SECURITIES PURCHASE AGREEMENT
This
Securities Purchase Agreement (this “Agreement”)
is
dated as of September 30, 2008, by and among KL Energy Corporation, a Nevada
corporation (the “Company”),
and
the investors identified on the signature pages hereto (each, an “Investor”
and
collectively, the “Investors”).
WHEREAS,
subject to the terms and conditions set forth in this Agreement and pursuant
to
Section 4(2) of the Securities Act of 1933, as amended (the “Securities
Act”),
Rule 506 promulgated thereunder, and Regulations S under the
Securities Act, the Company desires to issue and sell to the Investors, and
the
Investors, severally and not jointly, desire to purchase from the Company
certain securities of the Company, as more fully described in this
Agreement.
AGREEMENT
NOW,
THEREFORE, IN CONSIDERATION of the mutual covenants contained in this Agreement,
and for other good and valuable consideration the receipt and adequacy of which
are hereby acknowledged, the Company and the Investors agree as
follows:
ARTICLE
1.
DEFINITIONS
1.1. Definitions.
In addition to the terms defined elsewhere in this Agreement, for all
purposes of this Agreement, the following terms shall have the meanings
indicated in this Section 1.1:
“Affiliate”
means
any Person that, directly or indirectly through one or more intermediaries,
controls or is controlled by or is under common control with a Person, as such
terms are used in and construed under Rule 144.
“Business
Day”
means
any day except Saturday, Sunday and any day which is a U.S. federal legal
holiday
“Common
Stock”
means
the common stock of the Company, par value $0.001 per share, and any securities
into which such common stock may hereafter be reclassified or for which it
may
be exchanged as a class.
“Investment
Amount”
means,
with respect to each Investor, the investment amount indicated on such
Investor’s signature page to this Agreement.
“Material
Adverse Effect”
means
any of (i) a material and adverse effect on the legality, validity or
enforceability of this Agreement or the Warrants, (ii) a material and
adverse effect on the results of operations, assets, prospects, business or
condition (financial or otherwise) of the Company and the subsidiaries, taken
as
a whole, or (iii) an adverse impairment to the Company’s ability to perform
on a timely basis any of its obligations under this Agreement or the
Warrants.
“Person”
means an
individual or corporation, partnership, trust, incorporated or unincorporated
association, joint venture, limited liability company, joint stock company,
government (or an agency or subdivision thereof) or other entity of any
kind.
“Trading
Day”
means a
day on which the Common Stock is traded in the over-the-counter market, as
reported by the OTC Bulletin Board (or any similar organization or agency
succeeding to its functions of reporting prices); provided, that in the event
that the Common Stock is not listed or quoted as set forth in the foregoing,
then Trading Day shall mean a Business Day.
“Trading
Market”
means
whichever of the New York Stock Exchange, the American Stock Exchange, the
NASDAQ Global Select Market, the NASDAQ Global Market, the NASDAQ Capital Market
or OTC Bulletin Board on which the Common Stock is listed or quoted for trading
on the date in question.
“Units”
means
collectively the units purchased by the Investors pursuant to this Agreement,
with each Unit consisting of two (2) shares of Common Stock and Warrant for
the
purchase of one (1) share of Common Stock. The Warrant will be immediately
detachable and separately transferable.
“Warrants”
means
collectively the Common Stock purchase warrants, in the form of Exhibit A,
delivered to the Investors pursuant to this Agreement.
ARTICLE
2.
PURCHASE
AND SALE
2.1. Closing.
Subject to the terms and conditions set forth in this Agreement, at the
closing of the purchase and sale of the Units (the “Closing”)
the
Company shall issue and sell to each Investor, and each Investor shall,
severally and not jointly, purchase from the Company, the number of Units set
forth on each respective Investor’s signature page attached hereto, at a per
Unit purchase price of $8.00, in consideration of the Investor’s payment of the
Investment Amount set forth thereon. (All references herein are to United States
Dollars). The Closing shall take place at the offices of The Bank of New York
Mellon Corporation (the “Escrow
Agent”)
on the
Business Day on which all of the conditions set forth in Sections 5.1
and 5.2
hereof
are satisfied, or such other date as the parties may agree (the “Closing
Date”),
or at
such other location and/or time as the parties may agree. The purchase and
sale
of the Units may take place at one or more Closings, and if there are multiple
Closings, then all deliveries and conditions required to be completed on or
before the Closing Date shall refer to the Closing Date for the initial Closing.
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2.2. Closing
Deliveries.
(a)
On
or
prior to the Closing, the Company shall deliver or cause to be delivered to
each
Investor this Agreement duly executed by the Company (the “Company
Deliverables”).
