BIOGOLD FUELS CORPORATION SENIOR SECURED NOTE PURCHASE AGREEMENT

 

 

 

This Senior Secured Note Purchase Agreement (the “Agreement”) is made as of the 3^rd day of March, 2008, by and between BioGold Fuels Corporation, a Nevada corporation (the “Company”), and Heritage Holding Group, LLC, a California limited liability company (the “Purchaser”).

 

 

The Company desires to issue and sell, and the Purchaser desires to purchase (i) a senior secured promissory note in substantially the form attached as Exhibit A (the “Note” or “Securities”). Any capitalized term not defined herein shall have the meaning ascribed to it in the Note, or the Security Agreement (taken together, the “Ancillary Agreements”). This Agreement and the Ancillary Agreements shall be referred to collectively as the “Transaction Documents”.

 

 

In consideration of the mutual promises contained herein and other good and valuable consideration, receipt of which is hereby acknowledged, the parties to this Agreement agree as follows:

 

1. Purchase and Sale of Note.

 

(a) Sale and Issuance of Note. Subject to the terms and conditions of this Agreement, the Purchaser agrees to purchase at the Closing (as defined below) and the Company agrees to sell and issue to the Purchaser the Note in the principal amount of $550,000.

 

(b) Closing; Delivery.

 

(i) The purchase and sale of the Note shall take place at the offices of BioGold Fuels Corporation, 1800 Century Park E, Suite 600, Los Angeles, CA 90067, on March 3, 2008, or at such other time and place as the Company and the Purchaser mutually agree upon, orally or in writing, in three separate Closings (which time and place are designated as the “Closing”).

 

(ii) Subject to the satisfactory completion of the Closing Conditions at each Closing, the Company shall deliver to Purchaser the executed Note along with signed copies of the Ancillary Agreements against (1) payment of the Purchase Price in three separate installations (as defined herein) as applicable to the specific Closing, therefor by check payable to the Company or by wire transfer to a bank designated by the Company, and (2) delivery of counterpart signature pages to this Agreement and the Ancillary Agreements.

 

(iii) The total aggregate “Purchase Price” shall equal $550,000 minus the Loan Arrangement Fee. The “Loan Arrangement Fee” shall equal 10% of the Principal amount of the Note funded ($50,000 for Aggregate Purchase Price). The parties hereto agree that the “Loan Arrangement Fee” has been fully earned by Purchaser and is non-refundable. Purchaser, in its sole discretion, may off-set the Loan Arrangement Fee from any amounts provided under the Note. The Purchase Price shall be delivered in three separate installation in accordance with the terms and conditions contained herein and in the following amounts: (x) the “First Closing Amount” shall equal $110,000 minus the Loan Arrangement Fee of 10% of the Principal amount of the Note funded ($10,000 for First Closing Amount”); (y) the “Second Closing Amount” shall equal $165,000 minus the Loan Arrangement Fee of 10% of the Principal amount of the Note funded ($15,000 for Second Closing Amount”); (z) and the “Third Closing Amount” shall equal $275,000 minus the Loan Arrangement Fee of 10% of the Principal amount of the Note funded ($25,000 for Third Closing Amount”).

 

2. Security Interest. The indebtedness represented by the Note shall be secured by Collateral of the Company in accordance with the provisions of a Security Agreement between the Company and the Purchaser in the form attached to this Agreement as Exhibit B (the “Security Agreement”).

 

3. Representations and Warranties of the Company. The Company hereby represents and warrants to each Purchaser that:

 

(a) Organization, Good Standing and Qualification. The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Nevada and has all requisite corporate power and authority to carry on its business as now conducted and as proposed to be conducted (the “Business”). The Company is duly qualified to transact business and is in good standing in each jurisdiction in which the failure so to qualify would have a material adverse effect on its Business or properties.

 

(b) Authorization. All corporate action required on the part of the Company, its officers, directors and stockholders necessary for the authorization, execution and delivery of this Agreement and the Ancillary Agreements and the authorization, sale, issuance and delivery of the Note, and the performance of all obligations of the Company hereunder and under the Ancillary Agreements has been taken or will be taken prior to the Closing. All corporate action required to authorize the issuance of the Securities will be taken prior to the issuance thereof. The Agreement, and each of the Ancillary Agreements, when executed and delivered by the Company, shall constitute valid and legally binding obligations of the Company, enforceable against the Company in accordance with their respective terms except as limited by applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance, and other laws of general application affecting enforcement of creditors’ rights generally, and as limited by laws relating to the availability of specific performance, injunctive relief, or other equitable remedies.

