Organizational Agreement, dated as of June 23, 2006, by and between Xethanol Corporation and Global Energy and Management LLC. ORGANIZATIONAL AGREEMENT
Exhibit
1.1
Organizational
Agreement, dated as of June 23, 2006, by and between Xethanol Corporation and
Global Energy and Management LLC.
This
Organizational Agreement is made as of the 23rd day of June, 2006 by and among
Xethanol Corporation, a Delaware corporation with an address at 1185 Avenue
of
the Xxxxxxxx, 00xx
Xxxxx,
Xxx Xxxx, XX 00000 ("Xethanol"),
Global Energy and Management, LLC, a Connecticut limited liability company
with
an address at 000 Xxxxxxxx Xxxxx, Xxxxxxxxx, XX 00000 (“Global”) and
NewEnglandXethanol, LLC, a Delaware limited liability company with an address
at
000 Xxxxxxxx Xxxxx, Xxxxxxxxx, XX 00000 (the “Company”).
RECITALS:
I. Xethanol
and Global (each, a “Member”
and,
together, the “Members”)
have
formed the Company for the purpose of initiating, developing, investing in
and
managing projects for the production of ethanol in the States of Connecticut,
Massachusetts, Rhode Island, New Hampshire, Vermont and Maine (the “Territory”);
(ii)
engaging in any or all general business activities that may be related or
incidental to, or may appear conducive or expedient for the accomplishment
of,
the foregoing ; and (iii) engaging in any business or activity that might be
engaged in or carried on by a limited liability company formed under the Act.
Each Member will have an interest in the Company as set forth in this Agreement.
II. The
Members have agreed upon the method by which they will manage the ethanol
projects to be engaged in by the Company and upon certain financial obligations
that they will have to each other and the Company. They wish to set forth their
understandings and agreement in this Agreement.
NOW,
THEREFORE, in order to evidence their mutual agreements and understandings
concerning the subject matter hereof, the parties hereto agree as
follows:
1. Organization
of the Company.
1.1 Organization
and Initial Ownership Interests.
On the
date hereof, the parties will execute the NewEnglandXethanol Operating Agreement
(the “Operating
Agreement”)
that
is attached to this Agreement as Exhibit A and will take or cause to be taken
all such further action as may be necessary or proper to effect the existence
of
the Company under the laws of the State of Delaware. Pursuant to the Operating
Agreement, Xethanol will own 5 Units of Interest as a Class A Member in the
Company and Global will own 5 Units of Interest as a Class B Member in the
Company. In consideration for such Interests,
1.1.1 Global
will contribute the sum of $1,500,000 to the capital of the Company. Such sum
will be payable in three installments. The first installment of $250,000 will
be
payable concurrently with the execution of this Agreement and the Operating
Agreement (the “Effective
Date”).
The
second installment of $250,000 will be payable ninety (90) days from the
Effective Date. The third installment of $1,000,000 will be payable upon on
the
date on which the construction of the first Facility (as hereinafter defined)
is
approved by the Members.
1.1.2 Xethanol
will grant the Company and each Special LLC (as hereinafter defined) a
non-exclusive license to use (without the right to sublicense) in the Territory
all of its intellectual property that is useful in developing or operating
Facilities including, but not limited to, patents and know-how relating to
ethanol production and the engineering of biorefineries for ethanol production,
feedstock analysis and procurement, plant location, strategic alliances,
customers, corporate branding, plant management, recruitment and training.
Xethanol will provide such information to the Company and to each Special LLC
upon request, and will furnish them with reasonable assistance to use such
information for the purposes of development and operation of the Facility being
developed by the relevant Special LLC. All of such information shall be deemed
to be, and shall be treated by Global, the Company and each Special LLC as,
Confidential Information in accordance with the provisions of Section 5.1 of
this Agreement.
2. Project
Management.
The
Company, with the assistance of Global and Xethanol, will be responsible for
site selection and acquisition, the development of facilities for the production
of ethanol and the management of those facilities, in accordance with the
following:
2.1 The
facilities which the Company will develop pursuant to this agreement will be
biorefineries for the production of ethanol, each having an annual production
capacity of 40,000,000 barrels of ethanol per year (each, a “Facility”).