(b) On
or
prior to the Closing Date, each Investor shall deliver or cause to be delivered
the following (the “Investor
Deliverables”):
(i) to
the
Company, this Agreement duly executed by the Investor; and
(ii) to
the
Escrow Agent for deposit and disbursement, such Investor’s Investment Amount, in
United States dollars and in immediately available funds, by wire transfer
to an
account designated in writing by the Company for such purpose.
(c) Within
five (5) Business Days following the Closing Date, the Company shall deliver
or
cause to be delivered the following:
(i) one
or
more stock certificates evidencing the shares of Common Stock (excluding the
Warrant Shares (as defined below)) issued to the Investors as part of the Units
by the Company pursuant to the terms of this Agreement (the “Shares”)
purchased by each Investor, as indicated on each such Investor’s signature page
attached hereto; and
(ii) a
Warrant
registered in the name of each Investor, pursuant to which each such Investor
shall have the right to acquire the number of shares of Common Stock (the
“Warrant
Shares”)
set
forth on such Investor’s signature page attached hereto.
ARTICLE
3.
REPRESENTATIONS
AND WARRANTIES
3.1. Representations
and Warranties of the Company.
Except as set forth under the corresponding section of the disclosure schedules
of the Company delivered by the Company to Investors contemporaneously with
this
Agreement (the “Disclosure
Schedules”),
which
Disclosure Schedules shall be deemed a part hereof and shall be deemed to
qualify any representation or warranty otherwise made herein to the extent
of
such disclosure, the Company hereby makes the following representations and
warranties to each Investor:
(a) Organization
and Qualification.
The
Company is duly incorporated or otherwise organized, validly existing and in
good standing under the laws of the State of Nevada, with the requisite power
and authority to own and use its properties and assets and to carry on its
business as currently conducted. The Company is duly qualified to conduct its
business as presently conducted and is in good standing as a foreign corporation
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, could not, individually
or
in the aggregate, have or reasonably be expected to result in a Material Adverse
Effect.
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(b) Authorization;
Enforcement.
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 this
Agreement and the Warrants by the Company and the consummation by it of the
transactions contemplated hereby have been duly authorized by all necessary
action on the part of the Company and no further action is required by the
Company, its board of directors or its stockholders in connection therewith.
This Agreement and the Warrants have been (or upon delivery will have been)
duly
executed by the Company and, when delivered in accordance with the terms hereof,
will constitute the valid and binding obligation of the Company enforceable
against the Company in accordance with its terms, except as such enforceability
may be limited by applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation or similar laws relating to, or affecting generally the enforcement
of, creditors’ rights and remedies or by other equitable principles of general
application.
(c) No
Conflicts.
The
execution, delivery and performance of this Agreement and the Warrants by the
Company and the consummation by the Company of the transactions contemplated
hereby do not and will not (i) conflict with or violate any provision of
the Company’s articles of incorporation or bylaws, or (ii) conflict with,
or constitute a default under, or give to others any rights of termination,
amendment, acceleration or cancellation of, any agreement, credit facility,
debt
or other instrument or other understanding to which the Company is a party
or by
which any property or asset of the Company is bound or affected, or
(iii) 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, or by which any property or asset of the
Company is bound or affected; except in the case of each of clauses (ii) and
(iii), such as could not, individually or in the aggregate, have or reasonably
be expected to result in a Material Adverse Effect.
(d) Filings,
Consents and Approvals.
The
Company is not 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 or other Person
in
connection with the execution, delivery and performance by the Company of this
Agreement and the Warrants, other than (i) the filing with the Securities
and Exchange Commission (the “SEC”)
of one
or more Registration Statements (as defined herein) in accordance with the
requirements of Section 4.3,
(ii) filings required by state securities laws, (iii) the filing of a
Notice of Sale of Securities on Form D with the SEC under Regulation D
of the Securities Act, (iv) information statement that complies with
Section 14(f) of the Securities Exchange Act of 1934, as amended (the
“Exchange
Act”),
and
Rule 14f-1 thereunder; and (v) a current report on Form 8-K relating
to the transactions contemplated by this Agreement (collectively, the
“Required
Approvals”).
(e) Issuance
of the Securities.
The
Shares have been duly authorized and, when issued and paid for in accordance
with this Agreement, will be duly and validly issued, fully paid and
nonassessable, free and clear of all liens, charges, encumbrances, security
interests, rights of first refusal, rights of participation or other
restrictions of any kind (individually, a “Lien”
and
collectively, the “Liens”)
other
than restrictions on transfer provided for in this Agreement. The Warrant
Shares, when issued in accordance with the terms of this Agreement, will be
validly issued, fully paid and nonassessable, free and clear of all Liens other
than restrictions on transfer provided for in this Agreement and the Warrants.
