordance
with, the laws of the State of Delaware. The
Parties submit to the exclusive jurisdiction of the courts
located in Broward County, Florida, with respect to any
dispute arising under this Agreement and the transactions
contemplated hereby.
(b)
This
Agreement, the Note, the Indenture and the Security Agreement
contain the entire agreement between the Company and Purchaser
with regard to the subject matter hereof and may not be
modified or waived except in a writing signed by both the
Company and all parties to each such agreement ;
provided ,
however ,
that the Trustee shall not consent to any such amendment without
the prior consent of the holders of a majority of the principal
amount of the Notes.
(c)
The
headings of this Agreement are for convenience and reference
only, and shall not limit or otherwise affect the
interpretation of any term or provision hereof.
(d)
This
Agreement and the rights, powers, and duties set forth herein
shall, except as otherwise expressly provided, be binding upon
and inure to the benefit of, the heirs, executors,
administrators, legal representatives, successors, and assigns
of the Parties.
(e)
This
Agreement and the rights and obligations hereunder shall not
be assignable or transferable by the Purchaser or the Company
without the prior written consent of the other Parties, except
(i) in the case of the Company, by operation of law in
connection with a merger, consolidation or sale of
substantially all of its assets or (ii) in the case of a
Purchaser, (1) to any Affiliates (as defined below) of the
Purchaser or (2) to partners, members, beneficiaries or
other equity interest holders of the Purchaser;
provided ,
that in each case referred to in (1) and (2) above, the
third party transferee would have been eligible to be an original
purchaser of Notes pursuant to this Agreement and executes a
counterpart signature page hereto becoming a
“Purchaser” hereunder, subject to all of the rights and
obligations of this Agreement. Subject to the preceding sentence,
this Agreement shall be binding upon, inure to the benefit of and
be enforceable by the Parties and their respective successors and
assigns. “
Person ”
means an individual, corporation, partnership, association, trust
or other entity or organization, including a government or
political subdivision or agency or instrumentality thereof.
“
Affiliate ”
means, with respect to any Person, any other Person who, directly
or indirectly, owns or controls, is under common ownership or
control with, or is owned or controlled by, such
Person.
(f)
This
Agreement is for the sole benefit of the Parties and their
permitted assigns and nothing expressed or implied in this
Agreement shall give or be construed to give to any Person,
other than the Parties and such assigns, any legal or
equitable rights hereunder.
(g)
If
any legal action or any arbitration or other proceeding is
brought for the enforcement of this Agreement, or because of
an alleged dispute, breach, default, or misrepresentation in
connection with any of the provisions of this Agreement, the
successful or prevailing party or parties shall be entitled to
recover reasonable attorneys’ fees and other costs
incurred in that action or proceeding, in addition to any
other relief to which it may be entitled.
-7-
(h)
This
Agreement shall be construed in accordance with its intent and
without regard to any presumption or any other rule requiring
construction against the party causing the same to be
drafted.
(i)
If
any provision of this Agreement, or any portion of any
provision, shall be deemed invalid
or
unenforceable for any reason whatsoever, such invalidity
or unenforceability
shall
not affect the enforceability and validity of the remaining
provisions.
(j)
This
Agreement may be executed in two or more counterparts, each of
which shall be deemed to be an original but all of which taken
together shall constitute one agreement. Signatures to
this Agreement may be transmitted by facsimile and such
transmission shall be deemed to be an original.
[Signature
page follows.]
-8-
IN
WITNESS WHEREOF ,
the Parties have caused this Agreement to be executed by their
respective duly authorized officers or persons as of the date
first
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