Exhibit 10.3

 

SECURITIES EXCHANGE AND NOTE PURCHASE AGREEMENT

 

This Debt Exchange Agreement and Release (this “Agreement”) is made and entered
into as of __, 2018 (the “Effective Date”), by and among BioHiTech Global, Inc.,
a Delaware corporation (“BHTG”), BioHiTech America LLC, a Delaware limited
liability company (“BHTA”) wholly owned by BHTG (BHTG and BHTA collectively and
individually referred to as the “Company”) and Frank E. Celli (the “Creditor”).

 

BACKGROUND

 

WHEREAS, the Company is indebted to the Creditor in the amounts as of the dates
set forth on the attached Exhibit A hereto (the “Obligations”);

 

WHEREAS, the Company, together with certain of its Subsidiaries, intends to
enter into a Note Purchase and Security Agreement (the “Purchase Agreement”)
with Michaelson Capital Special Finance Fund II, L.P. (the “Lender”) whereby,
pursuant to the terms of the Purchase Agreement, the Lender is requiring the
Creditor reduce any and all indebtedness from the Company to Two Million Dollars
($2,000,000) (the “Debt Redemption”);

 

WHEREAS, in order to effectuate the Debt Reduction, the Company has requested
the Creditor exchange a portion of the Obligations in the amount of Four Million
Dollars ($4,000,000) (the “Debt”) in consideration for 400,000 shares (the
“Exchange Shares”) of the Company’s Series C Convertible Preferred Stock, par
value $0.0001 per share (the “Preferred Stock”), which is convertible into the
BHTG common stock, par value $0.0001 per share (the “Common Stock”) and warrants
(the “Warrants”) as fully described in the Common Stock Purchase Warrant, to
acquire up to 50% of the number of shares of Common Stock into which the
Preferred Stock is convertible (the “Warrants Shares”). The Exchange Shares,
Preferred Stock and Common Stock, Warrants, Warrant Shares and the “Note” (as
that term is defined herein) are collectively referred to herein as the
“Securities”;

 

WHEREAS, in addition to the Securities, the Company shall issue and sell to
Creditor a promissory note in the principal amount of Two Million Dollars
($2,000,000) (the “Note”).

 

NOW THEREFORE, for and in consideration of the mutual covenants and agreements
contained herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:

 

1. Securities Exchange, Purchase and Sale.

 

(a) Exchange of Debt. Subject to the terms and conditions herein, the Creditor
agrees to accept the Exchange Shares and the Warrants in the form attached
hereto as Exhibit A, in full satisfaction of the Company’s obligation to repay
the Debt. The Company agrees to issue the Exchange Shares and Warrants to the
Creditor promptly following the execution of this Agreement.

 

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(b) Issuance of Note. Subject to the terms and conditions herein, the Company
hereby agrees to issue to Creditor, and the Creditor hereby agrees to receive
from the Company the Note in the form of Exhibit B attached hereto as a
modification of the unpaid portion of the obligation which remains unpaid and is
not the Debt being exchanged for the Securities as set forth herein.

 

(c) Exempt Issuance. The Company and the Creditor are executing and delivering
this Agreement in accordance with and in reliance upon the exemption from
securities registration afforded by Section 4(2) of the Securities Act of 1933,
as amended, and the rules and regulations promulgated thereunder (the
“Securities Act”), including Regulation D promulgated thereunder, and/or upon
such other exemption from the registration requirements of the Securities Act as
may be available with respect to any or all of the investments to be made
hereunder.

 

2. Representations of Creditor. Creditor represents and warrants to the Company:

 

(a) That the Debt is a valid obligation, due and payable to the Creditor as of
the Effective Date.

 

(b) The Creditor is an individual person or persons or is duly incorporated,
organized or otherwise formed, validly existing and in good standing under the
laws of the jurisdiction in which it is incorporated, organized or otherwise
formed.

 

(c) The Creditor has the requisite power and authority to enter into and to
perform its obligations under this Agreement and to consummate the transactions
contemplated hereby in accordance with the terms hereof and the execution,
delivery and performance of this Agreement by the Creditor and no further
consent or authorization of the Creditor, its Board of Directors or its
shareholders, members or other interest holders is required.

