SECURITIES
AND EXCHANGE COMMISSION
450
Fifth Street, N.W.
Washington,
D. C. 20549
FORM 10-SB
General
Form for Registration of Securities
Pursuant
to Section 12(b) or (g) of
the
Securities Exchange Act of 1934
(Exact
name of registrant as specific in its charter)
Nevada
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20-4590982
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(State
of Incorporation)
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(I.R.S.
Employer I.D. No.)
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31
Musick
Irvine,
California 92618
(Address
of principal executive offices, including zip code)
(949)
588-3767
(Registrant’s
telephone number, including area code)
Copies
to:
Scott
D. Olson, Esq.
251
High Drive
Laguna
Beach, California 92651
(310)
985-1034
Securities
to be registered pursuant to Section 12(b) of the Act:
None
(Title
of
Class)
Securities
to be registered pursuant to Section 12(g) of the Act:
Common
Stock, $0.001 par value per share
(Title
of
Class)
INFORMATION
REQUIRED IN REGISTRATION STATEMENT
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Page
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Part
I
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Item
1.
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Description
of Business
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3
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Item
2.
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Management's
Discussion and Analysis of Financial Condition and Results of
Operations
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11
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Item
3.
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Description
of Property
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19
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Item
4.
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Security
Ownership of Certain Beneficial Owners and
Management
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19
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Item
5.
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Directors,
Executive Officers, Promoters and Control Persons
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19
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Item
6.
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Executive
Compensation
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21
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Item
7.
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Certain
Relationships and Related Transactions
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22
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Item
8.
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Description
of Securities
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22
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Part
II
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Item
1.
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Market
Price of and Dividends on the Registrant's Common Equity and Related
Shareholder Matters
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23
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Item
2.
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Legal
Proceedings
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24
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Item
3.
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Changes
in and Disagreements with Accountants
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24
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Item
4.
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Recent
Sales of Unregistered Securities
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24
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Item
5.
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Indemnification
of Directors and Officers
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24
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Part
F/S
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Item
1.
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Financial
Statements
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F-1
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Part
III
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Item
1.
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Index
to Exhibits
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25
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Item
2.
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Description
of Exhibits
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25
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Signatures
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25
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Exhibits
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PART I
SPECIAL
NOTE REGARDING FORWARD-LOOKING STATEMENTS
Included
in this prospectus are "forward-looking" statements, as well as historical
information. Although we believe that the expectations reflected in these
forward-looking statements are reasonable, we cannot assure you that the
expectations reflected in these forward-looking statements will prove to be
correct. Our actual results could differ materially from those anticipated
in
forward-looking statements as a result of certain factors, including matters
described in the section titled "Risk Factors." Forward-looking statements
include those that use forward-looking terminology, such as the words
"anticipate," "believe," "estimate," "expect," "intend," "may," "project,"
"plan," "will," "shall," "should," and similar expressions, including when
used
in the negative. Although we believe that the expectations reflected in these
forward-looking statements are reasonable and achievable, these statements
involve risks and uncertainties and we cannot assure you that actual results
will be consistent with these forward-looking statements. Important factors
that
could cause our actual results, performance or achievements to differ from
these
forward-looking statements include the following:
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the
availability and adequacy of our cash flow to meet our
requirements,
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economic,
competitive, demographic, business and other conditions in our local
and
regional
markets,
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changes
or developments in laws, regulations or taxes in the ethanol or energy
industries,
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actions
taken or not taken by third-parties, including our suppliers and
competitors,
as
well as legislative, regulatory, judicial and other governmental
authorities,
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competition
in the ethanol industry,
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the
failure to obtain or loss of any license or
permit,
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changes
in our business and growth strategy (including our plant building
strategy
and
co-location strategy), capital improvements or development
plans,
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the
availability of additional capital to support capital improvements
and
development,
and
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other
factors discussed under the section entitled "Risk Factors" or elsewhere
in this
registration
statement.
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All
forward-looking statements attributable to us are expressly qualified in their
entirety by these and other factors. We undertake no obligation to update or
revise these forward-looking statements, whether to reflect events or
circumstances after the date initially filed or published, to reflect the
occurrence of unanticipated events or otherwise.
ITEM
I: DESCRIPTION OF BUSINESS
Company
History
BlueFire
Ethanol Fuels, Inc., a Nevada corporation (the “Company”), was initially
organized as Atlanta Technology Group, Inc., a Delaware corporation, on October
12, 1993. The Company was re-named Docplus.net Corporation on December 31,
1998,
and further re-named Sucre Agricultural Corp. and re-domiciled as a Nevada
corporation on March 6, 2006. Finally, on May 24, 2006, in anticipation of
the
reverse merger by which it would acquire BlueFire Ethanol, Inc. (“BlueFire”), a
privately held Nevada corporation organized on March 28, 2006, as described
below, the Company was re-named to its current name BlueFire Ethanol Fuels,
Inc.
On
June
27, 2006, the Company purchased all 10,000 shares of the issued and outstanding
common stock, par value $1.00, of BlueFire in exchange for 17,000,000 shares
of
the Company’s common stock, par value $0.001, pursuant to a Stock Purchase
Agreement and Plan of Reorganization (“Reverse Merger”). On June 21, 2006, prior
to and in anticipation of the Reverse Merger, Sucre Agricultural Corp. (“Sucre”)
sold 3,000,000 shares of its common stock to two related investors in a private
offering of shares pursuant to Rule 504 for proceeds of $1,000,000. Prior to
the
Reverse Merger, Sucre was not operational and considered a blank-check company,
therefore, all references to the Company’s business and financials throughout
this registration statement reflect the operations of BlueFire. BlueFire is
the
Company’s only wholly owned operating subsidiary.
The
Company’s shares of common stock began trading under the symbol “BFRE” on the
Pink Sheets of the National Quotation Bureau on July 11, 2006. On December
8,
2006, the closing price of the common stock was $3.05 per share.
Business
of Issuer
Principal
products or services and their markets
The
Company has licensed for use a patented process from Arkenol, Inc. (“Arkenol”)
which produces ethanol from cellulose (“Arkenol Technology”) for sale into the
transportation fuel market. The Company is the exclusive North America licensee
of the Arkenol Technology. The Company has also received, for future
consideration, certain ethanol plant related rights, assets, work-product,
intellectual property and other know-how on 19 ethanol project opportunities
from ARK Energy, Inc., which may be used by the Company to accelerate its
deployment of the Arkenol technology. The Company’s goal is to develop and
operate high-value carbohydrate-based transportation fuel plants to provide
a
viable alternative to fossil fuels. These "biorefineries" will convert widely
available, inexpensive, organic materials such as agricultural residues,
high-content biomass crops, wood residues, and cellulose in municipal solid
wastes into ethanol. This versatility enables the Company to consider a wide
variety of feedstocks and locations in which to develop facilities to become
a
low cost producer of ethanol.
With
Arkenol’s research and development work completed at pilot plants in Southern
California and Izumi, Japan in coordination with JGC Corp., a Japanese
corporation, patent protections in place, the product markets researched, and
plants currently in early stages of development, the Company is positioned
to
become a leader in the development, ownership and operation of cellulose to
ethanol biorefineries.
Arkenol
Technology
The
production of chemicals by fermenting various sugars is a well-accepted science.
Its use ranges from producing beverage alcohol and fuel-ethanol to making citric
acid and xantham gum for food uses. However, the high price of sugar and the
relatively low cost of competing petroleum based fuel has kept the production
of
chemicals mainly confined to producing ethanol from corn sugar.
Arkenol
has developed proprietary improvements to a well known conversion technology
known as concentrated acid hydrolysis such that the process is ready for
commercial implementation. These improvements, are: (i) efficient acid recovery
and reconcentration; (ii) high sugar concentration at high purity; (iii) the
ability to ferment C6 and C5 sugars efficiently with conventional microbes;
(iv)
the ability to handle silica in biomass feedstocks; and (v) all by-products
are
usable and marketable.
An
integrated, full-scale commercial process plant consists of six basic unit
operations: (i) Feedstock preparation; (ii) Decrystallization/Hydrolysis
Reaction Vessel; (iii) Solids/Liquid Filtration; (iv) Separation of the acid
and
sugars; (v) Fermentation of the sugars; and (vi) Product
purification.
Incoming
biomass feedstocks are cleaned and ground to reduce the particle size for the
process equipment. The pretreated material is then dried to a moisture content
consistent with the acid concentration requirements for decrystallization
(separation of the cellulose and hemicellulose from the lignin), then hydrolyzed
(degrading the chemical bonds of the cellulose) to produce hexose and pentose
sugars at the high concentrations necessary for commercial fermentation.
Insoluble materials, principally the lignin portion of the biomass input, are
separated from the hydrolyzate by filtering and pressing and further processed
into fuel or other beneficial uses. The remaining acid-sugar solution is
separated into its acid and sugar components by means of an Arkenol-developed
technology that uses commercially available ion exchange resins to separate
the
components without diluting the sugar. The separated sulfuric acid is
recirculated and reconcentrated to the level required by the decrystallization
and hydrolysis steps. The small quantity of acid left in the sugar solution
is
neutralized with lime to make hydrated gypsum, CaSO4 · 2H2O, an insoluble
precipitate which is readily separated from the sugar solution and which also
has beneficial use as an agricultural soil conditioner. At this point the
process has produced a clean stream of mixed sugars (both C6 and C5) for
fermentation. In an ethanol production plant, naturally-occurring yeast, which
Arkenol has been specifically cultured by a proprietary method to ferment the
mixed sugar stream, is mixed with nutrients and added to the sugar solution
where it efficiently converts both the C6 and C5 sugars to fermentation beer
(an
ethanol, yeast and water mixture) and carbon dioxide. The yeast culture is
separated from the fermentation beer by a centrifuge and returned to the
fermentation tanks for reuse. Ethanol is separated from the now clear
fermentation beer by conventional distillation technology, dehydrated to 200
proof with conventional molecular sieve technology, and denatured with unleaded
gasoline to produce the final fuel-grade ethanol product. The still bottoms,
containing principally water and unfermented pentose sugar, is returned to
the
process for economic water use and for further conversion of the pentose
sugars.
Simply
put, the process separates the biomass into two main constituents: cellulose
and
hemicellulose (the main building blocks of plant life) and lignin (the "glue"
that holds the building blocks together), converts the cellulose and
hemicellulose to sugars, ferments them and purifies the fermentation liquids
into products.
From
time
to time, BlueFire may enter into agreements to provide professional services
with various parties that are interested in developing and building an ethanol
plant based on BlueFire’s licensed Arkenol Process. Professional services
include work related to project site selection, feedstock selection and
contracting, product marketing and sales, site development and engineering
design. Such services will be provided by BlueFire on market rates for similar
expertise.
Status
of Publicly Announced New Products and Services
None.
Distribution
methods of the products or services
The
Company will utilize existing distribution channels to sell its ethanol into
that is produced from its plants. For example, the Company has entered into
a
Letter of Intent with Petro-Diamond, Inc. (“PDI”) to purchase the ethanol
produced from the Company’s first North American biomass-to-ethanol conversion
facility to be located at a Southern California landfill. PDI is a significant
blender of denatured ethanol into motor fuel in Southern California. Ethanol
is
currently blended year-round at PDI’s terminal facility located in Long Beach,
California.
Competitive
business conditions and the small business issuer's competitive position in
the
industry and methods of competition
Competition
Most
of
the ethanol supply in the United States is derived from corn and is produced
at
approximately 106 facilities, ranging in size from 300,000 to 110 million
gallons per year, located predominately in the corn belt in the Midwest.
According to the Renewable Fuels Association, about 20% of the current
production is by the Archer-Daniels-Midland Company, which owns some of the
largest plants in the country.
Archer-Daniels-Midland
Company accounts for approximately 20% of all domestic capacity with more than
1
billion gallons of production. Its larger plants are wet milling, as opposed
to
dry milling, and each plant produces 150 to 300 million gallons of ethanol
per
year. These large plants have certain cost advantages and economies of
scale.
Traditional
corn-based production techniques are mature and well entrenched in the
marketplace, and the entire industry's infrastructure is geared toward corn
as
the principal feedstock. However, in the area of biomass-to-ethanol production,
there are few companies and no commercial production infrastructure is built.
We
believe our long-term growth prospects in biomass-to-ethanol depend on our
ability to fund and build new bio-refineries. As we continue to advance our
biomass technology platform, we are likely to encounter competition for the
same
technologies from other companies that are also attempting to manufacture
ethanol from cellulosic biomass feedstocks.
Ethanol
production is also expanding internationally. Ethanol produced or processed
in
certain countries in Central American and the Caribbean region is eligible
for
tariff reduction or elimination upon importation to the United States under
a
program known as the Caribbean Basin Initiative. Large ethanol producers, such
as Cargill, have expressed interest in building dehydration plants in
participating Caribbean Basin countries, such as El Salvador, which would
convert ethanol into fuel-grade ethanol for shipment to the United States.
Ethanol imported from Caribbean Basin countries may be a less expensive
alternative to domestically produced ethanol and may affect our ability to
sell
our ethanol profitably.
Industry
Overview
On
August
8, 2005, President Bush signed into law the Energy Policy Act of 2005. The
Energy Policy Act transformed ethanol from a gasoline additive under the 1990
Clean Air Act to a primary gasoline substitute, which we believe will serve
to
strengthen and expand the role of ethanol in the U.S. fuel economy. A highlight
of the Energy Policy Act is the creation of a 7.5 billion gallon renewable
fuel
standard (RFS) increasing use of renewable domestic fuels such as ethanol and
biodiesel. The newly approved RFS of the Energy Policy Act establishes that
a
percentage of the U.S. fuel supply will be provided by renewable, domestic
fuels
such as ethanol. In addition, the Energy Policy Act establishes a 30% tax credit
up to $30,000 for the cost of installing clean fuel refueling equipment, such
as
an E85 ethanol fuel pump.
Historically,
producers and blenders had a choice of fuel additives to increase the oxygen
content of fuels. MTBE (methyl tertiary butyl ether), a petroleum-based
additive, was the most popular additive, accounting for up to 75% of the fuel
oxygenate market. However, in the United States, ethanol is replacing MTBE
as a
common fuel additive. While both increase octane and reduce air pollution,
MTBE
is a presumed carcinogen which contaminates ground water. It has already been
banned in California, New York, Illinois and 16 other states. Major oil
companies have voluntarily abandoned MTBE and it is scheduled to be phased
out
under the Energy Policy Act. As MTBE is phased out, we expect demand for ethanol
as a fuel additive and fuel extender to rise. A blend of 5.5% or more of
ethanol, which does not contaminate ground water like MTBE, effectively complies
with U.S. Environmental Protection Agency requirements for reformulated
gasoline, which is mandated in most urban areas. We believe there are no
economically feasible substitutes for MTBE other than ethanol.
Ethanol
is a clean, high-octane, high-performance automotive fuel commonly blended
in
gasoline to extend supplies and reduce emissions. In 2004, according to the
American Coalition for Ethanol, 3% of all United States gasoline was blended
with some percentage of ethanol. The most common blend is E10, which contains
10% ethanol and 90% gasoline. There is also growing federal government support
for E85, which is a blend of 85% ethanol and 15% gasoline.
Ethanol
is a renewable fuel produced by the fermentation of starches and sugars such
as
those found in grains and other crops. Ethanol contains 35% oxygen by weight
and, when combined with gasoline, it acts as an oxygenate, artificially
introducing oxygen into gasoline and raising oxygen concentration in the
combustion mixture with air. As a result, the gasoline burns more completely
and
releases less unburnt hydrocarbons, carbon monoxide and other harmful exhaust
emissions into the atmosphere. The use of ethanol as an automotive fuel is
commonly viewed as a way to reduce harmful automobile exhaust emissions. Ethanol
can also be blended with regular unleaded gasoline as an octane booster to
provide a mid-grade octane product which is commonly distributed as a premium
unleaded gasoline.
Studies
published by the Renewable Fuel Association indicate that approximately 5.0
billion gallons of ethanol will be consumed this year in the United States
and
every automobile manufacturer approves and warrants the use of E10. Because
the
ethanol molecule contains oxygen, it allows an automobile engine to more
completely combust fuel, resulting in fewer emissions and improved performance.
Fuel ethanol has an octane value of 113 compared to 87 for regular unleaded
gasoline. Domestic ethanol consumption has tripled in the last eight years,
and
consumption increases in some foreign countries, such as Brazil, are even
greater in recent years. For instance, 40% of the automobiles in Brazil operate
on 100% ethanol, and others use a mixture of 22% ethanol and 78% gasoline.
The
European Union and Japan also encourage and mandate the increased use of
ethanol.
For
every
barrel of ethanol produced, the American Coalition for Ethanol estimates that
1.2 barrels of petroleum are displaced at the refinery level, and that since
1978, U.S. ethanol production has replaced over 14.0 billion gallons of imported
gasoline or crude oil. According to a Mississippi State University Department
of
Agricultural Economics Staff Report in August 2003, a 10% ethanol blend results
in a 25% to 30% reduction in carbon monoxide emissions by making combustion
more
complete. The same 10% blend lowers carbon dioxide emissions by 6% to
10%.
During
the last 20 years, ethanol production capacity in the United States has grown
from almost nothing to an estimated 3.7 billion gallons per year in 2004. In
the
United States, ethanol is primarily made from starch crops, principally from
the
starch fraction of corn. Consequently, the production plants are concentrated
in
the grain belt of the Midwest, principally in Illinois, Iowa, Minnesota,
Nebraska and South Dakota.
In
the
United States, there are two principal commercial applications for ethanol.
The
first is as a mandatory oxygenate additive to gasoline to comply with clean
air
regulations. The second is as a voluntary substitute for gasoline - this is
a
purely economic choice by gasoline retailers who can make higher margins on
selling ethanol-blended gasoline, provided ethanol is available in the local
market. The U.S. gasoline market is currently approximately 140 billion gallons
annually, so the potential market for ethanol (assuming only a 10% blend) is
14
billion gallons per year. Increasingly, motor manufacturers are producing
flexible fuel vehicles (particularly sports utility vehicle models) which can
run off ethanol blends of up to 85% (known as E85) in order to obtain exemptions
from fleet fuel economy quotas. There are now in excess of 5 million flexible
fuel vehicles on the road in the United States and automakers will produce
several millions per year, offering further potential for significant growth
in
ethanol demand.
Cellulose
to Ethanol Production
In
a
recent report, "Outlook For Biomass Ethanol Production Demand," the U.S. Energy
Information Administration found that advancements in production technology
of
ethanol from cellulose could reduce costs and result in production increases
of
40% to 160% by 2010. Biomass (cellulosic feedstocks) includes agricultural
waste, woody fibrous materials, forestry residues, waste paper, municipal solid
waste and most plant material. Like waste starches and sugars, they are often
available for relatively low cost, or are even free. However, cellulosic
feedstocks are more abundant, global and renewable in nature. These waste
streams, which would otherwise be abandoned, land-filled or incinerated, exist
in populated metropolitan areas where ethanol prices are higher.
In
addition to its lower raw material costs, biomass-to-ethanol production has
the
following advantages over corn-based production:
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biomass
allows producers to avoid the pressure on margins created by rises
in corn
prices,
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a
key limitation for ethanol is that there are currently no pipelines
available for the transportation of ethanol; this create a competitive
advantage for for biomass ethanol because it can be produced locally
with
a variety of waste products.
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Biomass
allows for immediate proximity to urban ethanol markets reduces freight
costs and increases potential
margins.
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biomass
generates an additional class of valuable co-products which are
not
derived from corn.
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biomass
is more energy efficient than its corn
counterpart.
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Biomass
ethanol provides significant reduction in greenhouse gas
emissions
compared to petroleum based
fuels
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Sources
and availability of raw materials and the names of principal
suppliers
The
main
sources of raw cellulose fuel for the Company will be North American landfills.
Landfills are mainly owned by large waste disposal companies and by
municipalities.
Additionally,
the U.S. DOE and USDA in its April 2005 report
Biomass
as Feedstock for a Bioenergy and Bioproducts Industry: The technical Feasibility
of a Billion-Ton Annual Supply
found
that about one billion tons of cellulosic materials from agricultural and forest
residues are available to produce more than one-third of the current U.S. demand
for transportation fuels. While BlueFire’s deployment begins with the use of
cellulosic materials already collected through an existing infrastructure and
available for minimum costs, the potential for using agricultural and forest
residues provide additional business opportunities for the Technology as issues
surrounding the collection, handling and supply of these feedstock are
resolved.
Dependence
on one or a few major customers
Currently,
the Company has no dependence on one or a few major customers, although it
has
entered into a letter of intent with Petro-Diamond, Inc. to be the Company’s
sole purchaser of ethanol from its first scheduled plant in Southern California.
See “
Distribution
methods of the products or services
.”
Patents,
trademarks, licenses, franchises, concessions, royalty agreements or labor
contracts
On
March
1, 2006, the Company entered into a Technology License Agreement with Arkenol,
Inc. (“Arkenol”). For the Arkenol technology, Arkenol holds eleven U.S. patents,
twenty one foreign patents, and one pending foreign patent. According to the
terms of the agreement, the Company was granted an exclusive, non-transferable,
North American license to use and to sub-license the Arkenol technology. The
Arkenol Technology, converts cellulose and waste materials into ethanol and
other high value chemicals. As consideration for the grant of the license,
the
Company shall make a one time payment of $1,000,000 at first project
construction funding and for each plant make the following payments: (1) royalty
payment of 4% of the gross sales price for sales by the Company or its
sublicensees of all products produced from the use of the Arkenol Technology
(2)
and a one time license fee of $40.00 per 1,000 gallons of production capacity
per plant. According to the terms of the agreement, the Company made a one
time
exclusivity fee prepayment of $30,000 during the period ended August 31, 2006.
As of August 31, 2006, the Company had not incurred any liabilities related
to
the agreement. All sub-licenses issued by BlueFire will provide for payments
of
the license fees and royalties due Arkenol.
Need
for any government approval of principal products or services
BlueFire
Ethanol is not subject to any government oversight for its current operations
other than for corporate governance and taxes. However, the production
facilities that the Company will be constructing will be subject to various
federal, state and local environmental laws and regulations, including those
relating to the discharge of materials into the air, water and ground, the
generation, storage, handling, use, transportation and disposal of hazardous
materials, and the health and safety of our employees. In addition, some of
these laws and regulations will require our facilities to operate under permits
that are subject to renewal or modification. These laws, regulations and permits
can often require expensive pollution control equipment or operational changes
to limit actual or potential impacts to the environment. A violation of these
laws and regulations or permit conditions can result in substantial fines,
natural resource damages, criminal sanctions, permit revocations and/or facility
shutdowns.
Effect
of existing or probable governmental regulations on the
business
Currently,
the federal government encourages the use of ethanol as a component in
oxygenated gasoline as a measure to protect the environment as a viable
renewable domestic fuel to reduce U.S. dependence on foreign oil.
The
ethanol industry is heavily dependent on several economic incentives to produce
ethanol, including federal ethanol supports. Ethanol sales have been favorably
affected by the Clean Air Act amendments of 1990, particularly the Federal
Oxygen Program which became effective November 1, 1992. The Federal Oxygen
Program requires the sale of oxygenated motor fuels during the winter months
in
certain major metropolitan areas to reduce carbon monoxide pollution. Ethanol
use has increased due to a second Clean Air Act program, the Reformulated
Gasoline Program. This program became effective January 1, 1995, and requires
the sale of reformulated gasoline in nine major urban areas to reduce
pollutants, including those that contribute to ground level ozone, better known
as smog. Increasingly stricter EPA regulations are expected to increase the
number of metropolitan areas deemed in non-compliance with Clean Air Standards,
which could increase the demand for ethanol.
On
August
8, 2005, President Bush signed the Energy Policy Act of 2005 (H.R. 6) into
law.
The comprehensive energy legislation includes a nationwide renewable fuels
standard (RFS) that will double the use of ethanol and biodiesel by
2012.
Under
the
RFS, a small percentage of our nation's fuel supply will be provided by
renewable, domestic fuels. The increased use of renewable fuels will expand
U.S.
fuel supplies while easing an overburdened refining industry. The Energy Policy
Act of 2005 established Renewable Fuel Standard (RFS) provisions that mandates
use of renewable fuels starting at 4 billion gallons in 2006 and increases
to
7.5 billion gallons in 2012. The Act also provides that, beginning in 2013,
a
minimum of 250 million gallons a year of cellulosic derived ethanol be included
in the RFS. Flexibility in meeting RFS is provided for refiners through a credit
trading program that allows refiners to use renewable fuels where and when
it is
most efficient and cost-effective for them to do so. The credit trading program
will result in lower costs to refiners and thus, consumers. RFS credits have
a
lifespan of 12 months. The credit trading program allows for every gallon of
cellulose-derived ethanol to be equal to 2.5 gallons of renewable fuel. The
reformulated gasoline (RFG) 2.0 wt percentage oxygenate standard under the
Clean
Air Act is eliminated 270 days after enactment. (Requirement was lifted by
U.S. EPA May 8, 2006).
The
Energy Policy Act also provides for grants and loan guarantee programs to
incentivize the growth of the cellulosic ethanol market. These programs include
a Cellulosic Biomass Ethanol and Municipal Solid Waste Guarantee Program that
could provide loan guarantees up to $250,000,000 per qualified project. The
U.S.
Department of Energy has issued a request for pre-applications under this
program with submittal due by December 31, 2006. The Company intends to file
a
response to the solicitation. The 2005 Energy Act also created a Biorefinery
Demonstration Project Program under which $100,000,000 is available to fund
up
to 3 biorefinery demonstration project. The Company submitted a proposal for
funding under this solicitation and has recently been notified that it has
been
selected to be part of the “short-list” for further review. The U.S. Department
of Energy expects to determine successful applicants for the biorefinery grant
program by early 2007. As available and as applicable to the business plans
of
the Company, applications for public funding will be submitted to leverage
private capital raised by the Company.
The
use
of ethanol as an oxygenate to blend with fuel to comply with federal mandates
also has been aided by federal tax policy. The Energy Tax Act of 1978 exempted
ethanol blended gasoline from the federal gas tax as a means of stimulating
the
development of a domestic ethanol industry and mitigating the country's
dependence on foreign oil. As amended, the federal tax exemption currently
allows the market price of ethanol to compete with the price of domestic
gasoline. The exemption for a 10% ethanol blend is the equivalent of providing
a
per gallon "equalization" payment that allows blenders to pay more for ethanol
than the wholesale price of gasoline and still retain profit margins equal
to
those received upon the sale of gasoline that is not blended with ethanol.
Under
current legislation, the federal gasoline tax exemption for a 10% ethanol blend
is 5.2 cents per gallon. This exemption was to gradually drop to 5.1 cents
per
gallon in 2005, however, as of January 1, 2005, this federal tax incentive
was
be replaced by a new volumetric ethanol excise tax credit discussed
below.
On
October 22, 2004, President Bush signed H.R. 4520, which contained the
Volumetric Ethanol Excise Tax Credit ("VEETC") and amended the federal excise
tax structure effective as of January 1, 2005. Currently, ethanol-blended fuel
is taxed at a lower rate than regular gasoline (13.2 cents on a 10% blend).
Under VEETC, the existing ethanol excise tax exemption is eliminated, thereby
allowing the full federal excise tax of 18.4 cents per gallon of gasoline to
be
collected on all gasoline and allocated to the highway trust fund. This would
add approximately $1.4 billion to the highway trust fund revenue annually.
In
place of the current exemption, the bill creates a new volumetric ethanol excise
tax credit of 5.1 cents per gallon of ethanol blended. Refiners and gasoline
blenders would apply for this credit on the same tax form as before only it
would be a credit from general revenue, not the highway trust fund. Based on
volume, the VEETC is expected to allow much greater refinery flexibility in
blending ethanol.
Estimate
of the amount spent during each of the last two fiscal years on research and
development activities
None.
The
Company has not developed its own proprietary technology but rather is a
licensee of the Arkenol Technology.
Costs
and effects of compliance with environmental laws (federal, state and
local)
We
will
be subject to extensive air, water and other environmental regulations and
we
will have to obtain a number of environmental permits to construct and operate
our plants, including, air pollution construction permits, a pollutant discharge
elimination system general permit, storm water discharge permits, a water
withdrawal permit, and an alcohol fuel producer's permit. In addition, we may
have to complete spill prevention control and countermeasures plans.
The
production facilities that we will build are subject to oversight activities
by
the federal, state, and local regulatory agencies. There is always a risk that
the federal agencies may enforce certain rules and regulations differently
than
state environmental administrators. State or federal rules are subject to
change, and any such changes could result in greater regulatory burdens on
plant
operations. We could also be subject to environmental or nuisance claims from
adjacent property owners or residents in the area arising from possible foul
smells or other air or water discharges from the plant.
Number
of total employees and number of full time employees
We
had
three (3) full time employees as of December 8, 2006 and no part time
employees.
Reports
to Security Holders
As
a
result of its filing of this Form 10-SB, the Company expects to become
subject to the reporting obligations of the Securities Exchange Act of 1934,
as
amended (the “Exchange Act”). These obligations include filing an annual report
under cover of Form 10-KSB, with audited financial statements, unaudited
quarterly reports on Form 10-QSB and the requisite proxy statements with
regard to annual shareholder meetings. The public may read and copy any
materials the Company files with the Securities and Exchange Commission (the
“Commission”) at the Commission’s Public Reference Room at 100 F Street,
NE, Washington, DC 20549. The public may obtain information on the operation
of
the Public Reference Room by calling the Commission at 1-800-SEC-0030. The
Commission maintains an Internet site (http://www.sec.gov) that contains
reports, proxy and information statements and other information regarding
issuers that file electronically with the Commission.
Management’s
Discussion and Plan of Operation
The
following discussion of our Plan of Operation should be read in conjunction
with
the financial statements and related notes to the financial statements included
elsewhere in this registration statement. This discussion contains
forward-looking statements that relate to future events or our future financial
performance. These statements involve known and unknown risks, uncertainties
and
other factors that may cause our actual results, levels of activity, performance
or achievements to be materially different from any future results, levels
of
activity, performance or achievements expressed or implied by these
forward-looking statements. These risks and other factors include, among others,
those listed under “Forward-Looking Statements” and “Risk Factors” and those
included elsewhere in this registration statement.
Plan
of operation
Management
plans to raise additional funds through project financings or through future
sales of their common stock, until such time as the Company’s revenues are
sufficient to meet its cost structure, and ultimately achieve profitable
operations. There is no assurance that the Company will be successful in raising
additional capital or achieving profitable operations. The consolidated
financial statements do not include any adjustments that might result from
the
outcome of these uncertainties. The Company s will need financing within 12
months to continue its operations.
The
Company has not developed its own proprietary technology but rather is a
licensee of the Arkenol Technology and therefore has benefited from Arkenol’s
research and development efforts and cost expenditures. Any additional research
and development related to BlueFire’s licensed technology will be the
responsibility of Arkenol.
BlueFire’s
business will encompass development activities leading to the construction
and
long-term operation of production facilities. BlueFire is currently in the
development-stage of deploying project opportunities for converting cellulose
fractions of municipal solid waste and other opportunistic feedstock into
ethanol fuels. The Company entered into an Asset Transfer and Acquisition
Agreement with ARK Energy, Inc. (“ARK Energy”). Based upon the terms of the
agreement, ARK Energy transferred certain rights, assets, work-product,
intellectual property and other know-how on 19 project opportunities, that
management estimates is worth approximately $16,000,000, which may be used
by
BlueFire to accelerate its deployment of the Arkenol technology. In
consideration, the Company has agreed to pay a performance bonus of up to
$16,000,000 when certain milestones are met. These milestones include
transferee’s project implementation which would be demonstrated by start of the
construction of a facility or completion of financial closing whichever is
earlier. The payment is based on ARK Energy’s cost to develop 19 sites which are
currently at different stages of development. As of August 31, 2006, the Company
had not incurred any liabilities related to the agreement.
The
Company anticipates beginning construction of a plant within the next six (6)
months and expects to complete the project and to begin production of ethanol
within the next 24 months. Although the cost of construction is not readily
determinable, the Company estimates the cost to be approximately $20 million
for
the first plant. Management plans to raise additional funds through project
financings or through future sales of their common stock to purchase the capital
equipment for the plant.
BlueFire
is in discussions with potential candidates and plans to retain a Chief
Financial Officer as soon as possible. Other positions will be filled as need
arises and funding is available. Currently, the Company anticipates hiring
three
to four personnel in the next 12 months.
Off-balance
sheet arrangements
There
are
no off-balance sheet arrangements.
Risk
Factors
This
registration statement contains forward-looking statements that involve risks
and uncertainties. These statements can be identified by the use of
forward-looking terminology such as “believes,” “expects,” “intends,” “plans,”
“may,” “will,” “should,” or “anticipation” or the negative thereof or other
variations thereon or comparable terminology. Actual results could differ
materially from those discussed in the forward-looking statements as a result
of
certain factors, including those set forth below and elsewhere in this
Registration Statement. The following risk factors should be considered
carefully in addition to the other information in this Registration Statement,
before purchasing any of the Company’s securities.
Risks
Related to Our Business and Industry
The
Company has had limited operations and revenue and has incurred
losses.
The
Company has had limited operations and has incurred net losses of $343,000
for
the period from March 28, 2006 (Inception) through August 31, 2006,. The Company
has yet to begin ethanol production or construction of ethanol producing plants.
Since the reverse acquisition, we have been engaged in organizational
activities, including developing a strategic operating plan, entering into
contracts, hiring personnel, developing processing technology, and raising
private capital. Accordingly, we have limited relevant operating history upon
which an evaluation of our performance and prospects can be made. We are subject
to all of the business risks associated with a new enterprise, including, but
not limited to, risks of unforeseen capital requirements, failure of market
acceptance, failure to establish business relationships and competitive
disadvantages as against larger and more established companies.
The
Company received a going concern paragraph in the report from its
auditors.
In
their
report dated November 9, 2006, the Company’s auditors indicated there was
substantial doubt about the Company’s ability to continue as a going concern.
Accordingly, unless the we raise additional working capital, construction
financing and/or revenues grow to support our business plan, we may be unable
to
remain in business.
The
Company will require additional capital.
We
will
need additional funds to continue its operations, to build ethanol production
plants, and to distribute and market ethanol. We cannot guarantee that it will
have access to these required funds in the future, or that such funds will
be
available on acceptable terms and conditions. If we are unable to raise
additional funds, it will be unable to market its products and may be unable
to
remain in business. If we are successful in raising funds, we may be required
to
issue additional equity securities which will dilute the ownership of its
current shareholders.
Our
cellulose-to-ethanol technologies are unproven on a large-scale commercial
basis
and performance could fail to meet projections, which could have a detrimental
effect on the long-term capital appreciation of our
stock.
While
production of ethanol from corn, sugars and starches is a mature technology,
newer technologies for production of ethanol from cellulose biomass have not
been built at large commercial scales.. The technologies being pursued by us
for
ethanol production from biomass have not been demonstrated at commercial scale.
All of the tests conducted to date by us with respect to our technologies have
been performed on limited quantities of feedstocks, and we cannot assure you
that the same or similar results could be obtained at competitive costs on
a
large-scale commercial basis. We have never utilized these technologies under
the conditions or in the volumes that will be required to be profitable and
cannot predict all of the difficulties that may arise. It is possible that
the
technologies, when used, may require further research, development, design
and
testing prior to larger-scale commercialization. Accordingly, we cannot assure
you that these technologies will perform successfully on a large-scale
commercial basis or that they will be profitable to us.
Our
business employs licensed Arkenol Technology which may be difficult to protect
and may infringe on the intellectual property rights of third
parties.
We
currently license our technology from Arkenol. Arkenol owns eleven U.S. patents,
twenty-one foreign patents, and has one foreign patent pending and may file
more
patent applications in the future. Our success depends, in part, on our ability
to use the Arkenol Technology, and for Arkenol to obtain patents, maintain
trade
secrecy and not infringe the proprietary rights of third parties. We cannot
assure you that the patents of others will not have an adverse effect on our
ability to conduct our business, that we will develop additional proprietary
technology that is patentable or that any patents issued to us or Arkenol will
provide us with competitive advantages or will not be challenged by third
parties. Further, we cannot assure you that others will not independently
develop similar or superior technologies, duplicate elements of the Arkenol
Technology or design around it.
It
is
possible that we may need to acquire other licenses to, or to contest the
validity of, issued or pending patents or claims of third parties. We cannot
assure you that any license would be made available to us on acceptable terms,
if at all, or that we would prevail in any such contest. In addition, we could
incur substantial costs in defending ourselves in suits brought against us
for
alleged infringement of another party's patents in bringing patent infringement
suits against other parties based on our licensed patents.
In
addition to licensed patent protection, we also rely on trade secrets,
proprietary know-how and technology that we seek to protect, in part, by
confidentiality agreements with our prospective joint venture partners,
employees and consultants. We cannot assure you that these agreements will
not
be breached, that we will have adequate remedies for any breach, or that our
trade secrets and proprietary know-how will not otherwise become known or be
independently discovered by others.
We
are dependent upon Arnie Klann, our Chairman and President, and John Cuzens,
our
VP Engineering, who we need to succeed.
We
believe that our continued success will depend to a significant extent upon
the
efforts and abilities of (i) Arnie Klann, our Chairman and President, due to
his
contacts in the ethanol and cellulose industries and his overall insight into
our business direction, and (ii) John Cuzens, our VP Engineering for his
comprehension of the Arkenol Technology. Our failure to retain Mr. Klann or
Mr.
Cuzens, or to attract and retain additional qualified personnel, could adversely
affect our operations. We do not currently carry key-man life insurance on
any
of our officers. See "Management."
Because
we are smaller and currently have fewer financial resources than many larger
ethanol producers, we may not be able to successfully compete in the very
competitive ethanol industry.
There
is
significant competition among ethanol producers. Our business faces competition
from larger corn ethanol plants, , and from other proposed plants using
cellulose. Our ethanol plants will be in direct competition with other ethanol
producers, many of which have greater resources than we currently have. While,
BlueFire’s competitive position will come from our projected lower production
costs because we are using cheaper feedstock and lower transportation costs
because our production facilities will be located closer to the urban markets
for ethanol, the large ethanol producers are capable of producing a
significantly greater amount of ethanol than we can and expect to produce
initially.
Competition
from large producers of petroleum-based gasoline additives and other competitive
products may impact our profitability.
Our
proposed ethanol plants will also compete with producers of other gasoline
additives made from other raw materials having similar octane and oxygenate
values as ethanol. The major oil companies have significantly greater resources
than we have to develop alternative products and to influence legislation and
public perception of ethanol. These other companies also have significant
resources to begin production of ethanol should they choose to do so. Ethanol
is
sold into the gasoline blending market where it competes with other oxygenates
and octane components and with gasoline itself. Therefore, ethanol's price
is
significantly affected by its value to refiners in these markets. Ethanol prices
are highly correlated with the price of gasoline and gasoline blending
components. The price of corn has very little to do with the price of ethanol.
That is why low corn prices do not always indicate low ethanol prices and high
corn prices do not always indicate high ethanol prices. Ethanol prices are
determined by the supply and demand for ethanol in specific markets.
Our
profits are impacted by corn supply.
Our
ethanol will be produced from cellulose, however currently most ethanol is
produced from corn, which is affected by weather, governmental policy, disease
and other conditions. A significant increase in the availability of corn and
resulting reduction in the price of corn may decrease the price of ethanol
and
harm our business.
If
ethanol and gasoline prices drop significantly, we will also be forced to reduce
our prices, which potentially may lead to further
losses.
Prices
for ethanol products can vary significantly over time and decreases in price
levels could adversely affect our profitability and viability. The price of
ethanol has some relation to the price of gasoline. The price of ethanol tends
to increase as the price of gasoline increases, and the price of ethanol tends
to decrease as the price of gasoline decreases. Any lowering of gasoline prices
will likely also lead to lower prices for ethanol and adversely affect our
operating results. We cannot assure you that we will be able to sell our ethanol
profitably, or at all.
Increased
ethanol production from cellulose in the United States could increase the demand
for feedstocks and the resulting price of feedstocks, reducing our
profitability.
New
ethanol plants that utilize cellulose as their feedstock may be under
construction or in the planning stages throughout the United States. This
increased ethanol production could increase cellulose demand and prices,
resulting in higher production costs and lower profits.
Price
increases or interruptions in needed energy supplies could cause loss of
customers and impair our profitability.
Ethanol
production requires a constant and consistent supply of energy. If there is
any
interruption in our supply of energy for whatever reason, such as availability,
delivery or mechanical problems, we may be required to halt production. If
we
halt production for any extended period of time, it will have a material adverse
effect on our business. Natural gas and electricity prices have historically
fluctuated significantly. We purchase significant amounts of these resources
as
part of our ethanol production. Increases in the price of natural gas or
electricity would harm our business and financial results by increasing our
energy costs.
Risks
Related to Government Regulation and Subsidization
Federal
regulations concerning tax incentives could expire or change, which could cause
an erosion of the current competitive strength of the ethanol
industry.
Congress
currently provides certain federal tax credits for ethanol producers and
marketers. The current ethanol industry and our business initially depend on
continuation of these credits. The credits have supported a market for ethanol
that might disappear without the credits. The credits are scheduled to expire
December 31, 2010. These credits may not continue beyond their scheduled
expiration date or, if they continue, the incentives may not be at the same
level. The revocation or amendment of any one or more of these tax incentives
could adversely affect the future use of ethanol in a material way, and we
cannot assure investors that any of these tax incentives will be continued.
The
elimination or reduction of federal tax incentives to the ethanol industry
could
have a material adverse impact on the industry as a whole. If BlueFire is
successful in meeting its target production costs, our business could continue
to compete in the market in the event the existing tax incentives are
eliminated. If the federal ethanol tax incentives are eliminated or sharply
curtailed, we believe that a decreased production from corn could
result.
Lax
enforcement of environmental and energy policy regulations may adversely affect
demand for ethanol
Our
success will depend in part on effective enforcement of existing environmental
and energy policy regulations. Many of our potential customers are unlikely
to
switch from the use of conventional fuels unless compliance with applicable
regulatory requirements leads, directly or indirectly, to the use of ethanol.
Both additional regulation and enforcement of such regulatory provisions are
likely to be vigorously opposed by the entities affected by such requirements.
If existing emissions-reducing standards are weakened, or if governments are not
active and effective in enforcing such standards, our business and results
of
operations could be adversely affected. Even if the current trend toward more
stringent emissions standards continues, we will depend on the ability of
ethanol to satisfy these emissions standards more efficiently than other
alternative technologies. Certain standards imposed by regulatory programs
may
limit or preclude the use of our products to comply with environmental or energy
requirements. Any decrease in the emission standards or the failure to enforce
existing emission standards and other regulations could result in a reduced
demand for ethanol. A significant decrease in the demand for ethanol will reduce
the price of ethanol, adversely affect our profitability and decrease the value
of your stock.
Costs
of compliance with burdensome or changing environmental and operational safety
regulations could cause our focus to be diverted away from our business and
our
results of operations to suffer
Ethanol
production involves the emission of various airborne pollutants, including
particulate matter, carbon monoxide, carbon dioxide, nitrous oxide, volatile
organic compounds and sulfur dioxide. The production facilities that we will
build will discharge water into the environment. As a result, we are subject
to
complicated environmental regulations of the U.S. Environmental Protection
Agency and regulations and permitting requirements of the states where our
plants are to be located. These regulations are subject to change and such
changes may require additional capital expenditures or increased operating
costs. Consequently, considerable resources may be required to comply with
future environmental regulations. In addition, our ethanol plants could be
subject to environmental nuisance or related claims by employees, property
owners or residents near the ethanol plants arising from air or water
discharges. Ethanol production has been known to produce an odor to which
surrounding residents could object. Environmental and public nuisance claims,
or
tort claims based on emissions, or increased environmental compliance costs
could significantly increase our operating costs.
Our
proposed new ethanol plants will also be subject to federal and state laws
regarding occupational safety
Risks
of
substantial compliance costs and liabilities are inherent in ethanol production.
We may be subject to costs and liabilities related to worker safety and job
related injuries, some of which may be significant. Possible future
developments, including stricter safety laws for workers and other individuals,
regulations and enforcement policies and claims for personal or property damages
resulting from operation of the ethanol plants could reduce the amount of cash
that would otherwise be available to further enhance our business.
Risks
Related to Our Common Stock
Our
common stock price has fluctuated considerably and stockholders may not be
able
to resell their shares at or above the price at which such shares were
purchased
The
market price of our common stock may fluctuate significantly (since July 11,
2006, the day we began trading publicly as BFRE and December 8, 2006, the high
and low bid price for our common stock has been $1.30 and $7.25 per share,
respectively) in response to factors, including not yet beginning construction
of first plant and therefore operational results, due to needing time to
organize engineering resources, feedstock sources, locating suitable plant
locations, locating distributors and finding funding sources.
The
stock market in general has experienced extreme price and volume
fluctuations
The
market prices of securities of fuel-related companies have experienced
fluctuations that often have been unrelated or disproportionate to the operating
results of these companies. Continued market fluctuations could result in
extreme volatility in the price of our common stock, which could cause a decline
in the value of our common stock. Price volatility might be worse if the trading
volume of our common stock is low
.
Because
we became public by means of a reverse acquisition with a public shell company,,
we may not be able to attract the attention of major brokerage firms for
research and support
Additional
risks may exist since we became public through a "reverse acquisition."
Securities analysts of major brokerage firms may not provide us with coverage
since there is no incentive to brokerage firms to recommend the purchase of
our
common stock. We cannot assure you that brokerage firms will want to conduct
any
secondary offerings on our behalf in the future.
Our
common stock may be considered "a penny stock" and may be difficult for you
to
sell
The
SEC
has adopted regulations which generally define "penny stock" to be an equity
security that has a market price of less than $5.00 per share or an exercise
price of less than $5.00 per share, subject to specific exemptions. The market
price of our common stock has been for much of its trading history since July
11, 2006, and may continue to be less than $5.00 per share, and therefore may
be
designated as a "penny stock" according to SEC rules. This designation requires
any broker or dealer selling these securities to disclose certain information
concerning the transaction, obtain a written agreement from the purchaser and
determine that the purchaser is reasonably suitable to purchase the securities.
These rules may restrict the ability of brokers or dealers to sell our common
stock and may affect the ability of investors to sell their shares. In addition,
since our common stock is currently traded on the NASD's OTC Pink Sheets,
investors may find it difficult to obtain accurate quotations of our common
stock and may experience a lack of buyers to purchase such stock or a lack
of
market makers to support the stock price.
Failure
to achieve and maintain effective internal controls in accordance with Section
404 of the Sarbanes-Oxley Act of 2002 could have a material adverse effect
on
our business and operating results
Effective
internal controls are necessary for us to provide reliable financial reports
and
effectively prevent fraud. If we cannot provide reliable financial reports
or
prevent fraud, our operating results could be harmed. Commencing December 15,
2007, we will be required to document and test our internal control procedures
in order to satisfy the requirements of Section 404 of the Sarbanes-Oxley Act
of
2002, which requires annual management assessments of the effectiveness of
our
internal controls over financial reporting and a report by our independent
registered public accounting firm addressing these assessments. In connection
with the audit by our independent accountants of our financial statements for
the five month period ended August 31, 2006, they notified us and our board
of
directors that they had identified significant deficiencies that they considered
material weaknesses in our internal controls. The material weaknesses related
to
the financial reporting process and segregation of duties. Although we intend
to
augment our internal controls procedures and expand our accounting staff, there
is no guarantee that this effort will be adequate.
During
the course of our testing, we may identify deficiencies which we may not be
able
to remediate in time to meet the deadline imposed by the Sarbanes-Oxley Act
for
compliance with the requirements of Section 404. In addition, if we fail to
maintain the adequacy of our internal accounting controls, as such standards
are
modified, supplemented or amended from time to time, we may not be able to
ensure that we can conclude on an ongoing basis that we have effective internal
controls over financial reporting in accordance with Section 404. Failure to
achieve and maintain an effective internal control environment could cause
us to
face regulatory action and also cause investors to lose confidence in our
reported financial information, either of which could have an adverse effect
on
our stock price.
