Attached files
| file | filename |
|---|---|
| EX-10.1 - KL Energy Corp | v204778_ex10-1.htm |
| EX-10.4 - KL Energy Corp | v204778_ex10-4.htm |
| EX-10.3 - KL Energy Corp | v204778_ex10-3.htm |
| 8-K - KL Energy Corp | v204778_8-k.htm |
EXIBIT
10.2
THIS
NOTE AND THE SECURITIES ISSUABLE UPON THE CONVERSION HEREOF HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THEY MAY NOT
BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT AS TO THE SECURITIES UNDER SAID ACT OR AN
OPINION OF COUNSEL SATISFACTORY TO THE CORPORATION THAT SUCH REGISTRATION IS NOT
REQUIRED.
KL
ENERGY CORP.
SECURED
CONVERTIBLE PROMISSORY NOTE
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$_______________
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November
___, 2010
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Rapid
City, South Dakota
FOR VALUE
RECEIVED, KL Energy Corp., a Nevada corporation (the “Company”), promises
to pay to [____________________] (“Investor”), or its registered
assigns, in lawful money of the United States of America the principal sum of
[__________] Dollars ($[_________]), or such lesser amount as shall equal the
outstanding principal amount hereof, together with interest from the date of
this Note on the unpaid principal balance at a rate equal to 10.00% per annum,
computed on the basis of the actual number of days elapsed and a year of 365
days. All unpaid principal, together with any then unpaid and accrued
interest and other amounts payable hereunder, shall be due and payable on the
earlier of (i) the date that is eight (8) months from the issuance date of the
Note (the “Maturity
Date”), or (ii) when, upon or after the occurrence of an Event of Default
(as defined below), such amounts are declared due and payable by Investor or
made automatically due and payable in accordance with the terms
hereof. This Note is one of the “Notes” issued pursuant to the Note
and Warrant Purchase Agreement of even date herewith (as amended, modified or
supplemented, the “Purchase
Agreement”) between the Company and the Investors (as defined in the
Purchase Agreement).
THE
OBLIGATIONS DUE UNDER THIS NOTE ARE SECURED BY A SECURITY AGREEMENT (THE “SECURITY AGREEMENT”) DATED AS
OF THE DATE HEREOF AND EXECUTED BY COMPANY FOR THE BENEFIT OF
INVESTOR. ADDITIONAL RIGHTS OF INVESTOR ARE SET FORTH IN THE SECURITY
AGREEMENT.
The
following is a statement of the rights of Investor and the conditions to which
this Note is subject, and to which Investor, by the acceptance of this Note,
agrees:
8. Definitions.
As used in this Note, the following capitalized terms have the following
meanings:
(a) the
“Company” includes the
corporation initially executing this Note and any Person which shall succeed to
or assume the obligations of the Company under this Note.
(b) “Event of Default” has the
meaning given in Section
4 hereof.
(c) “Investor” shall mean the
Person specified in the introductory paragraph of this Note or any Person who
shall at the time be the registered holder of this Note. A reference
to a Lien of Investor or a security agreement executed in favor of Investor
shall be deemed to include a Lien granted to a collateral agent on behalf of
Investor and a security agreement executed in favor of a collateral agent on
behalf of Investor, respectively.
(d) “Lien” shall mean, with respect
to any property, any security interest, mortgage, pledge, lien, claim, charge or
other encumbrance in, of, or on such property or the income therefrom,
including, without limitation, the interest of a vendor or lessor under a
conditional sale agreement, capital lease or other title retention agreement, or
any agreement to provide any of the foregoing, and the filing of any financing
statement or similar instrument under the Uniform Commercial Code or comparable
law of any jurisdiction.
(e) “Liquidity Event” shall mean
(i) a merger of the Company with or into another entity (if after such merger
the holders of a majority of the Company’s voting securities immediately prior
to the transaction do not hold a majority of the voting securities of the
successor entity); or (ii) a sale by the Company of all or substantially all of
its assets.
(f) “Majority in Interest” shall
mean more than 50% of the aggregate outstanding principal amount of the Notes
issued pursuant to the Purchase Agreement.
(g) “Purchase Agreement” has the
meaning given in the introductory paragraph hereof.
(h) “Obligations” shall mean and
include all loans, advances, debts, liabilities and obligations, howsoever
arising, owed by the Company to Investor of every kind and description (whether
or not evidenced by any note or instrument and whether or not for the payment of
money), now existing or hereafter arising under or pursuant to the terms of this
Note, the Purchase Agreement and the Security Agreement, including, all
interest, fees, charges, expenses, attorneys’ fees and costs and accountants’
fees and costs chargeable to and payable by the Company hereunder and
thereunder, in each case, whether direct or indirect, absolute or contingent,
due or to become due, and whether or not arising after the commencement of a
proceeding under Title 11 of the United States Code (11 U. S. C. Section 101
et seq.), as amended
from time to time (including post-petition interest) and whether or not allowed
or allowable as a claim in any such proceeding.