 

(d) This Agreement has been duly executed by the Creditor and constitutes a
legal, valid and binding obligation of the Creditor enforceable against the
Creditor in accordance with its terms, subject to the effect of any applicable
bankruptcy, insolvency, reorganization or moratorium or similar laws affecting
the rights of creditors generally and the application of general principles of
equity.

 

(e) The Creditor is not required to give any notice to, make any filing,
application or registration with, obtain any authorization, consent, order or
approval of or obtain any waiver from any person or entity in order to execute
and deliver this Agreement or to consummate the transactions contemplated
hereby.

 

(f) Neither the execution and the delivery by the Creditor of this Agreement,
nor the consummation by the Creditor of the transactions contemplated hereby,
will (a) violate any law, rule, injunction, or judgment of any governmental
agency or court to which the Creditor is subject or any provision of its
charter, bylaws, trust agreement, or other governing documents or (b) conflict
with, result in a breach of, or constitute a default under, any agreement,
contract, lease, license, instrument, or other arrangement to which the Creditor
is a party or by which the Creditor is bound or to which any of its assets is
subject.

 

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(g) The Creditor is acquiring the Exchange Shares for its own account and not
with a present view toward the public sale or distribution thereof.

 

(h) The Creditor is an “accredited investor” as defined in Regulation D under
the Securities Act of 1933, as amended (the “Securities Act”). The Creditor
hereby represents and warrants that, either by reason of the Creditor’s business
or financial experience or the business or financial experience of the
Creditor’s advisors (including, but not limited to, a “purchaser representative”
(as defined in Rule 501(h) promulgated under Regulation D), attorney and/or an
accountant each as engaged by the Creditor at its sole risk and expense) the
Creditor (a) has the capacity to protect its own interests in connection with
the transaction contemplated hereby and/or (b) the Creditor has prior investment
experience, including investments in securities of privately-held companies or
companies whose securities are not listed, registered, quoted and/or traded on a
national securities exchange, to the extent necessary, the Creditor has
retained, at its sole risk and expense, and relied upon appropriate professional
advice regarding the investment, tax and legal merits and consequences of this
Agreement and the purchase of the Debentures hereunder; if an entity, the
Creditor was not formed for the sole purpose of purchasing the Debentures.

 

(i) The Creditor agrees, acknowledges and understands that the Creditor and its
advisors, if any, have been furnished with all materials relating to the
business, finances and operations of the Company that have been requested by the
Creditor or its advisors. The Creditor represents and warrants that the Creditor
and its advisors, if any, have been afforded the opportunity to ask questions of
the Company. The Creditor agrees, acknowledges and understands that neither such
inquiries nor any other due diligence investigation conducted by the Creditor or
any of its advisors or representatives modify, amend or affect the Creditor’s
right to rely on the Company’s representations and warranties contained herein.

 

(j) The Creditor agrees, acknowledges and understands that:

 

(i) the Securities have not been and, except as set forth herein, are not being
registered under the Securities Act or any applicable state securities or “blue
sky” laws. Consequently, the Creditor may have to bear the risk of holding the
Securities for an indefinite period of time because the Securities may not be
transferred unless: (i) the resale of the Securities is registered pursuant to
an effective registration statement under the Securities Act; (ii) the Creditor
has delivered to the Company an opinion of counsel reasonably acceptable to the
Company and its counsel (in form, substance and scope customary for opinions of
counsel in comparable transactions) to the effect that the Securities to be sold
or transferred may be sold or transferred pursuant to an exemption from such
registration; or (iii) the Securities are sold or transferred pursuant to Rule
144 promulgated under the Securities Act (“Rule 144”);

 

(ii) any sale of the Securities made in reliance on Rule 144 may be made only in
accordance with the terms of Rule 144 and, if Rule 144 is not applicable, any
resale of the Securities under circumstances in which the seller (or the person
through whom the sale is made) may be deemed to be an underwriter (as that term
is defined in the Securities Act) may require compliance with some other
exemption under the Securities Act or the rules and regulations of the
Securities and Exchange Commission (the “Commission”) promulgated thereunder;
and

 

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(iii) except as set forth in herein, neither the Company nor any other person is
under any obligation to register the Securities under the Securities Act or any
state securities or “blue sky” laws or to comply with the terms and conditions
of any exemption thereunder.

 

(k) The Creditor agrees, acknowledges and understands that the Securities will
bear restrictive legends in substantially the following form (and a
stop-transfer order may be placed against transfer of the certificates for such
Securities):

 

THESE SHARES HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE
COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN
EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
“SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO
AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH
APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO
THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY
ACCEPTABLE TO THE COMPANY.

