UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
| Date of Report (Date of earliest event reported) July 25, 2014 |
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KLEANGAS ENERGY TECHNOLOGIES,
INC.
(Exact name of registrant as
specified in its chapter) |
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Delaware
(State or other jurisdiction
of incorporation |
333-176820
(Commission
File Number) |
26-2808844
(IRS Employer
Identification No.) |
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3001 N. Rocky Pt. RD. Suite 200 Tampa, Florida
(Address of principal executive offices) |
33771
(Zip Code) |
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(727)-364-2744
Registrant's telephone number,
including area code |
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__________________________________________
(Former
name or former address, if changed since last report) |
Check the appropriate box below if the Form 8-K filing is
intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction
A.2. below):
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Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
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Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| [ ] |
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
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Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
SECTION 1. REGISTRANT’S BUSINESS AND OPERATIONS
ITEM 1.01 ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT
Stock Purchase Agreement
On July 22, 2014, the Board of Directors
of Kleangas Energy Technologies, Inc. a Delaware corporation (the “Company”), finalized and authorized the execution
of that certain stock purchase agreement (the “Stock Purchase Agreement”) among the Company, as buyer, and Jerry Hansen,
Tracy Johnson and The PI Foundation, a non-profit Utah corporation (collectively, the “Sellers”) of 5,000,244 shares
of common stock of Company, Inc., a Wisconsin corporation, which is a refuse systems,
recycling and waste management company (“CI”), which constituted all of the issued and outstanding shares. The Company
also purchased 833,333 shares of newly issued stock of CI for a purchase price of $1,300,000 (the “Purchase Price”).
The Stock Purchase Agreement and associated documents referenced below will be held in escrow for up to ninety (90) days while
the Company raises funds to pay the Purchase Price. Based on the timing of certain deliveries out of escrow (each, a “Closing
Date”), payment constituting the Purchase Price will vary as follows:
(a)
If the Closing Date occurs in August 2014, the Purchase Price will be $7,281,555 plus the amount of “Other Current
Assets” shown on CI’s balance sheet, calculated as of the Closing Date, paid $219,551 in cash and delivery to Sellers
of a Secured Promissory Note (the “Note”) in the principal amount of $7,062,004, and when the Purchase Price is paid,
Jerry Hansen and Tracy Johnson will pay off the amount of “Other Current Assets” on CI’s balance sheet as of
the Closing Date.
(b)
If the Closing Date occurs in September 2014, the Purchase Price will be $7,301,174 plus the amount of “Other Current
Assets” shown on CI’s balance sheet, calculated as of the Closing Date, paid $239,170 in cash and delivery to Seller
of the Note in the principal amount of $7,062,004, and when the Purchase Price is paid, Jerry Hansen and Tracy Johnson will pay
off the amount of “Other Current Assets” on CI’s balance sheet as of the Closing Date.
(c)
If the Closing Date occurs in October 2014, the Purchase Price will be $7,320,860 plus the
amount of “Other Current Assets” shown on CI’s balance sheet, calculated as of the Closing Date, paid $258,856
in cash and delivery to Seller of the Note in the principal amount of $7,062,004, and when the Purchase Price is paid, Jerry Hansen
and Tracy Johnson will pay off the amount of “Other Current Assets” on CI’s balance sheet as of the Closing Date.
In further accordance with the terms
and provisions of the Stock Purchase Agreement, CI will use the Purchase Price it receives from issuance of the stock to pay off
a commercial loan owed CI to Sellers will use cash received as part of the Purchase Price to pay off the intercompany owed by CI
to Jerry Hansen, Tracy Johnson and Hawks Rest, LLC in the approximate amount of $460,000.
Lastly, on the date that is two months after the Closing Date, the Company will contribute funds to CI sufficient to allow CI to
pay off in full the “Small Loan.”