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(f) Capitalization.
No
Person has any right of first refusal, preemptive right, right of participation,
or any similar right to participate in the transactions contemplated by this
Agreement. There are no outstanding options, warrants, scrip rights to subscribe
to, calls or commitments of any character whatsoever relating to, or securities,
rights or obligations convertible into or exchangeable for, or giving any Person
any right to subscribe for or acquire, any securities of the Company, or
contracts, commitments, understandings or arrangements by which the Company
is
or may become bound to issue additional securities of the Company. The issue
and
sale of the Shares, Warrants and Warrant Shares (collectively, the “Securities”)
will
not, immediately or with the passage of time, obligate the Company to issue
shares of Common Stock or other securities to any Person (other than the
Investors) and will not result in a right of any holder of Company securities
to
adjust the exercise, conversion, exchange or reset price under such securities.
All of the outstanding shares of capital stock of the Company are validly
issued, fully paid and nonassessable, have been issued in compliance with all
federal and state securities laws, and none of such outstanding shares was
issued in violation of any preemptive rights or similar rights to subscribe
for
or purchase securities.
(g) Title
to Assets.
The
Company has good and marketable title to property owned by it that is material
to its business, free and clear of all Liens, except for Liens as do not
materially affect the value of such property and do not materially interfere
with the use made and proposed to be made of such property by the Company.
Any
real property and facilities held under lease by the Company are held by them
under valid, subsisting and enforceable leases of which the Company is in
compliance, except as could not, individually or in the aggregate, have or
reasonably be expected to result in a Material Adverse Effect.
(h) No
Integrated Offering.
Assuming
the accuracy of the Investors’ representations and warranties set forth in
Sections 3.2,
3.3 and 3.4,
neither
the Company, nor any of its Affiliates, nor any Person acting on its or their
behalf has, directly or indirectly, made any offers or sales of any security
or
solicited any offers to buy any security, under circumstances that would cause
this offering of the Securities to be integrated with prior offerings by the
Company for purposes of the Securities Act or any applicable shareholder
approval provisions of any Trading Market on which any of the securities of
the
Company are listed or designated.
(i) No
General Solicitation.
Neither
the Company nor any person acting on behalf of the Company has offered or sold
any of the Securities by any form of general solicitation or general
advertising. The Company has offered the Securities for sale only to the
Investors and certain other “accredited investors” within the meaning of
Rule 501 under the Securities Act.
3.2. Representations
and Warranties of the Investors.
Each Investor hereby, for itself and for no other Investor, represents and
warrants to the Company as follows:
(a) Organization;
Authority.
If an
entity, such Investor is duly organized, validly existing and in good standing
under the laws of the jurisdiction of its organization with the requisite
corporate or partnership 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 this Agreement and the
performance by such Investor of the transactions contemplated herein have been
duly authorized by all necessary corporate or, if such Investor is not a
corporation, such partnership, limited liability company or other applicable
like action, on the part of such Investor. This Agreement has been duly executed
by such Investor, and when delivered by such Investor in accordance with the
terms hereof, will constitute the valid and legally binding obligation of such
Investor, enforceable against it in accordance with its terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar laws relating to, or
affecting generally the enforcement of, creditors’ rights and remedies or by
other equitable principles of general application.
5
(b) Investment
Intent.
Such
Investor is acquiring the Securities as principal for its own account for
investment purposes only and not with a view to or for distributing or reselling
such Securities or any part thereof, without prejudice, however, to such
Investor’s right at all times to sell or otherwise dispose of all or any part of
such Securities in compliance with applicable federal and state securities
laws.
Subject to the immediately preceding sentence, nothing contained herein shall
be
deemed a representation or warranty by such Investor to hold the Securities
for
any period of time. Such Investor is acquiring the Securities hereunder in
the
ordinary course of its business. Such Investor does not have any agreement
or
understanding, directly or indirectly, with any Person to distribute any of
the
Securities.
(c) Investor
Status.
At the
time such Investor was offered the Securities, it was, and at the date hereof
it
is, an “accredited investor” as defined in Rule 501(a) under the Securities
Act. Such Investor is not a registered broker-dealer under Section 15 of
the Exchange Act.
(d) General
Solicitation.
Such
Investor is not purchasing the Securities as a result of any advertisement,
article, notice or other communication regarding the Securities published in
any
newspaper, magazine or similar media or broadcast over television or radio
or
presented at any seminar or any other general solicitation or general
advertisement.
(e) Access
to Information.