Our
principal stockholder has significant voting power and may take actions that
may
not be in the best interest of all other stockholders
Our
Chairman and President controls approximately 64.6% of our currently outstanding
shares of common stock. He may be able to exert significant control over our
management and affairs requiring stockholder approval, including approval of
significant corporate transactions. This concentration of ownership may expedite
approvals of company decisions, or have the effect of delaying or preventing
a
change in control, adversely affect the market price of our common stock, or
be
in the best interests of all our stockholders.
Investors
should not anticipate receiving cash dividends on our common
stock
We
have
never declared or paid any cash dividends or distributions on our capital stock.
We currently intend to retain our future earnings to support operations and
to
finance expansion and therefore we do not anticipate paying any cash dividends
on our common stock in the foreseeable future.
You
could be diluted from the issuance of additional common
stock
.
Presently,
we have 21,028,279 shares of common stock outstanding and no shares of preferred
stock outstanding. We are authorized to issue up to 100,000,000 shares of common
stock and 1,000,000 shares of preferred stock. To the extent of such
authorization, our board of directors will have the ability, without seeking
shareholder approval, to issue additional shares of common stock or preferred
stock in the future for such consideration as the board may consider sufficient.
The issuance of additional common stock or preferred stock in the future may
reduce your proportionate ownership and voting power.
ITEM
3: DESCRIPTION OF PROPERTY
The
Company leases from FR Systems, LLC on a month-to-month basis, approximately
1950 square feet of furnished office space at 31 Musick, Irvine, California
92618, for $3,500 per month.
ITEM
4: SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The
following table sets forth the current common stock ownership of (i) each
person known by the Company to be the beneficial owner of five percent or more
of the Company’s common stock based upon 21,028,279 shares outstanding as of
November 17, 2006, (ii) each director of the Company individually and
(iii) all officers and directors of the Company as a group. Each
person has sole voting and investment power with respect to the shares of common
stock shown, and all ownership is of record and beneficial. No stock options
have been issued. The address of each owner who is an officer or director is
in
care of the Company at 31 Musick, Irvine California 92618.
Title
of
Class
|
Name
of Beneficial Owner
|
Number
of
shares
|
Percent
of
Class
|
|
Common
|
Arnold
Klann, President, CEO and Director
|
13,597,500
|
64.6%
|
|
Common
|
Necitas
Sumait, Secretary, VP and Director
|
1,205,000
|
5.7%
|
|
Common
|
John
Cuzens, Treasurer, VP and Director
|
1,205,000
|
5.7%
|
|
Common
|
Chris
Nichols, Director
|
75,000
|
*
|
|
|
All
officers and directors as a group (4 persons)
|
16,082,500
|
76.4%
|
|
*Less
than 1%.
ITEM
5: DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
PERSONS
The
officers and directors of the Company, their ages and present positions held
in
the Company are as follows:
Name
|
|
Age
|
|
Position
|
|
Officer
and
Director
Since
|
|
|
|
|
|
|
|
Arnold
Klann
|
|
-55
|
|
President,
CEO and Director
|
|
June
2006
|
Necitas
Sumait
|
|
-46
|
|
Secretary,
VP and Director
|
|
June
2006
|
John
Cuzens
|
|
-55
|
|
Treasurer,
VP and Director
|
|
June
2006
|
Chris
Nichols
|
|
40-
|
|
Director
|
|
June
2006
|
The
Company’s directors serve in such capacity until the first annual meeting of the
Company’s shareholders and until their successors have been elected and
qualified. The Company’s officers serve at the discretion of the Company’s Board
of Directors, until their death, or until they resign or have been removed
from
office.
There
are
no agreements or understandings for any director or officer to resign at the
request of another person and none of the directors or officers is acting on
behalf of or will act at the direction of any other person. The activities
of
each director and officer are material to the operation of the Company. No
other
person’s activities are material to the operation of the Company.
Arnold
R. Klann - Chairman of the Board / President / Chief Executive
Officer
Mr.
Klann
has been BlueFire’s Chairman of the Board, and President/Chief Executive Officer
since its inception in March 2006. Prior to this, he founded and was President
of ARK Energy, Inc. and Arkenol, Inc. from January 1989 to present. Mr. Klann
has an AA from Lakeland College in Electrical Engineering.
John
E. Cuzens - Chief Technology Officer / Senior Vice President / Treasurer /
Director
Mr.
Cuzen
has been BlueFire’s Director, CTO and Senior VP since its inception in March
2006. Prior to this, he was Director of Projects Wahlco Inc. . He was with
ARK
Energy and Arkenol for six years and is the co-inventor on seven of Arkenol's
eight U.S. foundation patents for the conversion of cellulosic materials into
fermentable sugar products using a modified strong acid hydrolysis process.
Mr.
Cuzens has a B.S. Chemical Engineering degree from the University of California
at Berkeley.
Necitas
Sumait - Senior Vice President / Secretary / Director
Mrs.
Sumait has been BlueFire’s Director and Senior VP since its inception in March
2006. Prior to this, Mrs. Sumait was Vice President of ARK Energy/Arkenol from
December 1992 to July 2006. Mrs. Sumait has a MBA in Technological Management
from Illinois Institute of Technology and a B.S. in Biology from De Paul
University.
Chris
Nichols - Director
Mr.
Nichols is currently the Chairman and President/CEO of Advanced Growing Systems,
Inc. Prior to this role he headed Westcap Securities’ Private Client Group as
the Senior Vice President in charge of sales and marketing from 2003 to 2006.
Mr. Nichols is a graduate of California State University in Fullerton with
a
B.A. degree in Marketing.
Key
Consultants
William
Davis - VP Project Management.
Mr.
Davis
is currently Vice President of Project Management for BlueFire. Prior to this
he
was Director of Project Development for Diamond Energy from 2001 to
2006.
Kent
A. Larsen - VP Project Finance.
Mr.
Larsen is currently Vice President of of Project Finance for BlueFire. Prior
to
this, Mr. Larsen has been a Vice President of ARK Energy, Inc. and has, for
the
last thirteen years, provided financial advisory services to and has
successfully arranged multi-sourced and comprehensive project and structured
financings on behalf of many of the major US and international independent
power
producers for power projects totaling more than US $5 billion in financing
and
over 7,000 MW. Mr. Larsen has been a co-founder and senior finance officer
of
three independent power companies, corporate treasurer of two US based, global
engineering and construction companies, and a senior banking officer and
managing director for project and international finance at two of the world's
largest financial institutions. He holds an MBA-Finance from UCLA Graduate
School of Business, and BS degrees in Civil Engineering and Mathematics from
the
University of Washington.
The
Company has also entered into consulting agreements with accounting, legal,
marketing and investor relations firms. These agreements are fee based and
do
not include issuance of any stocks. However, the Company may enter into future
agreements that may include issuance of restricted stock.
There
are
no family relationships among our directors and executive officers.
No
director or executive officer has been a director or executive officer of any
business which has filed a bankruptcy petition or had a bankruptcy petition
filed against it during the past five years. No director or executive officer
has been convicted of a criminal offense or is the subject of a pending criminal
proceeding during the past five years. No director or executive officer has
been
the subject of any order, judgment or decree of any court permanently or
temporarily enjoining, barring, suspending or otherwise limiting his involvement
in any type of business, securities or banking activities during the past five
years. No director or officer has been found by a court to have violated a
federal or state securities or commodities law during the past five
years.
None
of
our directors or executive officers or their respective immediate family members
or affiliates are indebted to us.
ITEM
6: EXECUTIVE COMPENSATION
The
following table sets forth the total compensation earned by or paid to our
executive officers and directors for the period from the date of organization
of
Bluefire - March 28, 2006 - until November 30, 2006.
SUMMARY
COMPENSATION TABLE
|
|
Long
Term Compensation
|
|
|
Annual
Compensation
|
Awards
|
Payouts
|
|
(a)
|
(b)
|
(c)
|
(d)
|
(e)
|
(f)
|
(g)
|
(h)
|
(i)
|
Name
and Principle Position
|
Year
|
Salary
($)
|
Bonus
($)
|
Other
Annual
Compensation
($)
|
Restricted
Stock
Award(s)
($)
|
Securities
Underlying
Options/SARs
(#)
|
LTIP
Payouts
($)
|
All
Other
Compensation
($)
|
Arnie
Klann
Director
and President
|
2006
|
94,167
|
0
|
0
|
0
|
0
|
0
|
0
|
Necitas
Sumait
Director,
Secretary and VP
|
2006
|
65,000
|
0
|
0
|
0
|
0
|
0
|
0
|
John
Cuzens
Director,
Treasurer and VP
|
2006
|
62,000
|
0
|
0
|
0
|
0
|
0
|
0
|
Chris
Nichols
Director
|
2006
|
2,500
|
0
|
0
|
0
|
0
|
0
|
|
On
June
27, 2006, the Company entered into form employment agreements with its three
executive officers. The employment agreements are for a period of three years,
with prescribed percentage increases beginning in 2007 and can be cancelled
upon
a written notice by either employee or employer (if certain employee acts of
misconduct are committed). The total aggregate annual amount due under the
employment agreements is approximately $520,000.
In
addition, on June 27, 2006, the Company entered into a Directors agreement
with
four individuals to join the Company’s board of directors. Under the terms of
the agreement the non-employee Director (Chris Nichols) will receive annual
compensation in the amount of $5,000 and all Directors receive a one time grant
of 5,000 shares of the Company’s common stock. The common shares vest over the
period of one year. The value of the common stock granted was determined to
be
approximately $67,000 based on the estimated fair market value of the Company’s
common stock over a reasonable period of time.
ITEM
7: CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On
March
1, 2006, the Company entered into a Technology License agreement with Arkenol,
Inc. (“Arkenol”), which the Company’s majority shareholder and other family
members hold an interest in. Arkenol has its own management and board separate
and apart from the Company. According to the terms of the agreement, the Company
was granted an exclusive, non-transferable, North American license to use and
to
sub-license the Arkenol technology. The Arkenol Technology, converts cellulose
and waste materials into Ethanol and other high value chemicals. As
consideration for the grant of the license, the Company shall make a one time
payment of $1,000,000 at first project construction funding and for each plant
make the following payments: (1) royalty payment of 4% of the gross sales price
for sales by the Company or its sublicensees of all products produced from
the
use of the Arkenol Technology (2) and a one time license fee of $40.00 per
1,000
gallons of production capacity per plant. According to the terms of the
agreement, the Company made a one time exclusivity fee prepayment of $30,000
during the period ended August 31, 2006.
On
March
1, 2006, the Company entered into an Asset Transfer and Acquisition Agreement
with ARK Energy, Inc. (“ARK Energy”), which is owned (50%) by the Company’s
majority shareholder. ARK Energy, Inc. has its own management and board separate
and apart from the Company. Based upon the terms of the agreement, ARK Energy
transferred certain rights, assets, work-product, intellectual property and
other know-how on project opportunities that may be used to deploy the Arkenol
technology (as described in the above paragraph). In consideration, the Company
has agreed to pay a performance bonus of up to $16,000,000 when certain
milestones are met. These milestones include transferee’s project implementation
which would be demonstrated by start of the construction of a facility or
completion of financial closing which ever is earlier. The payment is based
on
ARK Energy’s cost to develop 19 sites which are currently at different stages of
research.
ITEM
8: DESCRIPTION OF SECURITIES
The
Company is authorized to issue 100,000,000 shares of $0.001 par value common
stock, and 1,000,000 shares of no par value preferred stock. Currently, the
Company has 21,028,279 shares of common stock outstanding.
Common
Stock
Presently,
the holders of our common stock are entitled to one vote for each share held
of
record on all matters submitted to a vote of our shareholders, including the
election of directors. Our common shareholders do not have cumulative voting
rights. Subject to preferences that may be applicable to any outstanding series
of our preferred stock which may be designated in the future, holders of our
common stock are entitled to receive ratably such dividends, if any, as may
be
declared by our Board of Directors out of legally available funds. In the event
of the liquidation, dissolution, or winding up of the Company, the holders
of
our common stock will be entitled to share ratably in the net assets legally
available for distribution to our shareholders after the payment of all our
debts and other liabilities, subject to the prior rights of any series of our
preferred stock then outstanding. The holders of our common stock have no
preemptive or conversion rights or other subscription rights and there are
no
redemption or sinking fund provisions applicable to our common
stock.
The
issuance of additional shares to certain persons allied with our management
could have the effect of making it more difficult to remove our current
management by diluting the stock ownership or voting rights of persons seeking
to cause such removal. In addition, an issuance of additional shares by us
could
have an effect on the potential realizable value of a shareholder's
investment.
Preferred
Stock
Our
board
of directors has the authority to issue up to 1,000,000 shares of preferred
stock, no par value per share, in one or more series and to fix the rights,
preferences, privileges, qualifications, limitations, and restrictions thereof,
and the number of shares constituting any series or the designation of such
series without shareholder approval. The existence of unissued preferred stock
may enable the board of directors, without further action by the stockholders,
to issue such stock to persons friendly to current management or to issue such
stock with terms that could render more difficult or discourage an attempt
to
obtain control of the Company, thereby protecting the continuity of the
Company’s management. Our shares of preferred stock could therefore be issued
quickly with terms that could delay, defer, or prevent a change in control
of
the Company, or make removal of management more difficult. No shares of
preferred stock are outstanding.
PART II
ITEM
1. MARKET PRICE OF AND DIVIDENDS ON THE COMPANY’S COMMON EQUITY AND OTHER
SHAREHOLDER MATTERS
Market
Information
The
Company’s common stock has traded on the Pink Sheets of the National Quotation
Bureau under the symbol BFRE since July 11, 2006. The following table sets
forth
the high and low sale prices for the Company’s common stock for the periods
indicated. The prices below reflect inter-dealer quotations, without retail
mark-up, mark-down or commissions and may not represent actual
transactions.
Quarter
ended
|
|
Low
price
|
|
High
price
|
|
|
|
|
|
|
|
|
|
September
30, 2006
|
|
$
|
1.30
|
|
$
|
7.25
|
|
Holders
A
total
of 21,028,279 shares of the Company’s common stock are currently outstanding
held by approximately 731 shareholders of record.
Dividends
The
Company has not paid any dividends since its inception. The Company currently
intends to retain any earnings for use in its business, and therefore does
not
anticipate paying dividends in the foreseeable future.
ITEM
2. LEGAL PROCEEDINGS
The
Company is not a party to any litigation and, to its knowledge, no action,
suit
or proceeding has been threatened against the Company. There are no material
proceedings to which any director, officer or affiliate of the Company or
security holder is a party adverse to the Company or has a material interest
adverse to the Company.
ITEM
3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
There
have been no disagreements on accounting and financial disclosures nor any
change in accountants from the inception of the Company through the date of
this
Registration Statement.
ITEM
4. RECENT SALES OF UNREGISTERED SECURITIES.
Prior
to
the reverse acquisition, Sucre entered into an agreement with two related
investors for the sale of 3,000,000 free trading shares of the Sucre’s common
stock for gross proceeds of $1,000,000. The previous management of Sucre
erroneously issued 4,000,000 shares of the Sucre’s common stock to the
investors. To date, the excess shares of 1,000,000 have not been returned to
the
transfer agent. The Company has demanded the return of the 1,000,000 and is
actively pursuing every possible channel to get the shares returned. Since
the
Company cannot predict the ultimate outcome, the 1,000,000 shares have been
accounted for as outstanding and included in the common shares retained by
Sucre’s shareholders. These securities were issued exempt from registration
pursuant to Rule 504 of Regulation D of the Securities Act of 1933 as
amended.
ITEM
5.
INDEMNIFICATION
OF OFFICERS AND DIRECTORS
The
Company’s Articles of Incorporation provide for indemnification of the Company’s
officers, directors and controlling persons to the full extent provided by
Nevada law. Further, the Articles of Incorporation provide that no director
or
officer is personally liable to the Company or its shareholders for monetary
damages for any breach of fiduciary duty by such person as a director or
officer. Notwithstanding the foregoing sentence, a director or officer is liable
to the extent provided by Nevada law, (i) for acts or omissions which
involve intentional misconduct, fraud or a knowing violation of law, or
(ii) for the payment of dividends in violation of Section 78.300 of
the Nevada Revised Statutes.
INDEX
TO CONSOLIDATED FINANCIAL STATEMENTS
Report
of Independent Registered Public Accounting Firm
|
|
F-2
|
|
|
|
Consolidated
Balance Sheet as of August 31, 2006
|
|
F-3
|
|
|
|
Consolidated
Statement of Operations from March 28, 2006 (Inception) to August
31,
2006
|
|
F-4
|
|
|
|
Consolidated
Statements of Stockholders’ Equity for the period from March 28, 2006
(Inception)
to August 31, 2006
|
|
F-5
|
|
|
|
Consolidated
Statements of Cash Flows for the period March 28, 2006 (Inception)
to
August
31, 2006
|
|
F-6
|
|
|
|
Notes
to Consolidated Financial Statements
|
|
F-7
|
|
|
|
Report
of Independent Registered Public Accounting Firm
November
9, 2006
Board
of
Directors
BlueFire
Ethanol Fuels, Inc. and Subsidiary
We
have
audited the accompanying consolidated balance sheet of BlueFire Ethanol Fuels,
Inc. (formerly Sucre Agricultural Corp.) and subsidiary, BlueFire Ethanol,
Inc.,
a development-stage company, (the “Company”) as of August 31, 2006, and the
related consolidated statements of operations, stockholders’ equity, and cash
flows for the period from March 28, 2006 (Inception) to August 31, 2006. These
consolidated financial statements are the responsibility of the Company’s
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audit.
We
conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we
plan
and perform the audit to obtain reasonable assurance about whether the
consolidated financial statements are free of material misstatement.
The
Company is not required to have, nor were we engaged to perform, an audit of
its
internal control over financial reporting. Our audit included consideration
of
internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose
of
expressing an opinion on the effectiveness of the Company’s internal control
over financial reporting. Accordingly, we express no such opinion.
An
audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the consolidated financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall consolidated financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.
In
our
opinion, the consolidated financial statements referred to above present fairly,
in all material respects, the financial position of BlueFire Ethanol Fuels,
Inc.
and subsidiary, BlueFire Ethanol, Inc., as of August 31, 2006, and the results
of their operations and their cash flows for the period from March 28, 2006
(Inception) to August 31, 2006, in conformity with accounting principles
generally accepted in the United States of America.
The
accompanying consolidated financial statements have been prepared assuming
that
the Company will continue as a going concern. As discussed in Note 2 of the
consolidated financial statements, the Company is a development-stage company
and has incurred losses from operations and used cash flows in operations.
These
factors raise substantial doubt about the Company’s ability to continue as a
going concern. Management’s plans regarding these matters are also described in
Note 2 of the consolidated financial statements. The accompanying consolidated
financial statements do not include any adjustments that might result from
the
outcome of this uncertainty.
BLUEFIRE
ETHANOL FUELS, INC. (FORMERLY SUCRE AGRICULTURAL CORP.) AND
SUBSIDIARY
(A
DEVELOPMENT-STAGE COMPANY)
CONSOLIDATED
BALANCE SHEET
|
|
August
31, 2006
|
|
ASSETS
|
|
|
|
|
|
|
|
Current
assets-
|
|
|
|
Cash
and cash equivalents
|
|
$
|
425,413
|
|
|
|
|
|
|
Prepaid
fees to related party (Note 5)
|
|
|
30,000
|
|
Total
assets
|
|
$
|
455,413
|
|
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
Accounts
payable
|
|
$
|
63,963
|
|
Accrued
liabilities
|
|
|
31,000
|
|
Total
liabilities
|
|
|
94,963
|
|
|
|
|
|
|
Commitments
and contingencies (Note 3)
|
|
|
|
|
|
|
|
|
|
Stockholders’
equity (Note 4):
|
|
|
|
|
Preferred
stock, no par value, 1,000,000
shares
authorized; none issued and outstanding
|
|
|
-
|
|
Common
stock, $0.001 par value; 100,000,000
shares
authorized; 21,028,279 shares
issued
and outstanding
|
|
|
21,028
|
|
Additional
paid-in capital
|
|
|
682,422
|
|
Deficit
accumulated during the development-stage
|
|
|
(343,000
|
)
|
Total
stockholders’ equity
|
|
|
360,450
|
|
|
|
|
|
|
Total
liabilities and stockholders’ equity
|
|
$
|
455,413
|
|
See
accompanying notes to consolidated financial
statements
BLUEFIRE
ETHANOL FUELS, INC. (FORMERLY SUCRE AGRICULTURAL CORP.) AND
SUBSIDIARY
(A
DEVELOPMENT-STAGE COMPANY)
CONSOLIDATED
STATEMENT OF OPERATIONS
|
|
Period
from
March
28, 2006
(Inception)
to
August
31,
|
|
|
|
2006
|
|
|
|
|
|
Revenues
|
|
$
|
-
|
|
|
|
|
|
|
Operating
expenses:
|
|
|
|
|
Project
development
|
|
|
160,806
|
|
General
and administrative
|
|
|
184,994
|
|
Total
operating expenses
|
|
|
345,800
|
|
|
|
|
|
|
Gross
profit
|
|
|
(345,800
|
)
|
|
|
|
|
|
Other
income
|
|
|
2,800
|
|
|
|
|
|
|
Net
loss
|
|
$
|
(343,000
|
)
|
|
|
|
|
|
Basic
and diluted loss per common shares:
|
|
$
|
(0.02
|
)
|
Weighted
average common shares outstanding, basic and diluted:
|
|
|
18,678,450
|
|
|
|
|
|
|
See
accompanying notes to consolidated financial
statements
BLUEFIRE
ETHANOL FUELS, INC. (FORMERLY SUCRE AGRICULTURAL CORP.)
AND
SUBSIDIARY
(A
DEVELOPMENT-STAGE COMPANY)
CONSOLIDATED
STATEMENT OF STOCKHOLDERS’ EQUITY
|
|
Common
Stock
|
|
Additional
Paid-in
|
|
Deficit
Accumulated During Development
|
|
Stockholders’
|
|
|
|
Shares
|
|
Amount
|
|
Capital
|
|
Stage
|
|
Equity
|
|
Balances
at March 28, 2006
(Inception)
|
|
|
-
|
|
$
|
-
|
|
$
|
-
|
|
$
|
-
|
|
$
|
-
|
|
Issuance
of founder’s shares for
compensation
at $0.001 per share
|
|
|
17,000,000
|
|
|
17,000
|
|
|
-
|
|
|
-
|
|
|
17,000
|
|
Common
shares retained by
Sucre
Agricultural Corp.
Shareholders
|
|
|
4,028,279
|
|
|
4,028
|
|
|
685,972
|
|
|
-
|
|
|
690,000
|
|
Costs
associated with the
acquisition
of
Sucre
Agricultural
Corp.
|
|
|
-
|
|
|
-
|
|
|
(3,550
|
)
|
|
-
|
|
|
(3,550
|
)
|
Net
loss
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(343,000
|
)
|
|
(343,000
|
)
|
Balances
at August 31, 2006
|
|
|
21,028,279
|
|
$
|
21,028
|
|
$
|
682,422
|
|
$
|
(343,000
|
)
|
$
|
360,450
|
|
See
accompanying notes to consolidated financial
statements
BLUEFIRE
ETHANOL FUELS, INC. (FORMERLY SUCRE AGRICULTURAL CORP.) AND
SUBSIDIARY
(A
DEVELOPMENT-STAGE COMPANY)
CONSOLIDATED
STATEMENT OF CASH FLOWS
|
|
Period
from
March
28, 2006
(Inception)
to
August
31,
|
|
|
|
2006
|
|
Cash
flows from operating activities:
|
|
|
|
Net
loss
|
|
$
|
(343,000
|
)
|
Adjustments
to reconcile net loss to net
cash
used in operating activities:
|
|
|
|
|
Costs
associated with acquisition of Sucre Agricultural Corp.
|
|
|
(3,550
|
)
|
Founders’
shares issued for compensation
|
|
|
17,000
|
|
Changes
in operating assets and liabilities:
|
|
|
|
|
Long
term prepaid
|
|
|
(30,000
|
)
|
Accounts
payable
|
|
|
63,963
|
|
Accrued
liabilities
|
|
|
31,000
|
|
Net
cash used in operating activities
|
|
|
(264,587
|
)
|
|
|
|
|
|
Cash
flows from financing activities-
|
|
|
|
|
Cash
received in acquisition of Sucre Agricultural Corp.
|
|
|
690,000
|
|
|
|
|
|
|
Net
increase in cash and cash equivalents
|
|
|
425,413
|
|
|
|
|
|
|
Cash
and cash equivalents beginning of period
|
|
|
-
|
|
|
|
|
|
|
Cash
and cash equivalents end of period
|
|
$
|
425,413
|
|
|
|
|
|
|
Supplemental
disclosures of cash flow information
|
|
|
|
|
Cash
paid during the period for:
|
|
|
|
|
Interest
|
|
$
|
-
|
|
Income
taxes
|
|
$
|
-
|
|
See
accompanying notes to consolidated financial
statements
BLUEFIRE
ETHANOL FUELS, INC. (FORMERLY SUCRE AGRICULTURAL CORP.)
AND
SUBSIDIARY
(A
DEVELOPMENT-STAGE COMPANY)
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE
1 - ORGANIZATION AND BUSINESS
BlueFire
Ethanol, Inc. (“BlueFire”) was incorporated in the state of Nevada on March 28,
2006 (“Inception”). BlueFire was established to deploy the commercially ready,
patented, and proven process for the profitable conversion of cellulosic waste
materials to ethanol (“Arkenol Process Technology”) under a technology license
agreement with Arkenol, Inc. (“Arkenol”). BlueFire's use of the Arkenol Process
Technology positions it as the only cellulose-to-ethanol company worldwide
with
demonstrated production of ethanol from urban trash (post-sorted MSW), rice
and
wheat straws, wood waste and other agricultural residues. The Company’s goal is
to develop and operate high-value carbohydrate-based transportation fuel
production facilities worldwide. These "biorefineries" will convert widely
available, inexpensive, organic materials such as agricultural residues,
high-content biomass crops, wood residues, and cellulose from MSW into ethanol.
BlueFire’s
business will encompass development activities leading to the construction
and
long-term operation of production facilities.
BlueFire
is currently in the development-stage of deploying project opportunities for
converting cellulose fractions of municipal solid waste and other opportunistic
feedstock into ethanol fuels. The Company entered into an Asset Transfer and
Acquisition Agreement with ARK Energy, Inc. (“ARK Energy”). Based upon the terms
of the agreement, ARK Energy transferred certain rights, assets, work-product,
intellectual property and other know-how on 19 project opportunities, that
management estimates is worth approximately $16,000,000, which may be used
by
BlueFire to accelerate its deployment of the Arkenol technology.
On
June
27, 2006, BlueFire completed a reverse acquisition of Sucre Agricultural Corp
(“Sucre”), a Delaware corporation. At the time of acquisition, Sucre had no
operations, revenues or liabilities. The only asset possessed by Sucre was
$690,000 in cash which was included in the acquisition. Sucre was considered
a
blank-check company prior to the acquisition. In connection with the acquisition
Sucre issued BlueFire 17,000,000 shares of common stock, approximately 85%
of
the outstanding common stock of Sucre, for all the issued and outstanding
BlueFire common stock. The Sucre stockholders retained 4,028,279 shares of
Sucre
common stock. BlueFire and Sucre will be collectively referred herein to as
the
“Company”. Immediately prior to the acquisition, Sucre changed its name to
BlueFire Ethanol Fuels, Inc.
NOTE
2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis
of Presentation and Change in Reporting Entity
The
acquisition of Sucre Agricultural Corp. by BlueFire Ethanol, Inc., as discussed
in Note 1, was accounted for as a reverse acquisition, whereby the assets and
liabilities of BlueFire are reported at their historical cost since the entities
are under common control immediately after the acquisition in accordance with
Statement of Financial Accounting Standards (“SFAS”) No. 141 “Business
Combinations” . The assets and liabilities of Sucre, which were not significant,
were recorded at fair value on June 27, 2006, the date of the acquisition.
No
goodwill was recorded in connection with the reverse acquisition since Sucre
had
no business. The reverse acquisition resulted in a change in the reporting
entity of Sucre, for accounting and reporting purposes. Accordingly, the
financial statements herein reflect the operations of BlueFire from Inception
and Sucre from June 27, 2006, the date of acquisition, through August 31, 2006.
The 4,028,279 shares retained by the stockholders of Sucre have been recorded
on
the date of acquisition of June 27, 2006.
BLUEFIRE
ETHANOL FUELS, INC. (FORMERLY SUCRE AGRICULTURAL CORP.)
AND
SUBSIDIARY
(A
DEVELOPMENT-STAGE COMPANY)
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
Going
Concern Considerations
The
accompanying consolidated financial statements have been prepared assuming
the
Company will continue as a going concern. The Company is currently a
development-stage enterprise. The Company's continued existence is dependent
upon the Company's ability to obtain additional debt and/or equity financing.
The Company has incurred losses since Inception and, the Company has not
generated any revenues from its products. These factors raise substantial doubt
about the ability of the Company to continue as a going concern. The Company
anticipates beginning construction of a plant within the next 6 months and
expects to complete the project and to begin production of ethanol within the
next 24 months. Although the cost of construction is not readily determinable,
the Company estimates the cost to be approximately $20 million per plant.
Management plans to raise additional funds through project financings or through
future sales of their common stock, until such time as the Company’s revenues
are sufficient to meet its cost structure, and ultimately achieve profitable
operations. There is no assurance that the Company will be successful in raising
additional capital or achieving profitable operations. The consolidated
financial statements do not include any adjustments that might result from
the
outcome of these uncertainties.
Principles
of Consolidation
The
consolidated financial statements include the accounts of BlueFire Ethanol
Fuels, Inc., and its wholly-owned subsidiary BlueFire Ethanol, Inc. All
significant intercompany balances and transactions have been eliminated in
consolidation.
Use
of Estimates
The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date
of
the financial statements, and the reported amounts of revenues and expenses
during the reported periods. Actual results could materially differ from those
estimates.
Cash
and Cash Equivalents
For
purpose of the statement of cash flows, the Company considers all highly liquid
debt instruments purchased with a maturity of three months or less to be cash
equivalents.
Revenue
Recognition
The
Company is currently a developmental-stage company and has recognized minimal
revenues to date. The Company will recognize revenues from 1) consulting
services rendered to potential sub-licensees for development and construction
of
cellulose to ethanol projects, 2) sales of ethanol from its production
facilities when (a) persuasive evidence that an agreement exists; (b) the
products have been delivered; (c) the prices are fixed and determinable and
not
subject to refund or adjustment; and (d) collection of the amounts due is
reasonably assured.
BLUEFIRE
ETHANOL FUELS, INC. (FORMERLY SUCRE AGRICULTURAL CORP.)
AND
SUBSIDIARY
(A
DEVELOPMENT-STAGE COMPANY)
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
Project
Development
Project
development costs are expensed as incurred. The costs of materials and equipment
that will be acquired or constructed for project development activities, and
that have alternative future uses, both in project development, marketing or
sales, will be classified as property and equipment and depreciated over their
estimated useful lives. To date, project development costs include the
development, engineering, and marketing expenses related to the Company’s
cellulose fractions of municipal solid waste into ethanol fuels.
Income
Taxes
The
Company accounts for income taxes in accordance with FASB Statement No. 109
“Accounting for Income Taxes.” SFAS No. 109 requires the Company to provide a
net deferred tax asset/liability equal to the expected future tax
benefit/expense of temporary reporting differences between book and tax
accounting methods and any available operating loss or tax credit carry
forwards.
Fair
Value of Financial Instruments
The
fair
value of financial instruments approximated their carrying values at August
31,
2006. The financial instruments consist of cash and accounts
payable.
Loss
per Common Share
The
Company presents basic loss per share (“EPS”) and diluted EPS on the face of the
consolidated statement of operations. Basic loss per share is computed as net
loss divided by the weighted average number of common shares outstanding for
the
period. Diluted EPS reflects the potential dilution that could occur from common
shares issuable through stock options, warrants, and other convertible
securities. During the period ended August 31, 2006, there were no dilutive
instruments outstanding.
Risks
and Uncertainties
The
Company’s operations are subject to new innovations in product design and
function. Significant technical changes can have an adverse effect on product
lives. Design and development of new products are important elements to achieve
and maintain profitability in the Company’s industry segment.
The
Company may be subject to federal, state and local environmental laws and
regulations. The Company does not anticipate expenditures to comply with such
laws and does not believe that regulations will have a material impact on the
Company’s financial position, results of operations, or liquidity. The Company
believes that its operations comply, in all material respects, with applicable
federal, state, and local environmental laws and regulations
BLUEFIRE
ETHANOL FUELS, INC. (FORMERLY SUCRE AGRICULTURAL CORP.)
AND
SUBSIDIARY
(A
DEVELOPMENT-STAGE COMPANY)
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
Concentrations
of Credit Risk
The
Company, at times, maintains cash balances at certain financial institutions
in
excess of amounts insured by federal agencies.
Recent
Accounting Pronouncements
In
December 2004, the FASB issued SFAS No. 123(R), “Share-Based Payment,” which
revises SFAS No. 123. SFAS No. 123(R) is effective July 1, 2005 for all calendar
year-end companies and requires companies to expense the fair value of employee
stock options and other forms of stock-based compensation. This expense will
be
recognized over the period during which an employee is required to provide
services in exchange for the award. Currently, the Company does not have any
outstanding stock options, and as such the Company does not expect the guidance
under SFAS No. 123(R) to have a material impact on the consolidated financial
statements.
NOTE
3 - COMMITMENTS AND CONTINGENCIES
On
May 1,
2006, the Company began discussions with a certain consultant to negotiate
project and operating financing for the Company. As of August 31, 2006, the
Company had not finalized the consulting agreement and the consultant did not
have any capital funding arrangements. However, the Company has made monthly
payments in the amount of $7,500 to Consultant since July of 2006.
On
June
27, 2006, the Company entered into employment agreements with three key
employees. The employment agreements are for a period of three years, with
prescribed percentage increases beginning in 2007 and can be cancelled upon
a
written notice by either employee or employer (if certain employee acts of
misconduct are committed). The total aggregate annual payments under the
employment agreements are approximately $520,000.
In
addition, on June 27, 2006, the Company entered into an agreement with four
individuals to join the Company’s board of directors. Under the terms of the
agreement the individuals will receive annual compensation in the amount of
$5,000 and a one time grant of 5,000 shares of the Company’s common stock. The
common shares vest over the period of one year. The value of the common stock
granted was determined to be approximately $67,000 based on the estimated fair
market value of the Company’s common stock over a reasonable period of time. The
Company is currently expensing the value of the common stock over the vesting
period. As of August 31, 2006, the Company amortized $11,000 to general and
administrative expenses and included in accrued liabilities as the shares had
not been issued.
NOTE
4 -STOCKHOLDERS’ EQUITY
Founder
Shares
In
March
2006, upon incorporation BlueFire issued 10,000 shares of $1.00 par value common
stock to various individuals. The shares were recorded at their par value of
$10,000 and expensed. In connection with the reverse acquisition, as discussed
in Note 2, these individuals received an aggregate of 17,000,000 shares of
Sucre’s common stock in exchange for their 10,000 shares of BlueFire. At the
time of the transaction BlueFire did not have sufficient paid-in capital to
reclass the additional par value of the common shares to common stock, thus
the
Company expensed an additional $7,000. The amounts were recorded as general
and
administrative expense on the accompanying statement of operations.
BLUEFIRE
ETHANOL FUELS, INC. (FORMERLY SUCRE AGRICULTURAL CORP.)
AND
SUBSIDIARY
(A
DEVELOPMENT-STAGE COMPANY)
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
Acquisition
Costs
In
connection with the acquisition of Sucre, the Company incurred legal costs
of
$3,550. The costs have been treated as a reduction of additional paid-in
capital.
Financings
Prior to Reverse Acquisition
Prior
to
the reverse acquisition, Sucre entered into an agreement with an investor for
the sale of 3,000,000 shares of the Sucre’s common stock for gross proceeds of
$1,000,000. The previous management of Sucre erroneously issued 4,000,000 shares
of Sucre’s common stock to the investor. To date, the excess shares of 1,000,000
have not been returned to the transfer agent. The Company has demanded the
return of the 1,000,000 and is actively pursuing every possible channel to
get
the shares returned. Since the Company cannot predict the ultimate outcome,
the
1,000,000 shares have been accounted for as outstanding and included in the
common shares retained by Sucre shareholders.
NOTE
5 -RELATED PARTY TRANSACTIONS
On
March
1, 2006, the Company entered into a Technology License agreement with Arkenol,
Inc. (“Arkenol”), which the Company’s majority shareholder and other family
members hold an interest in. Arkenol has its own management and board separate
and apart from the Company. According to the terms of the agreement, the Company
was granted an exclusive, non-transferable, North American license to use and
to
sub-license the Arkenol technology. The Arkenol Technology, converts cellulose
and waste materials into Ethanol and other high value chemicals. As
consideration for the grant of the license, the Company shall make a one time
payment of $1,000,000 at first project construction funding and for each plant
make the following payments: (1) royalty payment of 4% of the gross sales price
for sales by the Company or its sublicensees of all products produced from
the
use of the Arkenol Technology (2) and a one time license fee of $40.00 per
1,000
gallons of production capacity per plant. According to the terms of the
agreement, the Company made a one time exclusivity fee prepayment of $30,000
during the period ended August 31, 2006. As of August 31, 2006, the amount
has
been reflected as a long term prepaid asset as the Company does not expect
to
incur any liabilities under this agreement prior to one year from the balance
sheet date. As of August 31, 2006, the Company had not incurred any liabilities
related to the agreement.
On
March
1, 2006, the Company entered into an Asset Transfer and Acquisition Agreement
with ARK Energy, Inc. (“ARK Energy”), which is owned (50%) by the Company’s
majority shareholder. ARK Energy, Inc. has its own management and board separate
and apart from the Company. Based upon the terms of the agreement, ARK Energy
transferred certain rights, assets, work-product, intellectual property and
other know-how on project opportunities that may be used to deploy the Arkenol
technology (as described in the above paragraph). In consideration, the Company
has agreed to pay a performance bonus of up to $16,000,000 when certain
milestones are met. These milestones include transferee’s project implementation
which would be demonstrated by start of the construction of a facility or
completion of financial closing which ever is earlier. The payment is based
on
ARK Energy’s cost to acquire and develop 19 sites which are currently at
different stages of research. As of August 31, 2006, the Company had not
incurred any liabilities related to the agreement.
BLUEFIRE
ETHANOL FUELS, INC. (FORMERLY SUCRE AGRICULTURAL CORP.)
AND
SUBSIDIARY
(A
DEVELOPMENT-STAGE COMPANY)
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE
6 - INCOME TAXES
Income
tax reporting primarily relates to the business of the parent company Sucre
which experienced a change in ownership on June 27, 2006. A change in ownership
requires management to compute the annual limitation under Section 382 of the
Internal Revenue Code. The amount of benefits the Company may receive from
the
operating loss carry forwards for income tax purposes is further dependent,
in
part, upon the tax laws in effect, the future earnings of the Company, and
other
future events, the effects of which cannot be determined.
The
Company’s deferred tax assets consist solely of net operating loss carry
forwards of approximately $107,000. For federal tax purposes these carry
forwards expire in twenty years beginning in 2026 and for the State of
California purposes they expire in five years beginning in 2011. A full
valuation allowance has been placed on 100% of the Company’s deferred tax assets
as it cannot be determined if the assets will be ultimately used. During the
period from Inception to August 31, 2006, the Company’s valuation allowance
increased by approximately $107,000.
In
addition, the Company expects that Sucre is not current in their federal and
state income tax filings. The Company has not determined how delinquent the
filings are. However, the effect of non filing is not expected to be significant
as Sucre has not had active operations for a significant period of time.
PART III
ITEMS
1 AND 2. INDEX TO EXHIBITS AND DESCRIPTION OF
EXHIBITS
Exhibit No.
|
Description
|
2.1
|
Stock
Purchase Agreement and Plan of Reorganization dated May 31, 2006,
filed
herewith.
|
3.1
|
Amended
and Restated Articles of Incorporation dated July 2, 2006, filed
herewith.
|
3.2
|
Amended
and Restated Bylaws dated May 27, 2006, filed herewith.
|
10.1
|
Form
Directors Agreement, filed herewith.
|
10.2
|
Form
Executive Employment Agreement, filed herewith.
|
10.3
|
Arkenol
Technology License Agreement, dated March 1, 2006, filed
herewith.
|
10.4
|
ARK
Energy Asset Transfer and Acquisition Agreement, dated March 1, 2006,
filed herewith.
|
21.1
|
Subsidiaries,
filed herewith.
|
SIGNATURES
In
accordance with Section 12 of the Securities Exchange Act of 1934, the
registrant caused this registration statement to be signed on its behalf by
the
undersigned, thereunto duly authorized on December 8, 2006.
|
By:
|
/s/
Arnold Klann
|
|
|
|
President,
CEO and Director
|
|
|
|
Pursuant
to the requirements of the Securities Exchange Act of 1934, this registration
statement has been signed by the following persons in the capacities indicated
on December 8, 2006.
Signature
|
|
Title
|
|
|
|
/s/
Arnie Klann
|
|
Arnie
Klann, President, CEO and Chairman
|
|
|
(Principal
Executive Officer)
|
|
|
|
/s/
John Cuzens
|
|
John
Cuzens, Treasurer, VP and Director
|
|
|
(Principal
Financial Officer)
|
|
|
|
/s/
Necitas Sumait
|
|
Necitas
Sumait, Secretary, VP and Director
|
|
|
|
|
|
|
/s/
Chris Nichols
|
|
Chris
Nichols, Director
|
|
|
|
25
Exhibit
2.1
STOCK
PURCHASE AGREEMENT
AND
PLAN OF REORGANIZATION
BY
AND
AMONG
SUCRE
AGRICULTURAL CORP.
("BUYER"),
_____________________
THE
SHAREHOLDERS OF BLUEFIRE ETHANOL INC.
(“SELLER’),
BLUEFIRE
ETHANOL INC.
(“COMPANY”)
AND
TBECK
CAPITAL, INC.
STOCK
PURCHASE AGREEMENT AND PLAN OF REORGANIZATION
THIS
STOCK PURCHASE AGREEMENT AND PLAN OF REORGANIZATION is made and entered into
this 31st day of May, 2006, by and among Sucre Agriculatural Corp., a Delaware
corporation (hereinafter referred to as “Buyer”), the shareholders of Blue Fire
Ethanol, Inc., (collectively the “SELLER”, listed on
Exhibit
A
),
BLUEFIRE ETHANOL INC., a Nevada corporation (hereinafter referred to as the
“Company”), and TBeck Capital, Inc.
RECITALS:
a.
Seller
owns all of the 10,000 shares of issued and outstanding common stock, par value
$1.00, of the Company (“Company Shares”).
b.
Buyer
has
authorized capital stock consisting 50,000,000 shares of common stock, par
value
$.001 (“Buyer Common Stock”), of which 1,053,000 are currently issued and
outstanding, however, of which 3,000,000 will be issued and outstanding prior
to
the Closing (defined below).
c.
Seller
is
willing to sell to Buyer, and Buyer is willing to purchase from Seller, all
of
the Company Shares in exchange for Buyer’s issuance of Seventeen Million
(17,000.000) shares of Buyer Common Stock to Seller, on the terms and subject
to
the conditions set forth herein.
d.
Buyer
is
to have $700,000 in cash assets at the time of Closing for the Company to
utilize as working capital moving forward.
NOW,
THEREFORE, in consideration of the above premises and of the mutual covenants,
conditions and agreements set forth herein and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the
parties, intending to be legally bound, hereby agree as follows:
ARTICLE
1
DEFINITIONS
1.1
Definitions
.
In
addition to the terms defined elsewhere in this Agreement, for purposes of
this
Agreement:
"Affiliate"
means, with respect to any Person, any other Person that directly or indirectly,
through one or more intermediaries, controls, is controlled by, or is under
common control with, such first Person.
"Agreement"
means this Stock Purchase Agreement and Plan of Reorganization, together with
the Schedules and the Exhibits attached hereto, as the same may be amended,
supplemented or otherwise modified from time to time.
“Buyer
Balance Sheet Date” means April 30, 2006.
“Buyer
Charter Documents” means the organizational documents and By-laws of
Buyer.
"Closing"
means the actual transfer and delivery of the documents transferring the Company
Shares to Buyer, the payment of the Purchase Consideration and the exchange
and
delivery by the parties of the other documents and instruments contemplated
by
this Agreement.
"Closing
Date" means, subject to the provisions of Section 6.1, on or before May 31,
2006. .
“Company
Charter Documents” means the organizational documents and By-laws of the
Company.
“Company
Balance Sheet Date” means April 15 2006 .
“Code”
shall mean the Internal Revenue Code of 1986, as amended.
“Defensible
Title” means such right, title and interest that is (a) evidenced by an
instrument or instruments filed of record in accordance with the conveyance
and
recording laws of the applicable jurisdiction to the extent necessary to prevail
against competing claims of bona fide purchasers for value without notice,
and
(b) subject to Permitted Encumbrances, free and clear of all Liens, claims,
infringements, burdens and other defects.
“Dollars”
means the lawful currency of the United States of America.
“Environmental
Law” means any federal, state, local or foreign statute, code, ordinance, rule,
regulation, policy, guideline, permit, consent, approval, license, judgment,
order, writ, decree, common law, injunction or other authorization in effect
on
the date hereof, at the Closing Date, or at a previous time applicable to the
operations of the Company: (a) relating to emissions, discharges, releases
or
threatened releases of hazardous materials into the natural environment,
including into ambient air, soil, sediments, land surface or subsurface,
buildings or facilities, surface water, groundwater, publicly-owned treatment
works, septic systems or land; (b) relating to the generation, treatment,
storage, disposal, use, handling, manufacturing, recycling, transportation
or
shipment of hazardous materials; (c) relating to occupational health and safety;
or (d) otherwise relating to the pollution of the environment, solid waste
handling treatment or disposal, operation or reclamation of land, or protection
of environmentally sensitive areas.
“GAAP”
means United States generally accepted accounting principles, consistently
applied.
"Knowledge"
with respect to (i) Seller and the Company means the knowledge of each Seller
and the knowledge of each Company's officers and directors listed in
Exhibit
A
,
after
reasonable inquiry, and (ii) Buyer means the knowledge of the officers and
directors of Buyer and TBeck Capital as listed in
Exhibit
B
,
after
reasonable inquiry.
“Labor
Claims” means any employment and/or social security related claim, whether
judicial or administrative, including but not limited to claims for rights,
benefits, indemnities or actions that could correspond to the employees
pursuant to the Labor Law, Social Security Law, Civil Code, Working Environment
and Conditions Law, Housing Policy Law, National Institute for Cooperative
Education Law, Feeding Law for Employees, their Regulations, as well
as any other legal or contractual provision related to the services
performed by the employees.
"Lien"
means any mortgage, deed of trust, pledge, hypothecation, security interest,
encumbrance, easement, claim, lien, lease (including any capitalized lease)
or
charge of any kind, whether voluntarily incurred or arising by operation of
law
or otherwise, affecting any assets or property, including any agreement to
give
or grant any of the foregoing, any conditional sale or other title retention
agreement and the filing of or agreement to give any financing statement with
respect to any assets or property.
"Material
Adverse Effect" or "Material Adverse Change" means, when used in connection
with
any Person, any change or effect (or any development that, insofar as can
reasonably be foreseen, is likely to result in any change or effect) that would
result in an adverse change in the business, financial condition, operating
results, assets, operations or business prospects of such Person, or in a labor
disruption or casualty loss or damage to the assets of such Person.