Secured Promissory Note
On July 22, 2014, the Board of Directors
authorized the execution of that certain secured promissory note in the principal amount of $7,062,004.00 dated July 22, 2014 (the
“Secured Note”) payable to Jerry Hansen, Tracy Johnson and The PI Foundation (collectively and for purposes of the
Secured Note, the Holders”). The Secured Note bears no interest and requires the Company beginning one month after July 22,
2014 (the “Effective Date”) to make fifteen monthly payments of principal on the terms and in the amount provided in
the Convertible Note. The Secured Note will be secured by a first priority perfected security interest that encumbers all of the
assets of the Company. The Secured Note will further be secured by a stock pledge agreement that encumbers the shares of stock
of CI together with a control agreement and a mortgage on the fiber recovery building
together with all stock powers, endorsements and other security documents and other agreements of any kind whatsoever entered into
in connection with the transactions contemplated by the Stock Purchase Agreement.
The Secured Note will also give the
Company the option of missing up to two monthly payments without penalty or interest during the Secured Note’s initial fifteen
month term. The Secured Note will also allow the Company to elect to extend the maturity date of the Secured Note from fifteen
months beginning on the Closing Date to eighteen months beginning on the Closing Date if the Company notifies the Holders of the
Company’s wish to extend the maturity date, during which three month extension time amounts owed under the Security Note
will bear interest at the rate of twelve percent per annum.
All payments due under the Secured Note
will be made on the Company’s behalf by, as determined by the Holders, the Company or the Company’s payment agent,
Pyrenees Investments, LLC, a line of credit lender to the Company. The Holders will at all times be entitled to direct that all
payments made under the Secured Note be sent to one or more separate bank accounts in the name of each of the persons referred
to herein as “Holder,” in whatever relative amounts that Jerry Hansen specifies.
Stock Pledge Agreement
On July 22, 2014, the Board of Directors
authorized the execution of that certain stock pledge agreement dated July 22, 2014 by and among Jerry Hansen, Tracy Johnson, The
PI Foundation (collectively and for purposes of the Stock Pledge Agreement, the “Secured Party”) and the Company (the
“Stock Pledge Agreement”). In accordance with the terms and provisions of the Stock Pledge Agreement, the Company granted
a security interest to the Secured Party in the shares of common stock of CI acquired from the Sellers and the shares of common
stock issued by CI. The Company, in the event of a default under the Secured Note, authorized and appointed the Secured Party as
its attorney in fact to arrange for the transfer of the shares of CI to the name of the Secured Party. The shares of CI shall not
be encumbered or disposed of by the Company while the Stock Purchase Agreement is in force.
Upon the occurrence of an event of default
by the Company, the Secured Party shall have all of the rights and remedies of a secured party under the Wisconsin
Uniform Commercial Code in addition to the following:
| (a) | sell the shares of CI, which sale can be a public or private sale and the Secured Party shall determine
the terms of any such sale in its sole discretion. The Secured Party shall be entitled to use the proceeds of the sale towards
the amounts that the Company owes the Secured Party under the Stock Purchase Agreement. The Secured Party may add to what the Company
owes the Secured Party the expenses of collection, sale and delivery of the shares of CI and any other expenses, including, but
not limited to, reasonable attorney’s fees and disbursements, costs, broker’s commission, any and all transfer fees
and taxes. The Company will pay the Secured Party any difference between the proceeds which the Secured Party realizes from the
sale and what the Company owes the Secured Party. Upon each such sale the Secured Party may purchase all or any part of the collateral
being sold, free from and discharged of all trusts, claims, right of redemption and equities of the Company, which are hereby waived
and released; |
| (b) | elect to continue to hold the shares of CI if the Secured Party determines that a better price
may be obtained at a later date and the Secured Party will not be liable to the Company for any loss in value in the Shares. If
the Secured Party has the right to sell the shares and has not begun to do so within ninety (90) days after the obligations of
the Company under the Secured Note have been accelerated, the Company may demand in writing that the Secured Party proceed to sell
the shares. However, the Secured Party will not be required to sell the shares if in the Secured Party’s reasonable discretion
the net proceeds would not be enough to repay in full the obligations of the Company and the amounts due under the Stock Purchase
Agreement; |
| (c) | complete, in connection with a sale, a stock power in order to transfer the shares of CI; or |
| (d) | terminate the Company’s right to vote the shares of CI and the Secured Party may vote such
shares in its discretion. By signing the Stock Pledge Agreement, the Company gave the Secured Party a right and proxy to vote the
shares of CI as the Company’s agent, which cannot be revoked. |
In the event the Secured Party sells the shares of CI,
the proceeds shall be applied as follows: (a) to the expenses of collecting, selling and delivering the shares of CI including,
but not limited to, attorney’s fees, brokerage commissions, auctioneer’s fees, transfer fees, disbursements and taxes;
(b) second, to the payment of the obligations of the Company under the transaction documents; and (c) finally, the surplus if any
to the Company.