 

 

(c) Issuance of the Securities. The Securities are duly authorized and, when issued and paid for in accordance with the Transaction Documents, will be duly and validly issued, fully paid and nonassessable, free and clear of all liens.

 

(d) Litigation. Except as set forth on Schedule 3.(d), attached hereto, there is no claim, action, suit, proceeding, arbitration, complaint, charge or investigation pending with respect to which the Company has been notified or is aware, to the Company’s knowledge, currently threatened against the Company that, if successful, would reasonably be expected to have, either individually or in the aggregate, a material adverse effect on its Business or properties, or any change in the current equity ownership of the Company, nor is the Company aware that there is any basis for the foregoing.

 

(e) SEC Reports; Financial Statements. To the best of its knowledge, the Company has filed all material reports required to be filed by it under the Securities Act and the Exchange Act for the two years preceding (collectively, the “SEC Reports”) on a timely basis. As of their respective dates, to the Company’s knowledge, the SEC Reports complied in all material respects with the requirements of the Securities Act and the Exchange Act and the rules and regulations of the Commission promulgated thereunder, and none of the SEC Reports, when filed, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading.

 

4. Representations and Warranties of the Purchaser. The Purchaser hereby represents and warrants to the Company that:

 

(a) Authorization. The Purchaser has full power and authority to enter into this Agreement. This Agreement, when executed and delivered by the Purchaser, will constitute a valid and legally binding obligation of the Purchaser, enforceable in accordance with its terms, except as limited by applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance, and any other laws of general application affecting enforcement of creditors’ rights generally, and as limited by laws relating to the availability of a specific performance, injunctive relief, or other equitable remedies.

 

(b) Purchase Entirely for Own Account. This Agreement is made with the Purchaser in reliance upon the Purchaser’s representation to the Company, which by the Purchaser’s execution of this Agreement, the Purchaser hereby confirms, that the Securities to be acquired by the Purchaser will be acquired for investment for the Purchaser’s own account, not as a nominee or agent, and not with a view to the resale or distribution of any part thereof, and that the Purchaser has no present intention of selling, granting any participation in, or otherwise distributing the same. By executing this Agreement, the Purchaser further represents that the Purchaser does not presently have any contract, undertaking, agreement or arrangement with any person to sell, transfer or grant participations to such person or to any third person, with respect to any of the Securities.

 

(c) Knowledge. The Purchaser is aware of the Company’s business affairs and financial condition and has acquired sufficient information about the Company to reach an informed and knowledgeable decision to acquire the Securities. The Purchaser has had the opportunity to request and review any business materials, marketing documentation, financial statements, corporate books and records, and accounting records that it deems necessary to acquire sufficient information about the Company to be knowledgeable about the Securities and the Company.

 

(d) Restricted Securities. The Purchaser understands that the Securities have not been, and will not be, registered under the Securities Act of 1933, as amended (the “Securities Act”), by reason of a specific exemption from the registration provisions of the Securities Act which depends upon, among other things, the bona fide nature of the investment intent and the accuracy of the Purchaser’s representations as expressed herein. The Purchaser understands that the Securities are “restricted securities” under applicable U.S. federal and state securities laws and that, pursuant to these laws, the Purchaser must hold the Securities indefinitely unless they are registered with the Securities and Exchange Commission and qualified by state authorities, or an exemption from such registration and qualification requirements is available. The Purchaser acknowledges that the Company has no obligation to register or qualify the Securities for resale. The Purchaser further acknowledges that if an exemption from registration or qualification is available, it may be conditioned on various requirements including, but not limited to, the time and manner of sale, the holding period for the Securities, and on requirements relating to the Company which are outside of the Purchaser’s control, and which the Company is under no obligation and may not be able to satisfy.  

 

(e) Legends. The Purchaser understands that the Securities may bear one or all of the following legends:

 

(i) “THE SECURITIES REPRESENTED BY THIS CERTIFICATE OR INSTRUMENT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AND HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. NO SUCH SALE OR DISTRIBUTION MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL IN A FORM SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933.”

 

(ii) Any other legend required by the Blue Sky laws of any state to the extent such laws are applicable to the shares represented by the certificate so legended.