(i) “Person” shall mean and include
an individual, a partnership, a corporation (including a business trust), a
joint stock company, a limited liability company, an unincorporated association,
a joint venture or other entity or a governmental authority.
(j) “Securities Act” shall mean the
Securities Act of 1933, as amended.
(k) “Security Agreement” has the
meaning given in the introductory paragraphs to this Note.
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(l) “Transaction Documents” shall
mean this Note, each of the other Notes issued under the Purchase Agreement, the
Purchase Agreement, the Warrants issued under the Purchase Agreement and the
Security Agreement.
9. Interest. Interest
shall accrue on this Note at the rate of ten percent (10%) per annum and shall
be payable on the last business day of each calendar quarter until the
outstanding principal amount hereof shall be paid in full at
maturity.
10. Prepayment. Upon
five days prior
written notice to Investor, the Company may prepay this Note in whole (“Prepayment,” and the date of
such Pepayment, the “Prepayment
Date”); provided that any prepayment of this Note may only be made in
connection with the prepayment of all Notes issued under the Purchase
Agreement.
11. Events of
Default. The occurrence of any of the following shall
constitute an “Event of
Default” under this Note and the other Transaction
Documents:
(a) Failure to
Pay. The Company shall fail to pay (i) when due any principal
or interest payment on the due date hereunder or (ii) any other payment required
under the terms of this Note on the date due and such payment shall not have
been made within five days of the Company’s receipt of Investor’s written notice
to the Company of such failure to pay; or
(b) Voluntary Bankruptcy or Insolvency
Proceedings. The Company shall (i) apply for or consent to the
appointment of a receiver, trustee, liquidator or custodian of itself or of all
or a substantial part of its property, (ii) be unable, or admit in writing its
inability, to pay its debts generally as they mature, (iii) make a general
assignment for the benefit of its or any of its creditors, (iv) be dissolved or
liquidated, (v) become insolvent (as such term may be defined or interpreted
under any applicable statute), (vi) commence a voluntary case or other
proceeding seeking liquidation, reorganization or other relief with respect to
itself or its debts under any bankruptcy, insolvency or other similar law now or
hereafter in effect or consent to any such relief or to the appointment of or
taking possession of its property by any official in an involuntary case or
other proceeding commenced against it, or (vii) take any action for the purpose
of effecting any of the foregoing; or
(c) Involuntary Bankruptcy or Insolvency
Proceedings. Proceedings for the appointment of a receiver,
trustee, liquidator or custodian of the Company or of all or a substantial part
of the property thereof, or an involuntary case or other proceedings seeking
liquidation, reorganization or other relief with respect to the Company or the
debts thereof under any bankruptcy, insolvency or other similar law now or
hereafter in effect shall be commenced and an order for relief entered or such
proceeding shall not be dismissed or discharged within 30 days of
commencement.
12. Rights of
Investor upon Default. Upon the occurrence or existence of any
Event of Default (other than an Event of Default described in Sections 4(b) or 4(c)) and at any time
thereafter during the continuance of such Event of Default, Investor may, with
the consent of a Majority in Interest of the holders of the Notes issued under
the Purchase Agreement, by written notice to the Company, declare all
outstanding Obligations payable by the Company hereunder to be immediately due
and payable without presentment, demand, protest or any other notice of any
kind, all of which are hereby expressly waived. Upon the occurrence
or existence of any Event of Default described in Sections 4(b) and 4(c), immediately and without
notice, all outstanding Obligations payable by the Company hereunder shall
automatically become immediately due and payable, without presentment, demand,
protest or any other notice of any kind, all of which are hereby expressly
waived. In addition to the foregoing remedies, upon the occurrence or
existence of any Event of Default and subject to the consent of a Majority in
Interest of the holders of the Notes issued under the Note Purchase Agreement,
Investor may exercise any other right power or remedy granted to it by the
Transaction Documents or otherwise permitted to it by law, either by suit in
equity or by action at law, or both.
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13. Conversion.