Securities Control Agreement
On July 22, 2014, the Board of Directors
authorized the execution of that certain securities control agreement dated July 22, 2014 by and among Jerry Hansen, Tracy Johnson,
The PI Foundation (collectively and for purposes of the Securities Control Agreement, the “Secured Party”) and the
Company (the “Securities Control Agreement”). In accordance with the terms and provisions of the Securities Control
Agreement, the Company agreed that as the registered owner of the 5,000,244 shares of common stock of CI, it would not change the
registered owner of such shares of common stock without the prior written consent of the Secured Party.
Escrow Agreement
On July 22, 2014, the Board of Directors
authorized the execution of that certain escrow agreement (the “Escrow Agreement”), by and among Mark E. Rinehart,
as escrow agent, Jerry Hanson, Tracy Johnson, The PI Foundation and the Company (the “Escrow Agreement”), pursuant
to which the Escrow Agent shall hold certain documents and other items and perform certain obligations in relation to the Stock
Purchase Agreement.
The foregoing is a summary description
of the terms and conditions of the Stock Purchase Agreement, the Secured Note, the Stock Pledge Agreement, the Securities Control
Agreement and the Escrow Agreement and does not purport to be complete and is qualified in its entirety by reference to the Stock
Purchase Agreement, the Secured Note, the Stock Pledge Agreement, the Securities Control Agreement and the Escrow Agreement, a
form of which each is filed hereto as Exhibit 10.1, 10.2, 10.3, 10.4 and 10,5, respectively, to this Current Report on Form 8-K
and incorporated by reference herein.
SECTION 9 - FINANCIAL STATEMENTS AND EXHIBITS
ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements of Business
Acquired.
Not applicable.
(b) Pro forma Financial Information.
Not applicable.
(c) Shell Company Transaction.
Not applicable.
(d) Exhibits.
10.1 Stock Purchase Agreement
dated July 22, 2014 among Kleangas Energy Technologies Inc., Jerry Hansen, Tracy Johnson and The PI Foundation, a non-profit Utah
corporation.
10.2 Secured Promissory Note
dated July 22, 2014 among Kleangas Energy Technologies Inc., Jerry Hansen, Tracy Johnson and The PI Foundation, a non-profit Utah
corporation.
10.3 Stock Pledge Agreement
dated July 22, 2014 among Kleangas Energy Technologies Inc., Jerry Hansen, Tracy Johnson and The PI Foundation, a non-profit Utah
corporation.
10.4 Securities Control
Agreement dated July 22, 2014 among Kleangas Energy Technologies Inc., Jerry Hansen, Tracy Johnson and The PI Foundation,
a non-profit Utah corporation.