2.2 The
Company and Global will identify sites within the Territory for the proposed
location of Facilities. Upon identification of each site, the Company will
so
notify the Members and, upon approval of such site by the Members, the Company
and Global will commence negotiation for the acquisition or lease of such
site.
2.3 Upon
identification of a site for a Facility, the Company and Global shall cause
a
Bankable
Feasibility Study with respect to such facility and its operation, to determine
whether or not such Facility can support a stand-alone capital structure (each,
a “Study”). Among other things, each Study will set forth the risks and returns
applicable to each Facility, the terms and conditions for the financing of
such
facility and a preliminary analysis of available feedstock, pricing and
quantity. The Study will include financial modeling illustrating total required
capital investment for the Facility and proposed financing terms, operating
cash
flow scenarios, debt servicing (with coverages) and returns on membership
interests.
2.4 If
the
Company and Global are successful in procuring a site, the Study applicable
to
such site is acceptable to both Global and Xethanol and the Company has been
able to procure financing for the construction and operation of the applicable
Facility that is acceptable to both Global and Xethanol, then the Company will
form a single-purpose limited liability company (a “Special
LLC”),
of
which the Company will be the sole Member, which will (a) acquire or lease
that
site, (b) conduct such environmental and other tests as are required, (c) engage
engineers, architects and other professional advisors as may be necessary for
the development of a Facility on such site, (d) enter into contracts for the
construction of, and effect the construction of, such Facility and (e) operate
such Facility, directly or under contract with third parties.
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2.5 The
Company will, and Global and Xethanol will assist the Company to, raise
investment capital from third parties for purposes of funding the development
and operation of each Facility. Xethanol will have the right, but not the
obligation, to invest in any or all of such Special LLCs, on the same terms
as
are offered to third party investors. Such investment may be made, at the option
of Xethanol, in either the applicable Special LLC or the Company, in which
latter event the percentage interest to be obtained by Xethanol in the Company
shall be agreed upon by Global and Xethanol or, in the absence of such
agreement, determined by arbitration held before a single arbitrator sitting
in
New York, NY, and appointed and acting in accordance with the commercial
arbitration rules of the American Arbitration Association then in
effect.
2.6 Subject
to obtaining necessary approvals from Xethanol as the Class A Member of the
Company, Global shall cause the commencement of construction (or, in the case
of
conversion of an existing facility to become a Facility, the commencement of
such conversion) of at least one (1) Facility during 2006 and shall cause the
commencement of construction (or, in the case of conversion of an existing
facility to become a Facility, the commencement of such conversion) of at least
one (1) additional Facility during 2007.
2.7 Xxx
X.
Tyrol, a Member of Global (“Tyrol”),
or,
if Tyrol is unable to serve, Global or another person designated by Global
and
reasonably acceptable to Xethanol, will be the Manager of each Special LLC;
provided, however, that such Manager, will not have the right without the
consent of the Members to:
2.7.1 lease,
license or purchase any material assets;
2.7.2 sell,
lease, license or make any other disposition of any material assets of the
Special LLC, other than in the ordinary course of its business;
2.7.3 borrow
money which is not for use in the ordinary course of business of the Special
LLC;
2.7.4 make
any
loan on behalf of the Special LLC, or advance credit on behalf of the Special
LLC (other than in the ordinary course of its business), or authorize the
guarantee by the Special LLC of any obligation of any third party;
or
2.7.5 issue
any
additional Membership Interests in the Special LLC, or the right or option
to
acquire any such interests, or any security convertible into such interests,
other than (a) to employees, consultants and others providing services to the
Special LLC, pursuant to plans or other arrangements approved by the
Member.
2.7.6 Confess
a
judgment against the Special LLC, or the consent to the entry of any such
judgment;
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2.7.7 on
behalf
of the Special LLC, enter into any transaction or agreement of any nature,
or
modifying any agreement, with any person or firm which is an Affiliate of
Global
2.8 Global
will provide the Company and each Special LLC with the services set forth on
Schedule A to this Agreement.