(a) Qualified Equity
Financing. In the event the Company consummates, prior to the
Maturity Date an equity financing pursuant to which it sells shares of its
preferred stock (the “Preferred
Stock”) or shares of its Common Stock for an amount of not less than
$15,000,000, excluding any and all notes which are converted into Preferred
Stock or Common Stock, as applicable (including this Note and the other Notes
issued under the Purchase Agreement), and with the principal purpose of raising
capital (a “Qualified Equity
Financing”), then the Investor may elect to convert all or part of the
outstanding principal amount and the accrued but unpaid interest under this Note
into shares of the Preferred Stock or Common Stock, as applicable, at the same
price and on the same terms as the other investors that purchase the Preferred
Stock or Common Stock, as applicable, in the Qualified Equity
Financing. Before the Investor shall be entitled to convert this Note
under this Section 6(a),
the Investor shall execute and deliver to the Company all transaction documents
related to the Qualified Equity Financing, including a purchase agreement and
other ancillary agreements, and having the same terms as those agreements
entered into by the other purchasers in the Qualified Equity
Financing. In addition, before Investor shall be entitled to convert
this Note under this Section
6(a), it shall surrender this Note, duly endorsed, at the office of the
Company and shall give written notice to the Company at its principal corporate
office, of the election to convert the same pursuant to this Section, and shall
state therein the amount of the unpaid principal amount of this Note to be
converted and the name or names in which the certificate or certificates for
shares subject to conversion are to be issued. The Company shall, as
soon as practicable thereafter, issue and deliver at such office to Investor a
certificate or certificates for the number of shares to which Investor shall be
entitled upon conversion (bearing such legends as are required by the purchase
agreement and applicable state and federal securities laws in the opinion of
counsel to the Company), together with a replacement Note (if any principal
amount is not converted) and any other securities and property to which Investor
is entitled upon such conversion under the terms of this Note, including a check
payable to Investor for any cash amounts payable as described in Section 6(d). The
conversion shall be deemed to have been made immediately prior to the close of
business on the date of the surrender of this Note, and the Person or Persons
entitled to receive the shares of Common Stock upon such conversion shall be
treated for all purposes as the record Investor or Investors of such shares of
Common Stock as of such date.
(b) Optional
Conversion. If no Qualified Financing takes place prior to the
Prepayment Date or the Maturity Date, whichever occurs first, then all or a
portion of the outstanding principal amount and all accrued but unpaid interest
under this Note shall be convertible at the option of the Investor, upon the
earlier to occur of the Prepayment Date or the Maturity Date, into that number
of shares of the Company’s Common Stock as is determined by dividing such
principal amount and accrued interest by $1.10 per share (adjusted to reflect
subsequent stock dividends, stock splits, combinations or
recapitalizations). Notwithstanding the immediately foregoing
sentence, in the event that the Company consummates a Qualified Equity Financing
at any time during the 24-month period following the conversion of this Note,
and the purchase price per share of the securities in such Qualified Equity
Financing is less than $1.10, then the Company agrees to issue additional shares
to Investor of the same securities that Investor received upon the prior
conversion of the Note to cover the difference in the number of shares that
Investor would have received if the conversion price was adjusted to the lower
purchase price in the Qualified Equity Financing. Before Investor
shall be entitled to convert this Note into shares of Common Stock under this
Section 6(b), the
Investor shall execute and deliver to the Company a common stock purchase
agreement reasonably acceptable to the Company containing customary
representations and warranties and transfer restrictions. In
addition, before Investor shall be entitled to convert this Note into shares of
Common Stock under this Section
6(b), it shall surrender this Note, duly endorsed, at the office of the
Company and shall give written notice to the Company at its principal corporate
office, of the election to convert the same pursuant to this Section, and shall
state therein the amount of the unpaid principal amount of this Note to be
converted and the name or names in which the certificate or certificates for
shares of Common Stock are to be issued. The Company shall, as soon
as practicable thereafter, issue and deliver at such office to Investor a
certificate or certificates for the number of shares of Common Stock to which
Investor shall be entitled upon conversion (bearing such legends as are required
by the common stock purchase agreement, the Purchase Agreement and applicable
state and federal securities laws in the opinion of counsel to the Company),
together with a replacement Note (if any principal amount is not converted) and
any other securities and property to which Investor is entitled upon such
conversion under the terms of this Note, including a check payable to Investor
for any cash amounts payable as described in Section 6(d). The
conversion shall be deemed to have been made immediately prior to the close of
business on the date of the surrender of this Note, and the Person or Persons
entitled to receive the shares of Common Stock upon such conversion shall be
treated for all purposes as the record Investor or Investors of such shares of
Common Stock as of such date.