 

(f) Accredited Investor. The Purchaser is an accredited investor as defined in Rule 501(a) of Regulation D promulgated under the Securities Act.

 

 

(a) Representations and Warranties. The representations and warranties of the Company contained in Section 3 shall be true on and as of the Closing with the same effect as though such representations and warranties had been made on and as of the date of the Closing.

 

(b) Qualifications. All authorizations, approvals or permits, if any, of any governmental authority or regulatory body of the United States or of any state that are required in connection with the lawful issuance and sale of the Notes pursuant to this Agreement shall be obtained and effective as of the Closing.

 

(c) Security Agreement. The Company and the Purchaser shall have executed the Security Agreement.

 

(d)  Conditions of the Purchasers’ Obligations to fund First Closing Amount. The Company shall have successfully completed certain mutually agreeable milestones on or before March 3, 2008.

 

(e)  Conditions of the Purchasers’ Obligations to fund Second Closing Amount. The Company shall have successfully completed certain mutually agreeable milestones on or before March 18, 2008.

 

(f)  Conditions of the Purchasers’ Obligations to fund Third Closing Amount. The Company shall have successfully completed certain mutually agreeable milestones on or before April 1, 2008.

 

6. Conditions of the Company’s Obligations at Closing. The obligations of the Company to each Purchaser under this Agreement are subject to the fulfillment, on or before the Closing, of each of the following conditions, unless otherwise waived:

 

(a) Representations and Warranties. The representations and warranties of the Purchaser contained in Section 4 shall be true on and as of the Closing with the same effect as though such representations and warranties had been made on and as of the Closing.

 

(b) Qualifications. All authorizations, approvals or permits, if any, of any governmental authority or regulatory body of the United States or of any state that are required in connection with the lawful issuance and sale of the Note and Warrant pursuant to this Agreement shall be obtained and effective as of the Closing.

 

(c) Ancillary Agreements. The Company and the Purchaser, and the other parties thereto, if any, shall have executed all of the Ancillary Agreements.

7. Additional Agreements

 

(a) Indemnification of Purchaser. The Company hereby indemnifies and holds the Purchaser and its managers, members, affiliates and agents (each, a “Purchaser Party”) harmless from any and all losses, liabilities, obligations, claims, contingencies, damages, costs and expenses, including all judgments, amounts paid in settlements, court costs and reasonable attorneys’ fees and costs of investigation (collectively, “Losses”) that any such Purchaser Party may suffer or incur as a result of or relating to (a) any misrepresentation, breach or inaccuracy, or any allegation by a third party that, if true, would constitute a breach or inaccuracy, of any of the representations, warranties, covenants or agreements made by the Company in this Agreement or in the other Transaction Documents; or (b) any cause of action, suit or claim brought or made against such Purchaser Party and solely arising out of or solely resulting from the execution, delivery, performance or enforcement of this Agreement or any of the other Transaction Documents. Notwithstanding the above, the Company shall not be liable in any such case for any loss, liability, obligation, claim, contingency, damage, cost or expense to the extent that it arises out of or is based written information furnished, or any other act or omission, by any such Purchaser Party. The Company will reimburse such Purchaser for its reasonable legal and other expenses incurred in connection therewith, as such expenses are incurred. The Purchaser Party may not, without the prior written consent of the Company, agree to any settlement of any claim or action with respect to which the Company is required to indemnify the Purchaser Party pursuant to this Section 7(a). The obligations of the Company under this Section 7(a) shall survive the payment and performance of the Company’s obligations under the Transaction Documents.

 

(b) Non-Public Information. The Company covenants and agrees that neither it nor any other Person acting on its behalf will provide any Purchaser or its agents or counsel with any information that the Company believes constitutes material non-public information, unless prior thereto such Purchaser shall have executed a written agreement regarding the confidentiality and use of such information. The Company understands and confirms that each Purchaser shall be relying on the foregoing representations in effecting transactions in securities of the Company.