Such
Investor acknowledges that it has been afforded (i) the opportunity to ask
such questions as it has deemed necessary of, and to receive answers from,
representatives of the Company concerning the terms and conditions of the
offering of the Securities and the merits and risks of investing in the
Securities; (ii) access to information about the Company and the
subsidiaries and their respective financial condition, results of operations,
business, properties, management and prospects sufficient to enable it to
evaluate its investment; and (iii) the opportunity to obtain such
additional information that the Company possesses or can acquire without
unreasonable effort or expense that is necessary to make an informed investment
decision with respect to the investment.
(f) No
Conflicts.
The
execution, delivery and performance by such Investor of this Agreement and
the
consummation by such Investor of the transactions contemplated hereunder will
not (i) result in a violation of the organizational documents, if any, of
such Investor, (ii) conflict with, or constitute a default under, or give
to others any rights of termination, amendment, acceleration or cancellation
of,
any agreement, indenture or instrument to which such Investor is a party, or
(iii) result in a violation of any law, rule, regulation, order, judgment
or decree applicable to such Investor, except in the case of clauses (ii) and
(iii) above, that do not otherwise affect the ability of such Investor to
consummate the transactions contemplated hereby.
6
(g) Restricted
Securities.
The
Investors understand that the Securities are characterized as “restricted
securities” under the U.S. federal securities laws inasmuch as they are being
acquired from the Company in a transaction not involving a public offering
and
that under such laws and applicable regulations such securities may be resold
without registration under the Securities Act only in certain limited
circumstances.
(h) No
Legal, Tax or Investment Advice.
Such
Investor understands that nothing in this Agreement or any other materials
presented by or on behalf of the Company to such Investor in connection with
the
purchase of the Securities constitutes legal, tax or investment advice.
(i) Independent
Investment Decision.
Such
Investor has independently evaluated the merits of its decision to purchase
the
Securities pursuant to this Agreement, and such Investor confirms that it has
not relied on the advice of any other Investor’s business and/or legal counsel
in making such decision. Such Investor has not relied on the business or legal
advice of the Company or any of its agents, counsel or Affiliates in making
its
investment decision hereunder, and confirms that none of such Persons has made
any representations or warranties to such Investor in connection with the
transactions contemplated by this Agreement.
3.3. Representations
and Warranties of Non-U.S. Investors Each
Investor who is a Non-U.S. person (as defined herein) hereby represents and
warrants to the Company as follows:
(a) This
Agreement is made by the Company with such Investor who is a Non-U.S. person
in
reliance upon such Non-U.S. person’s representations, warranties and covenants
made in this Section 3.3.
(b) Such
Non-U.S. person has been advised and acknowledges that:
(i) the
Securities have not been, and when issued, will not be registered under the
Securities Act, the securities laws of any state of the United States or the
securities laws of any other country;
(ii) in
issuing and selling the Securities to such Non-U.S. person pursuant hereto,
the
Company is relying upon the “safe harbor” provided by Regulation S and/or on
Section 4(2) under the Securities Act;
(iii) it
is a
condition to the availability of the Regulation S “safe harbor” that the
Securities not be offered or sold in the United States or to a U.S. person
(as
defined herein) until the expiration of a period of one year following the
Closing Date; and
(iv) notwithstanding
the foregoing, prior to the expiration of one year after the Closing (the
“Restricted
Period”),
the
Securities may be offered and sold by the holder thereof only if such offer
and
sale is made in compliance with the terms of this Agreement and either:
(A) if the offer or sale is within the United States or to or for the
account of a U.S. person (as such terms are defined in Regulation S), the
securities are offered and sold pursuant to an effective registration statement
or pursuant to Rule 144 promulgated by the SEC pursuant to the Securities Act,
as such Rule may be amended from time to time, or any similar rule or regulation
hereafter adopted by the SEC having substantially the same effect as such Rule
(“Rule 144”)
or
pursuant to an exemption from the registration requirements of the Securities
Act; or (B) the offer and sale is outside the United States and to other
than a U.S. person.
7
(c) As
used
herein, the term “United States” means and includes the United States of
America, its territories and possessions, any State of the United States, and
the District of Columbia, and the term “U.S.
person”
(as
defined in Regulation S) means:
(i) a
natural
person resident in the United States;
(ii) any
partnership or corporation organized or incorporated under the laws of the
United States;
(iii) any
estate of which any executor or administrator is a U.S. person;
(iv) any
trust
of which any trustee is a U.S. person;
(v) any
agency or branch of a foreign entity located in the United States;
(vi) any
nondiscretionary account or similar account (other than an estate or trust)
held
by a dealer or other fiduciary for the benefit or account of a U.S.
person;
(vii) any
discretionary account or similar account (other than an estate or trust) held
by
a dealer or other fiduciary organized, incorporated and (if an individual)
resident in the United States; and
(viii) a
corporation or partnership organized under the laws of any foreign jurisdiction
and formed by a U.S. person principally for the purpose of investing in
securities not registered under the Securities Act, unless it is organized
or
incorporated, and owned, by accredited investors (as defined in Rule 501(a)
under the Securities Act) who are not natural persons, estates or
trusts.