10.5 Escrow Agreement dated July 22, 2014 among Mark
E. Rinehart, as escrow agent, Terry Hansen, Tracy Johnson, The PI Foundation and Kleangas Energy Technologies Inc.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| Dated: August 6, 2014 |
Kleangas Energy Technologies Inc. |
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/s/Bo Linton |
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By: Bo Linton |
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Its: CEO |
Exhibit 10.1
STOCK PURCHASE AGREEMENT
entered into by and among
JERRY HANSEN,
an individual residing in the State of
Utah
TRACY JOHNSON,
an individual residing in the State of
Utah
and
THE PI FOUNDATION, INC.,
a Utah nonprofit corporation,
collectively, “Seller”
and
KLEANGAS ENERGY TECHNOLOGIES, INC.,
a Delaware corporation
(“Buyer”)
Effective as of July 22, 2014
STOCK PURCHASE AGREEMENT
TABLE OF CONTENTS
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| ARTICLE I - ACQUISITION AND SALE OF stock |
1 |
| 1.1 Sale, Assignment and Transfer. |
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| 1.2 Newly Issued Stock. |
1 |
| 1.3 Purchase Price. |
1 |
| 1.4 Loan Payments. |
3 |
| 1.5 Closing Deliveries. |
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| ARTICLE II - REPRESENTATIONS AND WARRANTIES OF JERRY HANSEN AND TRACY JOHNSON |
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| 2.1 Organization of the Company. |
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| 2.2 Status and Effect of Delivery of the Stock owned by Hansen and Johnson. |
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| 2.3 Authority. |
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| 2.4 No Conflicts. |
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| 2.5 Performance of Obligations. |
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| 2.6 Stock. |
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| 2.7 Financial Statements. |
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| 2.8 Operations Since December 31, 2013. |
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| 2.9 Taxes. |
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| 2.10 Licenses. |
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| 2.11 Title to Property. |
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| 2.12 No Undisclosed Events, Liabilities, Developments or Circumstances. |
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| 2.13 No Violations, Litigation or Regulatory Action. |
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| 2.14 Personal Property. |
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| 2.15 Disclosure. |
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| 2.16 Assumption of Risk Concerning Buyer’s Financial Condition. |
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| ARTICLE III - REPRESENTATIONS AND WARRANTIES OF the PI Fund |
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| 3.1 Status and Effect of Delivery of the Stock owned by the PI Fund. |
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| 3.2 Authority. |
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| ARTICLE IV - REPRESENTATIONS AND WARRANTIES OF BUYER |
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| 4.1 Organization of Buyer. |
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| 4.2 Authority. |
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| 4.3 No Conflicts. |
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| 4.4 No Litigation. |
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| 4.5 Investment Representation. |
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| 4.6 Accredited Investor Status. |
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| 4.7 Information. |
10 |
| 4.10 Securities Laws. |
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| 4.11 Opportunity to Investigate. |
10 |
| 4.12 Information Provided to Buyer. |
10 |
| 4.13 Future Plans and Prospects of the Company. |
10 |
| 4.14 No Governmental Review. |
11 |
| 4.15 Investment Risks. |
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| 4.16 Possible Loss of Investment. |
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| 4.17 Suitable Investment. |
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| 4.18 No Intent to Assign the Stock. |
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| 4.19 Qualifications of Buyer. |
11 |
| 4.20 No Nominee Ownership of the Stock. |
11 |
| 4.21 No General Solicitation. |
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| 4.22 Backup Withholding. |
11 |
| 4.23 Buyer’s Legal Counsel. |
12 |
| 4.24 Buyer’s Financial Qualification. |
12 |
| 4.25 Disclosure. |