 

(l) The Creditor has not engaged, consented to or authorized any broker, finder
or intermediary to act on its behalf, directly or indirectly, as a broker,
finder or intermediary in connection with the transactions contemplated by this
Agreement. The Creditor hereby agrees to indemnify and hold harmless the Company
from and against all fees, commissions or other payments owing to any such
person or firm acting on behalf of the Creditor hereunder.

 

3. Representations by BHTG and BHTA.

 

(a) Each of BHTG and BHTA is an entity duly incorporated or otherwise organized,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation, with the requisite power and authority to own and use its
properties and assets and to carry on its business as currently conducted.
Neither BHTG or BHTA is in violation or default of any of the provisions of its
respective certificate or articles of incorporation, bylaws or other
organizational or charter documents. Each of BHTG and BHTA is duly qualified to
conduct business and is in good standing as a foreign corporation or other
entity in each jurisdiction in which the nature of the business conducted or
property owned by it makes such qualification necessary, except where the
failure to be so qualified or in good standing, as the case may be, does not
have and would not reasonably be expected to result in (i) a material adverse
effect on the legality, validity or enforceability of any material agreement to
which BHTG or BHTA is a party (a “Material Agreement”), (ii) a material adverse
effect on the results of operations, assets, business, or condition (financial
or otherwise) of BHTG or BHTA, or (iii) a material adverse effect on ability of
BHTG or BHTA to perform in any material respect on a timely basis its
Obligations under any Material Agreement (any of (i), (ii), or (iii), a
“Material Adverse Effect”) and no Proceeding has been instituted in any such
jurisdiction revoking, limiting or curtailing or seeking to revoke, limit or
curtail such power and authority or qualification.

 

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(b) The Company has the requisite corporate power and authority to enter into
and to consummate the transactions contemplated by this Agreement and otherwise
to carry out its Obligations hereunder. The execution and delivery of each of
the Agreement by BHTG and BHTA and the consummation by it of the transactions
contemplated hereby have been duly authorized by all necessary action on the
part of BHTG and BHTA and no further action is required by BHTG and BHTA, the
Board of Directors the Managing Members or the equity holders of BHTG or BHTA in
connection therewith. This Agreement has been (or upon delivery will have been)
duly executed by BHTG and BHTA and, when delivered in accordance with the terms
hereof and thereof, will constitute the valid and binding obligation of the
Company enforceable against BHTG and BHTA in accordance with its terms, except
(i) as limited by general equitable principles and applicable bankruptcy,
insolvency, reorganization, moratorium and other laws of general application
affecting enforcement of creditors’ rights generally, (ii) as limited by laws
relating to the availability of specific performance, injunctive relief or other
equitable remedies and (iii) insofar as indemnification and contribution
provisions may be limited by applicable law.

 

(c) The execution, delivery and performance of the Agreement by BHTG and BHTA
and the consummation by BHTG and BHTA of the other transactions contemplated
hereby do not and will not: (i) conflict with or violate any provision of the
certificate or articles of incorporation, bylaws or other organizational or
charter documents, of BHTG or BHTA or (ii) conflict with or result in a
violation of any law, rule, regulation, order, judgment, injunction, decree or
other restriction of any court or governmental authority to which the Company is
subject (including federal and state securities laws and regulations), or by
which any property or asset of the Company is bound or affected.

 

(d) Neither BHTG or BHTA is required to obtain any consent, waiver,
authorization or order of, give any notice to, or make any filing or
registration with, any court or other federal, state, local or other
governmental authority in connection with the execution, delivery and
performance by BHTG or BHTA of this Agreement.

 

(e) The Securities acquired under this Agreement, will be duly authorized and,
upon issuance in accordance with the terms of this Agreement, will be validly
issued, fully paid and nonassessable, free and clear of all liens imposed by
BHTG other than restrictions on transfer provided for herein.

 

4. Releases by Creditor. Except as set forth herein, the Creditor fully and
forever releases, discharges and acquits BHTG and BHTA and its respective
officers, directors, stockholders, employees, predecessors and successors in
interest, assigns, attorneys and agents of each of the foregoing from and
against any and all claims, demands, obligations, duties, liabilities, damages,
expenses, indebtedness, debts, breaches of contract or warranty, duty or
relationship, acts, omissions, or liability of any type, kind, nature,
description or character whatsoever, whether now known or unknown, whether
liquidated or unliquidated, which arise out of or in connection with the Debt or
any agreement or other arrangement governing or related thereto.