“Permitted
Encumbrances” means: (a) Liens for Taxes, assessments or other governmental
charges or levies if the same shall not at the particular time in question
be
due and delinquent or (if foreclosure, distraint, sale or other similar
proceedings shall not have been commenced or, if commenced, shall have been
stayed) are being contested in good faith by appropriate proceedings and if
the
Company shall have set aside on its books such reserves (segregated to the
extent required by sound accounting practices) as may be required by or
consistent with GAAP and, whether reserves are set aside or not, are listed
on
the applicable Disclosure Schedule; (b) Liens of carriers, warehousemen,
mechanics, laborers, materialmen, landlords, vendors, workmen and operators
arising by operation of any Companies business; (c) Liens incurred in the
ordinary course of business in connection with workers' compensation,
unemployment insurance and other social security legislation which would not
and
will not, individually or in the aggregate, result in a Material Adverse Effect
on any Company; (d) Liens incurred in the ordinary course of business to secure
the performance of bids, tenders, trade contracts, leases, statutory
obligations, surety and appeal bonds, performance and repayment bonds and other
obligations of a like nature which would not and will not, individually or
in
the aggregate, result in a Material Adverse Effect on any Company; (e) Liens,
easements, rights-of-way, restrictions, servitudes, permits, conditions,
covenants, exceptions, reservations, and other similar encumbrances incurred
in
the ordinary course of business or existing on property and not materially
impairing the value of the assets of any Company, or interfering with the
ordinary conduct of the business of any Company, or rights to any of its assets;
and (f) any defects, irregularities or deficiencies in title to easements,
rights-of-way or other surface use agreements that do not materially adversely
affect the value of any asset of any Company by an amount in excess of $10,000
in the aggregate.
"Person"
means an individual, corporation, partnership, limited liability company,
association, trust, unincorporated organization or other entity.
"Purchase
Consideration" means the aggregate price to be paid by Buyer for the Company
Shares held by Seller, as provided for in Article 2.
“Taxes”
means taxes of any kind, levies, or other like assessments, customs, duties,
imposts, charges, or fees, including income, gross receipts, ad valorem, value
added, excise, real or personal property, asset, sales, use, royalties, license,
payroll, transaction, capital, net worth, and franchise taxes, estimated taxes,
withholding, employment, Social Security, Workman’s Compensation, utility,
severance, production, unemployment compensation, occupation, premium, windfall
profits, transfer and gains taxes, and other governmental taxes imposed or
payable to any state, local, municipal, or foreign governmental subdivision,
or
agency thereof, and in each instance such term shall include any interest,
penalties, or additions to tax attributable to any such tax, including penalties
for failure to file any tax return or report.
ARTICLE
2
PURCHASE
AND SALE
2.1
Purchase
and Sale
.
At the
Closing on the Closing Date, and upon all of the terms and subject to all of
the
conditions of this Agreement, each Seller shall sell, assign, convey, transfer
and deliver to Buyer, and Buyer shall purchase, all of Sellers' Company Shares,
such sale and purchase transactions being collectively referred to herein as
the
"
Purchase
".
2.2
Payments
on Closing
.
At the
Closing on the Closing Date, Buyer shall, in consideration for good and
marketable title to the Company Shares, free and clear of all Liens, charges,
encumbrances and restrictions of any kind (other than those imposed pursuant
to
the terms of this Agreement), issue Seventeen Million Shares of the restricted
Buyer Common Stock to Sellers on a pro rata basis of their holdings of Company
Stock. The exact breakdown on the 17,000,000 shares is attached as
Schedule
3.4
to this
Agreement.
2.3.
Buyer
Assets
.
At the
time of Closing, Buyer shall have cash assets of $700,000 ($1,00,000 net of
$300,000 commissions to be paid as discussed in Section 3.23 herein) to be
used
as working capital for the Company. Prior to the Closing, Buyer shall have
raised the $700,000 (plus $300,000 paid in commissions for this transaction)
by
a private offering of equity to investors related to TBeck Capital. The offering
documents and sample subscription agreement are attached hereto as
Exhibit
C
.
The
shares sold pursuant to this offering are included in the 3,000,000 shares
of
issued Buyer Common Stock as Buyer is capitalized prior to the Closing. Buyer
warrants that it has filed all necessary state and federal securities law
filings in regards to this financing prior to the Closing.
Furthermore,
TBeck Capital and Westcap Securities Inc., financial advisers to Buyer, shall
agree to raise a minimum of $4,000,000 within 180 days for the date of the
Closing, on terms and conditions acceptable to BlueFire Ethanol, as well as
$5,000,000 during the fourth quarter of 2007 as institutional
financing.
2.4
Additional
Consideration at Closing. Prior to the Closing, Buyer will effect a name change
with the Pink Sheets trading organization from Sucre Agricultural, Inc. to
Blue
Fire Ethanol, Inc., and a ticker symbol change (and CUSIP # change) from SAGR
to
an available ticker symbol as issued by the NASD.
2.5
The
Closing
.
The
Closing of the transactions contemplated by this Agreement shall take place
at
10:00 a.m., local time on the Closing Date, at the offices of the Company,
or at
such other time and place as the parties might hereafter mutually agree in
writing.
2.6
Deliveries
.
At the
Closing on the Closing Date:
(a)
Seller
will deliver to Buyer:
(i)
certificates
representing the Company Shares, duly endorsed (or
accompanied
by duly executed stock powers);
(ii)
a
certificate executed by each Seller representing and warranting to Buyer that,
except as otherwise stated in such certificate, each of Seller' representations
and warranties in this Agreement was accurate in all respects as of the date
of
this Agreement and is accurate in all material respects as of the Closing Date
as if made on the Closing Date, except that representations and warranties
that
are by their express provisions made as of a specific date need be true and
correct only as of such specific date; and
(b)
Buyer
will deliver or cause to be delivered to Seller:
(i)
the
certificates evidencing the Buyer Company Stock;
(ii)
$700,000
of cash capital available for the working capital needs of the
Company;
(iii)
|
written
resignation of the entire board of directors of the Buyer, as well
as its
officers, with a consent to appoint to the board of directors of
the Buyer
the appointees of the Seller, which shall include one designee
of TBeck
Capital Inc. on such board.
|
(iv)
|
a
certificate executed by Buyer to the effect that, except as otherwise
stated in such certificate, each of Buyer's representations and warranties
in this Agreement is accurate in all material respects as of the
Closing
Date as if made on the Closing Date.
|
2.7
Tax
Free Reorganization
.
The
parties intend that the transaction under this Agreement qualify as a tax-free
reorganization under Sections 368 and 354 of the Internal Revenue Code of 1986,
as amended.
ARTICLE
3
REPRESENTATIONS
AND WARRANTIES OF
SELLER
AND THE COMPANY
Seller
and the Company, jointly and severally, represent and warrant to Buyer that
the
statements contained in this Article 3 are true, correct and complete as of
the
date of this Agreement.
3.1
Organization,
Standing and Power
.
The
Company is a corporation duly organized, validly existing and in good standing
under the laws of the State of Nevada, and is duly qualified to do business
and
is in good standing in each jurisdiction in which the nature of its business
or
the ownership or leasing of its properties makes such qualification necessary,
other than in such jurisdictions where the failure to be so qualified to do
business or in good standing (individually or in the aggregate) would not have,
or would not reasonably be likely to have, a Material Adverse Effect on the
Company. The Company has all requisite corporate power and authority to own,
lease, and operate its properties and assets and to carry on its business as
now
conducted. Complete and correct copies of the certificate and articles of
incorporation, as amended, and the bylaws, as amended, of the Company as in
effect on the date of this Agreement have been previously delivered by Seller
to
Buyer.
3.2
No
Subsidiaries
.
(a) The
Company has no subsidiaries, and does not own, directly or indirectly, any
capital stock or other ownership, participation or equity interest in any
corporation, partnership, limited liability company, association, joint venture
or other entity , and (b) there are no outstanding contractual obligations
or
commitments of the Company to acquire or make any investment in any shares
of
capital stock or other ownership, participation, or equity interest in any
corporation, partnership, limited liability company, association, joint venture,
or other entity.
3.3
Capital
Structure
.
(a)
As
of the
date hereof, the authorized capital stock of the Company consists of 10,000
shares of common stock, par value $1.00. At the close of business on April
30,
2006, 10,000 shares of common stock were issued and outstanding (see
Schedule
3.4
for
shareholder list). No shares of common stock were held by the Company in its
treasury. The Company has no outstanding stock options, stock appreciation
rights, phantom units, profit participation or similar rights with respect
to
the Company. No shares of capital stock or other equity or voting securities
of
the Company are reserved for issuance or are outstanding. All of the issued
and
outstanding shares of capital stock of the Company are duly authorized, validly
issued, fully paid and non-assessable and have not been issued in violation
of
any preemptive rights or in violation of state or federal securities laws,
and
there are no preemptive rights with respect thereto. No capital stock has been
issued by the Company since the Company Balance Sheet Date. Except as set forth
above, as of the date hereof there are no outstanding or authorized securities,
options, warrants, calls, rights, commitments, preemptive rights, agreements,
arrangements, or undertakings of any kind to which the Company is a party,
or by
which it is bound, obligating the Company to issue, deliver or sell, or cause
to
be issued, delivered or sold, any shares of capital stock or other equity or
voting securities of, or other ownership interests in, the Company or obligating
the Company to issue, grant, extend, or enter into any such security, option,
warrant, call, right, commitment, agreement, arrangement, or undertaking. There
are not as of the date of this Agreement and there will not be at the Closing
Date any shareholder agreements, voting trusts or other agreements or
understandings to which the Company is a party or by which it is bound relating
to the voting of any shares of the capital stock of the Company.
(b)
The
shares of capital stock of the Company held by Seller (the "
Company
Shares
")
constitute all of the issued and outstanding shares of capital stock or other
ownership interests of the Company. Except for the purchase and sale of the
Company Shares pursuant to this Agreement, there are no outstanding claims,
options, or other rights of any Person to purchase from Seller, and no contracts
or commitments providing for the granting of rights to acquire, any of the
Company Shares. There are no claims pending or, to the Knowledge of Seller
and
the Company, threatened, against the Company or any Seller that concern or
affect title to the Company Shares, or that seek to compel the issuance of
capital stock or other securities of the Company.
(c)
There
are
no outstanding obligations in connection with the redemption by the Company
of
any of the previously issued and outstanding shares of capital stock of the
Company.
3.4
Title
to Company Shares
.
Each
Seller has legal, beneficial, and record title to the Company Shares set forth
opposite such Seller's name on
Schedule
3.4
,
free
and clear of any and all Liens, restrictions, options, voting trusts or
agreements, proxies, encumbrances, claims or charges of any kind whatsoever
(except as set forth in Section 3.3) and are validly issued, fully paid and
non-assessable. Seller has or will have at the Closing physical custody of
the
certificates evidencing all of the Company Shares. At Closing, Buyer will
acquire good and defensible title to the Company Shares, free and clear of
any
and all Liens, restrictions, options, voting trusts, or agreements, proxies,
encumbrances, claims or charges of any kind.
3.5
Authorization;
Enforceability
.
(a)
The
Company has the requisite corporate power and authority, to enter into this
Agreement and to consummate the transactions contemplated hereby. The execution
and delivery of this Agreement by the Company and the consummation by the
Company of the transactions contemplated hereby have been duly authorized by
all
necessary corporate action on the part of the Company. This Agreement has been
duly and validly executed and delivered by the Company and constitutes a valid
and binding obligation of the Company, enforceable against the Company in
accordance with its terms, except that (i) such enforcement may be subject
to
bankruptcy, insolvency, reorganization, moratorium, or other similar laws or
judicial decisions now or hereafter in effect relating to creditors' rights
generally and (ii) the remedy of specific performance and injunctive relief
may
be subject to equitable defenses and to the discretion of the court before
which
any proceeding may be brought. The execution and delivery of this Agreement
by
the Company do not, and the consummation of the transactions contemplated hereby
and compliance with the provisions hereof will not, conflict with, or result
in
any violation of, or default (with or without notice or lapse of time, or both
)
under, or give rise to a right of termination, cancellation, or acceleration
of
or "put" right with respect to any obligation or to loss of a material benefit
under, or result in the creation of any Lien on any of the properties or assets
of the Company under, any provision of (i) the articles of incorporation or
bylaws of the
Company,
each as amended through the date hereof (the "
Company
Charter Documents
"),
(ii)
any loan or credit agreement, note, bond, mortgage, indenture, lease, or other
agreement, instrument, permit, concession, franchise, or license applicable
to
the Company or its properties or assets or (iii) subject to governmental filings
and other matters referred to in the following sentence, any judgment, order,
decree, statute, law, ordinance, rule or regulation, or arbitration award
applicable to the Company or its properties or assets, other than in the case
of
clauses (ii) and (iii), any such conflicts, violations, defaults, rights, or
Liens that individually or in the aggregate would not have, or would not
reasonably be likely to have, a Material Adverse Effect on the Company and
would
not, or would not reasonably be likely to, materially impair the ability of
the
Company to perform its obligations hereunder or prevent the consummation of
any
of the transactions contemplated hereby. No consent, approval, order, or
authorization of, or registration, declaration, or filing with, any court,
administrative agency, or commission or other governmental authority or agency,
domestic or foreign, including local authorities (a "
Governmental
Authority
"),
is
required by or with respect to the Company in connection with the execution
and
delivery of this Agreement by the Company or the consummation by the Company
of
the transactions contemplated hereby.
(b)
The
execution, delivery and performance of this Agreement and all of the agreements,
documents and instruments required under this Agreement by Seller and the
consummation by Seller of the transactions contemplated hereby and thereby
(including the sale, transfer, assignment, and delivery of the Company Shares),
are within the power, legal rights, legal capacity, and authority of Seller.
This Agreement is, and the other agreements, documents and instruments required
by this Agreement will be, when executed and delivered by Seller, the valid
and
binding obligations of Seller, enforceable against Seller in accordance with
their terms, except as (i) such enforcement may be subject to bankruptcy,
insolvency, reorganization, moratorium, or other similar laws or judicial
decisions now or hereafter in effect relating to creditors' rights generally
and
(ii) the remedy of specific performance and injunctive relief may be subject
to
equitable defenses and to the discretion of the court before which any
proceeding may be brought.
3.6
Absence
of Conflicting Agreements
.
Neither
the execution, delivery, or performance of this Agreement by Seller or the
Company, nor the consummation of the transactions contemplated hereby does
or
will, after the giving of notice, or the lapse of time or both, or
otherwise:
(a)
subject
to receipt of any necessary third party consents, conflict with, result in
a
breach of, constitute a default, or give rise to a right of termination under
the certificate and articles of incorporation or bylaws of the Company, any
federal, state, or local law, statute, ordinance, rule, or regulation applicable
to the Company or Seller, or any court or administrative order or process,
or
any contract, agreement, arrangement, commitment, or plan to which Seller or
the
Company is a party or by which Seller or the Company is bound;
(b)
result
in
the creation of any Lien upon any of the Company Shares, or the assets,
business, and properties of the Company;
(c)
subject
to receipt of any necessary third party consents, terminate, amend, or modify,
or give any party the right to terminate, amend, modify, abandon, or refuse
to
perform any contract, agreement, arrangement, commitment, or plan to which
the
Company is a party or by which it is bound;
(d)
accelerate
or modify, or give any party the right to accelerate or modify, the time within
which, or the terms under which, any duties or obligations are to be performed,
or any rights or benefits are to be received, under any contract, agreement,
arrangement, commitment, or plan to which the Company is a party or by which
it
is bound; or
(e)
to
the
Knowledge of Seller and the Company, require the consent, waiver, approval,
permit, license, clearance or authorization of, or any declaration or filing
with, any court or public agency or other authority. All Parties agree to
cooperate fully with each other to have change of control in the Company to
be
approved by all necessary government authorities.
3.7
Condition
of Properties
.
To the
Knowledge of Seller and the Company, except as may be limited by the ordinary
course of business occurring on a day-to-day basis, all properties and assets
owned or utilized by the Company are in good operating condition and repair,
free from any defects (except such minor defects as do not interfere with the
use thereof in the conduct of the normal operations of the Company), ordinary
wear and tear excepted, and have been maintained consistent with prudent
industry practice. No other assets or properties are needed to permit the
Company to carry on its business as conducted during the preceding 12 months
and
as proposed to be conducted. To the Knowledge of Seller and the Company, all
buildings, plants and other structures owned or otherwise utilized by the
Company are in good condition and repair, ordinary wear and tear excepted,
and
have no structural defects or defects (except such minor defects as do not
significantly interfere with the use thereof in the conduct of the normal
operations of the Company) and are suitable and adequate for the purposes for
which they are presently being used.
(a)
Schedule
3.8
is a
true, correct and complete list of all contracts of the categories described
below (whether written or oral), including all amendments thereto, existing
as
of the date of this Agreement to which the Company is a party or by which any
of
the properties, business or assets of the Company is bound or is materially
affected ("
Material
Contracts
"):
(i)
any
note,
agreement, mortgage, indenture, security agreement, and other instrument
relating to the borrowing of money or evidence of credit for the deferred
purchase price of property, or the direct or indirect guarantee by the Company
of any such indebtedness or deferred purchase price in excess of
$10,000.00;
(ii)
any
lease
of real property or material personal property providing for annual payments
by
the Company under any such lease or group of related leases in excess of
$10,000.00;
(iii)
any
agreement that has a term of one year or more and/or provides for future
payments in excess of $10,000.00 that is not terminable (without penalty) on
no
more than one month's notice;
(iv)
any
management, employment and consulting agreement or other contract for personal
services that is not terminated simultaneously with the execution of this
Agreement or is not terminable on no more than one month's notice without
penalty;
(v)
any
agreement providing for severance pay, collective bargaining agreements, and
labor contracts;
(vi)
any
surety, performance and maintenance bond in excess of $10,000.00;
(vii)
any
plan,
contract or arrangement providing for bonuses, pensions, deferred compensation,
retirement plan payments, profit sharing, incentive pay, or for any other
employee benefit plan;
(viii)
any
brokerage or finder's agreement obligating the Company to make a payment
thereunder;
(ix)
any
agreement that restricts the right of the Company to engage in any place in
any
line of business;
(x)
any
contract, commitment, agreement or arrangement between the Company and any
Affiliate thereof;-
(xi)
any
contract or agreement relating to the sale, lease or other disposition of any
of
the properties, business or assets of the Company having a value, individually
or in the aggregate, in excess of $10,000.00;
(xii)
any
contract, commitment, or agreement that involves commodity or interest rate
swaps, floors, caps, collars, futures, options or other similar transactions;
and
(xiii)
any
obligation currently outstanding affecting any of the properties, business
or
assets of the Company which requires a single or series of related future
expenditures in the aggregate in excess of $10,000.00.
(b)
Seller
and the Company have provided Buyer with access to true, correct and complete
copies of all written Material Contracts and all amendments, modifications
and
supplements thereto, and have provided Buyer with accurate descriptions of
all
oral Material Contracts, including the parties thereto, the value of the goods
and services to be provided thereunder, and the financial obligations of the
parties thereunder.
(c)
To
the
Knowledge of Seller and the Company, as of the date of this Agreement, the
Company's relationships are generally satisfactory with its suppliers who are
material to the conduct of the Company's business.
(d)
As
of the
date of this Agreement, the Company does not have outstanding any powers of
attorney with any Person.
(e)
Each
of
the Material Contracts to which the Company is a signatory has been duly
executed by the Company, and to the Knowledge of Seller and the Company, as
of
the date of this Agreement, the Company is not in breach of any Material
Contract.
(f)
The
Company has performed in all material respects each material term, covenant
and
condition of each of the Material Contracts to which it is a party or by which
it is bound, and, to the Knowledge of Seller and the Company, no material event
of default on the part of any other party thereto exists under any of the
Material Contracts. The Company is current on all payment obligations under
all
Material Contracts to which it is a party or by which it is bound.
(g)
To
the
Knowledge of Seller and the Company, no event has occurred under any of the
Material Contracts that would constitute a material default thereunder on the
part of any other party thereto.
(h)
Each
of
the Material Contracts is valid, binding, enforceable, and in full force and
effect, unimpaired by any acts or omissions of the Company or its officers,
directors, and agents, and constitutes the legal and binding obligation of
the
Company in accordance with its terms, except that (i) such enforcement may
be
subject to bankruptcy, insolvency, reorganization, moratorium or other similar
laws or judicial decisions now or hereafter in effect relating to creditors'
rights generally, and (ii) the remedy of specific performance and injunctive
relief may be subject to equitable defenses and to the discretion of the court
before which any proceeding therefor may be brought.
3.9
No
Default
.
The
Company is not in default, breach or violation (and, to the Knowledge of Seller
and the Company, no event has occurred which, with notice or the lapse of time
or both, would constitute a default or violation) of any term, condition, or
provision of (i) the Company Charter Documents; (ii) any note, bond, mortgage,
indenture, license, agreement or other instrument or obligation to which the
Company is now a party or by which the Company or any of its properties,
business or assets is bound; or (iii) any order, writ, injunction, decree,
statute, rule or regulation applicable to the Company, except in the case of
clauses (ii) and (iii) for defaults or violations which in the aggregate would
not have a Material Adverse Effect on the Company.
3.10
Intellectual
Property
.
The
Company owns, or is licensed or otherwise has the right to use, all patents,
patent rights, trademarks, trademark rights, trade names, trade name rights,
service marks, service mark rights, copyrights, technology, know-how, processes
and other proprietary intellectual property rights and computer programs
("
Intellectual
Property Rights
")
which
are material to the condition (financial or otherwise) or conduct of the
business and operations of the Company. To the Knowledge of Seller and the
Company, (i) the use of Intellectual Property Rights by the Company in its
current operations does not infringe on the Intellectual Property Rights of
any
Person, subject to such claims and infringements as do not, in the aggregate,
give rise to any liability on the part of the Company which could have a
Material Adverse Effect on the Company, and (ii) no Person is, in any manner
that could have a Material Adverse Effect on the Company, infringing on any
Intellectual Property Right of the Company. No claims are pending or, to the
Knowledge of Seller and the Company, threatened that the Company is infringing
or otherwise adversely affecting the rights of any Person with regard to any
Intellectual Property Right.
(a)
The
leases described on
Schedule
3.11
constitute all of the lease agreements between the Company and third Persons
affecting the Company's real property, material personal property, or relating
to the operation of the business of the Company. The Company and Seller have
furnished true and complete copies of each of the leases to Buyer, including
any
and all amendments, supplements or modifications thereto.
(b)
The
Company has performed in all material respects each material term, covenant
and
condition of each of the leases to which it is a party or which is required
to
be performed by it at or before the date hereof, and no material event of
default on the part of the Company and, to the Knowledge of Seller and the
Company, on the part of any other party thereto, exists under any
lease.
(c)
Each
of
the leases is legal, valid, binding, enforceable and in full force and effect,
unimpaired by any acts or omissions of the Company and constitutes the legal
and
binding obligation of the Company in accordance with its terms, except (i)
such
enforcement may be subject to bankruptcy, insolvency, reorganization, moratorium
or other similar laws or judicial decisions now or hereafter in effect relating
to creditors' rights generally and (ii) the remedy of specific performance
and
injunctive relief may be subject to equitable defenses and to the discretion
of
the court before which any proceeding therefore may be brought.
(d)
To
the
Knowledge of Seller and the Company, there is no law, ordinance, regulation
or
requirement in existence, including any Environmental Law, as amended, which
would require any expenditure to remediate, remedy, remove, modify, or improve
any of the real property that is the subject of any lease in order to bring
it
into compliance therewith.
(e)
There
are
no leasing commissions or similar payments due, arising out of, resulting from
or with respect to any lease which are owed by the Company, except to the extent
accrued on the Company Balance Sheet.
(f)
The
Company has not assigned, transferred, conveyed, mortgaged, or deeded in trust
any interest in the leases.
(g)
The
Company has not subordinated its interest under any of the leases to any third
party, mortgagee, or otherwise.
(h)
The
Company enjoys peaceful and undisturbed possession under all
leases.
3.12
Financial
Statements
.
The
Company and Seller have provided to Buyer true and complete copies of (i) the
unaudited balance sheet of the Company as of December 31,2005, and the related
unaudited statements of operations and changes in stockholders' equity for
the
fiscal year then ended and (ii) the unaudited balance sheet of the Company
and
the related unaudited statements of operations for the three-month period ended
on March 31, 2006 (collectively, the "
Financial
Statements
").
The
Financial Statements (i) have been prepared in accordance with generally
accepted accounting principles (“GAAP”)(except for certain balance sheet
classifications, and certain required reports and all footnote disclosures
have
been omitted) on a basis consistent throughout the periods covered thereby;
(ii)
present fairly, in all material respects, the financial condition of the Company
as of the dates thereof and the results of its operations for the periods then
ended (subject to normal year-end audit adjustments); and (iii) are consistent
with the books and records of the Company, which books and records are true,
correct and complete in all material respects. As referred to herein, the
Company’s Balance Sheet Date shall mean March 31, 2006. The Seller and the
Company will take the following steps prior to the Closing Date:
(a)
Execution
of an
exclusive license from Arkenol Inc. with the Company to deploy the Arkenol
cellulose to ethanol technology in North America.
(b)
Execution
of an
asset transfer agreement of certain assets from Arkenol to the Company with
a
estimated fair market value of at least $16million.
3.13
Absence
of Certain Changes or Events
.
Since
the Company Balance Sheet Date, the Company has conducted its business only
in
the ordinary course consistent with past practices and there has not
been:
(a)
any
event, occurrence, circumstance or development that has had, or has been
reasonably likely to have, a Material Adverse Effect with respect to the
Company;
(b)
any
default on the part of the Company under any indebtedness of the Company, or
any
event which with the lapse of time or the giving of notice, or both, would
constitute such a default;
(c)
any
issuance, sale, or other disposal of any capital stock or other equity security
of the Company, or any grant of options, warrants or other rights to obtain
any
of its capital stock;
(d)
(A)
any
contract or agreement entered into by the Company on or prior to the date
hereof
relating to any material acquisition or disposition of any assets or business,
or (B) any modification, amendment, assignment, termination, or relinquishment
by the Company of any contract, license or other right (including any insurance
policy naming it as a beneficiary or loss payable payee) that reasonably would
be likely to have a Material Adverse Effect on the Company, in each case other
than transactions, commitments, contracts or agreements in the ordinary course
of business consistent with past practices and those contemplated by this
Agreement;
(e)
any
amendment made or authorized to the Company Charter Documents;
(f)
any
creation or assumption by the Company of any security interest or other Lien
imposed upon any material assets of the Company;
(g)
any
damage, destruction, or loss, whether or not covered by insurance, that has
or
reasonably could be expected to have a Material Adverse Effect on the
Company;
(h)
any
commitment to or liability to any labor organization which represents, or
proposes to represent, employees of the Company;
(i)
any
sale,
assignment, lease, or other transfer or disposition of any of the assets or
properties of the Company, except in the ordinary course of business or in
connection with the acquisition of similar property or assets or retirements
of
assets in the ordinary course of business consistent with past
practices;
(j)
any
write
down of the value of, or write off as uncollectible, any asset or accounts
receivable of the Company;
(k)
any
declaration, setting aside or payment, directly or indirectly, of any cash
or
non-cash dividend or other cash or non-cash distribution in respect of any
of
the securities of the Company, or any direct or indirect redemption, purchase,
or other acquisition of any securities of the Company or agreement to do
so;
(l)
any
material change in the Company's accounting methods, principles or practices;
(m)
any
amendment of any term of any outstanding security of the Company that would
materially increase the obligations of the Company under such
security;
(n)
any
making of any loan, advance, or capital contribution to or material investment
in any Person by the Company other than loans, advances, capital contributions,
or investments, in each case not exceeding $10,000.00; or
(o)
(A)
any
incurrence or assumption by the Company of any indebtedness for borrowed money
other than under existing credit facilities (or any renewals, replacements
or
extensions thereof that do not materially increase the commitments thereunder)
or otherwise by the Company in the ordinary course of business consistent with
past practices, or (B) any guaranty, endorsement, or other incurrence or
assumption of liability, whether directly, contingently or otherwise, by the
Company for the obligations of any other Person, other than in the ordinary
course of business consistent with past practice.
3.14
No
Undisclosed Liabilities
.
The
Company has no debt, liability or obligation of any kind, whether accrued,
absolute, contingent, inchoate, determined, determinable, or otherwise, except
for (i) liabilities or obligations which, individually or in the aggregate,
would not have a Material Adverse Effect on the Company, (ii) liabilities or
obligations under this Agreement or incurred in connection with the transactions
contemplated hereby, (iii) liabilities or obligations disclosed in
Schedule
3.14
;
(iv)
liabilities or obligations disclosed in the Financial Statements; and (v)
liabilities or obligations arising in the ordinary course of business after
the
Balance Sheet Date and which do not have a Material Adverse Effect on the
Company. Specifically, the Seller agree that all debt of the Company not listed
on
Schedule
3.14
shall be
repaid or forgiven as of the date of the Closing.
3.15
No
Litigation
.
There
is no suit, action, proceeding, or investigation presently pending or, to the
Knowledge of Seller or the Company, threatened against or affecting the Company
that has had or could reasonably be expected to have a Material Adverse Effect
on the Company or prevent, hinder or materially delay the ability of the Company
to consummate the transactions contemplated by this Agreement, nor is there
any
judgment, decree, injunction, rule or order of any Governmental Authority or
arbitrator outstanding against the Company which has had, or which, insofar
as
reasonably can be foreseen, in the future could have, any such effect.
3.16
Compliance
with Laws and Permits.
The
Company is not in violation of, or in default in any material respect under,
and
no event has occurred that (with notice or the lapse of time or both) would
constitute a violation of or default under (a) its certificate or articles
of
incorporation, bylaws or other organizational documents, or (b) any applicable
law, rule, regulation, ordinance, order, writ, decree or judgment of any
Governmental Authority. The Company has obtained and holds all permits,
licenses, variances, exemptions, orders, franchises, approvals and
authorizations of all Governmental Authorities necessary for the lawful conduct
of its business and the lawful ownership, use and operation of its assets
("Company Permits"), except for Company Permits which the failure to obtain
or
hold would not, individually or in the aggregate, have a Material Adverse Effect
on the Company. None of the Company Permits will be adversely affected by the
consummation of the transactions contemplated hereunder or requires any filing
or consent in connection therewith. The Company is in compliance with the terms
of its Company Permits, except where the failure to comply would not,
individually or in the aggregate, have a Material Adverse Effect on the Company.
No investigation or review by any Governmental Authority with respect to the
Company is pending or, to the knowledge of the Company, threatened, other than
those the outcome of which would not, individually or in the aggregate, have
a
Material Adverse Effect on the Company. To the knowledge of the Company, no
other party to any Material Contract is in material breach of the terms,
provisions or conditions of such Material Contract.
3.17
Title
to Assets.
The
Company has Defensible Title to all of its assets. Except for Permitted
Encumbrances, the Company has good, marketable, and Defensible Title to its
assets. All leases pursuant to which the Company leases any assets are in full
force and effect, and the Company has not received any notice of default under
any such lease.
3.18
Financial
and Commodity Hedging.
The
Company has no currently outstanding financial hedging positions (including
fixed price controls, collars, swaps, caps, hedges or puts).
3.19
Environmental
Matters.
Based
upon claims asserted or notices transmitted by Governmental Authorities or
other
third parties:
(a)
The
Company has conducted its business and operated its assets, and is conducting
its business and operating its assets, in material compliance with all
Environmental Laws;
(b)
The
Company has not been notified by any Governmental Authority or other third
party
that any of the operations or assets of the Company is the subject of any
investigation or inquiry by any Governmental Authority or other third party
evaluating whether any material remedial action is needed to respond to a
release or threatened release of any Hazardous Material or to the improper
storage or disposal (including storage or disposal at offsite locations) of
any
Hazardous Material;
(c)
Neither
the Company nor, to the Company's Knowledge, any Governmental Authority or
other
third person has filed any notice under any federal, state or local law
indicating that (i) the Company is responsible for the improper release into
the
environment, or the improper storage or disposal, of any Hazardous Material,
or
(ii) any Hazardous Material is improperly stored or disposed of upon any
property of the Company or any property formerly owned, leased or operated
by
the Company;
(d)
The
Company has no knowledge of any material contingent liability in connection
with
(i) the release or threatened release into the environment at, beneath, or
on
any property now or previously owned, leased or operated by the Company, or
(ii)
the storage or disposal of any Hazardous Material;
(e)
The
Company has not received any claim, complaint, notice, inquiry or request for
information from any Governmental Authority or other third person involving
any
matter which remains unresolved as of the date hereof with respect to any
alleged material violation of any Environmental Law or regarding potential
liability under any Environmental Law relating to or in connection with
operations or conditions of any facilities or property (including off-site
storage or disposal of any Hazardous Material from such facilities or property)
currently or formerly owned, leased or operated by the Company;
(f)
All
underground storage tanks and solid waste storage, treatment and/or disposal
facilities owned or operated by the Company are used and operated in material
compliance with Environmental Laws;
(g)
The
Company has obtained all material permits, licenses, approvals, and other
authorizations that are required with respect to the operation of the Company's
properties and assets under the Environmental Laws, and the Company is in
material compliance with all terms and conditions of such required permits,
licenses, approvals, and authorizations;
(h)
To
the
Knowledge of the Company and the Seller, there are no polychlorinated biphenyls
or asbestos located in, at, on, or under any facility or real property owned,
leased or operated by the Company that require removal, decontamination or
abatement pursuant to Environmental Laws;
(i)
There
are
no past or present events, conditions, circumstances, activities, practices,
incidents or actions that could reasonably be expected to interfere with or
prevent material compliance by the Company with any Environmental Law, or that
could reasonably be expected to give rise to any material liability under the
Environmental Laws;
(j)
No
Lien
has been recorded against any property, facility or assets currently owned
by
the Company under any Environmental Law; and
(k)
The
execution, delivery and performance of this Agreement and the
consummation
of
the
transactions contemplated hereby will not affect the validity or require the
transfer of any permits, licenses or approvals held by the Company under any
Environmental Law, and will not require any notification, disclosure,
registration, reporting, filing, investigation or remediation under any
Environmental law.
3.20
Taxes
.
(a)
The
Company has timely filed (taking into account any extensions) all Tax Returns
required to be filed by it on or before the date of this Agreement and has
timely paid or deposited all Taxes and estimated Taxes which are required to
be
paid or deposited on or before such date. Each of the Tax Returns filed by
the
Company is accurate and complete in all material respects and has been completed
in all material respects in accordance with applicable laws, regulations and
rules. The Company Balance Sheet reflects an adequate reserve for all Taxes
for
which the Company may be liable for all taxable periods and portions thereof
through the date thereof. The Company has not waived any statute of limitations
with respect to any Taxes of the Company. No material deficiencies for any
Taxes
have been proposed, asserted or assessed against the Company, no requests for
waivers of the time to assess any such Taxes have been granted or are pending,
and there are no Tax Liens upon any assets of the Company (except for liens
for
ad valorem Taxes not yet delinquent and other Taxes not yet due and payable).
There are no current examinations of any Tax Return of the Company being
conducted by any Governmental Authority and there are no settlements of any
prior examinations which could reasonably be expected to adversely affect any
taxable period for which the statute of limitations has not run. The Company
is
not a party to a Tax allocation agreement, Tax sharing agreement, Tax indemnity
agreement, Tax partnership agreement or similar agreement or arrangement. The
Company has complied in all material respects with all applicable laws, rules
and regulations relating to the payment and withholding of Taxes and has in
all
respects timely withheld from employee wages and paid over such taxes to the
appropriate Governmental Authority.
3.21
Governmental
Authorizations
.
The
Company holds, and on the Closing Date will hold, all the necessary, regular
and
valid licenses and authorizations from any Governmental Authority required
to
own its properties and assets and operate its business, and each such
authorization is validly issued and in full force and effect.
3.22
Insurance
.
The
Company has in full force and effect the liability and casualty insurance,
errors and omissions insurance. The Company is not in default in any material
respect with respect to such insurance policies, and the Company has not failed
to give any notice or present any claim under any policies in due and timely
fashion.
3.23
Brokers
.
Other
than the shell cost reimbursemet due to TBeck Capital for $200,000, and the
consulting fee due to BGLR Consulting Inc. for $100,000, both of which are
payable by the Buyer at Closing, neither party has any obligation or liability
to pay any fees or commission to any broker, finder, agent or similar Person,
with respect to the transactions contemplated by this Agreement.
3.24
Bank
Accounts
.
All
bank or other financial institution accounts of the Company are described in
Schedule
3.24
,
and
such Schedule also lists all Persons with check writing authority on behalf
of
the Company.
3.25
Related
Party Transactions
.
Except
as disclosed in
Schedule
3.25
,
there
are no currently existing business arrangements, other than employment, between
the Company and any of Seller, officers, or directors of the Company, or any
of
their respective Affiliates and there are no continuing obligations owing from
the Company to any third Person created by any of Seller, officers, or directors
of the Company or any of their Affiliates. None of Seller, officers or directors
of the Company, or any of their respective Affiliates owns any material asset,
tangible or intangible, which is used in the operation of the business of the
Company. At the time of the Closing, the Seller shall have compromised and
settled all claims from previous shareholder or investors in the Seller’s or
Company’s investors.
3.26
Real
Properties
.
(a)
Schedule
3.26
lists
all real property owned, leased, or occupied by the Company (the "
Real
Property
"),
including the legal description of all land, and all encumbrances thereon,
and
sets forth a description of all plants, buildings, or other structures located
thereon. There are now in full force and effect, to the extent legally required,
duly issued certificates of occupancy permitting the Real Property and
improvements located thereon to be legally used and occupied as the same are
now
constituted, and the business activities of the Company thereon are, in all
material respects, consistent with and permitted under, and not in default
of,
applicable zoning ordinances, restrictive covenants, or other restrictions.
To
the Knowledge of Seller and the Company, there is not:
(i)
any
claim
of adverse possession or prescriptive rights involving any of the Real
Property;
(ii)
any
structure located on any Real Property which encroaches on or over the
boundaries
of neighboring or adjacent properties; or
(iii)
any
structure of any other Person which encroaches on or over the boundaries
of
any of
such Real Property.
To
the
knowledge of Seller and the Company, no public improvements have been commenced
and none are planned which in either case may result in special assessments
against or otherwise materially adversely affect any Real Property. To the
Knowledge of Seller and the Company, there are no:
(i)
proposed
increases in assessed valuations of any Real Property;
(ii)
orders requiring repair, alteration or correction of any existing
condition affecting any Real Property or the systems or improvements
thereto;
(iii)
conditions
or defects which could give rise to an order of the sort referred to in clause
(ii) above;
(iv)
pending
or proposed modifications of zoning or similar laws affecting the Real Property;
or
(v)
structural,
mechanical, or other defects of material significance affecting any of the
Real
Property.
(b)
No
Condemnation or Expropriation
.
Neither
the whole nor any portion of the Real Property is subject to any order to be
sold or is being condemned, expropriated or otherwise taken by any Governmental
Authority with or without payment of compensation therefor, nor to the Knowledge
of Seller and the Company has any such condemnation, expropriation or taking
been proposed.
(c)
Utilities
.
All
utilities, including telephone, sewer and water, electricity and gas necessary
for the use of the Real Property, as currently used by the Company, are
available, connected and operational.
3.27
Prospects;
Outstanding Commitments; Customers and Suppliers
.
(a)
Seller
and the Company have no Knowledge of, nor have any of them been informed of,
any
existing or anticipated changes in the policies of the customers, suppliers
or
others with whom the Company transacts business that could affect the
availability of materials, or supplies, in any material respect, or of any
legislation or regulation, that will have a Material Adverse Effect on the
Company. As of the date of this Agreement, Seller and the Company have no
Knowledge of any proposed or contemplated changes in the employment status
of
any members of management or key employees of the Company.
(b)
All
outstanding commitments of the Company for the delivery of goods or the
performance of services were made on an arms’ length basis, and to the Knowledge
of Seller and the Company there are no facts or circumstances that could have
a
Material Adverse Effect with respect thereto.
3.28
Minute
Books
.
The
minute books of the Company, as previously made available to Buyer, contain
complete and accurate records of all meetings and accurately reflect all other
corporate action of the shareholders and board of directors of the Company.
The
stock certificate books and stock transfer ledgers of the Company are true
and
complete.
3.29
Absence
of Certain Business Practices
.
Neither
the Company nor any officer, employee or agent of the Company has, directly
or
indirectly, within the past five years, given or agreed to give any gift or
similar benefit to any customer, supplier, government employee or other Person
who is or may be in a position to help or hinder the business of the Company
(or
to assist the Company in connection with any actual or proposed transaction)
which (i) might subject the Company to any damage or penalty in any civil,
criminal, or governmental litigation or proceeding, (ii) if not given in the
past, might have had a Material Adverse Effect on the assets, business, or
operations of the Company as reflected in the Financial Statements, or (iii)
if
not continued in the future, might materially adversely effect the assets,
business operations or prospects of the Company or which might subject the
Company to suit or penalty in a private or governmental litigation or
proceeding.
3.30
Completeness
of Disclosure
.
No
statement of material fact by Seller or the Company contained in this Agreement
and no written statement of material fact furnished or to be furnished by Seller
or the Company to Buyer pursuant to or in connection with this Agreement
contains or will contain any untrue statement of a material fact or omits or
will omit to state a material fact necessary in order to make the statements
herein or therein contained not misleading.
Disclosure
of any fact in any provision of this Agreement or in any Schedule to which
reference is made herein shall constitute disclosure thereof for the purposes
of
all other provisions and Schedules.
ARTICLE
4
REPRESENTATIONS
AND WARRANTIES OF BUYER
Buyer
represents and warrants to the Companies and Seller as follows:
4.1
Organization;
Standing and Power
.
Buyer
is a corporation duly organized, validly existing and in good standing under
laws of the State of Delaware and is duly qualified to do business and is in
good standing in each jurisdiction in which the nature of its business or the
ownership or leasing of its properties makes such qualification necessary,
other
than in such jurisdictions where the failure to be so qualified to do business
or in good standing (individually or in the aggregate) would not have, or would
not reasonably be likely to have, a Material Adverse Effect on Buyer. Buyer
has
all requisite corporate power and authority to own, lease and operate its
properties and assets and to carry on its business as now being
conducted.
4.2
Authorization;
Enforceability
.
Buyer
has the corporate power and authority to execute and deliver this Agreement
and
to consummate the transactions contemplated by this Agreement. The execution
and
delivery of this Agreement and the consummation of the transactions contemplated
by this Agreement have been duly and validly authorized by all requisite
corporate action on the part of the Buyer. This Agreement has been duly and
validly executed and delivered by the Seller, and constitutes a valid and
binding agreement of the Buyer.
4.3
Absence
of Conflicting Agreements
.
Neither
the execution, delivery, or performance of this Agreement by Buyer, nor the
consummation of the transactions contemplated hereby does or will, after the
giving of notice, or the lapse of time or both, or otherwise:
(a)
subject
to receipt of any necessary third party consents, conflict with, result in
a
breach of, constitute a default, or give rise to a right of termination under
the Buyer Charter Documents, any federal, state, or local law, statute,
ordinance, rule, or regulation applicable to Buyer, or any court or
administrative order or process, or any contract, agreement, arrangement,
commitment, or plan to which Buyer is a party or by Buyer is bound;
(b)
result
in
the creation of any Lien upon the assets, business, and properties of
Buyer;
(c)
subject
to receipt of any necessary third party consents, terminate, amend, or modify,
or give any party the right to terminate, amend, modify, abandon, or refuse
to
perform any contract, agreement, arrangement, commitment, or plan to which
Buyer
is a party or by which it is bound;
(d)
accelerate
or modify, or give any party the right to accelerate or modify, the time within
which, or the terms under which, any duties or obligations are to be performed,
or any rights or benefits are to be received, under any contract, agreement,
arrangement, commitment, or plan to which Buyer is a party or by which it is
bound; or
(e)
to
the
Knowledge of Buyer, require the consent, waiver, approval, permit, license,
clearance or authorization of, or any declaration or filing with, any court
or
public agency or other authority.
4.4
Absence
of Material Adverse Effect
.
Since
the Buyer Balance Sheet Date, there has been no Material Adverse Effect on
the
business, assets, operations or condition, financial or otherwise, of
Buyer.
4.4
No
Default
.
Buyer
is not in default, breach or violation (and no event has occurred which, with
notice or the lapse of time or both, would constitute a default or violation)
of
any term, condition or provision of (i) the Buyer Charter Documents; (ii) any
note, bond, mortgage, indenture, license, agreement or other instrument or
obligation to which Buyer is now a party or by which Buyer or any of its
properties, business or assets is bound; or (iii) any order, writ, injunction,
decree, statute, rule or regulation applicable to Buyer, except in the case
of
clauses (ii) and (iii) for defaults or violations which in the aggregate would
not have a Material Adverse Effect on Buyer.
4.5
No
Undisclosed Liabilities
.
Buyer
has no debt, liability or obligation of any kind, whether accrued, absolute,
contingent, inchoate, determined, determinable or otherwise (and there is no
basis for any present or future action, suit, proceeding, hearing,
investigation, charge, complaint, claim or demand against Buyer giving rise
to
any such debt, liability or obligation), except for (i) liabilities or
obligations which, individually or in the aggregate would not have a Material
Adverse Effect on Buyer; (ii) liabilities or obligations under this Agreement
or
incurred in connection with the transactions contemplated hereby; or (iii)
liabilities or obligations disclosed or provided for in the Buyer Balance
Sheet.
4.6
No
Litigation
.
There
is no suit, action, proceeding or investigation presently pending or, to the
Knowledge of Buyer, threatened against or affecting Buyer or any of its
subsidiaries that has had or could reasonably be expected to have a Material
Adverse Effect on Buyer or prevent, hinder or materially delay the ability
of
Buyer to consummate the transactions contemplated by this Agreement, nor is
there any judgment, decree, injunction, rule or order of any governmental
authority or arbitrator outstanding against Buyer or any of its subsidiaries
which has had, or which, insofar as reasonably can be foreseen, in the future
could have, any such effect.
4.7
Financing
.
Buyer
has or will have at closing sufficient funds available to perform all of its
other obligations under this Agreement.
4.8
Completeness
of Disclosure
.
No
statement of material fact by Buyer contained in this Agreement and no written
statement of material fact furnished or to be furnished by Buyer to Seller
pursuant to or in connection with this Agreement contains or will contain any
untrue statement of a material fact or omits or will omit to state a material
fact necessary in order to make the statements herein or therein contained
not
misleading.
4.9
Capital
Structure
.
(a)
As
of the
date hereof, the authorized capital stock of the Buyer consists of 50,000,000
shares of common stock, .001 par value. As of the Closing, 1,053,295 shares
of
common stock were issued and outstanding.
Schedule
4.9
is the
shareholder list of Buyer at the time of Closing. No shares of common stock
were
held by the Buyer in its treasury. The Buyer has no outstanding stock options,
stock appreciation rights, phantom units, profit participation or similar rights
with respect to the Buyer. No shares of capital stock or other equity or voting
securities of the Buyer are reserved for issuance or are outstanding. All of
the
issued and outstanding shares of capital stock of the Buyer are duly authorized,
validly issued, fully paid and non-assessable and have not been issued in
violation of any preemptive rights or in violation of state or federal
securities laws, and there are no preemptive rights with respect thereto. No
capital stock has been issued by the Buyer since the Buyer Balance Sheet Date.
Except as set forth above, as of the date hereof there are no outstanding or
authorized securities, options, warrants, calls, rights, commitments, preemptive
rights, agreements, arrangements, or undertakings of any kind to which the
Buyer
is a party, or by which it is bound, obligating the Buyer to issue, deliver
or
sell, or cause to be issued, delivered or sold, any shares of capital stock
or
other equity or voting securities of, or other ownership interests in, the
Buyer
or obligating the Buyer to issue, grant, extend, or enter into any such
security, option, warrant, call, right, commitment, agreement, arrangement,
or
undertaking. There are not as of the date of this Agreement and there will
not
be at the Closing Date any shareholder agreements, voting trusts or other
agreements or understandings to which the Buyer is a party or by which it is
bound relating to the voting of any shares of the capital stock of the Buyer.
(b)
The
shares of capital stock of the Buyer constitute all of the issued and
outstanding shares of capital stock or other ownership interests of the Buyer.