As
used
herein, the term “Non-U.S.
person”
means
any person who is not a U.S. person or is deemed not to be a U.S. person under
Rule 902(k)(2) of the Securities Act.
(d) Such
Non-U.S. person agrees that with respect to the Securities until the expiration
of the Restricted Period:
(i) such
Non-U.S. person, its agents or its representatives have not and will not solicit
offers to buy, offer for sale or sell any of the Securities, or any beneficial
interest therein, in the United States or to or for the account of a U.S. person
during the Restricted Period; and
(ii) notwithstanding
the foregoing, prior to the expiration of the Restricted Period, the Securities
may be offered and sold by the holder thereof only if such offer and sale is
made in compliance with the terms of this Agreement and either: (A) if the
offer or sale is within the United States or to or for the account of a U.S.
person (as such terms are defined in Regulation S), the securities are offered
and sold pursuant to an effective registration statement or pursuant to
Rule 144 under the Securities Act or pursuant to an exemption from the
registration requirements of the Securities Act; or (B) the offer and sale
is outside the United States and to other than a U.S. person; and
8
(iii) such
Non-U.S. person shall not engage in hedging transactions with regard to the
Securities unless in compliance with the Securities Act.
The
foregoing restrictions are binding upon subsequent transferees of the
Securities, except for transferees pursuant to an effective registration
statement. Such Non-U.S. person agrees that after the Restricted Period, the
Securities may be offered or sold within the United States or to or for the
account of a U.S. person only pursuant to applicable securities
laws.
(e) Such
Non-U.S. person has not engaged, nor is it aware that any party has engaged,
and
such Non-U.S. person will not engage or cause any third party to engage, in
any
directed selling efforts (as such term is defined in Regulation S) in the
United States with respect to the Securities.
(f) Such
Non-U.S. person: (i) is domiciled and has its principal place of business
outside the United States; (ii) certifies it is not a U.S. person and is
not acquiring the Securities for the account or benefit of any U.S. person;
and
(iii) at the time of the Closing Date, the Non-U.S. person or persons
acting on Non-U.S. person’s behalf in connection therewith will be located
outside the United States.
(g) At
the
time of offering to such Non-U.S. person and communication of such Non-U.S.
person’s order to purchase the Securities and at the time of such Non-U.S.
Person’s execution of this Agreement, the Non-U.S. person or persons acting on
Non-U.S. person’s behalf in connection therewith were located outside the United
States.
(h) Such
Non-U.S. person is not a “distributor” (as defined in Regulation S) or a
“dealer” (as defined in the Securities Act).
(i) Such
Non-U.S. person acknowledges that the Company shall make a notation in its
stock
books regarding the restrictions on transfer set forth in this Section 3.3
and
shall transfer such shares on the books of the Company only to the extent
consistent therewith.
In
particular, such Non-U.S. person acknowledges that the Company shall refuse
to
register any transfer of the Securities not made in accordance with the
provisions of Regulation S, pursuant to registration under the Securities Act
or
pursuant to an available exemption from registration.
3.4. Representations
by Non-U.S. Persons. If an Investor is a Non-U.S. person, such Investor
hereby represents that such Investor is satisfied as to the full observance
of
the laws of such Investor’s jurisdiction in connection with any invitation to
subscribe for the Securities or any use of the Agreements, including
(i) the legal requirements within such Investor’s jurisdiction for the
purchase of Securities, (ii) any foreign exchange restrictions applicable
to such purchase, (iii) any governmental or other consents that may need to
be obtained and (iv) the income tax and other tax consequences, if any,
that may be relevant to the purchase, holding, redemption, sale or transfer
of
such securities. Such Investor’s subscription and payment for, and such
Investor’s continued beneficial ownership of, the Securities will not violate
any applicable securities or other laws of such Investor’s
jurisdiction.
9
ARTICLE
4.
OTHER
AGREEMENTS OF THE PARTIES
4.1. (a)
The
Securities may only be disposed of in compliance with state and federal
securities laws. In connection with any transfer of the Securities other than
pursuant to an effective registration statement, to the Company, to an Affiliate
of an Investor or in connection with a pledge as contemplated in Section 4.1(b),
the
Company may require the transferor thereof to provide to the Company an opinion
of counsel selected by the transferor, the form and substance of which opinion
shall be reasonably satisfactory to the Company, to the effect that such
transfer does not require registration of such transferred Securities under
the
Securities Act.