 

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5. Entire Agreement. This Agreement contains the entire agreement of the parties
hereto and supersedes all prior agreements and understandings, oral or written
between the parties hereto. No modification or amendment of any of the terms,
conditions or provisions herein may be made otherwise than by written agreement
signed by the parties hereto.

 

6. Miscellaneous.

 

(a) Governing Law; Jurisdiction.  This Agreement will be governed by and
interpreted in accordance with the laws of the State of New York without regard
to the principles of conflict of laws.  All questions concerning the
construction, validity, enforcement and interpretation of this Agreement shall
be governed by and construed and enforced in accordance with the internal laws
of the State of New York, without regard to the principles of conflict of laws
thereof.  Each party agrees that all legal proceedings concerning the
interpretation, enforcement and defense of the transactions contemplated this
Agreement shall be commenced in the state and federal courts sitting in the City
of New York, County of New York (the “New York Courts”).  Each party hereto
hereby irrevocably submits to the exclusive jurisdiction of the New York Courts
for the adjudication of any dispute hereunder or in connection herewith or with
any transaction contemplated hereby or discussed herein (including with respect
to the enforcement of any of the Transaction Documents), and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of such New York Courts,
or such New York Courts are improper or inconvenient venue for such proceeding. 
Each party hereby irrevocably waives personal service of process and consents to
process being served in any such suit, action or proceeding by mailing a copy
thereof via registered or certified mail or overnight delivery (with evidence of
delivery) to such party and agrees that such service shall constitute good and
sufficient service of process and notice thereof.  Nothing contained herein
shall be deemed to limit in any way any right to serve process in any other
manner permitted by applicable law. Each party hereto hereby irrevocably waives,
to the fullest extent permitted by applicable law, any and all right to trial by
jury in any legal proceeding arising out of or relating to this Agreement.

 

(b) Counterparts; Electronic Signatures.  This Agreement may be executed in two
or more counterparts, all of which are considered one and the same agreement and
will become effective when counterparts have been signed by each party and
delivered to the other parties.  This Agreement, once executed by a party, may
be delivered to the other parties hereto by (e.g. electronic submission,
facsimile transmission or e-mail of a copy of this Agreement bearing the
signature of the party so delivering this Agreement).

 

(c) Headings.  The headings of this Agreement are for convenience of reference
only, are not part of this Agreement and do not affect its interpretation.

 

(d) Severability. If any term, provision, covenant or restriction of this
Agreement is held by a court of competent jurisdiction to be invalid, illegal,
void or unenforceable, the remainder of the terms, provisions, covenants and
restrictions set forth herein shall remain in full force and effect and shall in
no way be affected, impaired or invalidated, and the parties hereto shall use
their commercially reasonable efforts to find and employ an alternative means to
achieve the same or substantially the same result as that contemplated by such
term, provision, covenant or restriction. It is hereby stipulated and declared
to be the intention of the parties that they would have executed the remaining
terms, provisions, covenants and restrictions without including any of such that
may be hereafter declared invalid, illegal, void or unenforceable.

 

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(e) Remedies.  In addition to being entitled to exercise all rights provided
herein or granted by law, including recovery of damages, each of the Subscriber
and the Company will be entitled to specific performance under this Agreement. 
The parties agree that monetary damages may not be adequate compensation for any
loss incurred by reason of any breach of obligations contained in this Agreement
and hereby agree to waive and not to assert in any action for specific
performance of any such obligation the defense that a remedy at law would be
adequate.

 

(f) Entire Agreement; Amendments.  This Agreement (including all schedules and
exhibits hereto) constitutes the entire agreement among the parties hereto with
respect to the subject matter hereof and thereof.  There are no restrictions,
promises, warranties or undertakings, other than those set forth or referred to
herein or therein.  This Agreement supersedes all prior agreements and
understandings among the parties hereto with respect to the subject matter
hereof.  Except as set forth in herein, no provision of this Agreement may be
waived or amended other than by an instrument in writing signed by the party to
be charged with enforcement.