Except for the purchase and sale of the Buyer Common Stock pursuant to this
Agreement, there are no outstanding claims, options, or other rights of any
Person to purchase from Buyer, and no contracts or commitments providing for
the
granting of rights to acquire, any of the Buyer Common Stock. There are no
claims pending or, to the Knowledge of Buyer, threatened, against the Buyer
that
concern or affect title to the Buyer Common Stock, or that seek to compel the
issuance of capital stock or other securities of the Buyer.
(c)
There
are
no outstanding obligations in connection with the redemption by the Buyer of
any
of the previously issued and outstanding shares of capital stock of the
Buyer.
4.10.
Environmental
Matters.
Based
upon claims asserted or notices transmitted by Governmental Authorities or
other
third parties:
(a)
The
Buyer
has conducted its business and operated its assets, and is conducting its
business and operating its assets, in material compliance with all Environmental
Laws;
(b)
The
Buyer
has not been notified by any Governmental Authority or other third party that
any of the operations or assets of the Buyer is the subject of any investigation
or inquiry by any Governmental Authority or other third party evaluating whether
any material remedial action is needed to respond to a release or threatened
release of any Hazardous Material or to the improper storage or disposal
(including storage or disposal at offsite locations) of any Hazardous
Material;
(c)
Neither
the Buyer nor, to the Company's Knowledge, any Governmental Authority or other
third person has filed any notice under any federal, state or local law
indicating that (i) the Buyer is responsible for the improper release into
the
environment, or the improper storage or disposal, of any Hazardous Material,
or
(ii) any Hazardous Material is improperly stored or disposed of upon any
property of the Buyer or any property formerly owned, leased or operated by
the
Buyer;
(d)
The
Buyer
has no knowledge of any material contingent liability in connection with (i)
the
release or threatened release into the environment at, beneath, or on any
property now or previously owned, leased or operated by the Buyer, or (ii)
the
storage or disposal of any Hazardous Material;
(e)
The
Buyer
has not received any claim, complaint, notice, inquiry or request for
information from any Governmental Authority or other third person involving
any
matter which remains unresolved as of the date hereof with respect to any
alleged material violation of any Environmental Law or regarding potential
liability under any Environmental Law relating to or in connection with
operations or conditions of any facilities or property (including off-site
storage or disposal of any Hazardous Material from such facilities or property)
currently or formerly owned, leased or operated by the Buyer;
(f)
All
underground storage tanks and solid waste storage, treatment and/or disposal
facilities owned or operated by the Buyer are used and operated in material
compliance with Environmental Laws;
(g)
The
Buyer
has obtained all material permits, licenses, approvals, and other authorizations
that are required with respect to the operation of the Company's properties
and
assets under the Environmental Laws, and the Buyer is in material compliance
with all terms and conditions of such required permits, licenses, approvals,
and
authorizations;
(h)
To
the
Knowledge of the Buyer, there are no polychlorinated biphenyls or asbestos
located in, at, on, or under any facility or real property owned, leased or
operated by the Company that require removal, decontamination or abatement
pursuant to Environmental Laws;
(i)
There
are
no past or present events, conditions, circumstances, activities, practices,
incidents or actions that could reasonably be expected to interfere with or
prevent material compliance by the Buyer with any Environmental Law, or that
could reasonably be expected to give rise to any material liability under the
Environmental Laws;
(j)
No
Lien
has been recorded against any property, facility or assets currently owned
by
the Buyer under any Environmental Law; and
(k)
The
execution, delivery and performance of this Agreement and the
consummation
of
the
transactions contemplated hereby will not affect the validity or require the
transfer of any permits, licenses or approvals held by the Buyer under any
Environmental Law, and will not require any notification, disclosure,
registration, reporting, filing, investigation or remediation under any
Environmental law.
4.11.
SEC
Filings. The Buyer warrants that it is a non-reporting public company, in that
it has never been required to file disclosure documents with the United States
Securities and Exchange Commission (“SEC”). To the extent that Buyer has filed
any documents with the SEC, such documents are listed on
Schedule
4.11
and have
been provided to Seller and the Company prior to Closing.
4.12.
Pink
Sheets. Buyer warrants that it is listed and trading on the Pink Sheets under
the ticker SAGR as of the Closing Date. For purposes of being listed on the
Pink
Sheets, the Buyer’s market maker is Knight Securities and Lampost
Capital.
4.13.
Taxes
.
The
Buyer has timely filed (taking into account any extensions) all Tax Returns
required to be filed by it on or before the date of this Agreement and has
timely paid or deposited all Taxes and estimated Taxes which are required to
be
paid or deposited on or before such date. Each of the Tax Returns filed by
the
Buyer is accurate and complete in all material respects and has been completed
in all material respects in accordance with applicable laws, regulations and
rules. The Buyer Balance Sheet reflects an adequate reserve for all Taxes for
which the Buyer may be liable for all taxable periods and portions thereof
through the date thereof. The Buyer has not waived any statute of limitations
with respect to any Taxes of the Buyer. No material deficiencies for any Taxes
have been proposed, asserted or assessed against the Buyer, no requests for
waivers of the time to assess any such Taxes have been granted or are pending,
and there are no Tax Liens upon any assets of the Buyer (except for liens for
ad
valorem Taxes not yet delinquent and other Taxes not yet due and payable).
There
are no current examinations of any Tax Return of the Buyer being conducted
by
any Governmental Authority and there are no settlements of any prior
examinations which could reasonably be expected to adversely affect any taxable
period for which the statute of limitations has not run. The Buyer is not a
party to a Tax allocation agreement, Tax sharing agreement, Tax indemnity
agreement, Tax partnership agreement or similar agreement or arrangement. The
Buyer has complied in all material respects with all applicable laws, rules
and
regulations relating to the payment and withholding of Taxes and has in all
respects timely withheld from employee wages and paid over such taxes to the
appropriate Governmental Authority.
ARTICLE
5
COVENANTS
RELATING TO CONDUCT OF BUSINESS
AND
ADDITIONAL AGREEMENTS
5.1
Conduct
of Business of each Company
.
(a)
Ordinary
Course.
During
the period from the date of this Agreement to the Closing Date (except as
otherwise specifically contemplated by the terms of this Agreement), each
Company shall, and Seller shall cause each Company to, carry on its businesses
in the usual, regular, and ordinary course in substantially the same manner
as
conducted at the date hereof, and, to the extent consistent therewith, use
all
reasonable efforts to preserve intact its current business organization, keep
available the services of its current officers and employees and preserve its
relationships with Blue Fire Ethanol Inc., customers, suppliers, licensors,
licensees, distributors, and others having business dealings with the Company,
in each case consistent with past practice, to the end that their goodwill
and
ongoing businesses shall be unimpaired to the fullest extent possible at the
Closing Date. Without limiting the generality of the foregoing, and except
as
otherwise expressly contemplated by this Agreement, prior to the Closing Date
the Companies will not, and Seller will not, without the prior written consent
of Buyer, permit or allow the Companies to:
(i)
(A)
declare, set aside, or pay any dividends on, or make any other distributions
(other than distributions to the Seller for amounts not exceeding their
respective income tax liabilities) in respect of, any of its capital stock,
(B)
split, combine, or reclassify any of its capital stock or issue or authorize
the
issuance of any other securities in respect of, in lieu of or in substitution
for shares of its capital stock or (C) purchase, redeem, or otherwise acquire
any shares of capital stock of each Company or any other securities thereof
or
any rights, warrants or options to acquire any such shares or other
securities;
(ii)
issue,
deliver, sell, pledge, dispose of, or otherwise encumber any of its capital
stock or any securities convertible into, or any rights, warrants or options
to
acquire, any such capital stock;
(iii)
amend
the
Company Charter Document;
(iv)
acquire
or agree to acquire (A) by merging or consolidating with, or by purchasing
a
substantial portion of the stock, or other ownership interests in, or assets
of,
or by any other manner, any business or any corporation, partnership,
association, joint venture, limited liability company, or other entity or
division thereof, or (B) any assets that would be material, individually or
in
the aggregate, to each Company, except purchases of supplies and inventory
in
the ordinary course of business consistent with past practice;
(v)
sell,
lease, mortgage, pledge, grant a Lien on, or otherwise encumber or dispose
of
any of its properties or assets, except (A) in the ordinary course of business
consistent with past practice or (B) other transactions involving not in excess
of $20,000.00 in the aggregate;
(vi)
(A)
incur
any indebtedness for borrowed money or guarantee any such indebtedness of
another person, issue or sell any debt securities or warrants or other rights
to
acquire any debt securities of each Company, guarantee any debt securities
of
another person, enter into any "keep well" or other agreement to maintain any
financial statement condition of another person or enter into any arrangement
having the economic effect of any of the foregoing, except for (1) working
capital borrowings under revolving credit facilities incurred in the ordinary
course of business, and (2) indebtedness incurred to refund, refinance, or
replace indebtedness for borrowed money outstanding on the date hereof, or
(B)
make any loans, advances or capital contributions to, or investments in, any
other person, other than employees of each Company in the ordinary course of
business consistent with past practice;
(vii)
make
or
incur capital expenditures in the aggregate in excess of $20,000;
(viii)
make
any
material election relating to Taxes or settle or compromise any material Tax
liability;
(ix)
pay,
discharge, or satisfy any claims, liabilities, or obligations (accrued, asserted
or unasserted, contingent, or otherwise), other than the payment, discharge,
or
satisfaction, in the ordinary course of business consistent with past practice
or in accordance with their terms of liabilities reflected or reserved against
in, or contemplated by, each Company Balance Sheet;
(x)
waive
the
benefits of, or agree to modify in any manner, any confidentiality, standstill
or similar agreement to which each Company is a party;
(xi)
adopt
a
plan of complete or partial liquidation or resolutions providing for or
authorizing such a liquidation or a dissolution, merger, consolidation,
restructuring, recapitalization, or reorganization;
(xii)
change
any accounting principle used by it;
(xiii)
settle
or
compromise any litigation (whether or not commenced prior to the date of this
Agreement) other than settlements or compromises of litigation where the amount
paid in settlement or compromise does not exceed $10,000.00;
(xiv)
(A)
enter into any
new, or amend any existing, severance agreement or arrangement, deferred
compensation arrangement or employment agreement with any officer, director,
or
employee, except that, each Company may hire additional employees to the extent
deemed by its management to be in the best interests of the relevant Company;
provided,
that
the
Company may not enter into any employment or severance agreement or any deferred
compensation arrangement with any such additional employees; (B) adopt any
new
incentive, retirement or welfare benefit arrangements, plans or programs for
the
benefit of current, former or retired employees or amend any existing Company
benefit plan (other than amendments required by law); (C) grant any increases
in
employee compensation, other than in the ordinary course or pursuant to
promotions, in each case consistent with past practice (which shall include
normal individual periodic performance reviews and related compensation and
benefit increases and bonus payments consistent with past practices); or (D)
grant any stock options or stock awards; or
(xv)
authorize
any of, or commit or agree to take any of, the foregoing actions.
(b)
Other
Actions.
During
the period from the date of this Agreement to the Closing Date, neither the
Companies nor the Seller shall take any action that would, or that could
reasonably
be expected to, result in any of the representations and warranties of the
Companies and Seller set forth in this Agreement becoming untrue in any material
respect.
5.2
Access
to Information
.
(a)
Subject
to the terms of the Confidentiality Agreement and Section 5.2(b), during the
period from the date hereof to the Closing Date:
(i)
The
Companies and Seller shall, and shall cause each of their respective officers,
employees, counsel, financial advisors and other representatives to, afford
to
Buyer, and to Buyer's accountants, counsel, financial advisors and other
representatives, reasonable access to each Company's properties, books,
contracts, commitments and records for the purpose of conducting such
inspections, evaluations and assessments, as Buyer deems appropriate, and,
during such period, each Company and Seller shall, and shall cause each of
their
respective officers, employees, counsel, financial advisors and other
representatives to, furnish promptly to Buyer, all other information concerning
its business, properties, financial condition, operations and personnel as
Buyer
may from time to time reasonably request so as to afford Buyer a reasonable
opportunity to make at its sole cost and expense such review, examination and
investigation of the relevant Company as Buyer may reasonably desire to make.
The Company and Seller agree to advise Buyer of all material developments with
respect to the Company and its assets and liabilities.
(ii)
The
Companies and Seller shall notify Buyer promptly of any notices from or
investigations by governmental authority relating to the relevant Company's
business or assets or the consummation of the Purchase. Buyer shall notify
the
Companies and Seller promptly of any notices from or investigations by
governmental authority that could materially affect Buyer's consummation of
the
Purchase.
(b)
Except
as
required by law, each of the Companies, Seller, and Buyer shall, and shall
cause
their respective directors, officers, employees, accountants, counsel, financial
advisors, and representatives and affiliates to: (i) hold in confidence, unless
compelled to disclose by judicial or administrative process, or, in the opinion
of its counsel, by other requirements of law, all nonpublic information
concerning the other party furnished in connection with the transactions
contemplated by this Agreement until such time as such information becomes
publicly available (otherwise than through the wrongful act of such Person),
(ii) not release or disclose such information to any other Person, except in
connection with this Agreement to its auditors, attorneys, financial advisors,
other consultants and advisors, and (iii) not use such information for any
competitive or other purpose other than with respect to its consideration and
evaluation of the transactions contemplated by this Agreement. Any investigation
by any party of the assets and business of the other party and its subsidiaries
shall not affect any representations and warranties hereunder, any conditions
to
the obligations of either party or either party's right to terminate this
Agreement as provided in Article 7.
(c)
In
the
event of the termination of this Agreement, each party promptly will deliver
to
the other party (and destroy all electronic data reflecting the same) all
documents, work papers and other material (and any reproductions or extracts
thereof and any notes or summaries thereto) obtained by such party or on its
behalf from such other party or its subsidiaries as a result of this Agreement
or in connection therewith so obtained before or after the execution
hereof.
5.3
Reasonable
Efforts; Notification
.
(a)
Reasonable
Efforts.
Upon
the
terms and subject to the conditions set forth in this Agreement, except to
the
extent otherwise provided in this Section 5.3, each of the parties agrees to
use
commercially reasonable efforts to take, or cause to be taken, all actions,
and
to do, or cause to be done, and to assist and cooperate with the other parties
in doing, all things necessary, proper or advisable to consummate and make
effective, in the most expeditious manner practicable, the Purchase, and the
other transactions contemplated by this Agreement, including (i) the obtaining
of all necessary actions or non-actions, waivers, consents and approvals from
governmental authority and the making of all necessary registrations and filings
(including filings with Blue Fire Ethanol, Inc.) and the taking of all
reasonable steps as may be necessary to obtain an approval or waiver from,
or to
avoid an action or proceeding by, any governmental authority, (ii) the obtaining
of all necessary consents, approvals or waivers from third parties, (iii) the
defending of any lawsuits or other legal proceedings, whether judicial or
administrative, challenging this Agreement or the consummation of the
transactions contemplated hereby, including seeking to have any stay or
temporary restraining order entered by any court or other governmental authority
vacated or reversed, and (iv) the execution and delivery of any additional
instruments necessary to consummate the transactions contemplated by this
Agreement;
provided,
however,
that
neither the Companies nor Buyer shall be under any obligation to take any action
to the extent that the Board of Directors of such party shall conclude in good
faith, after consultation with and based upon the written advice of their
respective outside legal counsel (which advice in each case need not constitute
an opinion), that such action would cause a breach of that Board of Directors'
fiduciary obligations under applicable law.
(b)
Notification.
The
Companies and Seller shall give prompt notice to Buyer, and Buyer shall give
prompt notice to the Company, when (i) any representation or warranty made
by
either under the terms of this Agreement becomes untrue or inaccurate in any
material respect or (ii) Seller, Companies or Buyer, as the case may be, fails
to comply with or satisfy in any material respect any covenant, condition,
or
agreement to be complied with or satisfied by it under this Agreement;
provided,
however,
that
no
such notification shall affect the representations or warranties or covenants
or
agreements of the parties or the conditions to the obligations of the parties
hereunder.
5.4
Fees
and Expenses
.
Except
as provided in Section 8.2, all fees and expenses incurred in connection with
the Purchase, this Agreement and the transactions contemplated hereby shall
be
paid by the party incurring such fees or expenses, whether or not the Purchase
is consummated.
5.5
Public
Announcements
.
The
Company and Seller, on the one hand, and Buyer, on the other hand, will consult
with each other before issuing any press release or otherwise making any public
statements with respect to the transactions contemplated by this Agreement
and
shall not issue any such press release or make any such public statement prior
to such consultation, except that each party may respond to questions from
shareholders or holders of ownership interests in either the Companies or the
Buyer.
5.6
Agreement
to Defend
.
In the
event any claim, action, suit, investigation, or other proceeding by any
governmental authority or other person
or
other
legal administrative proceeding is commenced that questions the validity or
legality of the transactions contemplated hereby or seeks damages in connection
therewith, the parties hereto agree to cooperate and use their reasonable
efforts to defend against and respond thereto.
ARTICLE
6
CONDITIONS
PRECEDENT
6.1
Conditions
to Each Party's Obligation to Effect the Purchase
.
The
respective obligations of each party to effect the Purchase are subject to
the
satisfaction of the requirement that the parties shall have arranged for the
filing of all authorizations, consents, orders or approvals of, or declarations
or filings with, or terminations or expirations of waiting periods imposed
by,
any governmental authority necessary for the consummation of the transactions
contemplated by this Agreement.
6.2
Conditions
to Obligations of Buyer
.
The
obligations of Buyer to effect the Purchase are subject to the satisfaction
of
the following conditions, any or all of which may be waived in whole or in
part
by Buyer:
(a)
Obligations.
The
Companies
and Seller shall have performed in all material respects all obligations to
be
performed by them under this Agreement at or prior to the Closing
Date.
(b)
Representations
and Warranties.
All
of
the representations and warranties of each Company and Seller contained in
this
Agreement (considered collectively) and each of the representations and
warranties of each Company and Seller contained in this Agreement (considered
individually) shall be true and correct in all material respects (disregarding
for these purposes any exceptions or supplemental disclosures contained in
the
certificates delivered to Buyer pursuant to Section 2.5(a) and disregarding
any
materiality qualifications contained therein) as of the date of this Agreement
and as of the Closing Date as if made on and as of such date;
provided,
that
such
representations and warranties that are by their express provisions made as
of a
specific date need be true and correct only as of such specific
date.
(c)
Third
Party Consents.
All
required authorizations, consents or approvals of any third party, including
BlueFire Ethanol Inc. approval, the failure of which to obtain would have a
Material Adverse Effect on Buyer, assuming the Purchase had taken place, shall
have been obtained.
(d)
Material
Adverse Change.
There
shall not have occurred a Material Adverse Change to the Companies or
Seller.
(e)
Absence
of Proceedings
.
No
claim, suit, action, or other proceeding shall be pending or threatened before
or by any court, governmental authority, arbitrator or other Person against
any
of the parties to this Agreement (i) with respect to the transactions
contemplated by this Agreement with the object of challenging or preventing
the
Closing, and no other proceedings shall be pending with such object or to
collect damages from Buyer on account thereof, (ii) which would materially
and
adversely affect the Company Shares or the assets, property, operations, result
of operations, financial condition, or prospects of the Company, and (iii)
there
shall not have been made or threatened by any Person any claim asserting that
such Person (a) is the holder or the beneficial owner of, or has the right
to
acquire or to obtain beneficial ownership of, any stock of, or any other voting,
equity or ownership interest in, the Company, or (b) is entitled to all or
any
portion of the Purchase Consideration payable for the Company Shares. Without
limiting the generality of the foregoing, no suit, action or other proceeding
shall be pending before any court or governmental authority in which it is
sought to restrain or prohibit, or obtain damages or other relief in connection
with, this Agreement or the consummation of the transactions contemplated
hereby.
(f)
Deliveries
at Closing
.
Seller
shall have delivered, or caused to be delivered, to Buyer, the documents,
properly executed and dated as of the Closing Date, required by Section
2.5(a).
(g)
Additional
Documents.
Buyer
shall have been furnished with such certificates, documents and opinions as
they
may reasonably request.
6.3
Condition
to Obligations of the Company and Seller
.
The
obligations of the Seller to effect the Purchase is subject to satisfaction
of
the following conditions, any or all of which may be waived in whole or in
part
by the Seller:
(a)
Obligations.
Buyer
shall have performed in all material respects all obligations to be performed
by
it under this Agreement at or prior to the Closing Date.
(b)
Representations
and Warranties.
All
of
the representations and warranties of Buyer contained in this Agreement
(considered collectively) and each of the representations and warranties of
Buyer contained in this Agreement (considered individually) shall be true and
correct in all material respects (disregarding for these purposes any
materiality qualifications contained therein) as of the date of this Agreement
and as of the Closing Date as if made on and as of such date;
provided,
that
such
representations and warranties that are by their express provisions made as
of a
specific date need be true and correct only as of such specific
date.
(c)
Material
Adverse Change.
There
shall not have occurred a Material Adverse Change to Buyer.
(d)
Absence
of Proceedings
.
No
claim, suit, action or other proceeding shall be pending or threatened before
or
by any court, governmental authority, arbitrator or other Person against any
of
the parties to this Agreement with respect to the transactions contemplated
by
this Agreement with the object of challenging or preventing the Closing, and
no
other proceedings shall be pending with such object or to collect damages from
Seller on account thereof.
(e)
Deliveries
at Closing
.
Buyer
shall
have delivered, or caused to be delivered, to Seller, the documents, properly
executed and dated as of the Closing Date, required by Section
2.5(b).
(f)
Seller
shall have been furnished with such certificates, documents and opinions as
it
may reasonably request.
ARTICLE
7
TERMINATION,
AMENDMENT AND WAIVER
7.1
Termination
.
This
Agreement may, by written notice given prior to the Closing, be terminated
at
any time:
(a)
by
mutual
written consent of Seller and Buyer;
(b)
without
liability on the part of any party hereto (unless occasioned by reason of
failure of one of the parties hereto to perform its obligations or a default
of
its representations and warranties hereunder), by either Buyer or Seller, if
the
transactions contemplated hereby are not consummated on or before the Closing
Date;
(c)
by
Buyer,
if Seller or the Company materially breach or default in the performance of
any
of their representations, warranties, covenants, or obligations hereunder,
and
either (i) such breach or default in performance shall not have been cured
or
waived within thirty (30) days after written notice thereof from Buyer to
Seller; or (ii) Seller shall not have provided reasonable assurance satisfactory
to Buyer that such breach or default will be cured on or before the Closing
Date;
(d)
by
Seller, if Buyer shall materially breach or default in performance of any of
its
representations, warranties, covenants, or obligations hereunder, and either
(i)
such breach or default in performance shall not have been cured or waived within
thirty (30) days after notice thereof from Seller to Buyer; or (ii) Buyer shall
not have provided reasonable assurance satisfactory to Seller that such breach
or default will be cured on or before the Closing Date;
(e)
by
Buyer,
if any of the conditions set forth in Section 6.1 or Section 6.2 shall not
have
been fulfilled by the Closing Date in any material respect or if satisfaction
of
such condition is or becomes impossible (unless the failure to fulfill such
conditions results primarily from Buyer’s breach of any representation or
warranty or failing to perform any covenant or agreement contained in this
Agreement) and Buyer has not waived such condition on or prior to the Closing;
(f)
by
Seller, if any of the conditions set forth in Section 6.1 or Section
6.3
shall
not
have been fulfilled by the Closing Date in any material respect or if
satisfaction of such condition is or becomes impossible (unless the failure
to
fulfill such conditions results primarily from the breach by the Company or
Seller themselves of any representation or warranty or failing to perform any
covenant or agreement contained in this Agreement) and Seller have not waived
such condition on or prior to the Closing.
7.2
Procedure
for Termination, Amendment, Extension or Waiver
.
A
termination of this Agreement pursuant to Section 7.1, an amendment of this
Agreement pursuant to Section 7.4 or an extension or waiver pursuant to Section
7.5 shall, in order to be effective, require action by its governing body,
or
the duly authorized designee of that governing body, of Seller, Buyer and the
Company.
7.3
Effect
of Termination
.
In the
event of termination of this Agreement by either Seller or Buyer as provided
in
Section 7.1, this Agreement shall forthwith become void and have no effect,
without any further liability or obligation on the part of Seller, the Company
or Buyer, or any director, officer, employee, or shareholder thereof, other
than
the provisions of Article 11;
provided,
however,
that any such termination shall not limit or relieve a party's liability or
obligation for damages suffered by the other party hereto as a result of such
party's breach of any representation, warranty or covenant in this Agreement.
7.4
Amendment
.
This
Agreement may not be amended except by an instrument in writing signed by or
on
behalf of each of the parties.
7.5
Extension;
Waiver
.
At any
time on or prior to the Closing Date, the parties may (a) extend the time for
the performance of any of the obligations or the other acts of the other
parties, (b) waive any inaccuracies in the representations and warranties
contained herein or in any document delivered pursuant hereto, or (c) waive
compliance with any of the agreements or conditions contained herein. Any
agreement on the part of a party to any such extension or waiver shall be valid
only if set forth in an instrument in writing signed by or on behalf of such
party. No waiver of any of the provisions of this Agreement shall be deemed
or
shall constitute a waiver of any other provision or breach of this Agreement,
whether or not similar, unless otherwise expressly provided. The failure of
any
party to this Agreement to assert any of his or its rights under this Agreement
or otherwise shall not constitute a waiver of such rights.
ARTICLE
8
NO
NEGOTIATION
Provided
that Buyer is not in default hereunder, from the date of this Agreement until
the earlier date of the Closing or the termination of this Agreement pursuant
to
Section 7.1, Seller will not, and will cause the Company and its officers,
directors, employees, agents, Affiliates and other representatives not to,
directly or indirectly, solicit, initiate, or encourage any inquiries or
proposals from, discuss or negotiate with, provide any non-public information
to, or consider the merits of any unsolicited inquiries or proposals from,
any
Person (other than Buyer) relating to any transaction involving the sale of
the
business or all or substantially all of the assets of the Company, or any of
the
capital stock of the Company, or any merger, consolidation, business
combination, or similar transaction involving the Company.
ARTICLE
9
INDEMNIFICATION
9.1
Indemnification
of Buyer
.
Seller
agrees, jointly and severally, to defend, indemnify, and hold harmless Buyer,
and their respective successors and assigns (individually a "
Buyer
Indemnitee
,"
and
collectively the "
Buyer
Indemnitees
")
from,
against, and in respect of the following:
(a)
any
and
all losses, damages, deficiencies or liabilities caused by, resulting or arising
from, or otherwise relating to: (i) any breach of the representations and
warranties of Seller or the Companies contained in this Agreement or in any
instrument, certificate or affidavit delivered by or on behalf of Seller or
the
Companies at the Closing in accordance with this Agreement; or (ii) any failure
by either Seller or the Companies to perform or otherwise fulfill or comply
with
(X) if this Agreement shall have been terminated, any covenant, undertaking,
agreement or obligation to be performed, fulfilled or complied with by Seller
or
the Companies prior to
or
in
connection with the Closing or (Y) if the Closing shall occur, any covenant,
undertaking or other agreement or obligation of Seller under this Agreement
to
be performed, fulfilled or otherwise complied with by Seller after the Closing.
Without limiting the foregoing in any manner, Seller shall indemnify Buyer
from
any and all claims made by the previous shareholders or investors in the Company
or any predecessor company of which the Seller was in control of day to day
operations; and
(b)
subject
to the provision of Article 10,
any
Taxes
(i) imposed on the Company, with respect to any taxable period, or portion
thereof, ending on or before the Closing Date, or, (ii) imposed with
respect to the ownership, use or operation of, including income and revenues
from, the Company Shares and the Company’s assets on or before the date of this
Agreement.
(c)
any
Labor
Claims asserted against the Company, with respect to periods prior to the
Closing Date.
(d)
any
and
all actions, suits, proceedings, claims, liabilities, demands, assessments,
judgments, interest, penalties, costs and expenses, including reasonable
attorneys' fees, incurred by the Buyer Indemnities in connection with
investigating, defending, settling or prosecuting any action, suit, proceeding
or claim against Buyer hereunder, incident to any of the items referred to
in
this Section 9.1;
provided
,
that,
if any action, suit, proceeding, claim, liability, demand or assessment shall
be
asserted against any Buyer Indemnitee in respect of which such Buyer Indemnitee
proposes to demand indemnification, such Buyer Indemnitee shall notify Seller
thereof within a reasonable period of time after assertion thereof, and such
notice shall include copies of all suit, service and claim documents and all
other relevant documents in the possession of the Buyer Indemnities and an
explanation of the Buyer Indemnities contentions and defenses with as much
specificity and particularity as the circumstances permit;
provided
,
further
,
that
the failure of the Buyer Indemnities to give such notice or provide such
documentation shall not relieve Seller of their obligations under this Section
9.1, if Seller shall not have been prejudiced thereby (and then solely to the
extent thereof). Subject to rights of or duties to any insurer or other third
Person having liability therefore, Seller shall have the right within ten (10)
days after receipt of such notice to assume in writing the control of the
defense, compromise or settlement of any such action, suit, proceeding, claim,
liability, demand, or assessment, including, at their own expense, employment
of
counsel;
provided
further
,
however
,
that,
if Seller shall have exercised their right to assume such control, the Buyer
Indemnities may, in its sole discretion and at its sole expense, employ counsel
to represent it (in addition to counsel employed by Seller) in any such matter,
and in such event counsel selected by Seller shall be required to cooperate
with
such counsel of the Buyer Indemnitee in such defense, compromise or settlement
for the purpose of informing and sharing information with such Buyer Indemnitee.
So long as Seller are defending in good faith any such claim or demand asserted
by a third Person against the Buyer Indemnitee, the Buyer Indemnitee shall
not
settle or compromise such claim or demand. If Seller has assumed the defense
of
any such claim or demand, then they shall not consent to the entry of judgment
or enter into any settlement without the prior written consent of the Buyer
Indemnitee, which consent shall not be unreasonably withheld. The Buyer
Indemnitee shall make available to Seller or their agents all records and other
materials in the Buyer Indemnitee's possession reasonably required by them
for
their use in contesting any third party claim or demand.
9.2
Indemnification
of Seller
.
Buyer
agrees to defend, indemnify and hold harmless Seller and the Company, and their
respective successors and assigns (individually a "
Seller
Indemnitee
,"
and
collectively the "
Seller
Indemnitees
")
from,
against and in respect
of
the
following:
(a)
any
and
all losses, damages, deficiencies or liabilities caused by, resulting or arising
from or otherwise relating to (i) any breach of the representations and
warranties of Buyer contained in this Agreement or in any instrument,
certificate or affidavit delivered by or on behalf of Buyer at the Closing
in
accordance with this Agreement; (ii) any failure by Buyer to perform or
otherwise fulfill or comply with: (X) if this Agreement shall have been
terminated, Section 5.3 or any other covenant, undertaking, agreement or
obligation to be performed, fulfilled or complied with by Buyer prior to or
in
connection with the Closing; or (Y) if the Closing shall occur, any covenant,
undertaking or other agreement or obligation hereunder to be performed,
fulfilled or otherwise complied with by Buyer after the Closing or (iii) any
obligation or liability with respect to the operation of the Company by Buyer
after the Closing;
(b)
any
and
all actions, suits, proceedings, claims, liabilities, demands, assessments,
judgments, interest, penalties, costs and expenses, including reasonable
attorneys' fees, incurred by the Seller Indemnities in connection with
investigating, defending, settling or prosecuting any action, suit, proceeding
or claim against any Seller Indemnitee hereunder, incident to any of the items
referred to in Section 9.2(a);
provided
,
that,
if any action, suit, proceeding, claim, liability, demand or assessment shall
be
asserted against any Seller Indemnitee in respect of which such Seller
Indemnitee proposes to demand indemnification, such Seller Indemnitee shall
notify Buyer thereof within a reasonable period of time after assertion thereof,
and such notice shall include copies of all suit, service and claim documents,
all other relevant documents in the possession of the Seller Indemnitee and
an
explanation of the Seller Indemnitee's contentions and defenses with as much
specificity and particularity as the circumstances permit;
provided
,
further
,
that
the failure of the Seller Indemnitee to give such notice or provide such
documentation shall not relieve Buyer of its obligations under this Section
9.2
if Buyer shall not have been prejudiced thereby (and then solely to the extent
thereof). Subject to rights of or duties to any insurer or other third Person
having liability therefore, Buyer shall have the right within ten (10) days
after receipt of such notice to assume the control of the defense, compromise
or
settlement of any such action, suit, proceeding, claim, liability, demand,
or
assessment, including, at its own expense, employment of counsel;
provided
,
that,
if Buyer shall have exercised its right to assume such control, the Seller
Indemnitee may, in its sole discretion and at its sole expense, employ counsel
to represent it (in addition to counsel employed by Buyer) in any such matter,
and in such event counsel selected by Buyer shall be required to cooperate
with
such counsel of the Seller Indemnitee in such defense, compromise or settlement
for the purpose of informing and sharing information with such Seller
Indemnitee. So long as Buyer is defending in good faith any such claims or
demands asserted by a third Person against the Seller Indemnitee, the Seller
Indemnitee shall not settle or compromise such claim or demand. If Buyer has
assumed the defense of any such claim or demand, then it shall not consent
to
the entry of judgment or enter into any settlement without the prior written
consent of the Seller Indemnitee (which consent shall not be unreasonably
withheld). The Seller Indemnitee shall make available to Buyer or its agents
all
records and other materials in the Seller Indemnitee's possession reasonably
required by it for its use in contesting any third party claim or
demand.
9.3
Indemnification
of Seller and Buyer by TBeck Capital, Inc. (“TBeck”)
.
TBeck
agrees to defend, indemnify and hold harmless Seller, the Buyer, and their
respective successors and assigns (individually a "
TBeck
Indemnitee
,"
and
collectively the "
TBeck
Indemnitees
")
from,
against and in respect
of
the
following:
(a)
any
and
all losses, damages, deficiencies or liabilities caused by, related to or
arising from liabilities incurred by prior to Closing or breach of warranties
by
Buyer at Closing;
(b)
any
and
all actions, suits, proceedings, claims, liabilities, demands, assessments,
judgments, interest, penalties, costs and expenses, including reasonable
attorneys' fees, incurred by the TBeck Indemnities in connection with
investigating, defending, settling or prosecuting any action, suit, proceeding
or claim against any TBeck Indemnitee hereunder, incident to any of the items
referred to in Section 9.3(a);
provided
,
that,
if any action, suit, proceeding, claim, liability, demand or assessment shall
be
asserted against any TBeck Indemnitee in respect of which such TBeck Indemnitee
proposes to demand indemnification, such TBeck Indemnitee shall notify Buyer
thereof within a reasonable period of time after assertion thereof, and such
notice shall include copies of all suit, service and claim documents, all other
relevant documents in the possession of the TBeck Indemnitee and an explanation
of the TBeck Indemnitee's contentions and defenses with as much specificity
and
particularity as the circumstances permit;
provided
,
further
,
that
the failure of the TBeck Indemnitee to give such notice or provide such
documentation shall not relieve Buyer of its obligations under this Section
9.3
if Buyer shall not have been prejudiced thereby (and then solely to the extent
thereof). Subject to rights of or duties to any insurer or other third Person
having liability therefore, Buyer shall have the right within ten (10) days
after receipt of such notice to assume the control of the defense, compromise
or
settlement of any such action, suit, proceeding, claim, liability, demand,
or
assessment, including, at its own expense, employment of counsel;
provided
,
that,
if Buyer shall have exercised its right to assume such control, the TBeck
Indemnitee may, in its sole discretion and at its sole expense, employ counsel
to represent it (in addition to counsel employed by Buyer) in any such matter,
and in such event counsel selected by Buyer shall be required to cooperate
with
such counsel of the TBeck Indemnitee in such defense, compromise or settlement
for the purpose of informing and sharing information with such TBeck Indemnitee.
So long as Buyer is defending in good faith any such claims or demands asserted
by a third Person against the TBeck Indemnitee, the TBeck Indemnitee shall
not
settle or compromise such claim or demand. If Buyer has assumed the defense
of
any such claim or demand, then it shall not consent to the entry of judgment
or
enter into any settlement without the prior written consent of the TBeck
Indemnitee (which consent shall not be unreasonably withheld). The TBeck
Indemnitee shall make available to Buyer or its agents all records and other
materials in the TBeck Indemnitee's possession reasonably required by it for
its
use in contesting any third party claim or demand.
9.4
Remedies;
Specific Performance
.
(a)
The
indemnification provisions of this Article 9 are in addition to, and not in
lieu
or in derogation of, any other rights or remedies any party may have at law
or
in equity for a breach of any representations, warranties or covenants contained
in this Agreement.
(b)
Each
of
the parties to this Agreement acknowledges and agrees that Buyer would be
damaged irreparably if any of the covenants of Seller or the Company under
this
Agreement are not performed in accordance with their specific terms or otherwise
are breached. Accordingly, each of the parties hereto agrees that Buyer shall
be
entitled to an injunction or injunctions to prevent breaches of the covenants
set forth in this Agreement by Seller and to enforce specifically this Agreement
and the terms and provisions hereof in any competent court having jurisdiction
over the parties, in addition to any other remedy to which it may be entitled,
at law or in equity.
(c)
Notwithstanding
any provision of this Agreement to the contrary, Buyer's and Seller' sole remedy
for any breach of any of the provisions of Article 3 or 4 shall be to exercise
their rights under this Article 9, which shall be subject to the procedures
and
limitations set forth in this Article 9, excluding however, any cause of action
for specific performance.
9.5
Survival
.
Notwithstanding any other provision to the contrary in this Agreement, this
Article 9 shall survive termination of this Agreement.
ARTICLE
10
TAX
MATTERS
The
following provisions shall govern the allocation of responsibility as between
Buyer, on the one hand, and Seller and the Company, on the other hand, for
certain Tax matters following the Closing Date:
10.1
Tax
Periods Ending on or Before the Closing Date
.
The
Company shall prepare or cause to be prepared and file or cause to be filed
all
tax returns, reports and other informational statements and documentation for
the Company for all periods ending on or prior to the Closing Date, which are
required to be filed on, before or after the Closing Date. Seller shall permit
Buyer (with respect to Tax Returns filed after the date hereof and before the
Closing Date) or Buyer and the Company shall permit Seller (with respect to
Tax
Returns filed after the Closing Date) to review and comment on each such Tax
Return described in the preceding sentence prior to filing. The Company shall
pay or cause to be paid any Taxes owed by the Company for all periods ending
on
or before the Closing Date, whether or not such Taxes are shown as owed on
the
appropriate Tax Returns.
10.2
Tax
Periods Beginning Before and Ending After the Closing Date
.
Buyer
shall prepare or cause to be prepared and file or cause to be filed any Tax
Returns of the Company for Tax periods which begin before the Closing Date
and
end after the Closing Date. Buyer shall permit Seller to review and comment
on
each such Tax Return.
10.3
Cooperation
on Tax Matters
.
(a)
Buyer,
the Company, and Seller shall reasonably cooperate, as and to the extent
reasonably requested by the other party, in connection with the filing of Tax
Returns pursuant to this Article 10 and any audit, litigation or other
proceeding with respect to Taxes for which the other party shall have liability
therefore under this Agreement. Such cooperation shall include the retention
and
(upon the other party's request) the provision of records and information which
are reasonably relevant to any such audit, litigation or other proceeding and
making employees reasonably available on a mutually convenient basis to provide
additional information and explanation of any material provided hereunder.
The
Company shall retain all books and records with respect to Tax matters pertinent
to the Company relating to any Tax period beginning before the Closing Date
until the expiration of the statute of limitations (and, to the extent notified
by Buyer or Seller, any extensions thereof) of the respective Tax periods,
and
to abide by all record retention agreements entered into with any taxing
authority.
(b)
Buyer,
the Company and Seller further agree, upon request, to use their commercially
reasonable efforts to obtain any certificate or other document from any
governmental authority or any other Person as may be necessary to mitigate,
reduce or eliminate any Tax that could be imposed (including with respect to
the
transactions contemplated hereby).
(c)
Buyer,
the Company and Seller further agree, upon request, to provide the other party
with all information that either party may be required to report pursuant to
tax
laws of the United States or any other jurisdiction.
10.4
Certain
Taxes
.
All
transfer, documentary, sales, use, stamp, registration and other such Taxes
incurred in connection with this Agreement shall be paid by Seller when due,
and
Seller will, at their own expense, file all necessary Tax returns and other
documentation with
respect
to all such transfer, documentary, sales, use, stamp, registration and other
Taxes and fees, and, if required by applicable law, Buyer will join in the
execution of any such Tax Returns and other documentation.
ARTICLE
11
GENERAL
PROVISIONS
11.1
Survival
of Representations and Warranties
.
All of
the representations and warranties of the parties hereto contained in this
Agreement shall survive the Closing and shall continue in full force and effect.
Any claims with respect to the foregoing sentence under Section 9.1 and Section
9.2 must be asserted in writing with reasonable particularity by the party
making such claims.
11.2
Survival
of Covenants and Agreements
.
The
respective covenants and agreements of the parties contained in this Agreement
shall survive the Closing. Any claims as to a breach of a covenant or agreement
under Article 9 or Article 10 must be asserted in writing with reasonable
particularity by the party making such claim.
11.3
Interpretation
.
When a
reference is made in this Agreement to a Section, Exhibit or Schedule, such
reference shall be to a Section of, or an Exhibit or Schedule to, this Agreement
unless otherwise indicated. The words "hereof', "herein" and "hereunder" and
similar terms refer to this Agreement as a whole and not to any particular
provision of this Agreement, unless the context otherwise requires. The table
of
contents and headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement. Whenever the words "include", "includes" or "including" are used
in
this Agreement, they shall be deemed to be followed by the words "without
limitation".
11.4
Counterparts
.
This
Agreement may be executed in one or more counterparts, all of which shall be
considered one and the same agreement and shall become effective when one or
more counterparts have been signed by each of the parties and delivered to
the
other parties.
11.5
Entire
Agreement; No Third-Party Beneficiaries
.
The
Confidentiality Agreement and this Agreement (including the Exhibits and
Schedules hereto and the documents and instruments referred to herein) (a)
constitute the entire agreement and supersede all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter hereof and (b) are not intended to confer upon any Person other
than the parties any rights or remedies hereunder.
11.6
Governing
Law
.
This
Agreement shall be governed by, and construed in accordance with the laws of
the
State of Nevada.
11.7
Assignment
.
Neither
this Agreement nor any of the rights, interests or obligations hereunder shall
be assigned by any of the parties without the prior written consent of the
other
parties, except that Buyer may assign its rights to purchase the Company Shares,
but not any of its obligations under this Agreement, to one of its Affiliates.
Subject to the preceding sentence, this Agreement will be binding upon, inure
to
the benefit of, and be enforceable by, the parties and their respective
successors and assigns.
11.8
Submission
to Jurisdiction
.
Each
party hereto hereby agrees that any suit, action or proceeding with respect
to
this Agreement may be brought in the courts of the State of Florida; and each
party hereto hereby irrevocably submits to the jurisdiction of such courts
and
all appellate courts thereof for the purpose of any such suit, action,
proceeding or judgment.
11.9
WAIVER
OF JURY TRIAL
.
EACH
PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW,
ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR
INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY).
EACH
PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY
OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY
WOULD
NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND
(B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO
ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS,
THE
MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.
11.10
Performance
by Companies
.
Seller
hereby agrees to cause the Companies to comply with its obligations under this
Agreement.
11.11
Severability
.
If any
one or more of the provisions contained in this Agreement should be held
invalid, illegal or unenforceable in any respect, the validity, legality and
enforceability of the remaining provisions contained herein shall not in any
way
be affected or impaired thereby. The parties shall endeavor in good-faith
negotiations to replace the invalid, illegal or unenforceable provisions with
valid provisions, the economic effect of which comes as close as possible to
that of the invalid, illegal or unenforceable provisions.
11.12
Notices
.
All
notices, requests, demands, claims and other communications required or
permitted to be given hereunder shall be in writing and shall be given by (a)
personal delivery (effective upon delivery), (b) facsimile (effective on the
next day after transmission), or (c) recognized overnight delivery service
(effective on the next day after delivery to the service), in each case
addressed to the intended recipient as set forth below:
If
to
Buyer:
Sucre Agricultural, Inc.
1340
South Main St, Ste. 190
Grapevine,
TX 76051
Attention: Lyle Mortensen
Cc:
David
Evans, Attorney at Law
1412
Main
St, Ste 1075
Dallas,
TX 75202
If
to
Seller:
Arnold Klann
37
Via Monarca
Dana
Point, Ca. 92629
If
to
Company:
BlueFire Ethanol Inc.
8275
So.
Eastern Ave., Suite 200
Las
Vegas, Nv. 89123
Attention: Arnold Klann
Cc:
Scott
D.
Olson, Esq.
766
Hoska
Drive
Del
Mar, CA 92014
If
to
TBeck:
TBeck
Capital, Inc.
1340
South Main St, Ste. 190
Grapevine,
TX 76051
Attention:
Lyle Mortensen
Cc:
David
Evans, Attorney at Law
1412
Main
St, Ste 1075
Dallas,
TX 75202
Any
party
may change his or its address for receiving notices by giving written notice
of
such change to the other parties in accordance with this Section
11.12.
IN
WITNESS WHEREOF, the parties have caused this Agreement to be executed by their
duly authorized representatives as of the date first above written.
|
BUYER
|
|
|
|
SUCRE
AGRICULTURAL, INC.
|
|
|
|
By:
/s/ Lyle
Mortensen
|
|
Name:
Lyle Mortensen
|
|
Title:
President
|
|
SELLER
|
|
|
|
/s/
Arnold
Klann
Arnold
Klann
|
|
|
|
Arnold
Klann, as trustee for RCR Trust 1
|
|
|
|
/s/
Necitas Camanga
Sumait
Necitas
Camanga Sumait
|
|
|
|
/s/
John
Earl
Cuzens
John
Earl Cuzens
|
|
|
|
Richard
Klann
|
|
|
|
/s/
Chris
Klann
Chris
Klann
|
|
|
|
/s/
[illegible
signature]
Life
Church, Inc.
|
|
|
|
/s/
Susan
Courtright
Cottonwood Christian Center, Inc.
|
|
|
|
/s/
Kent A.
Larsen
Kent
A. Larsen
|
|
|
|
/s/
Dorinda L.
Gullo
Dorinda
L. Gullo
|
|
|
|
/s/
David
C. Gullo
David
C. Gullo
|
|
|
|
/s/
Daniel J. Gullo
Daniel
J. Gullo
|
|
|
|
/s/
Deann
M.
Salcius
Deann
M. Salcius
|
|
|
|
/s/
Brenda S.
Russell
Brenda
S. Russell
|
|
|
|
/s/
Ronald J.
McLoud
Ronald
J. McLoud
|
|
|
|
/s/
Dorthea M.
Klann
Dorthea
M. Klann
|
|
|
|
/s/
Gregory M.
Klann
Gregory
M. Klann
|
|
|
|
/s/
Theodore M.
Klann
Theodore
M. Klann
|
|
|
|
/s/
Gaylen H.
Oderdirk
Gaylen
H. Oderdirk
|
|
|
|
/s/
Paul
Gallegos
Paul
Gallegos
|
|
|
|
COMPANY
BLUEFIRE
ETHANOL INC.
By:
/s/ Arnold
Klann
Name:
Arnold Klann
Title:
President
|
|
TBECK
CAPITAL, INC.
By:
/s/ Ron
Williams
Name:
Ron Williams
Title:
President
|
EXHIBIT
A
LIST
OF
SELLERS AND COMPANY’S OFFICERS AND DIRECTORS
Sellers:
Arnold
R.
Klann, as trustee for RCR Trust 1
Arnold
R.
Klann
Necitas
Camanga Sumait
John
Earl
Cuzens
Directors:
Arnold
R.