(b) Certificates
evidencing the Securities will contain the following legend or one similar
thereto, until such time as they are not required pursuant to the Securities
Act
and 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:
NEITHER
THESE SECURITIES NOR THE SECURITIES ISSUABLE UPON EXERCISE OF THESE SECURITIES
HAVE 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.
(c) Each
Investor, severally and not jointly with the other Investors, agrees that such
Investor will sell any Securities only pursuant to either the registration
requirements of the Securities Act, including any applicable prospectus delivery
requirements, or an exemption therefrom, and that if Securities are sold
pursuant to a Registration Statement, they will be sold in compliance with
the
plan of distribution set forth therein, and acknowledges that the removal of
the
restrictive legend from certificates representing Securities as set forth in
this Section 4.1
is
predicated upon the Company’s reliance upon this understanding.
10
4.2. Non-Public
Information.
The Company covenants and agrees that neither it nor any other Person acting
on
its behalf will provide any Investor or its agents or counsel with any
information that the Company believes constitutes material non-public
information, unless prior thereto such Investor shall have executed a written
agreement regarding the confidentiality and use of such information. The Company
understands and confirms that each Investor shall be relying on the foregoing
representations in effecting transactions in securities of the
Company.
4.3. Registration
Rights.
(a) The
Company shall file with the SEC not later than 60 days after the Closing Date
(the “Filing
Date”),
and
thereafter use its best efforts to cause to be declared effective by the SEC,
a
registration statement (the “Registration
Statement”)
on
Form S-1 (or such other form appropriate for such purpose), within 90 days
of the filing of the Registration Statement, in order to register the Shares
and
the Warrant Shares (the “Registrable
Securities”)
for
resale and distribution under the Securities Act. The Company agrees to respond
to all SEC comments within 14 business days of receipt thereof by the Company.
The Company agrees to pay penalties equal to 1.5% of the investment amount
for
the first 30 days and 1.0% of the investment amount price for every 30 days
thereafter if the registration is not filed by the Filing Date. The same
penalties shall apply if the registration is filed in a timely manner but it
is
not declared effective by the SEC within 90 days of the filing of the
Registration Statement. The penalty may be paid in cash or stock at the option
of Company; provided that the shares are registered. If the Company elects
to
pay the penalty in shares, the shares will be priced at the volume weighted
average price for the 10 Trading Days prior to the payment date.
(b) If
and
whenever the Company is required by the provisions hereof to effect the
registration of any Registrable Securities under the Securities Act, the Company
will, as expeditiously as possible:
(i) prepare
and file with the SEC such amendments and supplements to such Registration
Statement and the prospectus used in connection therewith as may be necessary
to
keep such Registration Statement effective until such Registration Statement
has
been effective for a period of one (1) year, and comply with the provisions
of the Securities Act with respect to the disposition of all of the Registrable
Securities covered by such Registration Statement in accordance with the
Investor’s intended method of disposition set forth in such Registration
Statement for such period;
(ii) furnish
to the Investor, at the Company’s expense, such number of copies of the
Registration Statement and the prospectus included therein (including each
preliminary prospectus) as such persons reasonably may request in order to
facilitate the public sale or their disposition of the securities covered by
such Registration Statement; and
(iii) immediately
notify the Investor when a prospectus relating thereto is required to be
delivered under the Securities Act, of the happening of any event of which
the
Company has knowledge as a result of which the prospectus contained in such
Registration Statement, as then in effect, includes an untrue statement of
a
material fact or omits to state a material fact required to be stated therein
or
necessary to make the statements therein not misleading in light of the
circumstances then existing.
11
(c) In
connection with each Registration Statement described in this Section 4.3,
the
Investor will furnish to the Company in writing such information and
representation letters with respect to itself and the proposed distribution
by
it as reasonably shall be necessary in order to assure compliance with federal
and applicable state securities laws.
ARTICLE
5.
CONDITIONS
PRECEDENT TO CLOSING
5.1. Conditions
Precedent to the Obligations of the Investors to Purchase
Securities.
The obligation of each Investor to acquire the Units at the Closing is subject
to the satisfaction or waiver by such Investor, at or before the Closing, of
each of the following conditions:
(a) Representations
and Warranties.
The
representations and warranties of the Company shall be true and correct in
all
material respects (except for those representations and warranties that are
qualified by materiality or Material Adverse Effect, which shall be true and
correct in all respects) as of the date when made and as of the Closing Date
as
though made at that time (except for representations and warranties that speak
as of a specific date, which shall remain true and correct as of such specific
date).
(b) Performance.
The
Company shall have performed, satisfied and complied in all material respects
with all covenants, agreements and conditions required by this Agreement to
be
performed, satisfied or complied with by it at or prior to the
Closing.
(c) No
Injunction.