 

(c) Release. The Company, its subsidiaries, officers, directors, managers, employees, shareholders, creditors, agents, heirs, representatives and any permitted successors, and assigns (each a “Company Releasing Party”) hereby fully, finally, completely, and forever releases, discharges, acquits, and relinquishes the Purchaser, its managers, members and agents and the affiliates of each of the foregoing(the “Purchaser Released Parties”) from and against all loss, cost, damage, claim, liability, or expense, including reasonable attorneys’ fees and costs , in any way arising from or related to the sale and issuance of the Note and Warrant and the entering into by the parties of the remaining Ancillary Agreements. The Company (for and on behalf of each Company Releasing Party) hereby agrees (a) not to file any lawsuit or pursue any other action with respect to any of the foregoing matters and (b) to indemnify and hold harmless, jointly and severally, any and all of the Company Released Parties from any and all injuries, harm, damages, costs, losses, expenses and/or liability, including reasonable attorneys’ fees and court costs, as incurred and when incurred as a result of the filing of any such lawsuit or the pursuit of any other action with respect to any of the foregoing matters. The agreement and obligations of the Company under this Section 7(c) shall survive the payment and performance of the Company’s obligations under the Transaction Documents.

 

 

8. Miscellaneous.

 

(a) Assignment; Successors and Assigns. The terms and conditions of this Agreement shall inure to the benefit of and be binding upon the respective successors and assigns of the parties. Nothing in this Agreement, express or implied, is intended to confer upon any party other than the parties hereto or their respective successors and assigns any rights, remedies, obligations, or liabilities under or by reason of this Agreement, except as expressly provided in this Agreement.

 

(b) [reserved]

 

(c) Governing Law. This Agreement and all acts and transactions pursuant hereto and the rights and obligations of the parties hereto shall be governed, construed and interpreted in accordance with the laws of the State of California, without giving effect to principles of conflicts of law.

 

(d) Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original and all of which together shall constitute one instrument.

 

(e) Titles and Subtitles. The titles and subtitles used in this Agreement are used for convenience only and are not to be considered in construing or interpreting this Agreement.

 

(f) Notices. Any notice required or permitted by this Agreement shall be in writing and shall be deemed sufficient upon receipt, when delivered personally or by courier, overnight delivery service or confirmed facsimile, or 48 hours after being deposited in the U.S. mail as certified or registered mail with postage prepaid, if such notice is addressed to the party to be notified at such party’s address or facsimile number as set forth below or as subsequently modified by written notice.

 

(g) Finder’s Fee. Each party represents that it neither is nor will be obligated for any finder’s fee or commission in connection with this transaction. Each Purchaser agrees to indemnify and to hold harmless the Company from any liability for any commission or compensation in the nature of a finder’s fee (and the costs and expenses of defending against such liability or asserted liability) for which each Purchaser or any of its officers, employees, or representatives is responsible. The Company agrees to indemnify and hold harmless each Purchaser from any liability for any commission or compensation in the nature of a finder’s fee (and the costs and expenses of defending against such liability or asserted liability) for which the Company or any of its officers, employees or representatives is responsible.

 

(h) Amendments and Waivers. Any term of this Agreement may only be amended or waived with the written consent of the Company and the holders of at least a majority in interest of the Notes. Any amendment or waiver effected in accordance with this Section 8(h) shall be binding upon each Purchaser and each transferee of the Securities, each future holder of all such Securities, and the Company.

 

 

(i) Severability. If one or more provisions of this Agreement are held to be unenforceable under applicable law, the parties agree to renegotiate such provision in good faith, in order to maintain the economic position enjoyed by each party as close as possible to that under the provision rendered unenforceable. In the event that the parties cannot reach a mutually agreeable and enforceable replacement for such provision, then (i) such provision shall be excluded from this Agreement, (ii) the balance of the Agreement shall be interpreted as if such provision were so excluded and (iii) the balance of the Agreement shall be enforceable in accordance with its terms.

 

(j) Entire Agreement. This Agreement, and the documents and agreements referred to herein constitute the entire agreement between the parties hereto pertaining to the subject matter hereof, and any and all other written or oral agreements existing between the parties hereto are expressly canceled.

 

[Signature Pages Follow]

    The parties have executed this Senior Secured Note Purchase Agreement as of the date first written above.

 

 

BIOGOLD FUELS CORPORATION

 

By:                         

 

Name:                                 

 

Title:                             

Address: 1800 Century Park East, Suite 600

Los Angeles, CA 90067

 

 

HERITAGE HOLDING GROUP, LLC

 

 

By: _______________________________

Name:                       

Title:                           

 

Address:                 

 

 

Exhibit A- Form of Senior Secured Promissory Note

 

Exhibit B- Form of Security Agreement