Klann
John
Earl
Cuzens
Necitas
Camangas Sumait
Robert
Moore
Officers:
President:
Arnold R. Klann
Secretary:
Necitas Camangas Sumait
Treasurer:
Robert Moore
EXHIBIT
B
LIST
OF
BUYER’S AND TBECK CAPITAL’S OFFICERS AND DIRECTORS
Buyer’s
Directors:
Lyle
Mortenson, Sole Director
TBeck
Capital Officers and Directors:
Ron
Williams, President and Director
EXHIBIT
C
BUYER
PRIVATE EQUITY OFFERING AGREEMENTS
SCHEDULE
3.4
COMPANY
SHAREHOLDER LIST
Shareholder
|
Company
Shares Held
|
Cert
No.
|
Percentage
Ownership
|
Buyer
Shares to be Issued
|
|
|
|
|
|
Arnold
R. Klann, as trustee for RCR Trust 1
|
6,996
|
001A
|
69.96
|
11,892,500
|
Arnold
R. Klann
|
1,000
|
002
|
10.00
|
1,700,000
|
John
Earl Cuzens
|
706
|
003A
|
7.06
|
1,200,000
|
Necitas
Camanga Sumait
|
706
|
004A
|
7.06
|
1,200,000
|
Richard
Klann
|
235
|
005
|
2.35
|
400,000
|
Chris
Klann
|
235
|
006
|
2.35
|
400,000
|
Life
Church, Inc.
|
29
|
007
|
0.29
|
50,000
|
Cottonwood
Christian Center, Inc.
|
29
|
008
|
0.29
|
50,000
|
Kent
A. Larsen
|
15
|
009
|
0.15
|
25,000
|
Dorinda
L. Gullo
|
6
|
010
|
0.06
|
10,000
|
David
C. Gullo
|
6
|
011
|
0.06
|
10,000
|
Daniel
J. Gullo
|
6
|
012
|
0.06
|
10,000
|
Deann
M. Salcius
|
6
|
013
|
0.06
|
10,000
|
Brenda
S. Russell
|
6
|
014
|
0.06
|
10,000
|
Ronald
J. McLoud
|
6
|
015
|
0.06
|
10,000
|
Dorthea
M. Klann
|
3
|
016
|
0.03
|
5,000
|
Gregory
M. Klann
|
3
|
017
|
0.03
|
5,000
|
Theodore
M. Klann
|
3
|
018
|
0.03
|
5,000
|
Gaylen
H. Oderdirk
|
3
|
019
|
0.03
|
5,000
|
Paul
Gallegos
|
1
|
020
|
0.01
|
2,500
|
|
|
|
|
|
TOTALS
|
10,000
|
|
100%
|
17,000,000
|
SCHEDULE
3.8
CONTRACTS
SCHEDULE
3.11
LEASES
SCHEDULE
3.14
LIABILITIES
AND OBLIGATIONS
SCHEDULE
3.24
COMPANY
BANK ACCOUNTS
Persons
with check writing authority on behalf of the Company:
SCHEDULE
3.25
RELATED
PARTY TRANSACTIONS
SCHEDULE
3.26
REAL
PROPERTY
SCHEDULE
4.9
BUYER
SHAREHOLDER LIST
Shareholder
|
Share
Amounts
|
|
|
|
|
|
|
|
|
|
|
|
|
SCHEDULE
4.11
BUYER
SEC
FILINGS
57
Exhibit
3.1
AMENDED
AND RESTATED
ARTICLES
OF INCORPORATION
OF
BLUE
FIRE
ETHANOL FUELS, INC.
(FORMERLY
SUCRE AGRICULTURAL CORP.)
Pursuant
to the provisions of Sections 78.385 and 78.403 of the Nevada Revised Statutes,
as amended, the undersigned does hereby declare and certify that:
1.
He
is the
duly elected and acting President of Blue Fire Ethanol Fuels, Inc., a
corporation duly organized and existing under the laws of the State of Nevada
(the “Corporation.”), and he has been authorized to execute this certificate by
resolution of the Corporation’s board of directors.
2.
The
Articles of Incorporation of the Corporation were originally filed by the
Secretary of State on March 8, 2006.
3.
The
board
of directors of this Corporation duly adopted resolutions on July 2, 2006,
proposing to amend and restate the Articles of Incorporation, declaring said
amendment and restatement to be advisable and in the best interests of this
Corporation and its stockholders and authorizing the appropriate officers of
this Corporation to solicit the consent of the stockholders therefore, which
resolution setting forth the proposed amendment and restatement is as
follows:
RESOLVED,
that the Articles of Incorporation of this Corporation be amended and restated
as follows:
ARTICLE
I
The
name
of the Corporation is: Blue Fire Ethanol Fuels, Inc.
ARTICLE
II
The
name
of the corporation’s resident agent is The Corporation Trust Company of Nevada,
and the street address of the said resident agent where process may be served
is
6100 Neil Road, Suite 500, Reno, NV 89511.
ARTICLE
III
The
nature of the business and the objects and purposes proposed to be transacted,
promoted or carried on by the Corporation to engage in any lawful activity.
To
do any and all things necessary, suitable and proper for the accomplishment
of
any of the purposes, the fulfillment of any of the obligations, or the
furtherance of any of the powers hereinbefore set forth, either alone or in
association, partnership, or joint venture with other persons, firms, or
corporations, and to do every other act or acts, thing or things, incidental
or
appurtenant to, growing out of, or connected with, the aforesaid business or
powers, any part or parts thereof, provided the same be not inconsistent with
the laws under which Corporation is organized.
The
above
and foregoing statement of purposes shall be construed as a statement of both
purposes and powers and shall not be construed as limiting in any way the powers
conferred upon corporations generally by the laws of the State of
Nevada.
ARTICLE
IV
Section
1:
Number.
The aggregate number of shares which the Corporation shall have authority to
issue is One Hundred Million (100,000,000) Common Shares of one class, with
unlimited voting rights, all with par value of $0.001. and One Million
(1,000,000) shares of Preferred Stock, no par value, and which may be issued
in
one or more series at the discretion of the Board of Directors. The Board of
Directors is hereby vested with authority to fix by resolution or resolutions
the designations and the powers, preferences and relative, participating,
optional or other special rights, and qualifications, limitations or
restrictions thereof, including without limitation the dividend rate, conversion
or exchange rights, redemption price and liquidation preference, of any series
of shares of Preferred Stock, and to fix the number of shares constituting
any
such series, and to increase or decrease the number of shares of any such series
(but not below the number of shares thereof then outstanding). In case the
number of shares of any such series shall be so decreased, the shares
constituting such decrease shall resume the status which they had prior to
the
adoption of the resolution or resolutions originally fixing the number of shares
of such series. All shares of any one series shall be alike in every particular
except as otherwise provided by these Articles of Incorporation or the Nevada
Business Corporation Act.
Section
2:
Dividends.
Dividends in cash, property or shares of the Corporation may be paid upon the
stock, as and when declared by the Board of Directors, out of funds of the
Corporation to the extent and in the manner permitted by law.
ARTICLE
V
The
holders of the capital stock of this Corporation shall not have the preemptive
right to acquire additional unmissed Shares or treasury shares of the capital
stock of this Corporation, or securities convertible into the shares of capital
stock or carrying capital purchase warrants or privileges.
ARTICLE
VI
Cumulative
Voting of shares of stock of the Corporation shall not be allowed or authorized
in the election of the Board of Directors of the Corporation.
ARTICLE
VII
The
number of directors of the Corporation shall be established in accordance with
the Bylaws of the Corporation.
ARTICLE
VIII
The
capital stock of Corporation, after the fixed consideration thereof has been
paid or performed, shall not be subject to assessment, and Stockholders of
Corporation shall not be individually liable for the debts and liabilities
of
Corporation.
ARTICLE
IX
This
Corporation shall have perpetual existence.
ARTICLE
X
The
Board
of Directors shall have the power and authority to make, alter, or amend the
Bylaws; to fix the amount, in cash or otherwise, to be reserved as working
capital; and to authorize and cease to be executed the mortgages and liens
upon
the property and franchises of Corporation.
ARTICLE
XI
Section
1:
Indemnification
of Directors. A director of the Corporation shall not be personally liable
to
the Corporation or to its shareholders for damages for breach of fiduciary
duty
as a director of the Corporation or to its shareholders for damages otherwise
existing for (i) any breach of the director’s duty of loyalty to the Corporation
or to its shareholders; (ii) acts or omission not in good faith or which involve
intentional misconduct or a knowing violation of the law; (Iii) acts revolving
around any unlawful distribution or contribution; or (iv) any transaction from
which the director directly or indirectly derived any improper personal benefit.
If Nevada Law is hereafter amended to eliminate or limit further liability
of a
director, then, in addition to the elimination and limitation of liability
provided by the foregoing, the liability of each director shall be eliminated
or
limited to the fullest extent permitted under the provisions of Nevada Law
as so
amended. Any repeal or modification of the indemnification provided in these
Articles shall not adversely affect any right or protection of a director of
the
Corporation under these Articles, as in effect immediately prior to such repeal
or modification, with respect to any liability that would have accrued, but
for
this limitation of liability, prior to such repeal or modification.
Section
2:
Indemnification.
The Corporation shall indemnify, to the fullest extent permitted by applicable
law in effect from time to time, any person, and the estate and personal
representative of any such person, against all liability and expense (including,
but not limited to attorney’s fees) incurred by reason of the fact that he is or
was a director or officer of the Corporation, he is or was serving at the
request of the Corporation as a director, officer, partner, trustee, employee,
fiduciary, or agent of, or in any similar managerial or fiduciary position
of,
another domestic or foreign corporation or other individual or entity of an
employee benefit plan. The Corporation shall also indemnify any person who
is
serving or has served the Corporation as a director, officer, employee,
fiduciary, or agent and that person’s estate and personal representative to the
extent and in the manner provided in any bylaw, resolution of the shareholders
or directors, contract, or otherwise, so long as such provision is legally
permissible.
ARTICLE
XII
This
Corporation shall not be governed by, nor shall the provisions of Sections
78.378 through and including 78.3793 and Section 78.411 through and including
78.444 of the Nevada Revised Statutes, as amended, in any way whatsoever affect
the management, operation or be applied to Corporation. This Article XII may
only be amended by a majority vote of not less than 90% of the then issued
and
outstanding shares of Corporation. A quorum of outstanding shares for voting
on
an Amendment to this Article XII shall not be met unless 95% or more of the
issues and outstanding shares are present at a properly called and noticed
meeting of the Stockholders. The super-majority set forth in this Article XII
only applies to any attempted amendment to this Article.
IN
WITNESS WHEREOF, the undersigned has executed this Amended and Restated Articles
of Incorporation this 2nd day of July, 2006.
|
/s/ Arnold Klann,
President
Arnold Klann,
President
|
3
Exhibit
3.2
AMENDED
AND RESTATED
BYLAWS
OF
BLUEFIRE
ETHANOL FUELS, INC.
a
Nevada Corporation
(formerly
Sucre Agricultural Corp.)
ARTICLE
I
OFFICES
Section
1.
PRINCIPAL
OFFICES
.
The
principal office shall be in the City of Las Vegas, State of
California.
Section
2.
OTHER
OFFICES
.
The
board of directors may at any time establish branch or subordinate offices
at
any place or places where the corporation is qualified to do
business.
ARTICLE
II
MEETINGS
OF STOCKHOLDERS
Section
1.
PLACE
OF MEETINGS
.
Meetings of stockholders shall be held at any place within or without the State
of Nevada designated by the board of directors. In the absence of any such
designation, stockholders’ meetings shall be held at the principal executive
office of the corporation.
Section
2.
ANNUAL
MEETINGS
.
The
annual meetings of stockholders shall be held at a date and time designated
by
the board of directors. At such meetings, directors shall be elected and any
other proper business may be transacted by a plurality vote of
stockholders.
Section
3.
SPECIAL
MEETINGS
.
A
special meeting of the stockholders, for any purpose or purposes whatsoever,
unless prescribed by statute or by the articles of incorporation, may be called
at any time by the president and shall be called by the president or secretary
at the request in writing of a majority of the board of directors, or at the
request in writing of stockholders holding shares in the aggregate entitled
to
cast not less than a majority of the votes at any such meeting.
The
request shall be in writing, specifying the time of such meeting, the place
where it is to be held and the general nature of the business proposed to be
transacted, and shall be delivered personally or sent by registered mail or
by
telegraphic or other facsimile transmission to the chairman of the board, the
president, any vice president or the secretary of the corporation. The officer
receiving such request forthwith shall cause notice to be given to the
stockholders entitled to vote, in accordance with the provisions of Sections
4
and 5 of this Article II, that a meeting will be held at the time requested
by
the person or persons calling the meeting, not less than thirty-five (35) nor
more than sixty (60) days after the receipt of the request. If the notice is
not
given within twenty (20) days after receipt of the request, the person or
persons requesting the meeting may give the notice. Nothing contained in this
paragraph of this Section 3 shall be construed as limiting, fixing or affecting
the time when a meeting of stockholders called by action of the board of
directors may be held.
Section
4.
NOTICE
OF STOCKHOLDERS’ MEETINGS
.
All
notices of meetings of stockholders shall be sent or otherwise given in
accordance with Section 5 of this Article II not less than ten (10) nor more
than sixty (60) days before the date of the meeting being noticed. The notice
shall specify the place, date and hour of the meeting and (i) in the case of
a
special meeting the general nature of the business to be transacted, or (ii)
in
the case of the annual meeting those matters which the board of directors,
at
the time of giving the notice, intends to present for action by the
stockholders. The notice of any meeting at which directors are to be elected
shall include the name of any nominee or nominees which, at the time of the
notice, management intends to present for election.
If
action
is proposed to be taken at any meeting for approval of (i) contracts or
transactions in which a director has a direct or indirect financial interest,
(ii) an amendment to the articles of incorporation, (iii) a reorganization
of
the corporation, (iv) dissolution of the corporation, or (v) a distribution
to
preferred stockholders, the notice shall also state the general nature of such
proposal.
Section
5.
MANNER
OF GIVING NOTICE; AFFIDAVIT OF NOTICE
.
Notice
of any meeting of stockholders shall be given either personally or by
first-class mail or telegraphic or other written communication, charges prepaid,
addressed to the stockholder at the address of such stockholder appearing on
the
books of the corporation or given by the stockholder to the corporation for
the
purpose of notice. If no such address appears on the corporation’s books or is
given, notice shall be deemed to have been given if sent by mail or telegram
to
the corporation’s principal executive office, or if published at least once in a
newspaper of general circulation in the county where this office is located.
Personal delivery of any such notice to any officer of a corporation or
association or to any member of a partnership shall constitute delivery of
such
notice to such corporation, association or partnership. Notice shall be deemed
to have been given at the time when delivered personally or deposited in the
mail or sent by telegram or other means of written communication. In the event
of the transfer of stock after delivery or mailing of the notice of and prior
to
the holding of the meeting, it shall not be necessary to deliver or mail notice
of the meeting to the transferee.
If
any
notice addressed to a stockholder at the address of such stockholder appearing
on the books of the corporation is returned to the corporation by the United
States Postal Service marked to indicate that the United States Postal Service
is unable to deliver the notice to the stockholder at such address, all future
notices or reports shall be deemed to have been duly given without further
mailing if the same shall be available to the stockholder upon written demand
of
the stockholder at the principal executive office of the corporation for a
period of one year from the date of the giving of such notice.
An
affidavit of the mailing or other means of giving any notice of any
stockholders’ meeting shall be executed by the secretary, assistant secretary or
any transfer agent of the corporation giving such notice, and shall be filed
and
maintained in the minute book of the corporation.
Business
transacted at any special meeting of stockholders shall be limited to the
purposes stated in the notice.
Section
6.
QUORUM
.
The
presence in person or by proxy of the holders of a majority of the shares
entitled to vote at any meeting of stockholders shall constitute a quorum for
the transaction of business, except as otherwise provided by statute or the
articles of incorporation. The stockholders present at a duly called or held
meeting at which a quorum is present may continue to do business until
adjournment, notwithstanding the withdrawal of enough stockholders to leave
less
than a quorum, if any action taken (other than adjournment) is approved by
at
least a majority of the shares required to constitute a quorum.
Section
7.
ADJOURNED
MEETING AND NOTICE THEREOF
.
Any
stockholders’ meeting, annual or special, whether or not a quorum is present,
may be adjourned from time to time by the vote of the majority of the shares
represented at such meeting, either in person or by proxy, but in the absence
of
a quorum, no other business may be transacted at such meeting.
When
any
meeting of stockholders, either annual or special, is adjourned to another
time
or place, notice need not be given of the adjourned meeting if the time and
place thereof are announced at a meeting at which the adjournment is taken.
At
any adjourned meeting the corporation may transact any business which might
have
been transacted at the original meeting.
Section
8.
VOTING
.
Unless
a record date set for voting purposes be fixed as provided in Section 1 of
Article VIII of these bylaws, only persons in whose names shares entitled to
vote stand on the stock records of the corporation at the close of business
on
the business day next preceding the day on which notice is given (or, if notice
is waived, at the close of business on the business day next preceding the
day
on which the meeting is held) shall be entitled to vote at such meeting. Any
stockholder entitled to vote on any matter other than elections of directors
or
officers, may vote part of the shares in favor of the proposal and refrain
from
voting the remaining shares or vote them against the proposal, but, if the
stockholder fails to specify the number of shares such stockholder is voting
affirmatively, it will be conclusively presumed that the stockholder’s approving
vote is with respect to all shares such stockholder is entitled to vote. Such
vote may be by voice vote or by ballot; provided, however, that all elections
for directors must be by ballot upon demand by a stockholder at any election
and
before the voting begins.
When
a
quorum is present or represented at any meeting, the vote of the holders of
a
majority of the stock having voting power present in person or represented
by
proxy shall decide any question brought before such meeting, unless the question
is one upon which by express provision of the statutes or of the articles of
incorporation a different vote is required in which case such express provision
shall govern and control the decision of such question. Every stockholder of
record of the corporation shall be entitled at each meeting of stockholders
to
one vote for each share of stock standing in his name on the books of the
corporation.
Section
9.
WAIVER
OF NOTICE OR CONSENT BY ABSENT
STOCKHOLDERS
.
The
transactions at any meeting of stockholders, either annual or special, however
called and noticed, and wherever held, shall be as valid as though had at a
meeting duly held after regular call and notice, if a quorum be present either
in person or by proxy, and if, either before or after the meeting, each person
entitled to vote, not present in person or by proxy, signs a written waiver
of
notice or a consent to a holding of the meeting, or an approval of the minutes
thereof. The waiver of notice or consent need not specify either the business
to
be transacted or the purpose of any regular or special meeting of stockholders,
except that if action is taken or proposed to be taken for approval of any
of
those matters specified in the second paragraph of Section 4 of this
Article II, the waiver of notice or consent shall state the general nature
of such proposal. All such waivers, consents or approvals shall be filed with
the corporate records or made a part of the minutes of the meeting.
Attendance
of a person at a meeting shall also constitute a waiver of notice of such
meeting, except when the person objects, at the beginning of the meeting, to
the
transaction of any business because the meeting is not lawfully called or
convened, and except that attendance at a meeting is not a waiver of any right
to object to the consideration of matters not included in the notice if such
objection is expressly made at the meeting.
Section
10.
STOCKHOLDER
ACTION BY WRITTEN CONSENT WITHOUT A MEETING
.
Any
action which may be taken at any annual or special meeting of stockholders
may
be taken without a meeting and without prior notice, if a consent in writing,
setting forth the action so taken, is signed by the holders of outstanding
shares having not less than the minimum number of votes that would be necessary
to authorize or take such action at a meeting at which all shares entitled
to
vote thereon were present and voted. All such consents shall be filed with
the
secretary of the corporation and shall be maintained in the corporate records.
Any stockholder giving a written consent, or the stockholder’s proxy holders, or
a transferee of the shares of a personal representative of the stockholder
of
their respective proxy holders, may revoke the consent by a writing received
by
the secretary of the corporation prior to the time that written consents of
the
number of shares required to authorize the proposed action have been filed
with
the secretary.
Section
11.
PROXIES
.
Every
person entitled to vote for directors or on any other matter shall have the
right to do so either in person or by one or more agents authorized by a written
proxy signed by the person and filed with the secretary of the corporation.
A
proxy shall be deemed signed if the stockholder’s name is placed on the proxy
(whether by manual signature, typewriting, telegraphic transmission or
otherwise) by the stockholder or the stockholder’s attorney in fact. A validly
executed proxy which does not state that it is irrevocable shall continue in
full force and effect unless revoked by the person executing it, prior to the
vote pursuant thereto, by a writing delivered to the corporation stating that
the proxy is revoked or by a subsequent proxy executed by, or attendance at
the
meeting and voting in person by the person executing the proxy; provided,
however, that no such proxy shall be valid after the expiration of six (6)
months from the date of such proxy, unless coupled with an interest, or unless
the person executing it specifies therein the length of time for which it is
to
continue in force, which in no case shall exceed seven (7) years from the date
of its execution. Subject to the above and the provisions of Section 78.355
of the Nevada General Corporation Law, any proxy duly executed is not revoked
and continues in full force and effect until an instrument revoking it or a
duly
executed proxy bearing a later date is filed with the secretary of the
corporation.
Section
12.
INSPECTORS
OF ELECTION
.
Before
any meeting of stockholders, the board of directors may appoint any persons
other than nominees for office to act as inspectors of election at the meeting
or its adjournment. If no inspectors of election are appointed, the chairman
of
the meeting may, and on the request of any stockholder or his proxy shall,
appoint inspectors of election at the meeting. The number of inspectors shall
be
either one (1) or three (3). If inspectors are appointed at a meeting on the
request of one or more stockholders or proxies, the holders of a majority of
shares or their proxies present at the meeting shall determine whether one
(1)
or three (3) inspectors are to be appointed. If any person appointed as
inspector fails to appear or fails or refuses to act, the vacancy may be filled
by appointment by the board of directors before the meeting, or by the chairman
at the meeting.
The
duties of these inspectors shall be as follows:
(a)
Determine
the number of shares outstanding and the voting power of each, the shares
represented at the meeting, the existence of a quorum, and the authenticity,
validity, and effect of proxies;
(b)
Receive
votes, ballots, or consents;
(c)
Hear
and
determine all challenges and questions in any way arising in connection with
the
right to vote;
(d)
Count
and
tabulate all votes or consents;
(e)
Determine
the election result; and
(f)
Do
any
other acts that may be proper to conduct the election or vote with fairness
to
all stockholders.
ARTICLE
III
DIRECTORS
Section
1.
POWERS
.
Subject
to the provisions of the Nevada General Corporation Law and any limitations
in
the articles of incorporation and these bylaws relating to action required
to be
approved by the stockholders or by the outstanding shares, the business and
affairs of the corporation shall be managed and all corporate powers shall
be
exercised by or under the direction of the board of directors.
Without
prejudice to such general powers, but subject to the same limitations, it is
hereby expressly declared that the directors shall have the power and authority
to:
(a)
Select
and remove all officers, agents, and employees of the corporation, prescribe
such powers and duties for them as may not be inconsistent with law, with the
articles of incorporation or these bylaws, fix their compensation, and require
from them security for faithful service.
(b)
Change
the principal executive office or the principal business office from one
location to another; cause the corporation to be qualified to do business in
any
other state, territory, dependency, or foreign country and conduct business
within or without the State; designate any place within or without the State
for
the holding of any stockholders’ meeting, or meetings, including annual
meetings; adopt, make and use a corporate seal, and prescribe the forms of
certificates of stock, and alter the form of such seal and of such certificates
from time to time as in their judgment they may deem best, provided that such
forms shall at all times comply with the provisions of law.
(c)
Authorize
the issuance of shares of stock of the corporation from time to time, upon
such
terms as may be lawful, in consideration of money paid, labor done or services
actually rendered, debts or securities cancelled, tangible or intangible
property actually received.
(d)
Borrow
money and incur indebtedness for the purpose of the corporation, and cause
to be
executed and delivered therefor, in the corporate name, promissory notes, bonds,
debentures, deeds of trust, mortgages, pledges, hypothecations, or other
evidences of debt and securities therefor.
Section
2.
NUMBER
OF DIRECTORS
.
The
number of directors which shall constitute the whole board shall not be less
than one (1) nor more than nine (9). The exact number of authorized directors
shall be set by resolution of the board of directors, within the limits
specified above. The maximum or minimum number of directors cannot be changed,
nor can a fixed number be substituted for the maximum and minimum numbers,
except by a duly adopted amendment to the articles of incorporation or by an
amendment to this bylaw.
Section
3.
QUALIFICATION,
ELECTION AND TERM OF OFFICE OF DIRECTORS
.
Directors shall be elected at each annual meeting of the stockholders to hold
office until the next annual meeting, but if any such annual meeting is not
held
or the directors are not elected at any annual meeting, the directors may be
elected at any special meeting of stockholders held for that purpose, or at
the
next annual meeting of stockholders held thereafter. Each director, including
a
director elected to fill a vacancy, shall hold office until the expiration
of
the term for which elected and until a successor has been elected and qualified
or until his earlier resignation or removal or his office has been declared
vacant in the manner provided in these bylaws. Directors need not be
stockholders.
Section
4.
RESIGNATION
AND REMOVAL OF DIRECTORS
.
Any
director may resign effective upon giving written notice to the chairman of
the
board, the president, the secretary or the board of directors of the
corporation, unless the notice specifies a later time for the effectiveness
of
such resignation, in which case such resignation shall be effective at the
time
specified. Unless such resignation specifies otherwise, its acceptance by the
corporation shall not be necessary to make it effective. The board of directors
may declare vacant the office of a director who has been declared of unsound
mind by an order of a court or convicted of a felony. Any or all of the
directors may be removed without cause of such removal is approved by the
affirmative vote of a majority of the outstanding shares entitled to vote.
No
reduction of the authorized number of directors shall have the effect of
removing any director before his term of office expires.
Section
5.
VACANCIES
.
Vacancies in the board of directors, may be filled by a majority of the
remaining directors, though less than a quorum, or by a sole remaining director.
Each director so elected shall hold office until the next annual meeting of
the
stockholders and until a successor has been elected and qualified.
A
vacancy
in the board of directors exists as to any authorized position of directors
which is not then filled by a duly elected director, whether caused by death,
resignation, removal, increase in the authorized number of directors or
otherwise.
The
stockholders may elect a director or directors at any time to fill any vacancy
or vacancies not filled by the directors, but any such election by written
consent shall require the consent of a majority of the outstanding shares
entitled to vote. If the resignation of a director is effective at a future
time, the board of directors may elect a successor to take office when the
resignation becomes effective.
If
after
the filling of any vacancy by the directors, the directors then in office who
have been elected by the stockholders shall constitute less than a majority
of
the directors then in office, any holder or holders of an aggregate of five
percent or more of the total number of shares at the time outstanding having
the
right to vote for such directors may call a special meeting of the stockholders
to elect the entire board. The term of office of any director not elected by
the
stockholders shall terminate upon the election of a successor.
Section
6.
PLACE
OF MEETINGS
.
Regular
meetings of the board of directors shall be held at any place within or without
the State of Nevada that has been designated from time to time by resolution
of
the board. In the absence of such designation, regular meetings shall be held
at
the principal executive office of the corporation. Special meetings of the
board
shall be held at any place within or without the State of Nevada that has been
designated in the notice of the meeting or, if not stated in the notice or
there
is not notice, at the principal executive office of the corporation. Any
meeting, regular or special, may be held by conference telephone or similar
communication equipment, so long as all directors participating in such meeting
can hear one another, and all such directors shall be deemed to be present
in
person at such meeting.
Section
7.
ANNUAL
MEETINGS
.
Immediately following each annual meeting of stockholders, the board of
directors shall hold a regular meeting for the purpose of transaction of other
business. Notice of this meeting shall not be required.
Section
8.
OTHER
REGULAR MEETINGS
.
Other
regular meetings of the board of directors shall be held without call at such
time as shall from time to time be fixed by the board of directors. Such regular
meetings may be held without notice, provided the notice of any change in the
time of any such meetings shall be given to all of the directors. Notice of
a
change in the determination of the time shall be given to each director in
the
same manner as notice for special meetings of the board of
directors.
Section
9.
SPECIAL
MEETINGS
.
Special
meetings of the board of directors for any purpose or purposes may be called
at
any time by the chairman of the board or the president or any vice president
or
the secretary or any two directors.
Notice
of
the time and place of special meetings shall be delivered personally or by
telephone to each director or sent by first-class mail or telegram, charges
prepaid, addressed to each director at his or her address as it is shown upon
the records of the corporation. In case such notice is mailed, it shall be
deposited in the United States mail at least four (4) days prior to the time
of
the holding of the meeting. In case such notice is delivered personally, or
by
telephone or telegram, it shall be delivered personally or by telephone or
to
the telegraph company at least forty-eight (48) hours prior to the time of
the
holding of the meeting. Any oral notice given personally or by telephone may
be
communicated to either the director or to a person at the office of the director
who the person giving the notice has reason to believe will promptly communicate
it to the director. The notice need not specify the purpose of the meeting
nor
the place if the meeting is to be held at the principal executive office of
the
corporation.
Section
10.
QUORUM
.
A
majority of the authorized number of directors shall constitute a quorum for
the
transaction of business, except to adjourn as hereinafter provided. Every act
or
decision done or made by a majority of the directors present at a meeting duly
held at which a quorum is present shall be regarded as the act of the board
of
directors, subject to the provisions of Section 78.140 of the Nevada
General Corporation Law (approval of contracts or transactions in which a
director has a direct or indirect material financial interest),
Section 78.125 (appointment of committees), and Section 78.751
(indemnification of directors). A meeting at which a quorum is initially present
may continue to transact business notwithstanding the withdrawal of directors,
if any action taken is approved by at least a majority of the required quorum
for such meeting.
Section
11.
WAIVER
OF NOTICE
.
The
transactions of any meeting of the board of directors, however called and
noticed or wherever held, shall be as valid as though had at a meeting duly
held
after regular call and notice if a quorum be present and if, either before
or
after the meeting, each of the directors not present signs a written waiver
of
notice, a consent to holding the meeting or an approval of the minutes thereof.
The waiver of notice of consent need not specify the purpose of the meeting.
All
such waivers, consents and approvals shall be filed with the corporate records
or made a part of the minutes of the meeting. Notice of a meeting shall also
be
deemed given to any director who attends the meeting without protesting, prior
thereto or at its commencement, the lack of notice to such
director.
Section
12.
ADJOURNMENT
.
A
majority of the directors present, whether or not constituting a quorum, may
adjourn any meeting to another time and place.
Section
13.
NOTICE
OF ADJOURNMENT
.
Notice
of the time and place of holding an adjourned meeting need not be given, unless
the meeting is adjourned for more than twenty-four (24) hours, in which case
notice of such time and place shall be given prior to the time of the adjourned
meeting, in the manner specified in Section 8 of this Article III, to the
directors who were not present at the time of the adjournment.
Section
14.
ACTION
WITHOUT MEETING
.
Any
action required or permitted to be taken by the board of directors may be taken
without a meeting, if all members of the board shall individually or
collectively consent in writing to such action. Such action by written consent
shall have the same force and effect as a unanimous vote of the board of
directors. Such written consent or consents shall be filed with the minutes
of
the proceedings of the board.
Section
15.
FEES
AND COMPENSATION OF DIRECTORS
.
Directors and members of committees may receive such compensation, if any,
for
their services, and such reimbursement of expenses, as may be fixed or
determined by resolution of the board of directors. Nothing herein contained
shall be construed to preclude any director from serving the corporation in
any
other capacity as an officer, agent, employee, or otherwise, and receiving
compensation for such services. Members of special or standing committees may
be
allowed like compensation for attending committee meetings.
ARTICLE
IV
COMMITTEES
Section
1.
COMMITTEES
OF DIRECTORS
.
The
board of directors may, by resolution adopted by a majority of the authorized
number of directors, designate one or more committees, each consisting of one
or
more directors, to serve at the pleasure of the board. The board may designate
one or more directors as alternate members of any committees, who may replace
any absent member at any meeting of the committee. Any such committee, to the
extent provided in the resolution of the board, shall have all the authority
of
the board, except with regard to:
(a)
the
approval of any action which, under the Nevada General Corporation Law, also
requires stockholders’ approval or approval of the outstanding
shares;
(b)
the
filing of vacancies on the board of directors or in any committees;
(c)
the
fixing of compensation of the directors for serving on the board or on any
committee;
(d)
the
amendment or repeal of bylaws or the adoption of new bylaws;
(e)
the
amendment or repeal of any resolution of the board of directors which by its
express terms is not so amendable or repealable;
(f)
a
distribution to the stockholders of the corporation, except at a rate or in
a
periodic amount or within a price range determined by the board of directors;
or
(g)
the
appointment of any other committees of the board of directors or the members
thereof.
Section
2.
MEETINGS
AND ACTION BY COMMITTEES
.
Meetings and action of committees shall be governed by, and held and taken
in
accordance with, the provisions of Article III, Sections 6 (place of meetings),
8 (regular meetings), 9 (special meetings and notice), 10 (quorum), 11 (waiver
of notice), 12 (adjournment), 13 (notice of adjournment) and 14 (action without
meeting), with such changes in the context of those bylaws as are necessary
to
substitute the committee and its members for the board of directors and its
members, except that the time or regular meetings of committees may be
determined by resolutions of the board of directors and notice of special
meetings of committees shall also be given to all alternate members, who shall
have the right to attend all meetings of the committee. The board of directors
may adopt rules for the government of any committee not inconsistent with the
provisions of these bylaws. The committees shall keep regular minutes of their
proceedings and report the same to the board when required.
ARTICLE
V
OFFICERS
Section
1.
OFFICERS
.
The
officers of the corporation shall be a president, a secretary and a treasurer.
The corporation may also have, at the discretion of the board of directors,
a
chairman of the board, one or more vice presidents, one or more assistant
secretaries, one or more assistant treasurers, and such other officers as may
be
appointed in accordance with the provisions of Section 3 of this Article V.
Any two or more offices may be held by the same person.
Section
2.
ELECTION
OF OFFICERS
.
The
officers of the corporation, except such officers as may be appointed in
accordance with the provisions of Section 3 or Section 5 of this
Article V, shall be chosen by the board of directors, and each shall serve
at the pleasure of the board, subject to the rights, if any, of an officer
under
any contract of employment. The board of directors at its first meeting after
each annual meeting of stockholders shall choose a president, a vice president,
a secretary and a treasurer, none of whom need be a member of the board. The
salaries of all officers and agents of the corporation shall be fixed by the
board of directors.
Section
3.
SUBORDINATE
OFFICERS, ETC
.
The
board of directors may appoint, and may empower the president to appoint, such
other officers as the business of the corporation may require, each of whom
shall hold office for such period, have such authority and perform such duties
as are provided in the bylaws or as the board of directors may from time to
time
determine.
Section
4.
REMOVAL
AND RESIGNATION OF OFFICERS
.
The
officers of the corporation shall hold office until their successors are chosen
and qualify. Subject to the rights, if any, of an officer under any contract
of
employment, any officer may be removed, either with or without cause, by the
board of directors, at any regular or special meeting thereof, or, except in
case of an officer chosen by the board of directors, by any officer upon whom
such power or removal may be conferred by the board of directors.
Any
officer may resign at any time by giving written notice to the corporation.
Any
such resignation shall take effect at the date of the receipt of such notice
or
at any later time specified therein; and, unless otherwise specified therein,
the acceptance of such resignation shall not be necessary to make it effective.
Any such resignation is without prejudice to the rights, if any, of the
corporation under any contract to which the officer is a party.
Section
5.
VACANCIES
IN OFFICES
.
A
vacancy in any office because of death, resignation, removal, disqualification
or any other cause shall be filled in the manner prescribed in these bylaws
for
regular appointments to such office.
Section
6.
CHAIRMAN
OF THE BOARD
.
The
chairman of the board, if such an officer be elected, shall, if present, preside
at all meetings of the board of directors and exercise and perform such other
powers and duties as may be from time to time assigned to him by the board
of
directors or prescribed by the bylaws. If there is no president, the chairman
of
the board shall in addition be the chief executive officer of the corporation
and shall have the powers and duties prescribed in Section 7 of this
Article V.
Section
7.
PRESIDENT
.
Subject
to such supervisory powers, if any, as may be given by the board of directors
to
the chairman of the board, if there be such an officer, the president shall
be
the chief executive officer of the corporation and shall, subject to the control
of the board of directors, have general supervision, direction and control
of
the business and the officers of the corporation. He shall preside at all
meetings of the stockholders and, in the absence of the chairman of the board,
of if there be none, at all meetings of the board of directors. He shall have
the general powers and duties of management usually vested in the office of
president of a corporation, and shall have such other powers and duties as
may
be prescribed by the board of directors or the bylaws. He shall execute bonds,
mortgages and other contracts requiring a seal, under the seal of the
corporation, except where required or permitted by law to be otherwise signed
and executed and except where the signing and execution thereof shall be
expressly delegated by the board of directors to some other officer or agent
of
the corporation.
Section
8.
VICE
PRESIDENTS
.
In the
absence or disability of the president, the vice presidents, if any, in order
of
their rank as fixed by the board of directors or, if not ranked, a vice
president designated by the board of directors, shall perform all the duties
of
the president, and when so acting shall have all the powers of, and be subject
to all the restrictions upon, the president. The vice presidents shall have
such
other powers and perform such other duties as from time to time may be
prescribed for them respectively by the board of directors or the bylaws, the
president or the chairman of the board.
Section
9.
SECRETARY
.
The
secretary shall attend all meetings of the board of directors and all meetings
of the stockholders and shall record, keep or cause to be kept, at the principal
executive office or such other place as the board of directors may order, a
book
of minutes of all meetings of directors, committees of directors and
stockholders, with the time and place of holding, whether regular or special,
and, if special, how authorized, the notice thereof given, the names of those
present at directors’ and committee meetings, the number of shares present or
represented at stockholders’ meetings, and the proceedings thereof.
The
secretary shall keep, or cause to be kept, at the principal executive office
or
at the office of the corporation’s transfer agent or registrar, as determined by
resolution of the board of directors, a share register, or a duplicate share
register, showing the names of all stockholders and their addresses, the number
and classes of shares held by each, the number and date of certificates issued
for the same, and the number and date of cancellation of every certificate
surrendered for cancellation.
The
secretary shall give, or cause to be given, notice of all meetings of
stockholders and of the board of directors required by the bylaws or by law
to
be given, and he shall keep the seal of the corporation in safe custody, as
may
be prescribed by the board of directors or by the bylaws.
Section
10.
CHIEF
FINANCIAL OFFICER/TREASURER
.
Unless
otherwise provided by the board of directors, the chief financial officer shall
be the treasurer of the Corporation. The treasurer shall keep and maintain,
or
cause to be kept and maintained, adequate and correct books and records of
accounts of the properties and business transactions of the corporation,
including accounts of its assets, liabilities, receipts, disbursements, gains,
losses, capital, retained earnings and shares. The books of account shall at
all
reasonable times be open to inspection by any director.
The
treasurer shall deposit all moneys and other valuables in the name and to the
credit of the corporation with such depositaries as may be designated by the
board of directors. He shall disburse the funds of the corporation as may be
ordered by the board of directors, shall render to the president and directors,
whenever they request it, an account of all of his transactions as treasurer
and
of the financial condition of the corporation, and shall have other powers
and
perform such other duties as may be prescribed by the board of directors or
the
bylaws.
If
required by the board of directors, the treasurer shall give the corporation
a
bond in such sum and with such surety or sureties as shall be satisfactory
to
the board of directors for the faithful performance of the duties of his office
and for the restoration to the corporation, in case of his death, resignation,
retirement or removal from office, of all books, papers, vouchers, money and
other property of whatever kind in his possession or under his control belonging
to the corporation.
ARTICLE
VI
INDEMNIFICATION
OF DIRECTORS, OFFICERS, EMPLOYEES,
AND
OTHER
AGENTS
Section
1.
ACTIONS
OTHER THAN BY THE CORPORATION
.
The
corporation may indemnify any person who was or is a party or is threatened
to
be made a party to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative, except
an
action by or in the right of the corporation, by reason of the fact that he
is
or was a director, officer, employee or agent of the corporation, or is or
was
serving at the request of the corporation as a director, officer, employee
or
agent of another corporation, partnership, joint venture, trust or other
enterprise, against expenses, including attorneys’ fees, judgments, fines and
amounts paid in settlement actually and reasonably incurred by him in connection
with the action, suit or proceeding if he acted in good faith and in a manner
which he reasonably believed to be in or not opposed to the best interests
of
the corporation, and, with respect to any criminal action or proceeding, has
no
reasonable cause to believe his conduct was unlawful. The termination of any
action, suit or proceeding by judgment, order, settlement, conviction, or upon
a
plea of nolo contendere or its equivalent, does not, of itself, create a
presumption that the person did not act in good faith and in a manner which
he
reasonably believed to be in or not opposed to the best interests of the
corporation, and that, with respect to any criminal action or proceeding, he
had
reasonable cause to believe that his conduct was unlawful.
Section
2.
ACTIONS
BY THE CORPORATION
.
The
corporation may indemnify any person who was or is a party or is threatened
to
be made a party to any threatened, pending or completed action or suit by or
in
the right of the corporation to procure a judgment in its favor by reason of
the
fact that he is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against expenses, including amounts paid
in
settlement and attorneys’ fees, actually and reasonably incurred by him in
connection with the defense or settlement of the action or suit if he acted
in
good faith and in a manner which he reasonably believed to be in or not opposed
to the best interests of the corporation. Indemnification may not be made for
any claim, issue or matter as to which such a person has been adjudged by a
court of competent jurisdiction, after exhaustion of all appeals therefrom,
to
be liable to the corporation or for amounts paid in settlement to the
corporation, unless and only to the extent that the court in which the action
or
suit was brought or other court of competent jurisdiction determines upon
application that in view of all the circumstances of the case, the person is
fairly and reasonably entitled to indemnity for such expenses as the court
deems
proper.
Section
3.
SUCCESSFUL
DEFENSE
.
To the
extent that a director, officer, employee or agent of the corporation has been
successful on the merits or otherwise in defense of any action, suit or
proceeding referred to in Sections 1 and 2, or in defense of any claim,
issue or matter therein, he must be indemnified by the corporation against
expenses, including attorneys’ fees, actually and reasonably incurred by him in
connection with the defense.
Section
4.
REQUIRED
APPROVAL
.
Any
indemnification under Sections 1 and 2, unless ordered by a court or
advanced pursuant to Section 5, must be made by the corporation only as
authorized in the specific case upon a determination that indemnification of
the
director, officer, employee or agent is proper in the circumstances. The
determination must be made:
(a)
By
the
stockholders;
(b)
By
the
board of directors by majority vote of a quorum consisting of directors who
were
not parties to the act, suit or proceeding;
(c)
If
a
majority vote of a quorum consisting of directors who were not parties to the
act, suit or proceeding so orders, by independent legal counsel in a written
opinion; or
(d)
If
a
quorum consisting of directors who were not parties to the act, suit or
proceeding cannot be obtained, by independent legal counsel in a written
opinion.
Section
5.
ADVANCE
OF EXPENSES
.
The
articles of incorporation, the bylaws or an agreement made by the corporation
may provide that the expenses of officers and directors incurred in defending
a
civil or criminal action, suit or proceeding must be paid by the corporation
as
they are incurred and in advance of the final disposition of the action, suit
or
proceeding upon receipt of an undertaking by or on behalf of the director or
officer to repay the amount if it is ultimately determined by a court of
competent jurisdiction that he is not entitled to be indemnified by the
corporation. The provisions of this section do not affect any rights to
advancement of expenses to which corporate personnel other than directors or
officers may be entitled under any contract or otherwise by law.
Section
6.
OTHER
RIGHTS
.
The
indemnification and advancement of expenses authorized in or ordered by a court
pursuant to this Article VI:
(a)
Does
not
exclude any other rights to which a person seeking indemnification or
advancement of expenses may be entitled under the articles of incorporation
or
any bylaw, agreement, vote of stockholders or disinterested directors or
otherwise, for either an action in his official capacity or an action in another
capacity while holding his office, except that indemnification, unless ordered
by a court pursuant to Section 2 or for the advancement of expenses made
pursuant to Section 5, may not be made to or on behalf of any director or
officer if a final adjudication establishes that his acts or omissions involved
intentional misconduct, fraud or a knowing violation of the law and was material
to the cause of action.
(b)
Continues
for a person who has ceased to be a director, officer, employee or agent and
inures to the benefit of the heirs, executors and administrators of such a
person.
Section
7.
INSURANCE
.
The
corporation may purchase and maintain insurance on behalf of any person who
is
or was a director, officer, employee or agent of the corporation, or is or
was
serving at the request of the corporation as a director, officer, employee
or
agent of another corporation, partnership, joint venture, trust or other
enterprise for any liability asserted against him and incurred by him in any
such capacity, or arising out of his status as such, whether or not the
corporation would have the power to indemnify him against such liability under
the provisions of this Article VI.
Section
8.
RELIANCE
ON PROVISIONS
.
Each
person who shall act as an authorized representative of the corporation shall
be
deemed to be doing so in reliance upon the rights of indemnification provided
by
this Article.
Section
9.
SEVERABILITY
.
If any
of the provisions of this Article are held to be invalid or unenforceable,
this
Article shall be construed as if it did not contain such invalid or
unenforceable provision and the remaining provisions of this Article shall
remain in full force and effect.
Section
10.
RETROACTIVE
EFFECT
.
To the
extent permitted by applicable law, the rights and powers granted pursuant
to
this Article VI shall apply to acts and actions occurring or in progress prior
to its adoption by the board of directors.
ARTICLE
VII
RECORDS
AND BOOKS
Section
1.
MAINTENANCE
OF SHARE REGISTER
.
The
corporation shall keep at its principal executive office, or at the office
of
its transfer agent or registrar, if either be appointed and as determined by
resolution of the board of directors, a record of its stockholders, giving
the
names and addresses of all stockholders and the number and class of shares
held
by each stockholder.
Section
2.
MAINTENANCE
OF BYLAWS
.
The
corporation shall keep at its principal executive office, or if its principal
executive office is not in this State at its principal business office in this
State, the original or a copy of the bylaws as amended to date, which shall
be
open to inspection by the stockholders at all reasonable times during office
hours. If the principal executive office of the corporation is outside this
state and the corporation has no principal business office in this state, the
secretary shall, upon the written request of any stockholder, furnish to such
stockholder a copy of the bylaws as amended to date.
Section
3.
MAINTENANCE
OF OTHER CORPORATE RECORDS
.
The
accounting books and records and minutes of proceedings of the stockholders
and
the board of directors and any committee or committees of the board of directors
shall be kept at such place or places designated by the board of directors,
or,
in the absence of such designation, at the principal executive office of the
corporation. The minutes shall be kept in written form and the accounting books
and records shall be kept either in written form or in any other form capable
of
being converted into written form.
Every
director shall have the absolute right at any reasonable time to inspect and
copy all books, records and documents of every kind and to inspect the physical
properties of this corporation and any subsidiary of this corporation. Such
inspection by a director may be made in person or by agent or attorney and
the
right of inspection includes the right to copy and make extracts. The foregoing
rights of inspection shall extend to the records of each subsidiary of the
corporation.
Section
4.
ANNUAL
REPORT TO STOCKHOLDERS
.
Nothing
herein shall be interpreted as prohibiting the board of directors from issuing
annual or other periodic reports to the stockholders of the corporation as
they
deem appropriate.
Section
5.
FINANCIAL
STATEMENTS
.
A copy
of any annual financial statement and any income statement of the corporation
for each quarterly period of each fiscal year, and any accompanying balance
sheet of the corporation as of the end of each such period, that has been
prepared by the corporation shall be kept on file in the principal executive
office of the corporation for twelve (12) months.
Section
6.
ANNUAL
LIST OF DIRECTORS, OFFICERS AND RESIDENT AGENTS
.
The
corporation shall, on or before December 31st of each year, file with the
Secretary of State of the State of Nevada, on the prescribed form, a list of
its
officers and directors and a designation of its resident agent in
Nevada.
ARTICLE
VIII
GENERAL
CORPORATE MATTERS
Section
1.