2.9 The
Company will compensate Global and Xethanol for the services rendered pursuant
to this Section 2 (other than, in the case of Xethanol, Sections 2.6 and 2.7)
by
payment to them of the amounts set forth in Sections 3.2 and 3.2, respectively.
The Company will provide Global with such office space and secretarial and
administrative assistance as he shall reasonably require in rendering his
services as required hereunder.
3 Financial
Obligations.
3.1 In
consideration of the services to be rendered by Global as provided in Section
2.4., the Company will cause each Special LLC to pay Global a management fee
as
follows:
3.1.1 Commencing
on the date that such Special LLC acquires title or enters into a long-tem
lease
to the property on which a Facility is to be built and ending on the earlier
of
(a) the date on which the applicable Facility first produces ethanol in
commercial quantities or (b) the Company elects to discontinue development
of
that Facility, a monthly fee of $15,000 per month, which fee shall be payable
on
the tenth day of each month during the period.
3.1.2 Commencing
on the date that such Special LLC first produces ethanol in commercial
quantities and thereafter until the first calendar month in which the operating
cash flow of such Special LLC is positive, a monthly fee of $15,000 per month,
which fee shall be payable on the tenth day of each month during the
period.
3.1.3 Commencing
with the first month following the first calendar month in which the operating
cash flow of such Special LLC is positive, a monthly fee equal to the greater
of
(s) $15,000 or (b) the sum of (x) 3% of the gross revenues of the applicable
Facility and (y) the net income (determined in accordance with generally
accepted accounting principles consistently applied) of such Special LLC with
respect to such month, which fee shall be payable on the tenth day of each
month
during the period.
3.2 In
consideration of the services to be rendered by Global in accordance with
Section 2.1, commencing on the Effective Date, the Company will pay Global
the
sum of $15,000 per month, plus expenses reasonably incurred by Global in
rendering such services.
3.3 In
consideration of the services to be rendered by Xethanol in accordance with
Sections 2.1 through 2.5, inclusive, commencing on the date on which each
Project is approved by the Company and ending on the date on which the Plant
constructed as part of such Project first produces ethanol for commercial sale,
the Company will pay Xethanol the sum of $10,000 per month with respect to
each
such Project.
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3.3.1 In
consideration of the license granted by Xethanol in Section 2.5, the Company
and
each Special LLC shall, jointly and severally, pay Xethanol the amounts set
forth Section 5.2.4 of the Operating Agreement.
4 Equity
Interests.
4.1 Concurrently
with the execution of this Agreement, Xethanol shall issue Global warrants
to
purchase 20,000 shares of Xethanol’s Common Stock, par value $.001 per share.
Such warrants shall be identical in form to the Class B Warrants issued to
certain investors and attached as an exhibit of Xethanol’s form 8-K filed with
the Securities and Exchange Commission on April 7, 2006, except
that:
4.1.1 Such
warrants shall have an exercise price of $6.85 per share;
4.1.2 Such
warrants shall be exercisable for a 3-year term commencing on the first
anniversary of the date of this Agreement; provided, however, that such warrants
shall become exercisable immediately upon the occurrence of a Change of Control
Event, as defined in Section 4.2.
Subject
to (a) compliance with applicable securities laws and regulations and (b) the
consent of Xethanol, which consent shall not e unreasonably withheld, Global
may
distribute (or direct that Xethanol issue such warrants directly to) Global’s
management, key advisors and directors.
Xethanol
shall use reasonable efforts to include the shares underlying such warrants
in
any registration statement filed with the Securities and Exchange Commission,
subject to (w) Global or the then holders of such warrants complying with such
reasonable and customary requirements as Xethanol may request, including the
providing of information and the entering into of customary indemnification
agreements, (x) Global or the then holders of such warrants complying with
such
reasonable and customary requirements as any underwriter with respect to such
registration may request, (y) cutbacks or limitations imposed by other holders
of securities to be included in such registration statement and (z) or
limitations imposed by any underwriter of the securities to be included in
such
registration statement.