No
statute, rule, regulation, executive order, decree, ruling or injunction shall
have been enacted, entered, promulgated or endorsed by any court or governmental
authority of competent jurisdiction that prohibits the consummation of the
transactions contemplated by this Agreement.
(d) Adverse
Changes.
Since
the date of execution of this Agreement, no event or series of events shall
have
occurred that reasonably could have or result in a Material Adverse Effect
or a
material adverse change with respect to the Company or KL Process Design Group,
LLC.
(e) Company
Deliverables.
The
Company shall have delivered the Company Deliverables in accordance with
Section 2.2(a).
(f) Lock-Up
Agreements.
Each of
Xxxxx Xxxxxx, Xxxxx Xxxxxx, Xxxxxx Xxxxxxx, and Xxxxx Xxxxxxxx shall have
entered into a lock-up agreement with respect to all of their shares of the
Company for a period of two (2) years from the effective time of this
Agreement.
(g) Voting
Agreement.
Each of
Xxxxx Xxxxxx, Xxxxx Xxxxxx, Xxxxxx Xxxxxxx, and Xxxxx Xxxxxxxx shall have
entered into a voting agreement pursuant to which they agree to vote their
shares as directed by Pelly Management in designating two (2) members of the
Board of Directors of the Company and a third one jointly designated with Pelly
Management so long as the Investors and the investors in the convertible bridge
financing (on a post-conversion basis) own an aggregate of 25% of the Company’s
outstanding common stock held by non-affiliates.
12
(h) Performance
Escrow Agreement.
Xxxxx
Xxxxxx, Xxxxx Xxxxxx, Xxxxxx Xxxxxxx and Xxxxx Xxxxxxxx shall have entered
into
an agreement with the Company and a mutually acceptable escrow agent, pursuant
to which their shares of the Company will be deposited into escrow for a period
of two (2) years from the effective time of this Agreement, with certain
portions of shares subject to cancellation based on the financial performance
of
the Company as measured for each of the two ( 2 ) years.
(i) Termination.
This
Agreement shall not have been terminated as to such Investor in accordance
with
Section 6.5.
5.2. Conditions
Precedent to the Obligations of the Company to Sell Securities.
The obligation of the Company to sell the Units at the Closing is subject to
the
satisfaction or waiver by the Company, at or before the Closing, of each of
the
following conditions:
(a) Representations
and Warranties.
The
representations and warranties of the Investors shall be true and correct in
all
material respects (except for those representations and warranties that are
qualified by materiality or Material Adverse Effect, which shall be true and
correct in all respects) as of the date when made and as of the Closing Date
as
though made at that time (except for representations and warranties that speak
as of a specific date, which shall remain true and correct as of such specific
date).
(b) Performance.
Each
Investor shall have performed, satisfied and complied in all material respects
with all covenants, agreements and conditions required by this Agreement to
be
performed, satisfied or complied with by such Investor at or prior to the
Closing.
(c) No
Injunction.
No
statute, rule, regulation, executive order, decree, ruling or injunction shall
have been enacted, entered, promulgated or endorsed by any court or governmental
authority of competent jurisdiction that prohibits the consummation of the
transactions contemplated by this Agreement.
(d) Investors
Deliverables.
Each
Investor shall have delivered its Investors Deliverables in accordance with
Section 2.2(b).
(e) Termination.
This
Agreement shall not have been terminated as to such Investor in accordance
with
Section 6.5.
ARTICLE
6.
MISCELLANEOUS
6.1. Fees
and Expenses.
Each party shall pay the fees and expenses of its advisers, counsel, accountants
and other experts, if any, and all other expenses incurred by such party
incident to the negotiation, preparation, execution, delivery and performance
of
this Agreement.
6.2. Entire
Agreement.
This Agreement and the Warrants contain the entire understanding of the parties
with respect to the subject matter hereof and supersede all prior agreements,
understandings, discussions and representations, oral or written, with respect
to such matters, which the parties acknowledge have been merged into such
documents, exhibits and schedules.
13
6.3. Notices.
All notices or other communications under this Agreement shall be in writing
and
shall be deemed given (i) when delivered personally by hand (with written
confirmation of receipt), (ii) when sent by facsimile (with written
confirmation of transmission) or (iii) one Business Day following the day
sent by overnight courier (with written confirmation of receipt), in each case
at the following addresses and facsimile numbers (or to such other address
or
facsimile number as a party may have specified by notice given to the other
party pursuant to this provision):
If to the Company:
|
KL Energy Corporation
|
Xxxxx 000
|
|
00000 Xxxx Xxx Xxxxx
|
|
Xxx Xxxxx, Xxxxxx 00000
|
|
With a copy to:
|
Clayborne, Loos, Xxxxxxxx & Sabers, L.L.P.