RECORD
DATE
.
For
purposes of determining the stockholders entitled to notice of any meeting
or to
vote or entitled to receive payment of any dividend or other distribution or
allotment of any rights or entitled to exercise any rights in respect of any
other lawful action, the board of directors may fix, in advance, a record date,
which shall not be more than sixty (60) days nor less than ten (10) days prior
to the date of any such meeting nor more than sixty (60) days prior to any
other
action, and in such case only stockholders of record on the date so fixed are
entitled to notice and to vote or to receive the dividend, distribution or
allotment of rights or to exercise the rights, as the case may be,
notwithstanding any transfer of any shares on the books of the corporation
after
the record date fixed as aforesaid, except as otherwise provided in the Nevada
General Corporation Law.
If
the
board of directors does not so fix a record date:
(a)
The
record date for determining stockholders entitled to notice of or to vote at
a
meeting of stockholders shall be at the close of business on the day next
preceding the day on which notice is given or, if notice is waived, at the
close
of business on the business day next preceding the day on which the meeting
is
held.
(b)
The
record date for determining stockholders entitled to give consent to corporate
action in writing without a meeting, when no prior action by the board has
been
taken, shall be the day on which the first written consent is
given.
(c)
The
record date for determining stockholders for any other purpose shall be at
the
close of business on the day on which the board adopts the resolution relating
thereto, or the sixtieth (60th) day prior to the date of such other action,
whichever is later.
Section
2.
CLOSING
OF TRANSFER BOOKS PROHIBITED
.
In
connection with the determination of stockholders entitled to notice of any
meeting or to vote or entitled to receive payment of any dividend or other
distribution or allotment of any rights or entitled to exercise any right in
respect of any other lawful action, the board of directors shall not close
the
stock transfer books of the corporation for any reason but shall instead fix
a
record date for such determination in the manner provided in Section 1 of
Article VIII of these bylaws.
Section
3.
REGISTERED
STOCKHOLDERS
.
The
corporation shall be entitled to recognize the exclusive right of a person
registered on its books as the owner of shares to receive dividends, and to
vote
as such owner, and to hold liable for calls and assessments a person registered
on its books as the owner of shares, and shall not be bound to recognize any
equitable or other claim to or interest in such share or shares on the part
of
any other person, whether or not it shall have express or other notice thereof,
except as otherwise provided by the laws of Nevada.
Section
4.
CHECKS,
DRAFTS, EVIDENCES OF INDEBTEDNESS
.
All
checks, drafts or other orders for payment of money, notes or other evidences
of
indebtedness, issued in the name of or payable to the corporation, shall be
signed or endorsed by such person or persons and in such manner as, from time
to
time, shall be determined by resolution of the board of directors.
Section
5.
CORPORATE
CONTRACTS AND INSTRUMENTS; HOW EXECUTED
.
The
board of directors, except as in the bylaws otherwise provided, may authorize
any officer or officers, agent or agents, to enter into any contract or execute
any instrument in the name of and on behalf of the corporation, and such
authority may be general or confined to specific instances; and, unless so
authorized or ratified by the board of directors or within the agency power
or
authority to bind the corporation by any contract or engagement or to pledge
its
credit or to render it liable for any purpose or to any amount.
Section
6.
STOCK
CERTIFICATES
.
A
certificate or certificates for shares of the capital stock of the corporation
shall be issued to each stockholder when any such shares are fully paid, and
the
board of directors may authorize the issuance of certificates or shares as
partly paid provided that such certificates shall state the amount of the
consideration to be paid therefor and the amount paid thereon. All certificates
shall be signed in the name of the corporation by the president or vice
president and by the treasurer or an assistant treasurer or the secretary or
any
assistant secretary, certifying the number of shares and the class or series
of
shares owned by the stockholder. When the corporation is authorized to issue
shares of more than one class or more than one series of any class, there shall
be set forth upon the face or back of the certificate, or the certificate shall
have a statement that the corporation will furnish to any stockholders upon
request and without charge, a full or summary statement of the designations,
preferences and relatives, participating, optional or other special rights
of
the various classes of stock or series thereof and the qualifications,
limitations or restrictions of such rights, and, if the corporation shall be
authorized to issue only special stock, such certificate must set forth in
full
or summarize the rights of the holders of such stock. Any or all of the
signatures on the certificate may be facsimile. In case any officer, transfer
agent or registrar who has signed or whose facsimile signature has been placed
upon a certificate shall have ceased to be such officer, transfer agent or
registrar before such certificate is issued, it may be issued by the corporation
with the same effect as if such person were an officer, transfer agent or
registrar at the date of issue.
No
new
certificate for shares shall be issued in place of any certificate theretofore
issued unless the latter is surrendered and cancelled at the same time;
provided, however, that a new certificate may be issued without the surrender
and cancellation of the old certificate if the certificate thereto fore issued
is alleged to have been lost, stolen or destroyed. In case of any such allegedly
lost, stolen or destroyed certificate, the corporation may require the owner
thereof or the legal representative of such owner to give the corporation a
bond
(or other adequate security) sufficient to indemnify it against any claim that
may be made against it (including any expense or liability) on account of the
alleged loss, theft or destruction of any such certificate or the issuance
of
such new certificate.
Section
7.
DIVIDENDS
.
Dividends upon the capital stock of the corporation, subject to the provisions
of the articles of incorporation, if any, may be declared by the board of
directors at any regular or special meeting pursuant to law. Dividends may
be
paid in cash, in property, or in shares of the capital stock, subject to the
provisions of the articles of incorporation.
Before
payment of any dividend, there may be set aside out of any funds of the
corporation available for dividends such sum or sums as the directors from
time
to time, in their absolute discretion, think proper as a reserve or reserves
to
meet contingencies, or for equalizing dividends, or for repairing or maintaining
any property of the corporation, or for such other purpose as the directors
shall think conducive to the interest of the corporation, and the directors
may
modify or abolish any such reserves in the manner in which it was
created.
Section
8.
FISCAL
YEAR
.
The
fiscal year of the corporation shall be fixed by resolution of the board of
directors.
Section
9.
SEAL
.
The
corporate seal shall have inscribed thereon the name of the corporation, the
year of its incorporation and the words “Corporate Seal, Nevada.”
Section
10.
REPRESENTATION
OF SHARES OF OTHER CORPORA-TIONS
.
The
chairman of the board, the president, or any vice president, or any other person
authorized by resolution of the board of directors by any of the foregoing
designated officers, is authorized to vote on behalf of the corporation any
and
all shares of any other corporation or corporations, foreign or domestic,
standing in the name of the corporation. The authority herein granted to said
officers to vote or represent on behalf of the corporation any and all shares
held by the corporation in any other corporation or corporations may be
exercised by any such officer in person or by any person authorized to do so
by
proxy duly executed by said officer.
Section
11.
CONSTRUCTION
AND DEFINITIONS
.
Unless
the context requires otherwise, the general provisions, rules of construction,
and definitions in the Nevada General Corporation Law shall govern the
construction of the bylaws. Without limiting the generality of the foregoing,
the singular number includes the plural, the plural number includes the
singular, and the term “person” includes both a corporation and a natural
person.
ARTICLE
IX
AMENDMENTS
Section
1.
AMENDMENT
BY STOCKHOLDERS
.
New
bylaws may be adopted or these bylaws may be amended or repealed by the
affirmative vote of a majority of the outstanding shares entitled to vote,
or by
the written assent of stockholders entitled to vote such shares, except as
otherwise provided by law or by the articles of incorporation.
Section
2.
AMENDMENT
BY DIRECTORS
.
Subject
to the rights of the stockholders as provided in Section 1 of this Article,
bylaws may be adopted, amended or repealed by the board of
directors.
C
E R
T I F I C A T E O F S E C R E T A R Y
I,
the
undersigned, do hereby certify:
1.
That
I am
the duly elected and acting secretary of BlueFire Ethanol Fuels, Inc. (formerly
Sucre Agricultural Corp.), a Nevada corporation; and
2.
That
the
foregoing Amended and Restated Bylaws, comprising eighteen (18) pages,
constitute the Bylaws of said corporation as duly adopted by the board of
directors of said corporation by a Unanimous Written Consent dated as of May
27,
2006.
IN
WITNESS WHEREOF, I have hereunto subscribed my name and affixed the seal of
said
corporation this 27th day of May 2006.
|
/s/
Necitas Camanga
Sumait
Necitas
Camanga Sumait, Secretary
|
Exhibit
10.1
BOARD
OF DIRECTORS - RETAINER AGREEMENT
This
agreement made as of the 1
st
day of
May, 2006 between BlueFire Ethanol, Inc., with its principal place of business
at 18201 Von Karman Ste 550, CA 92612 (“BlueFire”) and ________________, with an
address of ____________________________________, provides for director services,
according to the following:
BlueFire
agrees to engage --_________________ to serve as a member of the Board of
Directors (the “Director”) and to provide those services required of a director
under BlueFire’s Articles of Incorporation and Bylaws (“Articles and Bylaws”),
as both may be amended from time, to time and under the General Corporation
Law
of Delaware, the federal securities laws and other state and federal laws and
regulations, as applicable.
II.
|
Nature of
Relationship
|
The
Director is an independent contractor and will not be deemed an employee of
BlueFire for purposes of employee benefits, income tax withholding, F.I.C.A.
taxes, unemployment benefits or otherwise. The Director shall not enter
into any agreement or incur any obligations on BlueFire’s behalf.
BlueFire
will supply, at no cost to the Director: periodic briefings on the
business, director packages for each board and committee meeting, copies of
minutes of meetings and any other materials that are required under BlueFire’s
Articles and Bylaws or the charter of any committee of the board on which the
director serves and any other materials which may, by mutual agreement, be
necessary for performing the services requested under this
contract.
III.
|
Director’s
Warranties
|
The
Director warrants that no other party has exclusive rights to his services
in
the specific areas described and that the Director is in no way compromising
any
rights or trust between any other party and the Director or creating a conflict
of interest. The Director also warrants that no other agreement will be
entered into that will create a conflict of interest with this agreement.
The Director further warrants that he will comply with all applicable state
and
federal laws and regulations, as applicable, including Sections 10 and 16 of
the
Securities and Exchange Act of 1934.
Throughout
the term of this agreement and for a period of six months thereafter, the
Director agrees he will not, without obtaining BlueFire’s prior written consent,
directly or indirectly engage or prepare to engage in any activity in
competition with any BlueFire business or product, including products in the
development stage, accept employment or provide services to (including service
as a member of a board of directors), or establish a business in competition
with BlueFire.
A.
Retainer
BlueFire
shall pay the Director a nonrefundable retainer of $5,000 per year during the
term of this agreement (prorate for the first year) to provide the services
described in Section I which shall compensate him for all time spent preparing
for, traveling to (if applicable) and attending board of director meetings
during the year; provided, however, that if more than three board meetings
require out-of-town travel time, such additional travel time may be billed
at
the rate set forth in subparagraph C. below. The retainer shall be
provided for portions of the term less than a full calendar year. This
retainer may be revised by action of BlueFire’s Board of Directors from time to
time. Such revision shall be effective as of the date specified in the
resolution for payments not yet made and need not be documented by an amendment
to this agreement.
B.
Stock Options
Subject
to approval by the Board of Directors, an annual grant of an option to purchase
BlueFire common stock, par value $.001 per share, shall be made to the
Director. The grant shall consist of an option to purchase a specified
number of shares under the term of BlueFire’s 2006 Equity Incentive Plan or then
effective incentive plan. The specified number of shares for a new
appointment to the Board shall be 5,000 shares in 2006, which grant has already
been made, and an annual grant at the discretion of the Board. Currently
this grant is of 1,000 shares. Twenty-five percent of the option shall
vest on each quarterly anniversary of the date of grant. The amount and
terms of the annual option grant may be revised by action of BlueFire’s Board of
Directors from time to time. Such revision shall be effective as of the
date specified in the resolution for any grants not yet made and need not be
documented by an amendment to this agreement.
C.
Additional Payments
To
the
extent services described in Section I require more than three out-of-town
trips, such additional travel time may be charged at the rate of $1,000 per
day
or part thereof. This rate may be revised by action of BlueFire’s
Board of Directors from time to time for payments not yet made. Such
revision shall be effective as of the date specified in the resolution and
need
not be documented by an amendment to this agreement.
D.
Payment
Retainer
payments shall be made quarterly in cash in advance on the first day of each
accounting quarter. Additional payments shall be made in arrears. No
invoices need be submitted by the Director for payment of the retainer.
Invoices for additional payments under C, above, shall be submitted. Such
invoices must be approved by BlueFire’s Chief Executive Officer as to form and
completeness.
E.
Expenses
BlueFire
will reimburse the Director for reasonable expenses approved in advance, such
approval not to be unreasonably withheld. Invoices for expenses, with
receipts attached, shall be submitted. Such invoices must be approved by
BlueFire’s Chief Executive Officer as to form and completeness.
V.
|
Indemnification
and
Insurance
|
BlueFire
will execute an indemnification agreement in favor of the Director substantially
in the form of the agreement attached hereto as Exhibit B. In addition,
BlueFire will provide directors and officers liability insurance.
This
agreement shall be in effect from 1
st
day of
May, 2006 through the last date of the Director’s current term as a member of
BlueFire’s Board of Directors. This agreement shall be automatically
renewed on the date of the Director’s reelection as a member of BlueFire’s Board
of Director’s for the period of such new term unless the Board of Directors
determines not to renew this agreement. Any amendment to this
agreement must be approved by a written action of BlueFire’s Board of
Directors. Amendments to Section IV Compensation hereof do not require the
Director’s consent to be effective.
This
agreement shall automatically terminate upon the death of the Director or upon
his resignation or removal from, or failure to win election or reelection to,
the BlueFire Board of Directors.
In
the
event of any termination of this agreement, the Director agrees to return any
materials transferred to the Director under this agreement except as may be
necessary to fulfill any outstanding obligations hereunder. The Director
agrees that BlueFire has the right of injunctive relief to enforce this
provision.
BlueFire’s
obligation in the event of such termination shall be to pay the Director the
retainer and other payments due through the date of termination.
Termination
shall not relieve either party of its continuing obligation under this agreement
with respect to confidentiality of proprietary information.
VIII.
|
Limitation of
Liability
|
Under
no
circumstances shall BlueFire be liable to the Director for any consequential
damages claimed by any other party as a result of representations made by the
Director with respect to BlueFire which are different from any to those made
in
writing by BlueFire.
Furthermore,
except for the maintenance of confidentiality, neither party shall be liable
to
the other for delay in any performance, or for failure to render any performance
under this agreement when such delay or failure is caused by Government
regulations (whether or not valid), fire, strike, differences with workmen,
illness of employees, flood, accident, or any other cause or causes beyond
reasonable control of such delinquent party.
The
Director agrees to sign and abide by BlueFire’s Director Proprietary Information
and Inventions Agreement, a copy of which is attached hereto as Exhibit
A.
Any
dispute regarding the agreement (including without limitation its validity,
interpretation, performance, enforcement, termination and damages) shall be
determined in accordance with the laws of the State of California, the United
States of America. Any action under this paragraph shall not preclude any
party hereto from seeking injunctive or other legal relief to which each party
may be entitled.
This
agreement (including agreements executed in substantially in the form of the
exhibits attached hereto) supersedes all prior or contemporaneous written or
oral understandings or agreements, and may not be added to, modified, or waived,
in whole or in part, except by a writing signed by the party against whom such
addition, modification or waiver is sought to be asserted.
This
agreement and all of the provisions hereof shall be binding upon and insure
to
the benefit of the parties hereto and their respective successors and permitted
assigns and, except as otherwise expressly provided herein, neither this
agreement, nor any of the rights, interests or obligations hereunder shall
be
assigned by either of the parties hereto without the prior written consent
of
the other party.
Any
and
all notices, requests and other communications required or permitted hereunder
shall be in writing, registered mail or by facsimile, to each of the parties
at
the addresses set forth above or the numbers set forth below:
The
Director:
|
Attention:
|
|
|
Telephone:
|
|
|
Facsimile:
|
|
|
|
|
BlueFire:
|
Attention:
|
Arnold
R. Klann
|
|
Telephone:
|
800-511-4471
|
|
Facsimile:
|
949-752-9389
|
Any
such
notice shall be deemed given when received and notice given by registered mail
shall be considered to have been given on the tenth (10th) day after having
been
sent in the manner provided for above.
XIV.
|
Survival of
Obligations
|
Notwithstanding
the expiration of termination of this agreement, neither party hereto shall
be
released hereunder from any liability or obligation to the other which has
already accrued as of the time of such expiration or termination (including,
without limitation, BlueFire’s obligation to make any fees and expense payments
required pursuant to Article IV hereof) or which thereafter might accrue in
respect of any act or omission of such party prior to such expiration or
termination.
Any
provision of this agreement which is determined to be invalid or unenforceable
shall not affect the remainder of this agreement, which shall remain in effect
as though the invalid or unenforceable provision had not been included herein,
unless the removal of the invalid or unenforceable provision would substantially
defeat the intent, purpose or spirit of this agreement.
IN
WITNESS WHEREOF, the parties hereto have caused this agreement to be executed
by
their duly authorized officers, as of the date first written above.
Signature:
|
|
|
Date:
|
___/___/06
|
|
|
By:
|
|
|
Title:
|
|
Director
|
|
|
BlueFire
Ethanol, Inc.
|
|
|
Signature:
|
|
|
Date:
|
___/___/06
|
|
|
By:
|
|
Arnold
R. Klann
|
Title:
|
|
President
and Chief Executive Officer
|
|
|
|
|
|
|
|
EXHIBIT
A
BOARD
OF DIRECTORS PROPRIETARY INFORMATION
AND
INVENTIONS AGREEMENT
WHEREAS,
the parties desire to assure the confidential status of the information which
may be disclosed by BlueFire to the Director; NOW THEREFORE, in reliance upon
and in consideration of the following undertaking, the parties agree as
follows:
1.
Subject
to
the limitations set forth in Paragraph 2, all information disclosed by BlueFire
to the Director shall be deemed to be "Proprietary Information". In
particular, Proprietary Information shall be deemed to include any information,
process, technique, algorithm, program, design, drawing, formula or test data
relating to any research project, work in process, future development,
engineering, manufacturing, marketing, servicing, financing or personnel matter
relating to BlueFire, its present or future products, sales, suppliers,
customers, employees, investors, or business, whether or oral, written, graphic
or electronic form.
2.
The
term
"Proprietary Information" shall not be deemed to include information which
the
Director can demonstrate by competent written proof. (i) is now, or hereafter
becomes, through no act or failure to act on the part of the Director, generally
known or available; (ii) is known by the Director at the time of receiving
such
information as evidenced by its records: (iii) is hereafter furnished to the
Director by a third party, as a matter of right and without restriction on
disclosure; or (iv) is the subject of a written permission to disclose provided
by BlueFire.
3.
The
Director
shall maintain in trust and confidence and not disclose to any third party
or
use for any unauthorized purpose any Proprietary Information received from
BlueFire. The Director may use such Proprietary Information only to the
extent required to accomplish the purposes of this Agreement. The Director
shall not use Proprietary Information for any purpose or in any manner which
would constitute a violation of any laws or regulations, including without
limitation the export control laws of the United States. No other rights
of licenses to trademarks, inventions, copyrights, or patents are implied or
granted under this Agreement.
4.
Proprietary
Information supplied shall not be reproduced in any form except as required
to
accomplish the intent of this Agreement.
5.
The
Director
represents and warrants that he shall protect the Proprietary Information
received with at least the same degree of care used to protect its own
Proprietary Information from unauthorized use or disclosure. The Director
shall advise its employees or agents who might have access to such Proprietary
Information of the confidential nature thereof and shall obtain from each of
such employers and agents an agreement to abide by the terms of this
Agreement. The Director shall not disclose any Proprietary Information to
any officer, employee or agent who does not have a need for such
information.
6.
All
Proprietary Information (including all copies thereof) shall remain in the
property of BlueFire, and shall be returned to BlueFire after Director's need
for it has expired, or upon request of BlueFire, and in any event, upon
completion or termination of this Agreement.
7.
Notwithstanding
any
other provision of this Agreement, disclosure of Proprietary Information shall
not be precluded if such disclosure:
(a)
is in response to a valid order of a court or other governmental body of the
United States or any political subdivision thereof; provided, however, that
the
responding party shall first have given notice to the other party hereto and
shall have made a reasonable effort to obtain a protective order requiring
that
the Proprietary Information so disclosed be used only for the purpose for which
the order was issued;
(b)
is otherwise required by law; or
(c)
is otherwise necessary to establish rights or enforced obligations under this
Agreement, but only to the extent that any such disclosure is
necessary.
8.
This
Agreement shall continue in full force and effect for so long as the Director
continues to receive Proprietary Information. This Agreement may be
terminated at any time upon thirty (30) days written notice to the other
party. The termination of the Agreement shall not relieve the Director of
the obligations imposed by Paragraphs 3, 4, 5 and 12 of this Agreement with
respect to Proprietary information disclosed prior to the effective date of
such
termination and the provisions of these Paragraphs shall survive the termination
of this Agreement for a period of five (5) years from the date of such
termination.
9.
The
Director
agrees to indemnify BlueFire for any loss or damage suffered as a result of
any
breach by the Director of the terms of this Agreement, including any reasonable
fees incurred by BlueFire in the collection of such indemnity.
10.
This
Agreement
shall be governed by the laws of the State of California as those laws are
applied to contracts entered into and to be performed entirely in California
by
California residents.
11.
This
Agreement
contains the final, complete and exclusive agreement of the parties relative
to
the subject matter hereof and may not be changed, modified, amended or
supplemented except by a written instrument signed by both parties.
12.
Each
party hereby
acknowledges and agrees that in the event of any breach of this Agreement by
the
Director, including, without limitation, an actual or threatened disclosure
of
Proprietary Information without the prior express written consent of BlueFire,
BlueFire will suffer an irreparable injury, such that no remedy at law will
afford it adequate protection against, or appropriate compensation for, such
injury. Accordingly, each party hereby agrees that BlueFire shall be
entitled to specific performance of the Director's obligations under this
Agreement, as well as such further injunctive relief as may be granted by a
court of competent jurisdiction.
AGREED
TO:
|
|
AGREED
TO:
|
BlueFire
Ethanol, Inc.
|
|
|
18201
Von Karman Ste 550
|
|
|
Irvine,
CA 92612
|
|
|
By:
|
/s/
Arnold
R. Klann
|
|
By:
|
|
Name:
|
Arnold
R. Klann
|
|
Name:
|
|
Title:
|
President
& CEO
|
|
Title:
|
Director
|
EXHIBIT
B
INDEMNITY
AGREEMENT
THIS
AGREEMENT
is
made
and entered into this _____ day of _______, 2006 by and between
BLUEFIRE
ETHANOL, INC
.,
Delaware corporation (the “Corporation”), and
_________________
(“Agent”).
RECITALS
WHEREAS,
Agent
performs a valuable service to the Corporation in his capacity as Director
of
the Corporation;
WHEREAS,
the
stockholders of the Corporation have adopted bylaws (the “Bylaws”) providing for
the indemnification of the directors, officers, employees and other agents
of
the Corporation, including persons serving at the request of the Corporation
in
such capacities with other corporations or enterprises, as authorized by the
Delaware General Corporation Law, as amended (the “Code”);
WHEREAS,
the
Bylaws and the Code, by their non-exclusive nature, permit contracts between
the
Corporation and its agents, officers, employees and other agents with respect
to
indemnification of such persons; and
WHEREAS,
in
order
to induce Agent to continue to serve as Director of the Corporation, the
Corporation has determined and agreed to enter into this Agreement with
Agent;
NOW,
THEREFORE,
in
consideration of Agent’s continued service as Director after the date hereof,
the parties hereto agree as follows:
AGREEMENT
1.
Services to the Corporation.
Agent
will serve, at the will of the Corporation or under separate contract, if any
such contract exists, as Director of the Corporation or as a director, officer
or other fiduciary of an affiliate of the Corporation (including any employee
benefit plan of the Corporation) faithfully and to the best of his ability
so
long as he is duly elected and qualified in accordance with the provisions
of
the Bylaws or other applicable charter documents of the Corporation or such
affiliate;
provided,
however,
that
Agent may at anytime and for any reason resign from such position (subject
to
any contractual obligation that Agent may have assumed apart from this
Agreement) and that the Corporation or any affiliate shall have no obligation
under this Agreement to continue Agent in any such position.
2.
Indemnity of Agent.
The
Corporation hereby agrees to hold harmless and indemnify Agent to the fullest
extent authorized or permitted by the provisions of the Bylaws and the Code,
as
the same may be amended from time to time (but, only to the extent that such
amendment permits the Corporation to provide broader indemnification rights
than
the Bylaws or the Code permitted prior to adoption of such
amendment).
3.
Additional Indemnity.
In
addition to and not in limitation of the indemnification otherwise provided
for
herein, and subject only to the exclusions set forth in Section 4 hereof, the
Corporation hereby further agrees to hold harmless and indemnify
Agent:
(a)
against
any and all expenses (including attorneys’ fees), witness fees, damages,
judgments, fines and amounts paid in settlement and any other amounts that
Agent
becomes legally obligated to pay because of any claim or claims made against
or
by him in connection with any threatened, pending or completed action, suit
or
proceeding, whether civil, criminal, arbitrational, administrative or
investigative (including an action by or in the right of the Corporation) to
which Agent is, was or at any time becomes a party, or is threatened to be
made
a party, by reason of the fact that Agent is, was or at any time becomes a
director, officer, employee or other agent of Corporation, or is or was serving
or at any time serves at the request of the Corporation as a director, officer,
employee or other agent of another corporation, partnership, joint venture,
trust, employee benefit plan or other enterprise; and
(b)
otherwise
to the fullest extent as may be provided to Agent by the Corporation under
the
non-exclusivity provisions of the Code and Section 41 of the
Bylaws.
4.
Limitations on Additional Indemnity.
No
indemnity pursuant to Section 3 hereof shall be paid by the
Corporation:
(a)
on
account of any claim against Agent solely for an accounting of profits made
from
the purchase or sale by Agent of securities of the Corporation pursuant to
the
provisions of Section 16(b) of the Securities Exchange Act of 1934 and
amendments thereto or similar provisions of any federal, state or local
statutory law;
(b)
on
account of Agent’s conduct that is established by a final judgment as knowingly
fraudulent or deliberately dishonest or that constituted willful
misconduct;
(c)
on
account of Agent’s conduct that is established by a final judgment as
constituting a breach of Agent’s duty of loyalty to the Corporation or resulting
in any personal profit or advantage to which Agent was not legally
entitled;
(d)
for
which
payment is actually made to Agent under a valid and collectible insurance policy
or under a valid and enforceable indemnity clause, bylaw or agreement, except
in
respect of any excess beyond payment under such insurance, clause, bylaw or
agreement;
(e)
if
indemnification is not lawful (and, in this respect, both the Corporation and
Agent have been advised that the Securities and Exchange Commission believes
that indemnification for liabilities arising under the federal securities laws
is against public policy and is, therefore, unenforceable and that claims for
indemnification should be submitted to appropriate courts for adjudication);
or
(f)
in
connection with any proceeding (or part thereof) initiated by Agent, or any
proceeding by Agent against the Corporation or its directors, officers,
employees or other agents, unless (i) such indemnification is expressly required
to be made by law, (ii) the proceeding was authorized by the Board of Directors
of the Corporation, (iii) such indemnification is provided by the Corporation,
in its sole discretion, pursuant to the powers vested in the Corporation under
the Code, or (iv) the proceeding is initiated pursuant to Section 9
hereof.
5.
Continuation of Indemnity.
All
agreements and obligations of the Corporation contained herein shall continue
during the period Agent is a director, officer, employee or other agent of
the
Corporation (or is or was serving at the request of the Corporation as a
director, officer, employee or other agent of another corporation, partnership,
joint venture, trust, employee benefit plan or other enterprise) and shall
continue thereafter so long as Agent shall be subject to any possible claim
or
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, arbitrational, administrative or investigative, by reason of the
fact
that Agent was serving in the capacity referred to herein.
6.
Partial Indemnification.
Agent
shall be entitled under this Agreement to indemnification by the Corporation
for
a portion of the expenses (including attorneys’ fees), witness fees, damages,
judgments, fines and amounts paid in settlement and any other amounts that
Agent
becomes legally obligated to pay in connection with any action, suit or
proceeding referred to in Section 3 hereof even if not entitled hereunder to
indemnification for the total amount thereof, and the Corporation shall
indemnify Agent for the portion thereof to which Agent is entitled.
7.
Notification and Defense of Claim.
Not
later
than thirty (30) days after receipt by Agent of notice of the commencement
of
any action, suit or proceeding, Agent will, if a claim in respect thereof is
to
be made against the Corporation under this Agreement, notify the Corporation
of
the commencement thereof; but the omission so to notify the Corporation will
not
relieve it from any liability which it may have to Agent otherwise than under
this Agreement. With respect to any such action, suit or proceeding as to which
Agent notifies the Corporation of the commencement thereof:
(a)
the
Corporation will be entitled to participate therein at its own
expense;
(b)
except
as
otherwise provided below, the Corporation may, at its option and jointly with
any other indemnifying party similarly notified and electing to assume such
defense, assume the defense thereof, with counsel reasonably satisfactory to
Agent. After notice from the Corporation to Agent of its election to assume
the
defense thereof, the Corporation will not be liable to Agent under this
Agreement for any legal or other expenses subsequently incurred by Agent in
connection with the defense thereof except for reasonable costs of investigation
or otherwise as provided below. Agent shall have the right to employ separate
counsel in such action, suit or proceeding but the fees and expenses of such
counsel incurred after notice from the Corporation of its assumption of the
defense thereof shall be at the expense of Agent unless (i) the employment
of
counsel by Agent has been authorized by the Corporation, (ii) Agent shall have
reasonably concluded, and so notified the Corporation, that there is an actual
conflict of interest between the Corporation and Agent in the conduct of the
defense of such action or (iii) the Corporation shall not in fact have employed
counsel to assume the defense of such action, in each of which cases the fees
and expenses of Agent’s separate counsel shall be at the expense of the
Corporation. The Corporation shall not be entitled to assume the defense of
any
action, suit or proceeding brought by or on behalf of the Corporation or as
to
which Agent shall have made the conclusion provided for in clause (ii) above;
and
(c)
the
Corporation shall not be liable to indemnify Agent under this Agreement for
any
amounts paid in settlement of any action or claim effected without its written
consent, which shall not be unreasonably withheld. The Corporation shall be
permitted to settle any action except that it shall not settle any action or
claim in any manner which would impose any penalty or limitation on Agent
without Agent’s written consent, which may be given or withheld in Agent’s sole
discretion.
8.
Expenses.
The
Corporation shall advance, prior to the final disposition of any proceeding,
promptly following request therefore, all expenses incurred by Agent in
connection with such proceeding upon receipt of an undertaking by or on behalf
of Agent to repay said amounts if it shall be determined ultimately that Agent
is not entitled to be indemnified under the provisions of this Agreement, the
Bylaws, the Code or otherwise.
9.
Enforcement.
Any
right
to indemnification or advances granted by this Agreement to Agent shall be
enforceable by or on behalf of Agent in any court of competent jurisdiction
if
(i) the claim for indemnification or advances is denied, in whole or in part,
or
(ii) no disposition of such claim is made within ninety (90) days of request
therefore. Agent, in such enforcement action, if successful in whole or in
part,
shall be entitled to be paid also the expense of prosecuting his claim. It
shall
be a defense to any action for which a claim for indemnification is made under
Section 3 hereof (other than an action brought to enforce a claim for expenses
pursuant to Section 8 hereof,
provided
that
the
required undertaking has been tendered to the Corporation) that Agent is not
entitled to indemnification because of the limitations set forth in Section
4
hereof. Neither the failure of the Corporation (including its Board of Directors
or its stockholders) to have made a determination prior to the commencement
of
such enforcement action that indemnification of Agent is proper in the
circumstances, nor an actual determination by the Corporation (including its
Board of Directors or its stockholders) that such indemnification is improper
shall be a defense to the action or create a presumption that Agent is not
entitled to indemnification under this Agreement or otherwise.
10.
Subrogation.
In
the
event of payment under this Agreement, the Corporation shall be subrogated
to
the extent of such payment to all of the rights of recovery of Agent, who shall
execute all documents required and shall do all acts that may be necessary
to
secure such rights and to enable the Corporation effectively to bring suit
to
enforce such rights.
11.
Non-Exclusivity of Rights.
The
rights conferred on Agent by this Agreement shall not be exclusive of any other
right which Agent may have or hereafter acquire under any statute, provision
of
the Corporation’s Certificate of Incorporation or Bylaws, agreement, vote of
stockholders or directors, or otherwise, both as to action in his official
capacity and as to action in another capacity while holding office.
12.
Survival of Rights.
(a)
The
rights conferred on Agent by this Agreement shall continue after Agent has
ceased to be a director, officer, employee or other agent of the Corporation
or
to serve at the request of the Corporation as a director, officer, employee
or
other agent of another corporation, partnership, joint venture, trust, employee
benefit plan or other enterprise and shall inure to the benefit of Agent’s
heirs, executors and administrators.
(b)
The
Corporation shall require any successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or substantially all of
the
business or assets of the Corporation, expressly to assume and agree to perform
this Agreement in the same manner and to the same extent that the Corporation
would be required to perform if no such succession had taken place.
13.
Separability.
Each
of
the provisions of this Agreement is a separate and distinct agreement and
independent of the others, so that if any provision hereof shall be held to
be
invalid for any reason, such invalidity or unenforceability shall not affect
the
validity or enforceability of the other provisions hereof. Furthermore, if
this
Agreement shall be invalidated in its entirety on any ground, then the
Corporation shall nevertheless indemnify Agent to the fullest extent provided
by
the Bylaws, the Code or any other applicable law.
14.
Governing Law.
This
Agreement shall be interpreted and enforced in accordance with the laws of
the
State of Delaware.
15.
Amendment and Termination.
No
amendment, modification, termination or cancellation of this Agreement shall
be
effective unless in writing signed by both parties hereto.
16.
Identical Counterparts.
This
Agreement may be executed in one or more counterparts, each of which shall
for
all purposes be deemed to be an original but all of which together shall
constitute but one and the same Agreement. Only one such counterpart need be
produced to evidence the existence of this Agreement.
17.
Headings.
The
headings of the sections of this Agreement are inserted for convenience only
and
shall not be deemed to constitute part of this Agreement or to affect the
construction hereof.
18.
Notices.
All
notices, requests, demands and other communications hereunder shall be in
writing and shall be deemed to have been duly given (i) upon delivery if
delivered by hand to the party to whom such communication was directed or (ii)
upon the third business day after the date on which such communication was
mailed if mailed by certified or registered mail with postage
prepaid:
(a)
If
to
Agent, to:
(b)
If
to the
Corporation, to:
BLUEFIRE
ETHANOL, INC.
18201
Von
Karman Ste 550
Irvine,
CA 92612
or
to
such other address as may have been furnished to Agent by the
Corporation.
IN
WITNESS WHEREOF,
the
parties hereto have executed this Agreement on and as of the day and year first
above written.
BLUEFIRE
ETHANOL, INC,
|
|
|
|
By:
/s/ Arnold R.
Klann
|
|
Name:
Arnold R. Klann
|
Title:
President & CEO
|
|
|
|
AGENT
|
|
By:
|
|
|
|
Name:
|
|
B-5
Exhibit
10.2
EXECUTIVE
EMPLOYMENT AGREEMENT
This
Agreement is made and entered into as of the 1
st
day of
June, 20
06
(“Agreement Date”) by and between BlueFire Ethanol, Inc., a Nevada corporation
and subsidiary of BlueFire Ethanol, Inc, a Delaware corporation (hereinafter
referred to as the “Company”), and
____________
,
an
individual (hereinafter referred to as the “Employee”). The Company and the
Employee are collectively referred to as the “Parties”. This Agreement
supersedes any similar agreement between the Parties.
WITNESSETH:
Whereas
it is in
the best interest of the Company to retain quality personnel such as the
Employee; and
Whereas
the
Employee is willing to enter into an employment agreement with the Company
in
accordance with the conditions hereinafter provided.
Now,
therefore,
for and
in consideration of the terms and conditions contained herein, the Parties
agree
as follows, to wit:
1.
|
Definitions.
As
used in this Agreement:
|
A.
|
“Company”
means BlueFire Ethanol, Inc. its successors and assigns, and any
of its
present or future subsidiaries or organizations controlled by,
controlling, or under common control with
it.
|
B.
|
“Confidential
Information”
means any and all information disclosed or made available to the
Employee
or known by the Employee as a direct or indirect consequence of or
through
Employee’s employment by the Company and not generally known in the
industry in which the Company is or may become engaged, or any information
related to the Company’s products, processes, or services, including, but
not limited to, information relating to research, development, inventions,
manufacture, purchasing, accounting, engineering, marketing,
merchandising, or selling.
|
C.
|
“Inventions”
mean discoveries, concepts and ideas, whether patentable or not,
relating
to any present or prospective activities of the Company, including,
but
not limited to, devices, processes, methods, formulae, techniques,
applications, technology and any improvements to the foregoing. Such
definition shall also encompass all such discoveries, concepts and
ideas,
even if formulated by the Employee prior to his employment by the
Company.
|
D.
|
“Company
Monthly Base Pay”
means
the employee’s last monthly remuneration, prior to termination of
Employee’s employment with the Company, before federal, state, and local
taxes and other withholding, but exclusive of extra compensation,
such as
that attributable to bonuses, overtime or employee retirement or
pension
benefits.
|
E.
|
“Conflicting
Organization”
means any person or organization engaged, directly or indirectly,
in the
research, development, production, marketing or selling of a Conflicting
Product.
|
F.
|
“Conflicting
Product”
means any product, process, technology, application, or service of
any
person or organization, other than the Company, in existence or under
development, which resembles, competes with or is marketed or offered
for
sale or lease to the same or similar potential customers as a product,
process, technology, application, or service which is the subject
of
research, development, production, marketing or selling activities
of the
Company.
|
2.
|
Employment
.
The Company hereby employs the Employee and the Employee hereby
agrees to
accept employment with the Company upon the terms and conditions
herein
set forth.
|
3.
|
Term.
The Company hereby employs the Employee for a period of
three
(3)
years beginning on the 1st day of June, 2006, and ending
on the 31st day
of May, 2009, unless sooner terminated as provided in Section
13
(Disability), Section 14 (Death During Employment) or Section
16
(Termination), hereof; provided, this Agreement may be extended
for
additional periods or its terms amended upon the mutual written
agreement
of the
Parties.
|
Initials
____
Initials
____
4.
|
Position.
The Employee shall be employed in the capacity of
with such managerial, administrative and other services
as are customarily
associated with or incident to such position and shall
perform such other
duties and responsibilities for the Company as the Company
may reasonably
require, consistent with such position. The Employee shall
not be assigned
nor requested to perform duties or functions for which
he has not been
adequately trained or for which he does not have adequate
education and/or
professional
experience.
|
5.
|
Extent
of Services.
The Employee shall diligently and conscientiously devote
Employee’s time,
attention and energies to the business of the Company
and shall not,
during the term of this Agreement, be engaged in any
other full time
business activity whether or not such business activity
is pursued for
gain, profit, or other pecuniary advantage; however,
except as set forth
in Section 16, this provision shall not be construed
as preventing the
Employee from investing Employee’s assets in such form or manner as will
not require full-time services on the part of the Employee
outside of the
Company.
|
6.
|
Working
Facilities.
The Employee shall be furnished with such facilities
suitable to
Employee’s position and adequate for the performance of Employee’s duties
and the conduct of the Company’s business. The Employee’s principal office
shall be located in the area selected by the Company;
provided, however,
the Employee agrees to do such traveling as is required
to carry out
Employee’s duties hereunder.
|
7.
|
Compensation.
The Company’s Board of Directors or the management of the Company
may
increase the Employee’s Company Monthly Base Pay from time to time as the
Board may see fit to grant such an increase. The
Employee shall be a
participant in any deferred compensation, bonus and/or
stock option plans
designed and implemented by the Company’s Board of Directors for the
benefit of the Company’s key executives and employees. The Employee shall
participate in any such plans at a level commensurate
with Employee’s
position with the
Company.
|
A.
|
Company
Monthly Base Pay.
For all services rendered by the Employee under this Agreement, Employee
shall be paid a salary in the sum of
$
per
year, beginning on June
1,
2006 through December 31, 2006. These amounts shall be paid in equal
monthly or bi-monthly installments to the Employee as Company Monthly
Base
Pay.
|
B.
|
Benefits.
Employee
shall be eligible for Company-paid health insurance, dental insurance,
401K Plan when available, short/long term disability coverage and
other
benefits that are and may become available. Employee shall be eligible
to
participate in any such benefits at a level commensurate with Employee’s
position with the Company.
|
8.
|
Expenses.
All expenses for transportation and travel, including
business use of
personal automobile, incurred by the Employee for
the furtherance of the
legitimate business interests of the Company, shall
be reimbursed or
directly paid by the Company upon presentment of
receipts in accordance
with the record keeping requirements of the Internal
Revenue
Service.
|
9.
|
Right
to Participate.
The Employee shall have the right to participate
in all other benefits of
employment generally made available to the Company’s executive and
managerial employees including but not limited
to medical, dental,
disability, life insurance, retirement plans
and any other benefit(s)
presented by the Company’s Board of Directors and befitting the Employee’s
position and performance as
available.
|
9.
|
Right
to Participate.
The Employee shall have the right to participate
in all other benefits of
employment generally made available to the Company’s executive and
managerial employees including but not limited
to medical, dental,
disability, life insurance, retirement plans
and any other benefit(s)
presented by the Company’s Board of Directors and befitting the Employee’s
position and performance as
available.
|
10.
|
Vacation.
The Employee shall be entitled to paid vacation,
as
follows:
|
Ten
(10)
working days during the 2006 calendar year
fifteen
(15) working days during the 2007 calendar year
twenty
(20) working days during the 2008 calendar year
For
purposes hereunder, the term “working days” refers to Monday through Friday,
exclusive of weekends and holidays, observed by the Company as determined by
the
Board of Directors. Employee will not schedule vacation without prior written
approval from the Company’s CEO. Unused vacation days may not be carried into
the next calendar year nor will the Employee receive compensation for unused
vacation days, unless Employee’s work requirements cause Employee to miss
vacation days, in which case Employee can carry over unused vacation days or
be
compensated for unused vacation days.
Initials
____
Initials
____
11.
|
Right
to Inventions.
With respect to all Inventions made or conceived
by the Employee, whether
or not during the hours of Employee’s employment or with the use of
Company facilities, materials or personnel,
either solely or jointly with
others, during the term of Employee’s employment by the Company, and
without royalty or any other
consideration:
|
A.
|
Reports.
The Employee shall inform the Company promptly and fully of such
inventions by a written report, setting forth in detail the structures,
procedures, and methodology employed and the result achieved. A report
shall also be submitted by the Employee upon completion of any study
or
research project undertaken on the Company’s behalf, whether or not in the
Employee’s opinion a given study or project has resulted in an
invention.
|
B.
|
Assignment.
The Employee hereby assigns and agrees to assign to the Company all
of
Employee’s rights to such Inventions and to all proprietary right therein,
based thereon or related thereto, including, but not limited to,
applications for United States and foreign letters patent and resulting
letters patent.
|
C.
|
Patents.
At
the Company’s request and expense, the Employee shall execute such
documents and provide such assistance as may be deemed necessary
by the
Company to apply for, defend or enforce any United States or foreign
letters of patent based on or related to such
Inventions.
|
D.
|
Prior
Inventions and Intellectual Property.
All prior technical knowledge, inventions, know-how developed or
learned
by the Employee concerning the business of the Company, shall become
the
property of the Company upon execution of this Agreement, and the
Employee
shall not have any further proprietary rights to such Intellectual
Property.
|
12.
|
Disclosure
of Confidential
Information.
|
A.
|
Confidentiality.
Except as required in the performance of Employee’s duties during the term
of Employee’s employment by the Company, the Employee shall treat as
confidential and shall not, directly or indirectly, use, disseminate,
disclose, publish, or otherwise make available any Confidential
Information or any portion thereof. This provision shall remain in
effect
for a period of two (2) years after any termination of such
employment.
|
B.
|
Return
of Confidential Information.
Upon termination of Employee’s employment with the Company, all documents,
records, notebooks, and similar repositories containing Confidential
Information, including copies thereof, then in the Employee’s possession,
whether prepared by him or others, shall be promptly returned to
the
Company. If at any time after the termination of employment the Employee
determines that he has any Confidential Information in Employee’s
possession or control, he shall immediately return to the Company
all such
Confidential Information, including all copies and portions
thereof.
|
13.
|
Disability.
To
the extent not covered by the Company’s disability insurance, if any, if
the Employee is unable to perform Employee’s services during the term of
this agreement by reason of illness or
incapacity, he shall receive
Employee’s full compensation during the first
two (2) months of such
disability, to the extent not covered
by the Company’s disability
insurance, if any. If such disability
should continue for longer than two
(2) months, the compensation otherwise
payable to the Employee during the
continued period of disability shall
be reduced by fifty percent (50%)
provided such continued period of disability
lasts no longer than four (4)
months. The Employee’s full compensation shall be reinstated
upon
Employee’s return to employment and the discharge
of Employee’s full
duties hereunder. This provision shall
not be operative until all benefits
under the Company’s long-term disability insurance plan,
if any, have been
calculated and shall not be considered
in determining the amount of
benefits under any such insurance
plan.
|
A.
|
In
the event of disability of the Employee, shares of the Company, as
provided in Section 7(B) of this Agreement shall continue as if this
Agreement were in full force and
effect.
|
14.
|
Death
during Employment.
If
the Employee dies during the term of
this Agreement, this Agreement shall
be terminated; provided, however, the
Company shall pay to the estate of
the employee any salary which would have
otherwise been earned for the
balance of the month in which the Employee’s death
occurred.
|
Initials
____
Initials
____
15.
|
Non-Competition.
During the term of this Agreement and
or as long as thereafter as Employee
is receiving unemployment
insurance:
|
A.
|
For
a period of Three (3) years after Termination, the Employee shall
not
engage in competition with the Company, either directly or indirectly,
in
any manner or capacity, as advisor, consultant, principal, agent,
partner,
officer, director, stockholder, employee, representative, spokesman
or
otherwise, in any phase of the business carried on by the Company
at any
time.
|
B.
|
For
a period of Three (3) years after the termination of this Agreement,
the
Employee shall not solicit anyone who was an employee of the Company
when
the Employee’s employment with the company terminated or solicit anyone
then employed by the Company to terminate or refrain from renewing
Employee’s or her employment with the
Company.
|
C.
|
For
a period of Three (3) years after the termination of this Agreement,
the
Employee shall not, either directly or indirectly, solicit any customer,
broker, or distributor of the Employer, for such products as are
manufactured and/or sold by the Employer, and Employee will similarly
not
engage in the business of the manufacture and sales of such products
as
are manufactured and/or sold by the Employer within the said period.
|
16.
|
Termination.
The Employee may terminate this Agreement
upon thirty days (30) written
notice to the Company. Upon the effective
date of the Employee terminating
this Agreement, the Employee’s entitlement to any salary or other
benefits
hereunder shall cease subject to the
provisions of Section
13.
|
A.
|
The
Employer may terminate this Agreement at any time with twenty-four
(24)
hours prior written notice if the Employee commits any material act
of
dishonesty, discloses confidential information, is guilty of gross
misconduct, or acts in any way that has a direct, substantial and
adverse
effect on the Company’s reputation. Upon the effective date of the Company
terminating this Agreement, the Employee’s entitlement to any salary or
other benefits hereunder shall
cease.
|
17.
|
Certain
Provisions to Survive Termination.