4.2 Effective
on and after the occurrence of a Change of Control Event with respect to
Xethanol, Global shall have the option (the “Change
of Control Right”),
to
require Xethanol to purchase the interest of Global in the Company in exchange
for shares of the Common Stock of Xethanol. Global shall exercise its Change
of
Control Right, if at all, by giving Xethanol written notice of its election
to
do so within ten (10) days of the date the applicable Change of Control Event
becomes effective. If Global shall exercise his Change of Control Right,
Xethanol shall issue and deliver to Global as consideration for entire interest
of Global in the Company, such number of shares of Xethanol Common Stock as
Xethanol and Global may agree or, if no such agreement is reached within thirty
(30) days of written notice from Global to Xethanol that it is exercising its
Change of Control Right, such number of shares as is equal to (a) the value
of
Global’s interest in the Company, as determined by an investment banker mutually
agreeable to Global and Xethanol, divided by (b) the average closing price
of
Xethanol Common stock for the 15 days preceding the date on which the valuation
of Global’s interest in the Company is received from such investment banker,
multiplied by (c) 0.95. For purposes of this Section 4.1, a Change of Control
Event shall mean the approval by the stockholders of Xethanol, and the
completion of the transaction resulting from such approval, of (A) the sale
or
other disposition of all or substantially all the assets of the Company or
(B) a
complete liquidation or dissolution of the Company; or the acquisition by any
entity or individual of all or substantially all of the capital stock of the
Company, other than in connection with a corporate reorganization of
Xethanol.
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4.3 Effective
on and after the first anniversary of the date of this Agreement, Global shall
have the option (the “Put
Right”),
to
require Xethanol to purchase the interest of Global in the Company in exchange
for shares of the Common Stock of Xethanol. Global shall exercise its Put Right,
if at all, by giving Xethanol written notice of its election to do so. If Global
shall exercise its Put Right, Xethanol shall issue and deliver to Global as
consideration for entire interest of Global in the Company, such number of
shares of Xethanol Common Stock as Xethanol and Global may agree or, if no
such
agreement is reached within thirty (30) days of written notice from Global
to
Xethanol that it is exercising its Change of Control Right, such number of
shares as is equal to (a) the value of Global’s interest in the Company, as
determined by an investment banker mutually agreeable to Global and Xethanol,
divided by (b) ninety per cent (90%) of the average closing price of Xethanol
Common stock for the 15 days preceding the date on which the valuation of
Global’s interest in the Company is received from such investment banker.
5 Miscellaneous.
5.1 Services
of Global. Global shall fulfill all of its obligations contained in this
Agreement by providing the services of Tyrol to the extent necessary to fulfill
such obligations, without cost or expense to the Company other than the
compensation to be paid to Global as provided herein.
5.2 Confidentiality.
All
information received by any party with respect to the business and affairs
of
the Company or any Special LLC shall be considered confidential and shall not
be
utilized by any other party for its advantage or disclosed to others to the
detriment of such party; provided, however, that this sentence is not intended
to and shall not prevent any disclosure of information relating to the Company
or any Special LLC to the professional advisors or agents of any party nor
to
prevent any disclosure to the extent required by law, provided that they are
subject to obligations with respect to the confidentiality and use of such
information that are the same as contained in this Section 5.1. Confidential
information shall be deemed to include all information disclosed by Xethanol
pursuant to the provisions of Section 2.8.
5.3 Expenses.
Each
party hereto shall pay his, her or its own expenses in connection with the
preparation of this Agreement and the consummation of the transactions
contemplated herein.
5.4 Notices.
All
notices, requests, demands or other communi-cations required or authorized
or
contemplated to be given under this Agreement shall be in writing and shall
be
deemed to have been duly given if hand delivered or sent by certified or
registered mail, postage prepaid, and addressed to a party at its address as
first set froth above, or at such other address as any party may from time
to
time furnish to the other party by a notice given in accordance with the
provisions of this Section. All notices shall be deemed given (i) two business
days after deposit into the U.S. Mail, or (ii) when personally delivered in
the
manner provided in this Section.
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5.5 Counterparts.