 

(g) Notices. All notices, demands, requests, consents, approvals, and other
communications required or permitted hereunder shall be in writing and, unless
otherwise specified herein, shall be (i) personally served, (ii) deposited in
the mail, registered or certified, return receipt requested, postage prepaid,
(iii) delivered by reputable air courier service with charges prepaid, or (iv)
transmitted by hand delivery, telegram, or facsimile, addressed as set forth
below or to such other address as such party shall have specified most recently
by written notice. Any notice or other communication required or permitted to be
given hereunder shall be deemed effective (a) upon hand delivery or delivery by
facsimile, with accurate confirmation generated by the transmitting facsimile
machine, at the address or number designated below (if delivered on a business
day during normal business hours where such notice is to be received), or the
first business day following such delivery (if delivered other than on a
business day during normal business hours where such notice is to be received)
or (b) on the second business day following the date of mailing by express
courier service, fully prepaid, addressed to such address, or upon actual
receipt of such mailing, whichever shall first occur. The addresses for such
communications shall be:

 

If to Company, to:

 

BioHiTech Global, Inc.

80 Red Schoolhouse Road, Suite 101

Chestnut Ridge, NY 10977

Attention: Brian C. Essman, CFO

Email: bessman@biohitech.com

  

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With a copy by fax only to (which copy shall not constitute notice):

 

Kane Kessler, P.C.

666 Third Avenue

New York, New York 10019

Attn: Peter Campitiello, Esq.

Email: pcampitiello@kanekessler.com

facsimile: 212-245-3009

 

If to Creditor, to:

 

(h) Successors and Assigns.  This Agreement is binding upon and inures to the
benefit of the parties and their successors and assigns.  The Creditor
acknowledges that the Company may assign this Agreement and any rights or
obligations hereunder without the prior written consent of the Creditor and the
Creditor may not assign this Agreement or any rights or obligations hereunder
upon the Closing without the prior written consent of the Company. 

 

(i) Third Party Beneficiaries.  This Agreement is intended for the benefit of
the parties hereto and their respective permitted successors and assigns, and is
not for the benefit of, nor may any provision hereof be enforced by, any other
person.

 

(j) Further Assurances.  Each party will do and perform, or cause to be done and
performed, all such further acts and things, and will execute and deliver all
other agreements, certificates, instruments and documents, as another party may
reasonably request in order to carry out the intent and accomplish the purposes
of this Agreement and the consummation of the transactions contemplated hereby.

 

(k) Waiver.  It is agreed that a waiver by either party of a breach of any
provision of this Agreement shall not operate, or be construed, as a waiver of
any subsequent breach by that same party.

 

(l) Other Documents.  The parties agree to execute and deliver all such further
documents, agreements and instruments and take such other and further action as
may be necessary or appropriate to carry out the purposes and intent of this
Agreement.

 

(m) Waiver of Jury Trial.  In any action, suit or proceeding in any jurisdiction
brought by any party against any other party, the parties each knowingly and
intentionally, to the greatest extent permitted by applicable law, hereby
absolutely, unconditionally, irrevocably and expressly waive forever trial by
jury.

 

The parties have duly executed this Agreement as of the Effective Date.

 

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COMPANY   CREDITOR         BIOHITECH GLOBAL, INC.   FRANK E. CELLI         By:  
        Name: Brian C. Essman       Title: Chief Financial Officer and Treasurer
   

 

BIOHITECH AMERICA, LLC         By:       Name: Brian C. Essman     Title:  Chief
Financial Officer and Treasurer  

 

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EXHIBIT A

 

Creditor  Date of
Debt  Original
 Principal
Amount   Interest  Total
Amount  Frank E. Celli, Fourth Amended and Restated Secured Promissory Note
dated February 1, 2017 with BHTA  Through Effective Date  $4,500,000.00  
Interest shall remain separate and payable, together with monthly compounding
interest rate of 10.25% based on a 360 day year, upon maturity of the Note
following this agreement  $863,212.62* Monetary advances to the Company from
Frank E. Celli  Through Effective Date  $544,477.00   Interest shall remain
separate and payable, together with monthly compounding interest rate of 10.25%
based on a 360 day year, upon maturity of the Note following this agreement 
$146,292.23*

 

*Interest accrued as of December 31, 2017, additional interest accrued from
January 1, 2018 through the Effective Date shall be added to the indicated
balances.

 

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