Notwithstanding any termination
of this employment under this Agreement,
the Employee, in consideration
of Employee’s employment hereunder to the
date of such termination, shall
remain bound by the provisions
of Section
12 and 15. It is acknowledged that
the Company would be irrevocably
damaged if the Employee were to
violate the provisions of Section
12
and/or 15, and consequently, in
addition to all other remedies
that may be
available to it, the Company shall
be entitled to injunctive relief
for
any actual or threatened violation
of such
Sections.
|
A.
|
In
the event of termination of the Agreement as a result of the disability
or
death of the Employee, it is agreed that the provisions of Section
7(B)
relating to shares of the Company shall continue as if the Employee
were
alive and fulfilling Employee’s obligations under this Agreement and not
disabled or dead.
|
18.
|
Notice.
All notices herein shall be in
writing and shall be deemed to
have been
duly given at the time personally
delivered or deposited in the United
States Mail, postage prepaid, to
the address of the respective parties
set
forth below their signatures hereto,
subject to changes upon notice
to the
other
party.
|
19.
|
Waiver.
Failure to insist upon a strict
compliance with any of the terms
or
conditions of this Agreement shall
not be deemed waiver of such terms
or
conditions, nor shall any waiver
of any term, condition or right
of any
party at any time be deemed a waiver
of any other term, condition or
right
of any party hereto, nor shall
it preclude the party from subsequently
asserting or relying upon such
term, condition or
right.
|
20.
|
Severability.
The invalidity or enforceability
of any provision hereof shall in
no way
affect the validity or enforceability
of any other
provision.
|
21.
|
Modification.
There are no verbal understandings
between the Parties. This Agreement
contains the entire agreement
of the Parties and shall not
be changed,
modified, or terminated, except
in writing signed by the
Parties.
|
22.
|
Construction.
This Agreement shall be construed
in accordance with the laws of
the State
of
California.
|
23.
|
Assignment.
The rights and obligations
of the Company under this Agreement
shall inure
to the benefit of and shall
be binding upon the successors
and assigns of
the Company. The Employee’s rights, powers, privileges
and immunities
under this Agreement shall
not be assignable by the Employee
without the
prior written consent of the
Company.
|
Initials
____
Initials
____
24.
|
Binding
Effect.
This Agreement shall be binding
upon and shall inure to the
benefit of the
Parties and their respective
heirs, legal representatives,
successors and
assigns.
|
IN
WITNESS WHEREOF,
the
Parties have hereto set their hands on the day and year first above
written.
|
COMPANY: BlueFire Ethanol,
Inc.
|
This
agreement is hereby ratified by a majority of the BlueFire Ethanol, Inc. Board
of Directors on this 1st day of May, 2006.
|
By:
/s/
Arnold R. Klann
Name:
Arnold R. Klann
Title:
Chairman/CEO
|
EMPLOYEE:
|
By:
__________________________________
Name:
|
Initials
____
Initials
____
EXHIBIT
A
Operating
Targets
1.
Individual goals:
Initials
____
Initials
____
A-1
Exhibit
10.3
TECHNOLOGY
LICENSE
FROM
ARKENOL,
INC.
IN
FAVOR
OF
BlueFire
Ethanol, Inc.
FOR
THE
PROCESSING OF
CELLULOSE
TO ETHANOL
IN
NORTH
AMERICA
Dated
as
of
March
1,
2006
TABLE
OF
CONTENTS
ARTICLE I
DEFINITIONS
AND INTERPRETATION
|
1
|
|
|
1.1
Terms
Defined Above
|
1
|
1.2
Additional
Defined Terms
|
1
|
1.3
References
|
5
|
1.4
Articles
and Sections
|
5
|
1.5
Number
and Gender
|
5
|
1.6
Incorporation
of Exhibits
|
5
|
|
|
ARTICLE
II
TERMINATION
OF ORIGINAL AGREEMENT; GRANT OF RIGHTS
|
5
|
|
|
2.1
License
|
5
|
2.2
Limitation
on Use of Technology
|
6
|
2.3
Confidentiality
|
6
|
2.5
Royalty
Payment
|
7
|
|
|
ARTICLE
III
OWNERSHIP
AND IMPROVEMENTS
|
8
|
|
|
3.1
Licensor
as Sole Owner
|
8
|
3.2
Improvements
Assigned to Licensor
|
8
|
3.3
Cooperation
|
8
|
3.4
No
Challenge to Ownership
|
8
|
3.5
Enforcement
of Intellectual Property Rights
|
9
|
3.6
Appointment
of Licensor as Attorney-in-Fact
|
9
|
|
|
ARTICLE
IV
ACCESS
TO PROJECTS AND INFORMATION
|
10
|
|
|
ARTICLE
V
REPRESENTATIONS
AND WARRANTIES
|
10
|
|
|
5.1
Licensor
Representations
|
10
|
5.2
Negation
of Certain Warranties
|
11
|
5.3
Licensee
Representations
|
11
|
|
|
ARTICLE
VI
TERM
AND TERMINATION
|
11
|
|
|
6.1
Term
|
11
|
6.2
Event
of Default
|
12
|
6.4
Default
Remedies
|
13
|
6.5
Obligations
of the Parties
|
13
|
6.6
Survival
of Claims
|
13
|
6.7
Survival
of Certain Provisions
|
13
|
ARTICLE
VII
INDEMNIFICATION
|
13
|
|
|
7.1
Indemnification
by
Licensor
|
13
|
7.2
Indemnification
by
Licensee
|
14
|
7.3
Duty
to Defend
|
14
|
7.4
Settlement
|
14
|
|
|
ARTICLE
VIII DISPUTE
RESOLUTION
|
15
|
|
|
8.1
Agreement
to Dispute Resolution
|
15
|
8.2
Initiation
of Dispute Resolution
|
15
|
8.3
Mediation
|
15
|
8.4
Expense of Mediation
|
15
|
|
|
ARTICLE
IX
MISCELLANEOUS
PROVISIONS
|
16
|
|
|
9.1
Assignment
and Sublicensing
|
16
|
9.2
Successors
and
Assigns
|
16
|
9.3
Parties
in Interest
|
16
|
9.4
Amendments
|
16
|
9.5
Non-Waiver
|
16
|
9.6
Notices
|
16
|
9.7
Attorneys'
Fees
|
17
|
9.8
Injunctive
Relief
|
18
|
9.9
Remedies
|
18
|
9.10
Further
Assurances
|
18
|
9.11
No
Agency, Joint Venture, Partnership
|
18
|
9.12
Severability
|
18
|
9.13
Negotiated
Transaction
|
18
|
9.14
Counterparts
|
19
|
9.15
Entire
Agreement
|
19
|
9.16
Jurisdiction
and Venue
|
19
|
9.17
Governing
Law
|
19
|
TECHNOLOGY
LICENSE
THIS
TECHNOLOGY LICENSE (as amended, modified, supplemented or restated from time
to
time, this "
Agreement
")
is
made and entered into as of the 1st day of March, 2006, by and between ARKENOL,
INC., a corporation organized under the laws of the State of Nevada
("
Licensor
"),
and
BlueFire Ethanol, Inc., a to be formed Nevada corporation ("
Licensee
").
Licensor and Licensee are sometimes hereinafter referred to individually as
a
"
Party
"
and
collectively as the "
Parties
."
RECITALS
WHEREAS,
Licensee is a to be formed company to promote, among other things, conversion
of
the cellulose fractions of municipal solid waste and other opportunistic
feedstocks into ethanol;
WHEREAS,
Licensor has developed the Technology, owns the patents and intellectual
property for and has maintained exclusive rights to license the Technology
(as
herein defined);
WHEREAS,
Licensee wishes to license the Technology from Licensor for use and sublicense
in connection with Licensee’s desire to develop and commercialize the production
of Ethanol from cellulose, and Licensor desires to grant such license to
Licensee, all on the terms and conditions set forth herein;
WHEREAS,
Licensor’s Technology is capable and pre-commercially developed to process this
type of feedstock; and
WHEREAS,
Licensee desires to obtain from Licensor an exclusive license to use and
sublicense the Technology in North America, and Licensor desires to grant such
license to Licensee, all on the terms and conditions set forth
herein;
NOW,
THEREFORE, in consideration of the foregoing premises and the mutual promises
and covenants contained herein, Licensor and Licensee hereby agree as
follows:
ARTICLE
I
DEFINITIONS
AND INTERPRETATION
1.1
Terms
Defined Above
.
As used
in this Technology License, each of the terms "
Agreement
,"
"
Licensee
,"
"
Licensor
,"
"
Party
,"
and
"
Parties
"
shall
have the meaning assigned to such term hereinabove.
1.2
Additional
Defined Terms
.
As used
in this Agreement, each of the following terms shall have the meaning assigned
to such term below.
"
Additional
Facility License
"
shall
have the meaning set forth in
Section
2.7
.
"
Affiliate
"
shall
mean, with respect to any Person, any other Person who, directly or indirectly,
controls, is controlled by, or is under common control with such Person. For
purposes of this definition, "control" means the ability to direct or cause
the
direction of the management or affairs of a Person, whether through the direct
or indirect ownership of voting interests, by contract or otherwise. For
purposes of this Agreement, neither Party shall be considered an Affiliate
of
the other Party unless otherwise expressly stated.
"
By-Products
"
shall
mean salable materials, which result from operation of the Process to create
sugars from lignocellulosic feedstocks, and which are not the intended final
product from sugars fermentation; for example lignin, gypsum, yeast, carbon
dioxide.
"
Commercial
Operation
"
shall
mean the continuous operation of a Project after completion of the commissioning
of the Project, which shall be deemed to occur no earlier than the satisfaction
of all contractual requirements (e.g., completion of all tests required under
applicable construction contracts) and material regulatory requirements (e.g.,
tests required under applicable governmental permits and approvals) in
connection with the commencement of continuous commercial
operations.
"
Confidential
Information
"
shall
mean, in whatever form, tangible or intangible, whether written, oral or visual,
including electronic data recorded or retrieved by any means, any and all trade
secrets, confidential knowledge, and proprietary data of a Party (the
"Disclosing Party"), including technical specifications, diagrams, flow charts,
methods, processes, procedures, discoveries, concepts, calculations, techniques,
formulas, systems, production plans, designs, research and development plans,
business opportunities, cost and pricing data, customer records and lists,
special chemical, engineering, manufacturing, financial, and marketing know-how,
but expressly excluding information which (a) was generally available to the
public prior to the time of disclosure to the other Party (the "Receiving
Party"), (b) becomes generally available to the public through no act or
omission of the Receiving Party, or any employee, Affiliate, agent or contractor
of the Receiving Party, or (c) becomes available to the Receiving Party through
or from a third party who is not an agent, contractor, employee or Affiliate
of
the Receiving Party and who is not, to the knowledge of the Receiving Party
after reasonable investigation, under any obligation of confidentiality to
the
Disclosing Party.
"
Effective
Date
"
shall
mean the date first hereinabove written.
"
Event
of Default
"
shall
have the meaning set forth in
Section
6.2
.
"
Exclusive
Payment
"
shall
have the meaning set forth in
Section
2.5
.
"
Force
Majeure
"
shall
mean an event or occurrence that is not reasonably foreseeable by a Party,
is
beyond such Party's reasonable control, and is not caused by its negligence
or
lack of due diligence, including acts of God, strikes, labor disputes, lockouts
or other industrial disturbances, riots, epidemics, landslides, lightning,
earthquakes, fires, storms, washouts, the enactment of, or changes in, Laws,
the
cancellation or withdrawal of a governmental permit, arrests and restraints
of
governments and people, civil disturbances and explosions;
provided
,
however
,
neither
economic hardship of either Party nor changes in market conditions shall
constitute a Force Majeure.
"
Governmental
Authority
"
shall
mean any national, state or local government, any political subdivision or
any
governmental, quasi-governmental, judicial, public or statutory instrumentality,
authority, body or entity, or other regulatory bureau, authority, body or
entity.
"
Improvements
"
shall
mean all inventions, modifications, revisions, alterations, enhancements,
betterments, ideas, and discoveries (whether or not patentable) conceived or
reduced to practice (actually or constructively) by either Party or under the
direction of either Party or acquired by Licensor or Licensee by operation
of
any license or sublicense of the Technology to any Person, or from any other
source and which, in any case, are based in any way on, or arise in any manner
out of, all or any portion of the Process, the Patents, the Licensor
Confidential Information or the Intellectual Property, or any such invention,
modification, revision, alteration, enhancement, betterment, idea or discovery
to any of the foregoing, including any developed through reverse engineering
or
independent derivation.
"
Intellectual
Property
"
shall
mean the Patents and all United States and foreign patents, applications
therefore, know-how, copyrightable works and applications for registration
and
registrations thereof, trademarks, trade names, service marks and all other
intellectual property rights with respect to or relating to all or any portion
of the Process.
"
Law
"
shall
mean any applicable Federal, state, local or other constitution, charter, act,
statute, law, ordinance, code, rule, regulation, or order, or other legislative
or administrative action of a Governmental Authority, or a final decree,
judgment, or order of a court having jurisdiction over any relevant Project
or
any Party.
"
License
"
shall
have the meaning assigned in
Section
2.1
.
"
License
Fee
"
shall
have the meaning assigned in
Section
2.6
.
"
Licensee
Indemnitees
"
shall
have the meaning assigned in
Section
7.1
.
"
Licensor
Confidential Information
"
shall
mean any Confidential Information relating to or arising out of any aspect
of
the Technology or Licensor's business other than information specifically
related to a Project that is in the public domain. For purposes of this
Agreement, and without otherwise affecting the respective ownership rights
of
Persons thereto, where any Confidential Information relating to or arising
out
of any aspect of the Technology is developed by any Person who is an Affiliate
of both Parties, then such Confidential Information shall be deemed to be
Licensor Confidential Information.
"
Licensor
Indemnitees
"
shall
have the meaning assigned in
Section
7.2
.
"
Notice
"
shall
have the meaning assigned to such term in
Section
9.6
.
"
North
America
"
shall
include all 50 United States and Canada.
"
Patents
"
shall
mean, collectively, Patent Nos. 5,562,777 and 5,580,389 issued by the United
States Patent and Trademark Office on October 8, 1996 and December 3, 1996,
respectively; any and all continuations, continuations-in-part, divisionals,
reissues, reexaminations or extensions thereof; all corresponding foreign
counterpart patents and applications thereto; and any additional patents issued
to Licensor from time to time by the United States Patent and Trademark
Office.
"
Person
"
shall
mean any individual, partnership, corporation, Limited Liability Company,
association, business, trust, government or political subdivision thereof,
Governmental Authority, or other entity.
"
Prime
Rate
"
shall
mean the per annum rate of interest announced or published from time to time
by
The Chase Manhattan Bank, N.A., as its reference or prime rate.
"
Process
"
shall
mean the acid hydrolysis process for lignocellulosic materials as more
particularly described on
Exhibit
A
.
"
Products
"
shall
mean By-Products, goods and materials produced through the
Technology.
"
Project
"
shall
mean a facility established for the purpose of using and practicing the
Technology in the production of one or more Products.
"
Project
Entity
"
shall
mean each entity formed for the ownership of a Project.
"
Project
Lender
"
shall
mean any bank, financial institution or other Person (or trustee or agent for
any such Person) providing any financing for, in whole or in part, the design,
acquisition, construction, refurbishment, modification, start-up, testing,
operation, maintenance or repair of any Project.
"
Royalty
"
shall
have the meaning assigned in
Section
2.4
.
"
Technology
"
shall
mean, collectively, the Process, the Patents, the Intellectual Property, the
Licensor Confidential Information, and all Improvements.
"
Term
"
shall
have the meaning assigned in
Section
6.1
.
1.3
References
.
References in this Agreement to Exhibit, Article or Section numbers shall be
to
Exhibits, Articles and Sections of this Agreement, unless expressly stated
herein to the contrary. References in this Agreement to "hereby," "herein,"
"hereinabove," "hereinafter," "herein below," "hereof," "hereunder," or words
of
similar import shall be to this Agreement in its entirety and not only to the
particular Exhibit, Article or Section in which such reference appears.
References in this Agreement to "includes" or "including" shall mean "includes,
without limitation," or "including, without limitation," as the case may be.
References in this Agreement to statutes, sections or regulations are to be
construed as including all statutory or regulatory provisions consolidating,
amending, replacing, succeeding or supplementing the statute, section or
regulation referred to. References in this Agreement to "writing" include
printing, typing, lithography, facsimile reproduction and other means of
reproducing words in a tangible visible form. References in this Agreement
to
agreements and other contractual instruments shall be deemed to include all
exhibits and appendices attached thereto and all subsequent amendments and
other
modifications to such instruments, but only to the extent such amendments and
other modifications are not prohibited by the terms of this Agreement.
References in this Agreement to Persons include their respective successors
and
permitted assigns.
1.4
Articles
and Sections
.
This
Agreement, for convenience only, has been divided into Articles and Sections
and
it is understood that the rights, powers, privileges, duties, and other legal
relations of the Parties shall be determined from this Agreement as an entirety
and without regard to the aforesaid division into Articles and Sections and
without regard to headings affixed to such Articles or Sections.
1.5
Number
and Gender
.
Whenever the context requires, reference herein made to the single number shall
be understood to include the plural and likewise the plural shall be understood
to include the singular. Words denoting sex shall be construed to include the
masculine, feminine, and neuter, when such construction is appropriate, and
specific enumeration shall not exclude the general, but shall be construed
as
cumulative. Definitions of terms defined in the singular or plural shall be
equally applicable to the plural or singular, as the case may be.
1.6
Incorporation
of Exhibits
.
The
Exhibits attached to this Agreement are incorporated herein and shall be
considered a part of this Agreement for all purposes.
ARTICLE
II
GRANT
OF LICENSE
2.1
License
.
Subject
to the further provisions of this
Section
2.1
and
Section
9.1
,
and for
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Licensor hereby grants to Licensee from and after the Effective
Date, and Licensee hereby accepts from and after the Effective Date, an
exclusive, non-transferable, North American license (the "
License
")
during
the Term to use and sublicense the Technology for any purpose pursuant to the
terms and conditions set forth herein. Notwithstanding the foregoing, Licensee
shall not use or sublicense the Technology, or allow the use of the Technology
by any permitted assignee or sublicensee of Licensee, outside of North America.
Licensor shall not permit any Person other than Licensee and its sublicensees
to
use the Technology;
provided
,
however
,
this
limitation shall not apply to rights established in other Persons in accordance
with the express provisions of
Section
9.1
or
following termination of this Agreement. Licensor and Licensee acknowledge
and
agree that the proprietary rights of Licensor in the Technology are extremely
valuable separate and apart from any patent rights related thereto, including
the Patents and any rights related thereto, and that the issuance of any
additional patent related to the Process or the Technology or the invalidation,
expiration or failure to obtain or prosecute any of the Patents shall not in
any
way affect the rights granted in this
Section
2.1
.
2.2
Limitation
on Use of Technology
.
Licensee and its sublicensees shall use the Technology in the precise manner
indicated in this Agreement and in any specifications that may be provided
to
Licensee by Licensor from time to time. Licensee and its sublicensees shall
not
make any material changes in the use or application of the Technology as set
forth in such specifications without the prior written consent of Licensor,
which consent shall not be unreasonably withheld so long as Licensor has been
provided with all reasonably necessary information as to the basis for the
requested change and has received reimbursement for the reasonable direct cost
to Licensor of evaluating such requested change and submitted information.
2.3
Confidentiality
.
(
a
)
During
the Term and for a period of two (2) years after the expiration of the Term
or
earlier termination of this Agreement pursuant to
Section
6.4
,
each of
Licensee and Licensor shall hold, and shall take all reasonable precautions
to
cause each of their Affiliates, and the directors, officers, managers,
employees, agents, contractors and advisors of the Parties and their respective
Affiliates, and, in the case of the Licensee, those of its permitted sub
licensees, and each of such sub licensees' and its Affiliates' respective
directors, officers, managers, employees, agents, and contractors coming into
possession or knowledge of any Confidential Information of the other Party,
to
hold the Confidential Information of the other Party in strictest confidence
and
trust (making only such copies thereof as necessary or appropriate for the
location, feasibility assessment, development, design, engineering, procurement,
construction, testing, modification, operation and maintenance of the Projects).
Notwithstanding the foregoing, (i) Licensor may make all disclosures which
are
reasonably necessary, appropriate or advisable to obtain protection of the
confidential and proprietary character of the Technology in the United States
and Canada, and (ii) Licensee may disclose Licensor Confidential Information
to
other Persons in connection with any financing whether through debt, equity
or
otherwise), assignment, sale, transfer or other disposition of any Project
Entity or interest in any Project Entity,
provided
,
that
Licensee shall be required to take all necessary precautions to cause such
other
Persons to hold the Licensor Confidential Information in strictest confidence
and to prevent its misappropriation, including the execution of written
confidentiality agreements with such Persons (containing terms and conditions
similar to those in this
Section
2.3
)
providing Licensor Confidential Information only on a limited need-to-know
basis, and taking reasonable security measures to ensure that only such portion
of the Licensor Confidential Information that is reasonable under the
circumstances is disclosed. Licensor shall be either (i) expressly named as
a
party to any such confidentiality agreement entered into by Licensee with any
of
its Affiliates, directors, managers, employees, agents, contractors, creditors
or other Persons permitted to come into possession or knowledge of any Licensor
Confidential Information, or (ii) shall be expressly named as a third-party
beneficiary of any such confidentiality agreement, and, in either case, Licensor
shall be entitled to enforce any such confidentiality agreement, including,
by
way of injunctive or other equitable relief.
(
b
)
In
addition to the disclosures permitted under the second sentence of
Section
2.3
(a)
,
each
Party may disclose Confidential Information of the other Party only (i) to
those
of its then current Affiliates, and the directors, officers, managers,
employees, agents, contractors, and advisors (including attorneys, accountants,
and consultants) of the Parties and such Affiliates, together with the permitted
sub licensees of Licensee, and the directors, officers, managers, employees,
agents, contractors, and advisors of such sub licensees and their Affiliates,
who need to know the Confidential Information for purposes of performing the
services for which they have been engaged, (ii) pursuant to the order or
subpoena of a Governmental Authority with subpoena power or as otherwise
required pursuant to applicable Law;
provided
,
however
,
should
either Party receive any such order or subpoena or propose to make voluntary
disclosure pursuant to any Law deemed by such Party to require such disclosure,
such Party shall notify the other Party promptly and in any event sufficiently
prior to compliance with the relevant order or subpoena or deemed applicable
Law
to enable such other Party to seek an appropriate protective order;
provided
,
further
,
any
disclosure pursuant to such an order or subpoena or deemed applicable Law shall
not act to relieve any Party of its continuing obligation to hold the
Confidential Information in strictest confidence and trust and cause other
Persons to do so as provided above in this
Section
2.3
,
and,
except for such disclosure pursuant to order or subpoena or deemed applicable
Law, each Party shall continue to be bound by the obligations of this
Section
2.3
with
respect to the Confidential Information.
(
c
)
The
Parties may enter into a separate Confidentiality Agreement relating to the
obligation to hold the Confidential Information in strictest confidence and
trust. In such event, if there is any conflict between the terms and conditions
of such Confidentiality Agreement and the terms and conditions of this Agreement
relating to the Confidential Information and the obligations of the Parties
in
connection therewith, the terms and conditions of such Confidentiality Agreement
shall govern and control.
2.4
Royalty
Payment
.
As
consideration for the grant of the License pursuant to
Section
2.1
,
Licensee shall pay Licensor a royalty (the "
Royalty
")
equal
to three percent (3%) of the gross sales price for sales by Licensee, its
Affiliates, sublicensees or assignees, of all Products produced from any use
of
the Technology pursuant to the License. For sales by sublicensees, the Royalty
to Licensor is conditional upon the sublicense royalty fees being paid to
Licensor. The Royalty shall be calculated on an accrual (rather than a cash)
basis. The Royalty shall be payable semi-annually on each August 1 (as to sales
accrued during the preceding January 1 through and including June 30) and on
each February 1 (as to sales accrued during the preceding July 1 through and
including December 31) during the Term. Royalty payments to Licensor shall
be
submitted with supporting documentation on a facility-by-facility basis as
to
(i) volumes of Products produced through the use or practice of the Technology
pursuant to the License during the relevant period, (ii) the name, address,
contact Person, and telephone number of the purchaser in each relevant sale
of
Products, and (iii) the gross sales price as to each relevant sale of Products.
Any Royalty owed to Licensor by Licensee beyond the date such amount is due
and
payable shall accrue interest at the per annum rate equal to the Prime Rate
in
effect from time to time plus two percent (2%);
provided
,
however
,
in no
event shall such rate of interest exceed the maximum lawful rate under
applicable Law. Failure to make any Royalty payment due shall constitute an
Event of Default giving rise to a right of Licensor to terminate this Agreement
and the License with notice from Licensor and the passage of time as provided
in
Section
6.2(a)
.
2.5
Exclusivity
Payment
.
As
consideration for the grant of exclusive license for
North
America, Licensee shall pay Licensor a one time payment of One Million Dollars
($1,000,000) at first project construction funding or term of a Licensee or
sublicense Project. A good faith payment of Thirty Thousand Dollars is to made
upon first funding of BlueFire which is deducted from the total amount. These
payments subject to subordination rights of lender only.
2.6
License
Fee
.
A
one-time License Fee will be paid by Licensee for Licensor and sublicensee
Project in the amount of Forty Dollars U.S. ($40.00) per 1000 gallons of
production capacity.
2.7
Commercial
Operation
.
Licensee shall use its good faith efforts to effect Commercial Operation of
any
Licensee Project as soon as practicable after the Effective Date;
provided
,
however
,
that
Licensee must complete the following or this Agreement shall terminate pursuant
to
Section
6.2(b)
:
(i) the
expenditure of at least Five Hundred Thousand Dollars ($500,000) toward the
commencement of development and Commercial Operation of the Project within
eighteen (18) months after the Effective Date, which may include the retention
of Licensor or its agent to perform the testing and analysis described in
Exhibit “B” hereto in order to produce data suitable for the preparation and
implementation of an engineering, procurement and construction contract between
Licensee and a third party contractor, containing appropriate financeable
performance guarantees, which testing and analysis shall use a feedstock that
has been delivered to Licensor in a form suitable for conversion using the
Technology, (ii) the expenditure of an additional One Million Five Hundred
Thousand Dollars ($1,500,000.00) prior to the third (3
rd
)
anniversary of the Effective Date,
and
(iii)
the taking, on or before the 3
rd
anniversary of the Effective Date, of other significant actions to effectuate
the commencement of Commercial Operation of the Project, such as obtaining
significant written contracts for the sale of Ethanol, obtaining Project site
control, and obtaining contracts for the supply of Biomass. Licensee’s
compliance with all of the provisions of this
Section
2.7
shall be
deemed to be a material obligation within the meaning of paragraph (b) of
Section
6.2
herein;
provided
,
however
,
that
Licensor’s sole remedy in the event Licensee shall fail to comply with this
Section
2.7
shall be
the termination of this agreement pursuant to
Section
6.2(b)
.
ARTICLE
I
II
OWNERSHIP
AND IMPROVEMENTS
3.1
Licensor
as Sole Owner
.
Licensee acknowledges and agrees that it does not now own, nor will it obtain
any interest in, the Technology, except for the License granted
herein.
3.2
Improvements
Assigned to Licensor
.
Licensee acknowledges and agrees that all Improvements shall be the exclusive
property of Licensor, and Licensee agrees to assign, and does hereby assign,
and
agrees to cause each of its Affiliates, permitted assignees and sublicensees,
and the Project Entities to assign, to Licensor any and all right, title, and
interest each of them may now hold or hereafter obtain in any such Improvements,
including any and all (a) applications for Letters Patent and all divisionals,
renewals, continuations and continuations-in-part thereof, (b) Letters Patent
of
the United States which may now or hereafter be granted thereon and all reissues
and extensions thereof, (c) rights of priority under international conventions
and applications for Letters Patent which may hereafter be filed for such
Improvements in any country other than the United States, and (d) all Letters
Patent which may be granted for such Improvements in any country or countries
other than the United States and all extensions, renewals, and reissues thereof.
Licensor agrees to license, and does hereby license, without further
consideration to Licensor, all such Improvements to Licensee pursuant to the
terms and provisions of this Agreement.
3.3
Cooperation
.
Licensee agrees to communicate to Licensor promptly upon becoming aware thereof,
any facts known to Licensee respecting the Technology and to testify in any
legal proceedings, sign all lawful papers, execute all divisional, continuing
and reissue applications, make all rightful oaths and generally do everything
possible to cooperate to effectuate the terms of this
Article
III
.
Upon
the reasonable request of Licensee exercisable from time to time, the Parties
shall meet to discuss any Improvements.
3.4
No
Challenge to Ownership
.
Except
in asserting rights of Licensee expressly granted hereunder, Licensee agrees
not
to take any action challenging or opposing, on any grounds whatsoever, the
ownership or intellectual property rights of Licensor with respect to the
Technology, the status thereof as the property of Licensor, or the validity
or
enforceability thereof by Licensor.
3.5
Enforcement
of Intellectual Property Rights
.
Subject
to the further provisions of this
Section
3.5
,
Licensor shall have the first right, but not the obligation, to enforce any
and/or all of the rights granted herein to Licensee against any third parties
believed by Licensor to be infringing, or about to infringe, upon any rights
forming a part of the Technology. Licensor is hereby authorized to initiate
any
legal proceeding in any court or administrative body for the enforcement of
any
such rights in the name of Licensor and/or Licensee (pursuant to the authority
granted in
Section
3.6
),
and
Licensee shall do all lawful things required or desirable to assist Licensor
in
the enforcement of any such rights. The rights of enforcement by Licensor under
this
Section
3.5
shall
include the initiation of any legal proceeding in any Federal or state court
or
administrative body in the form of an initial pleading or complaint, the filing
of a counterclaim, the filing of a declaratory judgment action, and the defense
of any action relating in any way to rights granted herein to Licensee. Any
and
all costs associated with such enforcement rights and actions initiated and
continued by Licensor shall be the sole and exclusive obligation of Licensor,
and Licensor shall retain all monetary damages, awards and recoveries there
from
and shall have the exclusive right to settle and/or compromise any matter
relating thereto. Licensee shall be entitled to participate, at its sole
expense, in any such action initiated by Licensor. Nothing contained in this
Section
3.5
shall be
construed as creating any obligation of Licensor to initiate or continue any
proceedings involving the enforcement of the rights granted herein to Licensee.
In the event that Licensor elects not to initiate and/or pursue any action
against any third party relating to the rights granted herein to Licensee,
Licensor shall so notify Licensee in writing within thirty (30) days (or ten
(10) days in the event of receipt of a petition or other complaint) after the
earlier of (a) receipt by Licensor from Licensee of actual notice of any alleged
infringement or (b) actual knowledge by Licensor of any alleged or threatened
infringement. After such notification by Licensor to Licensee, such right shall
revert to Licensee and Licensee shall have thereafter the right to take, at
the
sole expense of Licensee, whatever action, in the sole and exclusive opinion
of
Licensee, is reasonably necessary to protect the use and practice by Licensee
of
the Technology in accordance with the provisions of this Agreement. Should
Licensee, following such notice from Licensor, proceed to take any action,
Licensee shall retain all monetary damages, awards and recoveries from such
action and shall have the exclusive right to settle and/or compromise the
relevant matter;
provided
,
however
,
Licensee shall not be entitled to enter into any settlement or compromise which
could, in the good-faith opinion of Licensor, create a precedent or implication
that any Person other than Licensor owns the Technology or otherwise have a
materially adverse effect on Licensor.
3.6
Appointment
of Licensor as Attorney-in-Fact
.
Licensee hereby appoints Licensor as its attorney-in-fact for the specific
limited purpose of executing in the name of Licensee all documents and
performing in the name of Licensee all other acts necessary, appropriate or
desirable to protect, through filings with Governmental Authorities of the
United States, any state thereof or any foreign country or legal proceedings
before any court of other such Governmental Authority, the confidential and
proprietary nature of the Technology or the ownership thereof by
Licensor.
ARTICLE
IV
ACCESS
TO PROJECTS AND INFORMATION
Licensor
and its Affiliates, directors, officers, employees, agents and contractors
shall
have the right to be present at any Project at any reasonable time during normal
business hours during the Term upon no less than twenty-four (24) hours' advance
telephonic notice, but such access shall be at the sole risk and expense of
Licensor. Licensor and its shareholders, directors, officers, employees, agents
and contractors shall also have reasonable access during normal business hours
and upon no less than twenty-four (24) hours' advance telephonic notice to
inspect, audit and review all applications of the Technology and all operating
data, books, records, and other information of Licensee and the Project Entities
relating to applications of the Technology,
provided
that
such inspection and review does not interfere materially with the business
of
Licensee, or any Project Entity, as the case may be, and, provided further,
that
Licensor treats all such information which is Confidential Information (and
which is not otherwise Licensor Confidential Information) in trust and
confidence as provided in
Section
2.3
.
ARTICLE
V
REPRESENTATIONS
AND WARRANTIES
5.1
Licensor
Representations
.
Licensor represents and warrants to Licensee (each of which representations
and
warranties shall survive the execution and delivery of this Agreement for a
period of two (2) years after the expiration of the Term or the earlier
termination of this Agreement), subject to the provisions of
Section
5.2
,
that
(a) Licensor is a corporation duly organized, validly existing, and in good
standing under the laws of the jurisdiction of its incorporation, (b) Licensor
has clear title to the Technology, free of any judgments, liens or encumbrances,
and has the right to grant the License under this Agreement, and the Technology
does not infringe any issued United States or foreign patent rights of others
or
pending patent applications of which Licensor has notice, and Licensor has
no
notice of any claim that the Technology so infringes or that the use of the
Technology by Licensee or its Affiliates or agents pursuant to this Agreement
would so infringe, (c) the Technology includes patented technology which
converts cellulosic materials into sugars through a concentrated acid
hydrolysis, (d) Licensor has the power and all requisite authority to enter
into
this Agreement, (e) the execution and delivery of this Agreement by Licensor
and
the performance of its obligations hereunder do not conflict with or result
in a
default or imposition of any lien or encumbrance against any property of
Licensor under any agreement to which Licensor is a party or by which any of
its
property is bound which, in any such case, could reasonably be expected to
have
a materially adverse effect on the business or financial performance of
Licensor, and (f) this Agreement constitutes Licensor's legal, valid, and
binding obligation.
5.2
Negation
of Certain Warranties
.
LICENSOR
MAKES NO REPRESENTATION OR WARRANTY, EITHER EXPRESS OR IMPLIED, AS TO THE
ADEQUACY OF THE TECHNOLOGY, OR ITS SUFFICIENCY FOR ANY SPECIFIC PURPOSE OR
FREEDOM FROM ANY DEFECT OF ANY KIND, INCLUDING FREEDOM FROM ANY PATENT OR TRADE
SECRET INFRINGEMENT THAT MAY RESULT FROM THE USE BY LICENSEE OF THE TECHNOLOGY
(BUT WITHOUT IN ANY MANNER INTENDING TO LIMIT THE INDEMNIFICATION BY LICENSOR
PURSUANT TO
SECTION
7.1
).
FURTHER, LICENSOR MAKES NO REPRESENTATION, GUARANTY OR WARRANTY THAT THE
TECHNOLOGY DESCRIBED IN ANY PATENT APPLICATIONS, ISSUED PATENTS OR TRADE SECRET
DOCUMENTS IS SUITABLE FOR USE BY LICENSEE OR THAT ANY APPLICATION FOR A PATENT
WILL RESULT IN THE GRANT OF A PATENT.
5.3
Licensee
Representations
.
Licensee represents and warrants to Licensor (each of which representations
and
warranties shall survive the execution and delivery of this Agreement for a
period of two (2) years after the expiration of the Term or the earlier
termination this Agreement) that (a) Licensee is a to be duly formed and validly
existing under the laws of its jurisdiction of formation, (b) Licensee has
the
power and all requisite authority to enter into this Agreement, (c) the
execution and delivery of this Agreement by Licensee and the performance of
Licensee's obligations hereunder do not conflict with or result in a default
or
imposition of any lien or encumbrance under any other agreement to which
Licensee is a party or by which any of its property is bound which could
reasonably be expected to have a materially adverse effect on the business
or
financial performance of Licensee, and (d) this Agreement constitutes Licensee's
legal, valid, and binding obligation.
ARTICLE
VI
TERM
AND TERMINATION
6.1
Term
.
Subject
to the further provisions of this
Article
VI
,
this
Agreement shall remain in force and effect and the Parties shall remain
obligated hereby and entitled to rights and benefits hereunder until the earlier
of (the "
Term
")
(a)
termination of this Agreement by mutual agreement of the Parties, or (b) the
expiration of thirty (30) years from the Effective Date;
provided
,
however
,
that
with respect to any Project for which the owners thereof have, as of the
effective date of such termination or expiration, expended material funds in
connection with the development thereof, Licensor shall grant a license to
such
Project under substantially the same terms and conditions as set forth herein,
which license shall be for a term equal to twenty-five (25) years from the
commencement of Commercial Operation of such Project. Notwithstanding the
foregoing, if a project is not built and operating within the conditions set
forth in
Section
2.7
,
Licensor has the right to revoke this License if substantial progress or
financing has not been demonstrated or the company has not been formed within
the first date shown on this agreement.
6.2
Event
of Default
.
An
event of default under this Agreement (an "
Event
of Default
")
shall
be deemed to exist upon the occurrence of any one or more of the following
events:
(
a
)
failure
by a Party to make payment of any amounts due under this Agreement, including
the Royalty, which failure continues for a period of thirty (30) days after
written notice of such nonpayment from the Party entitled to
payment;
(
b
)
failure
by a Party to perform fully any material provision of this Agreement, other
than
the payment of any amounts due, and (i) such failure continues for a period
of
sixty (60) days after notice of such nonperformance from the other Party
describing in reasonable detail the relevant nonperformance or (ii) if such
nonperforming Party shall commence within such thirty (30) days and shall
thereafter proceed with all due diligence to cure such failure, such failure
is
not cured within such longer period as shall be necessary for such nonperforming
Party to cure the same with all due diligence, such longer period, in all
events, not to exceed ninety (90) days; or
(
c
)
either
Party shall (i) file, or consent to the filing against it of or admit any
allegations made against it in, a petition for relief or reorganization or
arrangement or any other petition in bankruptcy, for liquidation or to take
advantage of any bankruptcy or insolvency law of any jurisdiction; (ii) make
an
assignment for the benefit of its creditors; (iii) seek or consent to, or
acquiesce in, the appointment of a custodian, receiver, trustee, or other
officer with similar powers, for substantially all its property; (iv) be
adjudicated bankrupt or insolvent, or (v) suffer the entry against such Party
of
an order for relief in any case or proceeding for liquidation or reorganization
or otherwise to take advantage of any bankruptcy or insolvency law of any
jurisdiction or ordering the dissolution, winding up or liquidation of all
or
any substantial part of the property of such Party or have filed against such
Party any petition for any such relief and any such order or petition shall
remain unvacated or pending and unstayed for an aggregate of ninety (90) days
(whether or not consecutive).
6.3
Force
Majeure
.
In the
event that either Party is rendered unable, by reason of an event of Force
Majeure, to perform, wholly or in part, any obligation or commitment set forth
in this Agreement, then, provided such Party gives prompt written notice
describing the particulars of such event, including the nature of the occurrence
and its expected duration, and continues to furnish monthly reports with respect
thereto during the period of the Force Majeure, the obligations of both Parties
(except for the obligation of Licensee to pay accrued Royalties pursuant to
Section
2.4
)
shall
be suspended to the extent and for the period of such Force Majeure condition;
provided
,
however
,
that
(a) the suspension of performance is of no greater scope and of no longer
duration than is required by the Force Majeure and (b) the Party whose
performance is being excused shall use its reasonable efforts to perform its
obligations hereunder and use its reasonable efforts to remedy its inability
to
perform. If a Force Majeure affects a material obligation or commitment and
continues for more than six (6) consecutive months, either Party may terminate
this Agreement upon thirty (30) days' prior written notice.
6.4
Default
Remedies
.
Subject
in each case to the provisions of
Article
VIII
or
Section
9.8
to the
contrary, immediately upon the occurrence of an Event of Default under
Section
6.2
on the
part of either Party, the non-defaulting Party shall have the right, at its
election, to terminate this Agreement and/or sue such defaulting Party for
damages and/or injunctive or other equitable relief arising in connection with
such Event of Default.
6.5
Obligations
of the Parties
.
Upon
the expiration of the Term or the earlier termination of this Agreement,
Licensee shall, and shall cause each Project Entity, which is not a party to
a
separate sublicense with Licensee, or eligible under the proviso set forth
in
Section
9.1
to enter
into a license with Licensor, to (a) immediately cease all uses of the
Technology, (b) make no further use of any rights licensed to Licensee by this
Agreement, except to the extent of rights granted in any other written agreement
entered into after the Effective Date between Licensor and Licensee, and (c)
return to Licensor promptly (i) all Improvements in the possession of Licensee
and (ii) the originals and all copies of all Licensor Confidential Information.
Upon any termination of this Agreement, Licensor shall promptly return upon
request by Licensee the originals and all copies of all Confidential Information
relating to Licensee's business.
6.6
Survival
of Claims
.
Any
claims by either Party against the other Party existing under this Agreement
at
the expiration or any termination of this Agreement shall survive such
termination or expiration.
6.7
Survival
of Certain Provisions
.
Any
provisions, agreements, warranties or representations contained in this
Agreement which expressly or by implication come into or remain in force
following the termination or expiration of this Agreement shall survive such
termination or expiration, including the provisions of
Articles
III, V, VII and VIII and Sections 2.3, 2.4, 9.1, 9.2, 9.7, 9.8, 9.16 and
9.17
.
ARTICLE
VII
INDEMNIFICATION
7.1
Indemnification
by Licensor
.
Licensor, as indemnitor, agrees to indemnify, defend, and hold harmless Licensee
and its Affiliates (except for those Affiliates which are also Affiliates of
Licensor), and their respective officers, directors, managers, members,
shareholders, agents, employees, successors and assigns, as indemnitees
("
Licensee
Indemnitees
")
from
and against any and all claims, demands, liabilities, judgments, awards, liens,
losses, damages, or costs (including reasonable attorneys' fees and expenses)
of
any kind or nature (unless caused by the conduct of or omission by any of the
Licensee Indemnitees) arising from or in any manner related to (a) any
allegation by any Person other than an Affiliate of Licensee that any portion
of
the Technology or the use or practice thereof by Licensee (or any permitted
Sub
licensee thereof) in accordance with this Agreement infringes upon prior rights
of any other Person; (b) to the extent not covered by clause (a) immediately
above, the failure by Licensor to observe or perform the covenants and
agreements of Licensor under this Agreement or the inaccuracy of any
representation or warranty made by Licensor in this Agreement.
7.2
Indemnification
by Licensee
.
Licensee, as indemnitor, agrees to indemnify, defend, and hold harmless Licensor
and its Affiliates (except for those Affiliates which are also Affiliates of
Licensee), and their respective officers, directors, shareholders, agents,
employees, successors and assigns, as indemnitees ("
Licensor
Indemnitees
"),
from
and against any and all claims, demands, liabilities, judgments, awards, liens,
losses, damages, or costs (including reasonable attorneys' fees and expenses)
of
any kind or nature (unless caused by the conduct of or omission by any of the
Licensor Indemnitees) arising from or in any manner related to (a) the use
or
practice by Licensee of the Technology where such use and practice is not in
compliance with the provisions of
Section
2.2
,
except
to the extent arising from or related to any allegation by a Person other than
an Affiliate of Licensee that any portion of the Technology or the use thereof
by Licensee in accordance with this Agreement infringes upon prior rights of
any
other Person; (b) the operation of the business of Licensee and the Projects
as
they may relate to this Agreement or the Technology; or (c) to the extent not
covered by clause (a) immediately above, the failure by Licensee to observe
or
perform the covenants and agreements of Licensee under this Agreement or the
inaccuracy of any representation or warranty made by Licensee in this
Agreement.
7.3
Duty
to Defend
.
Each
indemnitor, at its sole cost and expense, shall defend, with counsel reasonably
satisfactory to each indemnitee, any claim, demand, suit, cause of action or
proceeding covered by the indemnities set forth in
Section
7.1
or
Section
7.2
,
as the
case may be. Each indemnitor shall have the right to control the defense of
any
claim, demand, suit, cause of action, or proceeding without prejudice to its
right to contest thereafter whether such was within the scope of the indemnities
contained in
Section
7.1
or
Section
7.2
,
as the
case may be. Each indemnitee shall have the right, but not the obligation,
at
its sole cost and expense, to participate in the defense of any such claim,
demand, suit, cause of action or proceeding. Each indemnitee shall have the
right at any time, by notice to each indemnitor, to assume exclusive control
of
the defense of any claim, demand, suit, cause of action or proceeding insofar
as
such indemnitee is concerned, at the sole cost and expense of the relevant
indemnitor (subject to the right of the relevant indemnitor to contest whether
such claim, demand, suit, cause of action or proceeding is within the scope
of
the indemnities contained in
Section
7.1
or
Section
7.2
as the
case may be), if (a) the relevant indemnitor fails to defend diligently such
claim, demand, suit, cause of action or proceeding, (b) there is a conflict
in
the interests of the relevant indemnitor and such indemnitee with respect to
such claim, demand, suit, cause of action or proceeding, or (c) at any time
during the pendency of such claim, demand, suit, cause of action or proceeding
the relevant indemnitor shall disaffirm its responsibility for the claim
involved. Each indemnitor shall pay all reasonable costs that may be incurred
by
all indemnitees in such defense or in enforcing the indemnity set forth in
Section
7.1
or
Section
7.2
,
as the
case may be, including reasonable attorneys' fees, within ten (10) days after
request therefor.
7.4
Settlement
.
Each
indemnitor shall have the right to settle, at its sole cost and expense, any
claim, demand, suit, cause of action, or proceeding within the scope of
Section
7.1
or
Section
7.2
,
as the
case may be, which results only in the payment of money. No indemnitor shall,
however, have the right, without the prior written consent of the relevant
indemnitee, to settle any claim, demand, suit, cause of action, or proceeding
which claim, demand, suit, cause of action or proceeding or settlement thereof,
involves nonmonetary obligations of any indemnitee;
provided
,
however
,
any
indemnitee not agreeing to any such settlement proposed by an indemnitor shall
be responsible, without benefit of the indemnity contained in
Section
7.1
or
Section
7.2
,
as the
case may be, for damages of such indemnitee incurred as a result of not agreeing
to such settlement and neither Licensee nor any Affiliate of Licensee shall
enter into any such settlement if, in the good-faith opinion of Licensor, such
settlement could create a precedent or implication that any Person other than
Licensor owns the Technology.
ARTICLE
VIII
DISPUTE
RESOLUTION
8.1
Agreement
to Dispute Resolution
.
Subject
to the provisions of
Section
9.8
,
in the
event a dispute arises between Licensor and Licensee regarding the application
or interpretation of this Agreement, such dispute shall be the subject of a
dispute resolution process, as provided below in this Article, before either
Licensor or Licensee may resort to litigation. Any such dispute resolution
process shall be conducted in Orange County, California, or at such other
location as may be mutually agreed upon by the Parties.
8.2
Initiation
of Dispute Resolution
.
The
Party proposing that any dispute be submitted to dispute resolution shall do
so
by giving written notice to the other Party of its desire to submit the matter
to dispute resolution. Promptly thereafter, but in any event within ten (10)
days or such longer time as the Parties may agree upon, the Parties (each being
represented by representatives with decision-making authority as to the relevant
dispute) shall meet to attempt to resolve the relevant dispute. Each of the
Parties shall bear its own expenses incurred in connection with any such
meeting.
8.3
Mediation
.
If the
Parties shall fail for any reason, within thirty (30) days from the initial
notice provided for in
Section
8.2
,
to
resolve the relevant dispute, then, prior to resorting to litigation, the
Parties shall submit the relevant dispute to mediation before a single
disinterested mediator, who shall be agreed upon mutually from among those
affiliated with Judicial Arbitration & Mediation Services, Inc., or any
other mediation service mutually agreed to by the Parties.
8.4
Expense
of Mediation
.