12 |
| ARTICLE V - ACTIONS PRIOR TO THE CLOSING DATE |
12 |
| 5.1 Due Diligence Information by the Buyer. |
12 |
| 5.2 Preservation of Representations and Warranties. |
13 |
| 5.3 No Public Announcements. |
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| 5.4 Accounting Transition. |
13 |
| ARTICLE VI - CONDITIONS TO OBLIGATIONS OF BUYER |
13 |
| 6.1 No Misrepresentation of Breach of Covenants and Warranties. |
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| 6.2 Corporate Action. |
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| 6.3 No Restraint or Litigation. |
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| ARTICLE VII - CONDITIONS TO OBLIGATIONS OF SELLER |
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| 7.1 No Misrepresentations or Breach of Covenants and Warranties. |
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| 7.2 Corporate Action. |
14 |
| 7.3 No Restraint or Litigation. |
14 |
| ARTICLE VIII - INDEMNIFICATION |
14 |
| 8.1 Indemnification by Jerry Hansen and Tracy Johnson. |
14 |
| 8.2 Indemnification by the Buyer. |
14 |
| 8.3 Notice of Claims. |
15 |
| 8.4 Cooperation. |
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| 8.5 Objections. |
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| 8.6 Limitation on Damages. |
16 |
| ARTICLE IX - TERMINATION |
16 |
| ARTICLE X - GENERAL PROVISIONS |
17 |
| 10.1 Confidential Nature of Information. |
17 |
| 10.2 Governing Law. |
17 |
| 10.3 Notices. |
17 |
| 10.4 Successors and Assigns. |
18 |
| 10.5 Entire Agreement; Amendments. |
18 |
| 10.6 Waivers. |
18 |
| 10.7 Expenses. |
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| 10.8 Severability. |
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| 10.9 No Set-Off. |
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| 10.10 Incorporation of Recitals and Exhibits. |
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| 10.11 Execution of Counterparts. |
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| 10.12 Arbitration of Disputes. |
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| 10.13 Time is of the Essence. |
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| 10.14 Further Assurances. |
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| 10.15 Jurisdiction and Venue. |
21 |
List of Exhibits, Schedules and
Index
Exhibit A - Note
Exhibit B - Security Agreement
Exhibit C - Stock Pledge Agreement
Exhibit D - Control Agreement
Exhibit E - Mortgage
Exhibit F - Stock Power
Schedule 2.12 - Events, Liabilities, Developments
and Circumstances
Schedule 2.13(b) - Lawsuits, Claims, Suits, Proceedings
and Investigations
STOCK PURCHASE AGREEMENT
This STOCK PURCHASE AGREEMENT (the “Agreement”)
is executed and delivered as of July 22, 2014 (the “Effective Date”), by and among JERRY HANSEN, an individual residing
in the State of Utah (“Hansen”), TRACY JOHNSON, an individual residing in the State of Utah (“ Johnson”),
and THE PI FOUNDATION, INC., a Utah nonprofit corporation (the “PI Fund”) (collectively herein, severally and not jointly,
“Seller”), and KLEANGAS ENERGY TECHNOLOGIES, INC., a Delaware corporation (“Buyer”). Seller and Buyer are
referred to collectively herein as the “Parties” and sometimes individually as a “Party.”
Recitals
A.
Seller owns all of the issued and outstanding shares of common stock (the “Stock”) of the Company, Inc., a Wisconsin
corporation (the “Company”).
B.
Seller wishes to sell the Stock to Buyer, and Buyer wishes to purchase the Stock from Seller, on the terms of this Agreement.
C.
Seller desires to sell, assign and transfer unto Buyer all of Seller’s right, title and interest in and to the Stock
on the terms and subject to the full satisfaction of all of the conditions contained herein.
Agreement
Therefore, for good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the Parties hereby agree as follows.
ARTICLE
I - ACQUISITION AND SALE OF stock
1.1
Sale, Assignment and Transfer. Upon the terms and subject to the conditions of this Agreement, on the Closing Date
(as defined in Section 1.3), Seller will sell, assign, transfer and set over unto Buyer, and Buyer will purchase from Seller, all
of the right, title and interest of Seller in and to the Stock, free and clear of all liens, claims, security interests, pledges
and encumbrances.
1.2
Newly Issued Stock. At the Closing, Buyer will purchase 833,333 shares of newly issued stock of the Company for a
purchase price of $1,300,000. The Company will use the purchase price it receives from issuance of the stock to pay off a commercial
loan owed by the Company to Bank (referred to by the Parties as the “Large Loan”) in approximately the same amount.