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(c) Liquidity
Event. If the event a Liquidity Event occurs before the
Maturity Date or the conversion of this Note, then all or a portion of the
outstanding principal amount and all accrued but unpaid interest under this Note
shall be convertible at the option of the Investor into that number of shares of
the Company’s Common Stock as is determined by dividing such principal amount
and accrued interest by 80% of the price per share of the Company’s Common Stock
determined as of the date of the Liquidity Event. In lieu of the
conversion of this Note provided in the immediately foregoing sentence, the
Investor may demand for payment of the principal and accrued but unpaid interest
outstanding as of the date of the Liquidity Event.
(d) Fractional Shares; Interest; Effect
of Conversion. No fractional shares shall be issued upon
conversion of this Note. In lieu of the Company issuing any
fractional shares to Investor upon the conversion of this Note, the Company
shall pay to Investor an amount equal to the product obtained by multiplying the
conversion price by the fraction of a share not issued pursuant to the previous
sentence. Upon conversion of this Note in full and the payment of any
amounts specified in this Section 6(d), the Company
shall be forever released from all its obligations and liabilities under this
Note.
14. Successors and
Assigns. Subject to the
restrictions on transfer described in Sections 9 and 10 below, the rights and
obligations of the Company and Investor shall be binding upon and benefit the
successors, assigns, heirs, administrators and transferees of the
parties.
15. Waiver and
Amendment. Any provision of
this Note may be amended, waived or modified upon the written consent of the
Company and the holders of a Majority in Interest.
16. Transfer of this
Note or Securities Issuable on Conversion Hereof. With respect to
any offer, sale or other disposition of this Note or securities into which such
Note may be converted, Investor will give written notice to the Company prior
thereto, describing briefly the manner thereof, together with a written opinion
of Investor’s counsel, or other evidence if reasonably satisfactory to the
Company, to the effect that such offer, sale or other distribution may be
effected without registration or qualification (under any federal or state law
then in effect). Upon receiving such written notice and reasonably
satisfactory opinion, if so requested, or other evidence, the Company, as
promptly as practicable, shall notify Investor that Investor may sell or
otherwise dispose of this Note or such securities, all in accordance with the
terms of the notice delivered to the Company. If a determination has
been made pursuant to this Section 9 that the opinion of
counsel for Investor, or other evidence, is not reasonably satisfactory to the
Company, the Company shall so notify Investor promptly after such determination
has been made. Each Note thus transferred and each certificate
representing the securities thus transferred shall bear a legend as to the
applicable restrictions on transferability in order to ensure compliance with
the Securities Act, unless in the opinion of counsel for the Company such legend
is not required in order to ensure compliance with the Securities
Act. the Company may issue stop transfer instructions to its transfer
agent in connection with such restrictions. Subject to the foregoing,
transfers of this Note shall be registered upon registration books maintained
for such purpose by or on behalf of the Company. Prior to
presentation of this Note for registration of transfer, the Company shall treat
the registered holder hereof as the owner and holder of this Note for
the purpose of receiving all payments of principal and interest hereon and for
all other purposes whatsoever, whether or not this Note shall be overdue and the
Company shall not be affected by notice to the contrary.
17. Assignment by the
Company. Neither this Note
nor any of the rights, interests or obligations hereunder may be assigned, by
operation of law or otherwise, in whole or in part, by the Company without the
prior written consent of the holders of a Majority in Interest.
18. Notices. All notices,
requests, demands, consents, instructions or other communications required or
permitted hereunder shall in writing and faxed, mailed or delivered to each
party at the respective addresses of the parties as set forth in the Note
Purchase Agreement, or at such other address or facsimile number as the Company
shall have furnished to Investor in writing. All such notices and
communications will be deemed effectively given the earlier of (i) when
received, (ii) when delivered personally, (iii) one business day after being
delivered by facsimile (with receipt of appropriate confirmation), (iv) one
business day after being deposited with an overnight courier service of
recognized standing or (v) four days after being deposited in the U.S. mail,
first class with postage prepaid.
19. Usury. In the event any interest is
paid on this Note which is deemed to be in excess of the then legal maximum
rate, then that portion of the interest payment representing an amount in excess
of the then legal maximum rate shall be deemed a payment of principal and
applied against the principal of this Note.
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20. Waivers. The Company hereby waives
notice of default, presentment or demand for payment, protest or notice of
nonpayment or dishonor and all other notices or demands relative to this
instrument.
21. Governing
Law. This Note and all
actions arising out of or in connection with this Note shall be governed by and
construed in accordance with the laws of the State of Nevada, without regard to
the conflicts of law provisions of the State of Nevada, or of any other
state.
[Signature
Page Follows]
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The
Company has caused this Note to be issued as of the date first written
above.
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KL
ENERGY CORP.
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a
Nevada corporation
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By:
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Name:
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Title:
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