This
Agreement may be executed simultaneously in two or more counterparts, each
of
which shall be deemed an original, but all of which together shall constitute
one and the same Agreement.
5.6 Assignment.
This
Agreement may not be assigned by any party without the prior written consent
of
all of the parties hereto; provided that Associates may assign this Agreement
to
any entity which is controlled by or is under common control with it, without
consent. Any attempt to assign this Agreement without the required consent
shall
be void. This Agreement shall be binding upon and inure to the benefit of the
parties named herein and their respective heirs, successors and
assigns.
5.7 Entire
Agreement.
This
Agreement, together with the Exhibits hereto, contains the entire understanding
between the parties hereto concerning the subject matter hereof and may not
be
changed, modified, altered or amended except by an agree-ment in writing
executed by the parties hereto.
5.8 Amendments.
Any
change, modification, alteration or amendment shall be effective only in the
specific instance for the specific purpose for which given. Any waiver by either
party of any of its rights under this Agreement or of any breach of this
Agreement shall not constitute a waiver of any other rights or of any other
future breach.
5.9 Applicable
Law.
This
Agreement shall be governed by, construed and enforced in accordance with the
internal laws of the State of New York for contracts to be performed wholly
within the State of New York, without reference to conflict of law
principles.
5.10 Jurisdiction
and Venue.
In the
event that any legal proceedings are commenced in any court with respect to
any
matter arising under this Agreement, the parties agree that:
5.10.1 The
courts of the State of New York and/or the United States Federal Courts located
in the State of New York shall have exclusive jurisdiction over each of the
parties hereto and over the subject matter of any such proceedings;
and
5.10.2 the
venue
of any such action shall be in New York County, New York and/or the United
States District Court for the Southern District of New York.
5.11 Headings.
The
headings contained in this Agreement are for reference purposes only and shall
not affect in any way the meaning or interpretation of the terms and conditions
contained in this Agreement.
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IN
WITNESS WHEREOF, the parties hereto have duly executed this Agreement on the
day
and year first above written.
|
Xethanol
Corporation
|
Global
Energy and Management, LLC
|
|
By:/s/
Xxxxxxxxxxx X’Xxxxxx-Xxxxxx
|
By:
/s/
Xxx X. Xxxxx
|
|
Xxxxxxxxxxx
X’Xxxxxx-Xxxxxx
|
Xxx
X. Xxxxx
|
|
CEO
|
President
and CEO
|
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Schedule
A
Services
to be Provided by Global
1. The
selection, employment, promotion, discharge and supervision of the executive
staff and through the executive staff, the hiring, promotion, discharge, and
work of all other operating and service employees performing services on behalf
of each Special LLC and relating to each applicable Special LLC. All employees
shall be on the payroll of the applicable Special LLC. The decision in regard
to
any change or replacement of employees shall be at the sole discretion of
Global.
2. The
establishment of all prices and rate schedules for the products produced by
the
applicable Special LLC, and the negotiation and entering into of all contracts
for the sale of its products by the applicable Special LLC.
3. The
negotiation and arranging of contract for the acquisition of feedstock,
utilities and other goods and services required for the operation of the
applicable Facility, and the monitoring, supervision of the performance of
third
parties under and enforcement of such agreements.
4. Applying
for, obtaining, and maintaining in the name of the applicable Special LLC all
licenses and permits required of in connection with the operation of the
applicable Facility. The applicable Special LLC shall execute and deliver any
and all applications and other documents necessary therefor and to cooperate
to
the fullest extent possible with Global in the performance of these
obligations.
5. The
submission to the Company for its approval of an annual budget of operations
thirty (30) days before the commencement of each fiscal year. Global may deviate
from such budget if in its reasonable judgment a deviation is necessary or
desirable for the efficient operation of the Facility, subject to the approval
of the Company, unless in the judgment of Global, the expense in question must
be incurred as an emergency expense.
6. The
implementation and maintenance of suitable accounting and internal control
systems.
7.
Performing all acts reasonably necessary in connection with the operation of
the
applicable Facility in an efficient and proper manner.
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