The
fees and expenses occasioned by a mediation, including reasonable attorneys'
fees of the prevailing Party, shall be the obligation of the nonprevailing
Party;
provided
,
however
,
in the
event that neither Party is the sole prevailing Party, unless otherwise agreed
by the Parties, the fees and expenses of the mediation process shall be paid
in
equal proportions by the Parties and each of the Parties shall pay the fees
and
expenses of its counsel.
ARTICLE
IX
MISCELLANEOUS
PROVISIONS
9.1
Assignment
.
Licensor may assign its rights under this Agreement, including in connection
with any sale, transfer or other disposition of the Technology, to any other
Person, without the consent of Licensee;
provided
,
however
,
that
any such Assignment shall be made expressly subject to this Agreement. Upon
the
prior written consent of Licensor, which consent shall not be unreasonably
withheld, Licensee may assign all or any portion of its rights under this
Agreement to a Project Entity, including any assignment or collateral assignment
of this Agreement by Licensee to (a) any Project Lender, or a purchaser at
a
foreclosure sale who assumes the interests and obligations of Licensee
hereunder, or (b) in connection with a sale, transfer or other disposition
of a
Project to a Project Entity in which the Project Entity assumes the interests
and obligations of Licensee with respect to this Agreement. Any attempt by
either Party to make any assignment, transfer or other disposition of this
Agreement or any rights or obligations hereunder, other than in accordance
with
the provisions of this Section shall be null and void and of no
effect.
9.2
Successors
and Assigns
.
All
terms and provisions contained herein shall inure to the benefit of and shall
be
binding on each of the Parties and their respective successors and permitted
assigns.
9.3
Parties
in Interest
.
Subject
to the provisions of
Sections
2.3 and 9.2
,
and
unless otherwise expressly provided herein, this Agreement and each and every
provision hereof is for the exclusive benefit of the Parties and is not for
the
benefit of any third Person.
9.4
Amendments;
Waivers
.
Neither
this Agreement nor any provision hereof may be amended, waived, discharged,
or
terminated orally, but only by an instrument in writing signed by the Party
against whom enforcement of the amendment, waiver, discharge, or termination
is
sought.
9.5
Non-Waiver
.
It is
understood and agreed that any delay, waiver, or omission by any Party to
exercise any right or power arising from any breach or default by the other
Party with respect to any of the terms, provisions, or covenants of this
Agreement shall not be construed to be a waiver by such Party of any subsequent
breach or default of the same or other terms, provisions or covenants on the
part of such other Party.
9.6
Notices
.
Any
notice, demand, offer, or other written instrument required or permitted to
be
given pursuant to this Agreement shall be in writing signed by the Party giving
such notice and shall be hand delivered or sent by overnight courier, certified
mail (return receipt requested), or telefax to the other Party at the relevant
address set forth below:
If
delivered to Licensor:
Arkenol,
Inc.
31
Musick
Irvine,
California 92618
Attention:
Arnold
R.
Klann
Telephone:
(949)
588-3767
Telefax:
(949)
588-3972
with
copy
to:
Kathleen
D. Klann
Arkenol,
Inc.
31
Musick
Irvine,
California 92618
Telephone:
(949)
795-4716
Telefax:
(949)
588-3972
If
delivered to Licensee:
BlueFire
Ethanol, Inc.
Attention:
Necy
Sumait
Telephone:
Telefax:
With
a
copy to:
Corporate
attorney (To Be Determined)
BLUEFIRE
ETHANOL, INC.
Telephone:
Telefax:
Either
Party shall have the right to change the address to which notice shall be sent
or delivered by similar notice sent in like manner to the other Party. Without
limiting any other means by which a Party may be able to provide that a notice
has been received by the other Party, a notice shall be deemed to be duly
received (a) if sent by hand, on the date when left with a responsible Person
at
the address of the recipient; (b) if sent by registered mail or overnight
courier, on the date of receipt; or (c) if sent by telefax upon receipt by
the
sender of an acknowledgment or transmission report generated by the machine
from
which the telefax was sent indicating that the telefax was sent in its entirety
to the recipient's facsimile number.
9.7
Attorneys'
Fees
.
In the
event any dispute between the Parties to this Agreement should result in
litigation or any other proceeding (including mediation), then, subject to
the
provisions of
Section
8.4
to the
contrary, the prevailing Party shall be reimbursed by the nonprevailing Party
for all reasonable costs and expenses, including reasonable attorneys' fees,
incurred by the prevailing Party in connection with such litigation or other
proceeding and any appeal or enforcement thereof.
9.8
Injunctive
Relief
.
It is
understood and agreed that any breach by Licensee of any of its obligations
or
agreements under any of
Sections
2.1, 2.2, 2.3, 3.2, 3.3, 3.4, 3.5, 3.6, 6.5
and
9.1
,
and
under either of
Articles
IV
and
VII
would
cause irreparable injury to Licensor for which money damages would not be a
sufficient remedy. In addition, it is understood and agreed that any breach
by
Licensor of any of its obligations or agreements under any of
Sections
2.3, 6.5
and
9.1
and
under
Article
VII
would
cause irreparable injury to Licensee for which money damages would not be a
sufficient remedy. Accordingly, in addition to any remedies available at law,
the Parties shall each, as the case may be, be entitled to seek equitable
relief, including a restraining order, an injunction and an order of specific
performance in the event of any breach or threatened breach by the other Party
of any of its respective obligations or agreements under the Sections and
Articles of this Agreement referenced above in this Section. Such remedies
shall
not be deemed to be the exclusive remedy for any such breach or threatened
breach of this Agreement, but shall be in addition to all other remedies
available to the Parties at law or in equity. The breach or threatened breach
of
the provisions of the Sections and Articles of this Agreement referenced above
shall not be subject to the dispute resolution provisions of this Agreement
and
the Parties need not pursue dispute resolution prior to seeking relief pursuant
to this Section.
9.9
Remedies
.
Except
as provided herein to the contrary, no remedy conferred by any specific
provision of this Agreement is intended to be exclusive of any other remedy,
and
each and every remedy shall be cumulative and shall be in addition to every
other remedy given hereunder, or now, or hereafter existing at law, in equity,
by statute or otherwise. The election of one or more remedies by either Party
shall not constitute a waiver of the right to pursue other available
remedies.
9.10
Further
Assurances
.
Each of
the Parties agrees to execute and deliver any and all additional papers and
documents, and to do any and all acts reasonably necessary in connection with
the performance of its obligations hereunder or to carry out the intent of
the
Parties reflected herein.
9.11
No
Agency, Joint Venture, Partnership
.
The
Parties hereby agree that this Agreement merely constitutes a license agreement,
and that no agency (except as expressly provided to the contrary in
Section
3.6
),
joint
venture or partnership is created hereby, and that neither Party shall incur
obligations in the name of the other or be obligated in respect of any
obligation of the other Party without the prior written consent of such other
Party or such Party, as the case may be.
9.12
Severability
.
Should
any part or provision of this Agreement be held unenforceable, the validity
of
the remaining parts or provisions shall not be affected by such holding so
long
as the primary purposes and intentions of the Parties can still be
accomplished.
9.13
Negotiated
Transaction
.
Each
Party affirms to the other that it has had the opportunity to consult and
discuss the provisions of this Agreement with independent legal counsel and
fully understands the legal effect of each provision. For all purposes, this
Agreement shall be deemed to have been drafted jointly by both
Parties.
9.14
Counterparts
.
This
Agreement may be executed in multiple counterparts, each of which shall be
deemed an original instrument and which shall have the same force and effect
as
the original instrument, and all of which shall constitute one and the same
agreement.
9.15
Entire
Agreement
.
This
Agreement constitutes the entire agreement of the Parties with respect to the
subject matter hereof and supersedes all prior agreements and understandings,
both written and oral, between the Parties with respect to the subject matter
hereof, including the Original Agreement.
9.16
Jurisdiction
and Venue
.
Subject
to the provisions of
Article
VIII
,
all
actions or proceedings with respect to, arising directly or indirectly in
connection with, out of, related to, or from this Agreement or any of the other
documents or agreements contemplated herein to be executed by either of the
Parties shall be litigated in courts having situs in Orange County, California,
and each Party hereby submits to the jurisdiction of such courts in any such
action and hereby waives any rights it may have to transfer or change the
jurisdiction or venue of any litigation brought against it in accordance with
this Section.
9.17
Governing
Law
.
This
Agreement shall be governed and construed in accordance with the laws of the
State of California without giving effect to the principles thereof relating
to
conflicts of laws.
IN
WITNESS WHEREOF, the Parties have caused this Agreement to be executed,
effective as of the day and year first set forth hereinabove.
|
LICENSOR
:
ARKENOL,
INC.
|
|
|
|
By:
/s/ Arnold
R. Klann
Arnold
R. Klann, President
|
|
|
|
LICENSEE
:
BLUEFIRE
ETHANOL, INC.
|
|
|
|
It’s
President
|
EXHIBIT
A
- Description of Process
EXHIBIT
B
- Description of Testing - Ethanol Specifications
EXHIBIT
A
DESCRIPTION
OF THE PROCESS
The
Process relates to a method of producing sugars and other end products using
strong acid hydrolysis of cellulosic and hemicellulosic materials, as described
in U.S. Patents Nos. 5,562,777 and 5,580,389, issued October 8, 1996 and
December 3, 1996, respectively. The Process also includes all related know-how
and Improvements to the Technology, whether described in said Patents or in
additional patents issued to Licensor from time to time in the future, and
whether such know-how or Improvements are protected as trade secrets or
not.
EXHIBIT
B
DESCRIPTION
OF TESTING - ETHANOL SPECIFICATIONS
·
|
Collection
of target feedstock under Arkenol
supervision;
|
·
|
Characterization
of feedstock;
|
·
|
Conversion
of feedstock to acid hydrolysis
sugar;
|
·
|
Analysis
of sugar for trace contaminants;
|
·
|
Conversion
of acid hydrolysis sugar to
Ethanol;
|
·
|
Evaluation
of optimum separation techniques for sugar-acid
separation.
|
Exhibit
10.4
ASSET
TRANSFER AND ACQUISITION AGREEMENT
This
ASSET TRANSFER AND ACQUISITION AGREEMENT (this “Agreement”) dated as of the
1
st
day of
March, 2006 (“Execution Date”) is made and entered into by and between
ARK
ENERGY, INC
.,
a
Nevada corporation
(“Transferor”) and
BLUEFIRE
ETHANOL, INC
.,
a
Nevada Corporation (“Transferee”),
(Transferee and Transferor being sometimes hereinafter referred to individually
as a “Party” and collectively as the “Parties”). Capitalized terms not otherwise
defined herein have the meaning set forth in
Article
I
.
WHEREAS,
Transferee has an exclusive license from ARKENOL, INC. to develop, own and
operate ethanol plants using the Arkenol Technology for the North
American
Market, and to sublicense the Technology to third parties to develop, own and
operate ethanol plants using the Arkenol Technology for the North American
Market;
WHEREAS,
Transferor owns certain rights, assets, Work-Product, intellectual property
and
other know-how on project opportunities that may be used for the deployment
of
the Arkenol Technology for the North American Market (all of the foregoing
being
hereafter referred to as the “Interests”) as described in Appendix I; and
WHEREAS,
Transferee may use the Interests in its and its sublicensees’ deployment of the
Arkenol Technology in the North American Market; and
WHEREAS,
Transferor desires to transfer, and Transferee desires to receive all rights,
title and interest held by Transferor in the Interests to Transferee, on the
terms and subject to the conditions set forth in this Agreement.
NOW,
THEREFORE, in consideration of the mutual covenants and agreements set forth
in
this Agreement, and for other good and valuable consideration, the receipt
and
sufficiency of which are hereby acknowledged, the Parties agree as
follows:
ARTICLE
I.
DEFINITIONS
Section
1.
Definitions
.
(a)
Defined
Terms. As used in this Agreement, the following defined terms have the meanings
indicated below:
“
Actions
or Proceedings
”
means
any action, suit, proceeding, arbitration or Government or Regulatory Authority
investigation.
“
Affiliate
”
means
any Person that directly, or indirectly through one of more intermediaries,
controls or is controlled by or is under common control with the Person
specified. For purposes of this definition, control of a Person means the power,
direct or indirect, to direct or cause the direction of the management and
policies of such Person whether by Contract or otherwise and, in any event
and
without limitation of the previous sentence, any Person owning ten percent
(l0%)
or more of the voting securities of another Person shall be deemed to control
that Person.
“
Agreement
”
means
this Asset Transfer and Acquisition Agreement and the Appendices and Exhibits
herewith, as the same shall be amended from time to time.
“
Arkenol
Technology”
means
Arkenol’s patented technology for the production of ethanol from cellulosic
materials.
“
Arkenol
License
”
means
the exclusive license that Transferee has received from Arkenol,
Inc.
“
Assets
and Properties
”
of
any
Person means all assets and properties of every kind, nature, character and
description (whether real, personal or mixed, whether tangible or intangible,
and wherever situated), including the goodwill related thereto, operated, owned
or leased by such Person.
“
Assignment
of Interests
”
means
the Assignment of Interests substantially in the form of Exhibit A.
“
Business
Day
”
means
a
day other than Saturday, Sunday or any day on which banks located in the State
of California and Nevada are authorized or obligated to close.
“
Code
”
means
the Internal Revenue Code of 1986, as amended, and the rules and regulations
promulgated thereunder.
“
Environmental
Law
”
means
any Law or Order relating to the regulation or protection of human health,
safety or the environment or to emissions, discharges, releases or threatened
releases of pollutants, contaminants, chemicals or industrial, toxic or
hazardous substances or wastes into the environment (including, without
limitation, ambient air, soil, surface water, ground water, wetlands, land
or
subsurface strata), or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
pollutants, contaminants, chemicals or industrial, toxic or hazardous substances
or wastes.
“
Execution
Date
”
means
the date first written in the introductory paragraph of this
Agreement.
“
Financial
Closing
”
shall
mean the long term non-recourse financing of the Transferee’s Project(s).
“
GAAP
”
means
generally accepted accounting principles, consistently applied throughout the
specified period and in the immediately prior comparable period.
“
Governmental
Approval
”
means
any authorization, approval, consent, license, exception, variance, order,
franchise, lease, ruling, permit, tariff, certification, exception, filing,
notice to, declarations of, or registration by or with any Governmental or
Regulatory Authority.
“
Governmental
or Regulatory Authority
”
means
any court, tribunal, arbitrator, authority, agency, commission, official or
other instrumentality of the United States or any state, county, city or other
political subdivision.
“
Interests
”
has
the
meaning ascribed to it in the forepart of this Agreement. “Interests” includes
the Work Product and any and all other assets, interests or property owned
or
held by Transferor described in Appendix I hereto.
“
Knowledge
of Transferor
”
means
the actual knowledge of the officers and employees of Transferor.
“
Laws
”
means
all laws, statutes, treaties, rules, codes, ordinances, regulations, permits,
official guidelines, certificates, orders, interpretations, licenses, leases
and
permits of any Governmental or Regulatory Authority, Governmental Approvals,
Environmental Laws, and judgments, decrees, injunctions, writs, orders or like
action of any court, arbitrator or other judicial or quasi-judicial tribunal
of
competent jurisdiction and all requirements of law.
“
Liens
”
means
any mortgage, pledge, assessment, security interest, lease, lien, adverse claim,
levy, charge or other encumbrance of any kind, or any conditional sale contract,
title retention contract or other contract to give any of the
foregoing.
“
North
American Market
”
shall
mean potential ethanol markets in the United States and Canada.
“
Order
”
means
any writ, judgment, decree, injunction or similar order of any Governmental
or
Regulatory Authority (in each such case whether preliminary or
final).
“
Party
”
or
“
Parties
”
shall
have the meaning set forth in the introductory paragraph to this
Agreement.
“
Person
”
means
any natural person, corporation, limited liability company, general partnership,
limited partnership, proprietorship, other business organizations, trust, union,
association or Governmental or Regulatory Authority.
“
Performance
Bonus
”
has
the
meaning ascribed to it in Article II, Section 2.
“
Start
of Construction
”
means
either the first placement of permanent construction of a building on site,
such
as the pouring of a slab or footing, the installation of piles, the construction
of columns, or any work beyond the stage of excavation; or the placement of
a
manufactured (mobile) home on a foundation.
“Transferee
”
has
the
meaning ascribed to it in the forepart of this Agreement, and includes any
successors and assigns.
“Transferee’s
Project(s)”
shall
mean project(s) owned or controlled by the Transferee or by its sublicensees
utilizing the Arkenol Technology in the North American Market.
“
Transferor
”
has
the
meaning ascribed to it in the forepart of this Agreement and includes its
successors and assigns.
“
Termination
Date
”
shall
mean the date that is three (3) years after the Execution Date unless otherwise
amended by both parties in writing if significant progress has not been made
by
Transferee to develop, design, and finance its first project
“
Work
Product
”
shall
mean all rights appurtenant to the development of projects related to the
Arkenol Technology, data, all reports of consultants, all know-how and
information based or obtained in connection with the development of projects
related to the Arkenol Technology and all of the other rights (including, but
not limited to, development rights and other work products) comprising or
relative to the Arkenol Technology.
(b)
Construction
of Certain Terms and Phrases
.
Unless
context of this Agreement otherwise requires, (i) words of any gender include
each other gender, (ii) words using the singular of plural number also include
the plural or singular number, respectively; (iii) the terms “
hereof
,”
“
herein
,”
“
hereby
”
and
derivative or similar words refer to this entire Agreement; and (iv) the terms
“
Article
”
or
“
Section
”
refer
to the specified Article or Section of this Agreement. Whenever this Agreement
refers to a number of days, such number shall refer to calendar days unless
Business Days are specified. All accounting terms used herein and not expressly
defined herein shall have the meanings given to them under GAAP. Any
representation or warranty contained herein as to the enforceability of a
Contract shall be subject to the effect of any bankruptcy, insolvency,
reorganization, moratorium or other similar law affecting the enforcement of
creditors’ rights generally and to general equitable principles (regardless of
whether such enforceability is considered in a proceeding in equity or at
law).
ARTICLE
II.
TRANSFER
OF INTERESTS AND EXECUTION
Section
1.
Transfer
and Receipt
.
Transferor agrees to transfer to Transferee, and Transferee agrees to receive
from Transferor at the Execution Date, all of the rights, title and interests
of
Transferor in and to the Interests on the terms and subject to the conditions
set forth in this Agreement.
Section
2.
Performance
Bonus
.
In
consideration of the receipt and transfer described above and in the event
that
the Interests are used by Transferee in Transferee’s Project(s), Transferee
shall pay to Transferor an aggregate sum (the “Performance Bonus”) of up to a
maximum of SIXTEEN MILLION DOLLARS ($16,000,000). The payment of the Performance
Bonus is based on one hundred percent (100%) of the “at-cost” transfer basis of
the Interests at the time of that specific Transferee’s Project’s implementation
(as described on Table 1) as demonstrated by Start of Construction or Financial
Closing, whichever is earlier, and subject to the limitations in Section 3
of
this Article II.
Section
3.
Payment
of Performance Bonus
.
(a)
The
Performance Bonus shall be due and payable as follows:
(i)
The
Performance Bonus shall be paid in whole or in increments, based upon the value
of the use of the Interests, or a portion thereof, by Transferee in Transferee’s
Project(s). Such payment(s) shall be paid no later than thirty (30) days after
the Financial Closing or Start of Construction of Transferee’s Project(s)
utilizing the Interests, or a portion thereof, and receipt of an Invoice from
Transferor of the amount due. All payments to Transferor under this Agreement
will be solely by bank wire transfer in U.S. dollars.
Section
4.
Conversion
Requirements
.
The
Performance Bonus will be converted to preferred shares in the event BlueFire
becomes or is reorganized into a publicly traded company. Such preferred shares
issued will have a right of conversion to common stock at a ratio that will
be
limited to a maximum face value of sixteen million dollars ($ 16,000,000) as
determined by the price of the common stock at the time of conversion to common
shares which shall occur five years from the date of first trading of
shares.
ARTICLE
III.
REPRESENTATIONS
AND WARRANTIES OF TRANSFEROR
Except
as
otherwise provided herein, Transferor hereby represents and warrants to
Transferee as follows:
Section
1.
Existence
.
Transferor is a corporation duly incorporated, validly existing and in good
standing under the laws of the State of Nevada. Transferor has full corporate
power and authority to execute and deliver this Agreement and to perform its
obligations hereunder and to consummate the sale of the Interests contemplated
hereby.
Section
2.
Authority
.
The
execution and delivery by Transferor of this Agreement, and the performance
by
Transferor of its obligations hereunder, have been duly and validly authorized
by its board of directors, no other corporate action on the part of Transferor,
its stockholders or any other person being necessary. This Agreement has been
duly and validly executed and delivered by Transferor and constitutes a legal,
valid and binding obligation of Transferor enforceable against Transferor in
accordance with its terms.
Section
3.
Title
to Properties
.
Transferor has good, valid and marketable title to the Interests, subject to
no
encumbrance, Lien, charge or other restriction of any kind or
character.
Section
4.
Interests
.
At the
Execution Date, the delivery of an Assignment of Interests provided in Section
4
of Article II will transfer to Transferee good and valid title to the Interests,
free and clear of all Liens, other than Liens created or suffered to exist
by
Transferee.
Section
5.
Legal
Proceedings
.
There
are no Actions or Proceedings pending or, to the Knowledge of Transferor,
threatened against, relating to or affecting Transferor or any of its Assets
and
Properties which could reasonably be expected to result in the issuance of
an
Order restraining, enjoining or otherwise prohibiting or making illegal the
consummation of the sale of the Interests contemplated by this
Agreement.
Section
6.
Consents;
No Violation of Agreements
.
No
consent of any person is necessary for the consummation by Transferor of the
transactions set forth herein, including, without limitation, consents from
governmental agencies, whether federal, state or local, and neither the
execution and delivery of this Agreement by Transferor nor the consummation
or
performance by Transferor of any of the transactions set forth herein, will
directly or indirectly (with or without notice or lapse of time) contravene,
conflict with, or result in a violation or breach of any provision of, or give
any person the right to declare a default or exercise any remedy under, or
to
accelerate the maturity or performance of, or to cancel, terminate, or modify,
any of the Interests.
Section
7.
Taxes
.
(a)
Transferor
is not a “foreign person” within the meaning of Section 1445(b)(2) of the
Code;
(b)
There
are
no liens for Taxes upon any of the Interests;
(c)
None
of
the assets of Transferor is “tax-exempt use property” within the meaning of
Section 168(h) of the Code or tax-exempt bond financed property within the
meaning of Section 168(g)(5) of the Code and none of the assets of Transferor
is
subject to any lease made pursuant to Section 168(f)(8) of the Code (as in
effect from time to time prior to the date hereof); and
Section
8.
Bankruptcy
.
Transferor has not filed any voluntary petition in bankruptcy or been
adjudicated as bankrupt or insolvent, filed any petition or answer seeking
any
reorganization, liquidation, dissolution or similar relief under any federal
or
state bankruptcy act, insolvency, or other debtor relief law, nor sought or
consented to or acquiesced in the appointment of any trustee, receiver,
conservator or liquidator of all or any substantial part of its
properties.
Section
9.
Brokers
.
All
negotiations relative to this Agreement and the transactions contemplated hereby
have been carried out by Transferor directly with Transferee without the
intervention of any Person on behalf of Transferor in such manner as to give
rise to any valid claim by any Person against Transferee for a finder’s fee,
brokerage commission or similar payment.
Section
10.
Disclosure
.
Transferor has made available to Transferee copies of all books and records
in
its possession relating to the Interests, including, but not limited to, all
governmental communications, reviews, audits, investigations or inspections,
whether pending, completed or, to Transferor’s knowledge, threatened, relating
to the Projects or the Interests, which contain any material data or information
with respect to the ownership or development of the Projects. The
representations and warranties of Transferor, when taken as a whole, do not
contain any untrue statement of a material fact nor do they omit to state a
material fact which is or should have been known to Transferor or its Affiliates
to be necessary in order to make the representations and warranties made, in
light of the circumstances under which they were made, not
misleading.
ARTICLE
IV.
REPRESENTATIONS
AND WARRANTIES OF TRANSFEREE
Transferee
hereby represents and warrants to Transferor as follows:
Section
1.
Corporate
Existence
.
Transferee is a to be formed corporation that would be duly organized, validly
existing and in good standing under the Laws of the State of Nevada. Transferee
has full corporate power and authority to execute and deliver this Agreement,
to
perform its obligations hereunder and to consummate the receipt of the Interests
contemplated hereby. If the corporation is not formed within one (1) year of
the
Execution Date, then this Agreement is voided.
Section
2.
Authority
.
The
execution and delivery by Transferee of this Agreement, and the performance
by
Transferee of its obligations hereunder, have been duly and validly authorized
by the President of Transferee, no other action on the part of Transferee being
necessary. This Agreement has been duly and validly executed and delivered
by
Transferee and constitutes a legal, valid and binding obligation of Transferee
enforceable against Transferee in accordance with its terms.
Section
3.
Legal
Proceedings
.
There
are no Actions or Proceedings pending or, to the knowledge of Transferee,
threatened against, relating to or affecting Transferee or any of its Assets
and
Properties which could reasonably be expected to result in the issuance of
an
Order restraining, enjoining or otherwise prohibiting or making illegal the
consummation of the receive of the Interests contemplated by this
Agreement.
Section
4.
Brokers
.
All
negotiations relative to this Agreement and the transactions contemplated hereby
have been carried out by Transferee directly with Transferor without the
intervention of any Person on behalf of Transferee in such manner as to give
rise to any valid claim by any Person against Transferor or any Subsidiary
for a
finder’s fee, brokerage commission or similar payment.
ARTICLE
V.
COVENANTS
OF TRANSFEROR
Transferor
covenants and agrees with Transferee that, at all times from and after the
date
hereof until the Termination Date, Transferor will comply with all covenants
and
provisions of this
Article
V
,
except
to the extent Transferee may otherwise consent in writing.
Section
1.
Fulfillment
of Conditions
.
Transferor will proceed diligently and in good faith and will take all
commercially reasonable steps necessary or desirable to satisfy each condition
to the obligations of Transferee contained in this Agreement and will not take
or fail to take any action that could reasonably be expected to result in the
nonfulfillment of any such condition.
Section
2.
Duty
to Notify
.
Transferor shall promptly notify Transferee of any actions or events that might
have a material adverse effect or which may result in a breach of covenants
in
this
Article
V
,
may
result in a breach of the representations and warranties in Article III, or
may
otherwise impede the use of the Interests by Transferee.
Section
3.
Duty
to Cooperate
.
Transferor shall use its best reasonable efforts to cooperate with Transferee
to
facilitate the use of the Interests by Transferee.
Section
4.
Non-Competition
.
Transferor shall not engage in any activity that is in any way competitive
with
Transferee’s interest in the use of the Interests, and shall not assist any
other person or organization in competing with or in preparing to compete with
Transferee’s interest in the Interests.
ARTICLE
VI.
COVENANTS
OF TRANSFEREE
Transferee
covenants and agrees with Transferor that, at all times from and after the
date
hereof until the Termination Date, Transferee will comply with all covenants
and
provisions of this
Article
VI
,
except
to the extent Transferor may otherwise consent in writing.
Section
1.
Fulfillment
of Conditions
.
Transferee will take all commercially reasonable steps necessary or desirable
to
satisfy each condition to the obligations of Transferor contained in this
Agreement and will not take or fail to take any action that could reasonably
be
expected to result in the nonfulfillment of any such condition.
ARTICLE
VII.
CONDITIONS
TO OBLIGATIONS OF TRANSFEREE
The
obligations of Transferee hereunder to receive the Interests are subject to
the
fulfillment, at or before the Execution Date, of each of the following
conditions (all or any of which may be waived in whole or in part by Transferee
in its sole discretion).
Section
1.
Performance
.
Transferor shall have performed and complied with, in all material respects,
the
agreements, covenants and obligations required by this Agreement to be so
performed or complied with by Transferor at or before the Execution
Date.
Section
2.
Accuracy
of Representations and Warranties
.
The
representations and warranties of the Transferors herein contained shall be
true
at the Execution Date in all material respects.
Section
3.
Assignment
of Interests
.
Transferor shall have delivered the Assignment of Interests, substantially
in
the form of
Exhibit
A
.
ARTICLE
VIII.
CONDITIONS
TO OBLIGATIONS OF TRANSFEROR
The
obligations of Transferor hereunder to transfer the Interests are subjected
to
the fulfillment, at or before the Execution Date, of each of the following
conditions (all or any of which may be waived in whole or in part by Transferor
in its sole discretion).
Section
1.
Performance
.
Transferee shall have performed and complied with, in all material respects,
the
agreements, covenants and obligations required by this Agreement to be so
performed or complied with by the Transferee at or before the Execution
Date.
ARTICLE
IX.
TERMINATION
Section
1.
Termination
.
This
Agreement may be terminated by Transferee, and the transactions contemplated
hereby may be abandoned, at any time before the Termination Date, at the sole
discretion of Transferee with or without cause, by giving written notice to
Transferor. Upon termination, Transferee shall relinquish all rights to the
Interests.
Section
2.
Effect
of Termination
.
If this
Agreement is validly terminated pursuant to Section 1 of this Article IX, this
Agreement will forthwith become null and void, and there shall be no liability
or obligation on the part of Transferor or Transferee (or any of their
respective officers, directors, employees, agents or other representatives
or
Affiliates), subject to the following exceptions:
(a)
Article
X
and Sections 3, 4, 5, 14, 15 and 16 of Article XI shall continue to apply
following any such termination; and
ARTICLE
X.
INDEMNIFICATION
Section
1.
Indemnification
of Transferee by Transferor
.
Transferor hereby agrees to indemnify and hold harmless Transferee, its
Affiliates and their respective shareholders, managers, officers, directors,
members, employees, partners, agents, and their respective heirs, personal
representatives, successors and assigns (the “Transferee Indemnified Parties”)
from and against any and all claims, demands, actions, proceedings,
investigations and rights of action asserted by any third party against any
of
the Transferee Indemnified Parties, including reasonable attorneys’ fees and
costs, whether or not action is instituted and, if instituted, whether at any
trial or appellate level, whether raised by the Transferee Indemnified Parties
or a third party
,
which
shall
or
may
arise
by virtue of or in connection with (i) anything done or omitted to be done
by
Transferor in connection with this Agreement, (ii) any breach by Transferor
of a
covenant, warranty or representation contained herein, or (iii) anything done
or
omitted to be done by Transferor in connection with the Interests prior to
the
Execution Date or after the termination of this Agreement pursuant to Article
IX. Indemnity claims shall be payable when incurred by the Transferee
Indemnified Parties.
Section
2.
Indemnification
of Transferor by Transferee
.
Transferee hereby agrees to indemnify and hold Transferor, its Affiliates,
officers, directors, managers, members, employees, partners, shareholders,
agents and their respective heirs, personal representatives, successors and
assigns (the “Transferor Indemnified Parties”) harmless from and against any and
all claims, demands, actions, proceedings, investigations and rights of action
asserted by any third party against any of the Transferor Indemnified Parties,
including reasonable attorneys’ fees and costs, whether action is instituted or
not and, if instituted, whether at any trial or appellate level, whether raised
by the Transferor Indemnified Parties or a third party, which shall or may
arise
by virtue of or in connection with (i) anything done or omitted to be done
by
Transferee with respect to the obligations of Transferee pursuant to this
Agreement, or (ii) any breach by Transferee of a covenant; warranty or
representation contained herein. Indemnity claims shall be payable when incurred
by the Transferor Indemnified Parties.
Section
3.
Limitation
on Indemnification
.
The
maximum amount of losses that either Party will be responsible to bear under
Sections 1 and 2, respectively, of this Article X is One Million Dollars
($1,000,000). This maximum amount shall not apply to losses resulting from
either Party’s fraud, intentional misrepresentation, intentional breaches of
covenants, or intentional violations of any Law.
ARTICLE
XI.
MISCELLANEOUS
Section
1.
Notices
.
All
notices, requests and other communications hereunder must be in writing and
will
be deemed to have been duly given only if delivered personally or by messenger
(including by air courier) or by facsimile transmission or mailed (first class
postage prepaid) to the Parties at the following addresses or facsimile
numbers:
If
to
Transferee, to:
BLUEFIRE
ETHANOL, INC
.
31
Musick
Irvine,
California 92618
Attn:
Arnold Klann
Tel:
(949) 588-3767 ext. 310
Fax:
(949) 580-6935
If
to
Transferor, to:
ARK
ENERGY, INC.
31
Musick
Irvine,
California 92618
Attn:
Necy Sumait
Tel:
(949) 588-3767, ext. 304
Fax:
(949) 588-3972
All
such
notices, requests and other communications will (i) if delivered personally
or
by messenger (including by air courier) to the address as provided in this
Section, be deemed given upon delivery, (ii) if delivered by facsimile
transmission to the facsimile number as provided in this Section, be deemed
given upon receipt, and (iii) if delivered by mail in the manner described
above
to the address as provided in this Section, be deemed given upon receipt (in
each case regardless of whether such notice, request or other communication
is
received by any other Person to whom a copy of such notice, request or other
communication is to be delivered pursuant to this Section). Any Party from
time
to time may change its address, facsimile number or other information for the
purpose of notices to that Party by giving notice specifying such change to
the
other Party.
Section
2.
Entire
Agreement
.
Each
appendix and exhibit delivered pursuant to this Agreement will be in writing
and
will constitute a part of this Agreement. This Agreement, together with those
appendices and exhibits, constitutes the entire agreement among the Parties
pertaining to the subject matter of this Agreement and supersedes all the
Parties’ prior agreements and understandings in connection
therewith.
Section
3.
Expenses
.
Except
as otherwise expressly provided in this Agreement, whether or not the sale
of
the Interests contemplated hereby are consummated, each Party will pay its
own
costs and expenses incurred in connection with the negotiation, execution and
Execution of this Agreement and the transactions contemplated
hereby.
Section
4.
Public
Announcements
.
Any
public announcement reporting the transfer hereunder or concerning the
transactions contemplated hereby shall be made at the sole discretion of
Transferee. Transferor will not issue or make any reports, statements or
releases to the public with respect to this Agreement or the transactions
contemplated hereby without the prior written consent of Transferee.
Section
5.
Waiver
.
Any
term or condition of this Agreement may be waived at any time by the Party
that
is entitled to the benefit thereof, but no such waiver shall be effective unless
set forth in a written instrument duly executed by or on behalf of the Party
waiving such term or condition. No waiver by any Party of any term or condition
of this Agreement, in any one or more instances, shall deemed to be or construed
as a waiver of the same or any other term or condition of this Agreement on
any
future occasion. All remedies, either under this Agreement or by Law or
otherwise afforded, will be cumulative and not alternative.
Section
6.
Further
Assurances
.
Subject
to the terms and conditions of this Agreement, at any time or from time to
time
after the Execution, each of the Parties shall execute and deliver such other
documents and instruments, provide such materials and information and take
such
other actions as may reasonably be necessary, proper or advisable, to the extent
permitted by Law, to fulfill its obligations under this Agreement.
Section
7.
Amendment
.
This
Agreement may be amended, supplemented or modified only by a written instrument
duly executed by or on behalf of each Party.
Section
8.
No
Third Party Beneficiary
.
The
terms and provisions of this Agreement are intended solely for the benefit
of
each Party and their respective successors or permitted assigns, and it is
not
the intention of the Parties to confer third-party beneficiary rights upon
any
other Person.
Section
9.
No
Assignment; Binding Effect
.
Transferee may assign this Agreement in whole or in part at any time, or from
time to time, in its sole discretion; provided, however, any such assignee
shall
assume Transferee’s obligations hereunder (in whole or in part, as appropriate).
Neither this Agreement nor any right, interest or obligation hereunder may
be
assigned by Transferor without the prior written consent of Transferee and
any
attempt to do so will be void. Subject to the preceding sentences, this
Agreement is binding upon, inures to the benefit of and is enforceable by the
Parties and their respective successors and assigns.
Section
10.
Headings
.
The
headings used in this Agreement have been inserted for convenience of reference
only and do not define or limit the provisions hereof.
Section
11.
Invalid
Provisions
.
If any
provision of this Agreement is held to be illegal, invalid or unenforceable
under any present or future Law, and if the rights or obligations of any Party
under this Agreement will not be materially and adversely affected thereby,
(a)
such provision will be fully severable, (b) this Agreement will be construed
and
enforced as if such illegal, invalid or unenforceable provision had never
comprised a part hereof, and (c) the remaining provisions of this Agreement
will
remain in full force and effect and will not be affected by the illegal, invalid
or unenforceable provision or by its severance herefrom.
Section
12.
Governing
Law
.
This
Agreement shall be governed in all respects by and construed in accordance
with
the laws of the State of Nevada without regard to principles of conflicts of
laws.
Section
13.
Arbitration
.
Any
controversy or claim arising out of or relating to this Agreement, its
enforcement or interpretation, or because of an alleged breach, default, or
misrepresentation in connection with any of its provisions, shall be submitted
to final and binding arbitration, to be held in Clark County, Nevada in
accordance with the Commercial Arbitration Rules or then existing rules for
commercial arbitration of the American Arbitration Association. The arbitrator
shall be selected by mutual agreement of the parties; if none, then by striking
from a panel of arbitrators from the American Arbitration
Association.
Section
14.
Attorneys’
Fees
.
In the
event of any arbitration or other proceeding between any of the Parties with
respect to any of the transactions contemplated hereby or subject matter hereof,
the prevailing Party shall, in addition to such other relief as the arbitrator
may award, be entitled to recover reasonable attorneys’ fees, all costs of the
arbitration, including but not limited to, the arbitration fees, court reporter
fees, etc. (and including, if applicable, any costs at the trial and appellate
levels and in any bankruptcy proceeding), and expenses of
investigation.
Section
15.
Counterparts
.
This
Agreement may be executed in any number of counterparts, each of which will
be
deemed an original, but all of which together will constitute one and the same
instrument.
Section
17.
Conflict
.
In the
event of any conflict between the terms of this Asset Transfer and Acquisition
Agreement and the terms of the Assignment of Interests, the terms of the Asset
Transfer and Acquisition Agreement shall prevail.
[Remainder
of page intentionally left blank]
IN
WITNESS WHEREOF, this Agreement has been duly executed and delivered by the
duly
authorized officer of each Party as of the date first above written (“Execution
Date”).
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BLUEFIRE
ETHANOL,
INC.
|
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By:
|
/s/ Arnold
Klann
|
|
Name:
Arnold Klann
|
|
Title:
President
|
|
|
|
|
ARK
ENERGY, INC.,
A
Nevada corporation
|
|
|
|
|
By:
|
/s/ Necy
Sumait
|
|
Name:
Necy Sumait
|
|
Title:
Vice President
|
APPENDIX
I
DESCRIPTION
OF INTERESTS
·
|
Process
Design Package for the Sacramento Biorefinery Project prepared by Bateman
Engineers;
|
·
|
Permits,
Work Product, reports, data and any and all information obtained in
connection with the project opportunities listed on
Table
1
in
connection with the Arkenol Technology in the North American
Market;
|
·
|
Any
and all data collected regarding the geographical location of potential
sites, environmental conditions, infrastructure, regulatory requirements;
|
·
|
Any
and all correspondences regarding meetings or telephone calls with
utilities, governmental or regulatory agencies, vendors, or potential
clients for facility outputs;
|
·
|
Any
and all draft or completed business plans for potential
facilities;
|
·
|
Any
and all engineering design or data developed for potential projects;
|
·
|
Any
and all research, data or reports on market information for facility
outputs;
|
·
|
All
documents, studies, reports, material, data, files, contact lists or
other
information or know-how developed, owned, held or obtained by Transferor
in connection with project opportunities;
and
|
·
|
All
other rights of the Transferor (including, but not limited to, development
rights, work product and other intellectual, tangible and intangible
property) comprising or relative to project
opportunities.
|
·
|
All
rights (including all intellectual property rights), title and interest
in
and to all assets, contract rights, products, reports, studies, drawings,
tracings, schedules, photographs, slides, estimates, specifications,
diagrams, models, calculations and other results of work by Transferor,
including any and all development rights and assets that are part of
or
relate in any way to project opportunities
.
|
Table
1
|
Project
Name
|
|
Location
|
Pilot
Analysis
|
Engineering
|
Site
Development
|
Feedstock
|
Benefit
to
BlueFire
|
1
|
California
#1
|
|
El
Sobrante, Simi, Bradley, Meccca, Orange County
|
|
|
$700
|
Urban
wood & green waste
|
1,2,3,4,5
|
2
|
California
#2
|
|
Colusa,
CA
|
|
|
$200
|
Ag
waste
|
|
3
|
California
#3
|
|
Rio
Linda, CA
|
$1,500
|
$2,000
|
$5,000
|
Ag
waste
|
1,2,3,4,5,6
|
4
|
California
#4
|
|
City
of Industry
|
$10
|
|
|
Post
sorted MSW
|
2
|
5
|
California
#5
|
|
Alameda
Corridor
|
|
|
$35
|
Urban
green waste
|
1
|
6
|
California
#6
|
|
Thermo
Fibergen
|
$32
|
|
|
|
|
7
|
Canada
|
|
Suncor
|
|
|
$20
|
|
|
8
|
Florida
# 1
|
|
Bartow,
FL
|
$40
|
|
$100
|
Sorghum
|
1,2,3,4
|
9
|
Florida
# 2
|
|
Ft.
Myers, FL
|
|
|
$50
|
Urban
green waste
|
1,2,5
|
10
|
Fort
Worth
|
|
Euless,
TX
|
$400
|
$2,000
|
$2,000
|
Urban
green waste
|
1,2,3,4,5,6
|
11
|
Hawaii
|
|
Various
|
$30
|
|
$800
|
Ag
waste
|
1,2,3,5
|
12
|
Illinois
|
|
Robbins,
IL
|
$30
|
|
$300
|
Post
sorted MSW
|
1,2
|
13
|
Minnesota
#1
|
|
Becker,
MN
|
$60
|
$50
|
$150
|
MSW/RDF
|
1,2,3
|
14
|
Minnesota
#2
|
|
Mankato,
MN
|
$60
|
$100
|
$150
|
MSW/RDF
|
1,2,3
|
15
|
Minnesota
#3
|
|
Dakota
County, MN
|
$30
|
$50
|
$200
|
MSW/RDF
|
1,2,3
|
16
|
Minnesota
#4
|
|
Hibbing,
MN
|
$30
|
$50
|
$200
|
Forest
Waste
|
1,2
|
17
|
New
Jersey
|
|
Plumstead
|
|
|
$50
|
Urban
green waste
|
3
|
18
|
Pensylvania
#1
|
|
Philadephia,
PA
|
|
|
$300
|
Urban
green waste
|
1,3
|
19
|
Pensylvania
#2
|
|
|
|
|
|
Urban
green waste
|
1,3
|
|
|
|
|
|
|
|
|
|
|
Subtotal
($1000s)
|
|
|
$2,222
|
$4,250
|
$10,255
|
|
|
|
Grand
Total ($1000s)
|
|
$16,727
|
|
|
|
|
|
|
Benefits
Legend:
|
1
|
Siting
and location
|
2
|
Feedstock
definition
|
3
|
Product
off-take
options
|
4
|
Site
use/ permitting
|
5
|
Infrstructure
requirements
|
6
|
Co-location
with
another
facility
|
EXHIBIT
A
ASSIGNMENT
OF INTERESTS
THIS
ASSIGNMENT OF INTERESTS, dated as of the 1
st
day of March, 2006 by and between ARK ENERGY, INC., a Nevada corporation (the
“Transferor”), and BLUEFIRE ETHANOL, INC., a to be formed Nevada corporation
(the “Transferee”),
W
I T N E
S S E T H
WHEREAS,
pursuant to that certain Asset Transfer and Acquisition Agreement dated as
of
March 1, 2006 (as amended, supplemented or otherwise modified from time to
time,
the “Asset Transfer and Acquisition Agreement”), by and between Transferor and
Transferee, Transferor has agreed to transfer, assign, convey, transfer and
deliver all of its respective rights, title and interest in and to the Interests
(as defined in the Asset Transfer and Acquisition Agreement) to Transferee
and
Transferee has agreed to receive and acquire such Interests from Transferor,
all
as more fully described in the Asset Transfer and Acquisition Agreement;
and
WHEREAS,
pursuant to the Asset Transfer and Acquisition Agreement, Transferor and
Transferee have agreed to enter into this Assignment of Interests pursuant
to
which the Interests will be conveyed to Transferee.
NOW,
THEREFORE, in consideration of the foregoing premises and for other good and
valuable consideration, the receipt and adequacy of which is hereby
acknowledged, the parties hereto agree as follows:
1.
Defined
Terms
.
Capitalized terms which are used but not defined in this Assignment of Interests
shall have the meaning ascribed to such terms in the Asset Transfer and
Acquisition Agreement.
2.
Assignment
.
Subject
to the terms and conditions of the Asset Transfer and Acquisition Agreement,
Transferor does hereby transfer, assign, convey, transfer and deliver to
Transferee all of Transferor’s right, title and interest in and to all of the
Interests. Transferor agrees to execute and deliver such other documents and
instruments requested from time to time by Transferee, including assignments
in
recordable form, and take such other actions as may reasonably be necessary,
proper or advisable, to evidence the assignment of the Interests described
herein.
3.
Appointment
.
Transferor hereby constitutes and appoints Transferee and its successors and
assigns as Transferor’s true and lawful attorney, with full power of
substitution, in Transferor’s name and stead, by, on behalf of and for the
benefit of Transferee, and its successors and assigns, to demand and receive
any
and all of the Interests transferred hereunder and to give receipts and releases
for and in respect of the same, and any part thereof, and from time to time
to
institute and prosecute, at the expense and for the benefit of Transferee,
and
its successors and assigns, any and all proceedings at law, in equity or
otherwise, which Transferee, and its successors or assigns, may deem proper
for
the collection or reduction to possession of any of the Interests transferred
hereunder or for the collection and enforcement of any claim or right of any
kind herby sold, assigned, conveyed, transferred and delivered, and to do all
acts and things in relation to the Interests transferred hereunder which
Transferee, and its successors or assigns, shall deem desirable.
4.
No
Third Party Beneficiaries
.
Nothing
in this instrument, express or implied, is intended or shall be construed to
confer upon, or give to, any person other than Transferee any remedy or claim
under or by reason of this instrument or any agreements, terms, covenants or
conditions hereof, and all the agreements, terms, covenants and conditions
in
this instrument contained shall be for the sole and exclusive benefit of
Transferee and its successors and permitted assigns.
5.
Binding
Effect, Assignment
.
This
Assignment of Interests and all of the provisions hereof shall be binding upon
and shall inure to the benefit of the parties hereto and their respective
successors and permitted assigns.
6.
Governing
Law
.
This
Assignment of Interests shall be governed in all respects by and construed
in
accordance with the laws of the State of California without regard to principles
of conflicts of laws.
7.
Construction
.
This
Assignment of Interests is delivered pursuant to and is subject to the Asset
Transfer and Acquisition Agreement. In the event of any conflict between the
terms of the Asset Transfer and Acquisition Agreement and the terms of this
Assignment of Interests, the terms of the Asset Transfer and Acquisition
Agreement shall prevail.
[Remainder
of page intentionally left blank]
IN
WITNESS WHEREOF, this Assignment of Interests has been duly executed and
delivered by the duly authorized officers of the parties hereto as of the date
first above written.
|
|
|
|
ARK
ENERGY, INC.,
a
Nevada corporation
|
|
|
|
|
By:
|
/s/ Necy
Sumait
|
|
Name:
Necy Sumait
|
|
Title:
Vice President
|
|
|
|
|
BLUEFIRE
ETHANOL, INC.
a
to-be formed Nevada Corporation
|
|
|
|
|
By:
|
/s/ Arnold
Klann
|
|
Name:
Arnold Klann
|
|
Title:
President
|
A-3
Exhibit
21.1
SUBSIDIARIES
OF BLUEFIRE ETHANOL FUELS, INC.
1.
BlueFire Ethanol, Inc., a Nevada corporation, operates as a wholly-owned
subsidiary of BlueFire Ethanol Fuels, Inc.