|
0000 Xxxxxxx Xxxxxxxxx, Xxxxx 000
|
|
Xxxxx Xxxx, Xxxxx Xxxxxx 00000-0000
|
|
Facsimile: 000-000-0000
|
|
Attention: Xxxxxxxx X. Xxxxxxxxx
|
|
If to an Investor:
|
To the address set forth under such Investor’s name on the signature pages hereof;
|
With a copy to:
|
Xxxxxxxxx Traurig, LLP
|
0000 Xxxxxxxxx Xxxxx, Xxxxx 0000
|
|
Xxxxxx, Xxxxxxxxxx 00000
|
|
Facsimile: 949-732-6501
|
|
Attention: Xxxxxxx X. Xxx, Esq.
|
or such other address as
may be designated in writing hereafter, in the same manner, by such
Person.
6.4. Amendments;
Waivers; No Additional Consideration.
No provision of this Agreement may be waived or amended at or prior to the
Closing except in a written instrument signed by the Company and each Investor.
No provision of this Agreement may be waived or amended after the Closing except
in a written instrument signed by the Company and the Investors holding a
majority of the Shares. No waiver of any default with respect to any provision,
condition or requirement of this Agreement shall be deemed to be a continuing
waiver in the future or a waiver of any subsequent default or a waiver of any
other provision, condition or requirement hereof, nor shall any delay or
omission of either party to exercise any right hereunder in any manner impair
the exercise of any such right.
6.5. Termination.
This Agreement may be terminated prior to Closing:
(a) by
mutual
written agreement of the Investors and the Company; and
14
(b) by
the
Company or an Investor (as to itself but no other Investor) upon written notice
to the other, if the Closing shall not have taken place by 6:30 p.m. Eastern
time on the date which is December 31, 2008 (the “Outside
Date”);
provided,
that
the right to terminate this Agreement under this Section 6.5(b)
shall
not be available to any Person whose failure to comply with its obligations
under this Agreement has been the cause of or resulted in the failure of the
Closing to occur on or before such time.
Upon
a
termination in accordance with this Section 6.5,
the
Company and the terminating Investor(s) shall not have any further obligation
or
liability to the other and no Investor will have any liability to any other
Investor under this Agreement as a result therefrom.
6.6. Construction.
The headings herein are for convenience only, do not constitute a part of this
Agreement and shall not be deemed to limit or affect any of the provisions
hereof. The language used in this Agreement will be deemed to be the language
chosen by the parties to express their mutual intent, and no rules of strict
construction will be applied against any party. This Agreement shall be
construed as if drafted jointly by the parties, and no presumption or burden
of
proof shall arise favoring or disfavoring any party by virtue of the authorship
of any provisions of this Agreement.
6.7. Successors
and Assigns.
This Agreement shall be binding upon and inure to the benefit of the parties
and
their successors and permitted assigns. The Company may not assign this
Agreement or any rights or obligations hereunder without the prior written
consent of the Investors. Investor may assign any or all of its rights under
this Agreement to any Person to whom such Investor assigns or transfers any
Shares, provided such transferee agrees in writing to be bound, with respect
to
the transferred Shares, by the provisions hereof that apply to the
“Investors.”
6.8. Governing
Law.
This Agreement shall be governed by and construed exclusively in accordance
with
the laws of the State of California, without giving effect to any principle
or
doctrine regarding conflict of laws.
6.9. Survival.
The representations, warranties, agreements and covenants contained herein
shall
survive the Closing and the delivery of the Units.
6.10. Execution.
This Agreement may be executed in two or more counterparts, all of which when
taken together shall be considered one and the same agreement and shall become
effective when counterparts have been signed by each party and delivered to
the
other party, it being understood that both parties need not sign the same
counterpart. In the event that any signature is delivered by facsimile
transmission, such signature shall create a valid and binding obligation of
the
party executing (or on whose behalf such signature is executed) with the same
force and effect as if such facsimile signature page were an original
thereof.
6.11. Severability.
If any provision of this Agreement is held to be invalid or unenforceable in
any
respect, the validity and enforceability of the remaining terms and provisions
of this Agreement shall not in any way be affected or impaired thereby and
the
parties will attempt to agree upon a valid and enforceable provision that is
a
reasonable substitute therefor, and upon so agreeing, shall incorporate such
substitute provision in this Agreement.
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![A](https://www.sec.gov/Archives/edgar/data/1403548/000114420408056361/ex10-1a.jpg)
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![B](https://www.sec.gov/Archives/edgar/data/1403548/000114420408056361/ex10-1b.jpg)
![C](https://www.sec.gov/Archives/edgar/data/1403548/000114420408056361/ex10-1c.jpg)
Exhibit A
Form
of Warrant