1.3
Purchase Price. This Agreement and the other Transaction Documents (defined below) will be held in escrow for up
to ninety days while the Buyer raises funds to pay the Purchase Price. Deliveries will be made out of escrow as provided in separate
Escrow Instructions and an Escrow Agreement. The purchase price (the “Purchase Price”) for the Stock will vary, depending
on when deliveries are made out of escrow. The date of delivery out of
escrow if a closing occurs is referred to herein as the “Closing
Date.” The Purchase Price will be paid to Seller as follows.
(a)
If the Closing Date occurs in August, 2014, the Purchase Price will be $7,281,555 plus the amount of “Other Current
Assets” shown on the Company’s balance sheet, calculated as of the Closing Date, paid $219,551 in cash by wire transfer
of immediately available funds to an account or accounts designated by Jerry Hansen on behalf of Seller and by delivery to Seller
of a Secured Promissory Note (the “Note”) in the principal amount of $7,062,004. The Note will be in substantially
the form of Exhibit A attached. When the Purchase Price is paid, Jerry Hansen and Tracy Johnson will pay off the amount of “Other
Current Assets” on the Company’s balance sheet as of the Closing Date.
(b)
If the Closing Date occurs in September, 2014, the Purchase Price will be $7,301,174 plus the amount of “Other Current
Assets” shown on the Company’s balance sheet, calculated as of the Closing Date, paid $239,170 in cash by wire transfer
of immediately available funds to an account or accounts designated by Jerry Hansen on behalf of Seller and by delivery to Seller
of the Note in the principal amount of $7,062,004. The Note will be in substantially the form of Exhibit A attached. When the Purchase
Price is paid, Jerry Hansen and Tracy Johnson will pay off the amount of “Other Current Assets” on the Company’s
balance sheet as of the Closing Date.
(c)
If the Closing Date occurs in October, 2014, the Purchase Price will be $7,320,860 plus the amount of “Other Current
Assets” shown on the Company’s balance sheet, calculated as of the Closing Date, paid $258,856 in cash by wire transfer
of immediately available funds to an account or accounts designated by Jerry Hansen on behalf of Seller and by delivery to Seller
of the Note in the principal amount of $7,062,004. The Note will be in substantially the form of Exhibit A attached. When the Purchase
Price is paid, Jerry Hansen and Tracy Johnson will pay off the amount of “Other Current Assets” on the Company’s
balance sheet as of the Closing Date.
(d)
The Note will bear no interest. The Note will require Buyer to make fifteen monthly payments of principal on the terms and
in the amount provided in the Note.
(e)
The Note will be secured by a first priority perfected security interest as evidenced in the Security Agreement in substantially
the form of Exhibit B attached, dated as of the Effective Date, that encumbers all of the assets of the Company. The Note will
further be secured by a Stock Pledge Agreement in substantially the form of Exhibit C attached, dated as of the Effective Date,
that encumbers the Stock (including the newly issued 833,333 shares of stock described in Section 1.2 above), together with a Control
Agreement in substantially the form of Exhibit D attached, together with a Mortgage on the Fiber
Recovery Building in substantially the form of Exhibit E attached, together with all stock powers, endorsements and other
security documents and other
agreements of any kind whatsoever entered into in connection
with the transactions contemplated in this Agreement (collectively, the “Security Documents”).
(f)
The Stock Pledge Agreement will require the Buyer, as pledgor under the Stock Purchase Agreement, to deliver to Seller monthly
reports for as long as amounts are owed under the Note. The monthly reports will summarize for Seller’s benefit all maintenance
of the property of the Company performed by Buyer and the Company, and will contain current monthly and year to date financial
statements (balance sheet and income statement) of the Company. The monthly reports will also inform Seller of material developments,
both positive and adverse, that affect the Company and its assets during the preceding month.
(g)
The Note will give the Buyer, as maker of the Note, the option of missing up to two monthly payments without penalty or
interest during the Note’s initial fifteen month term. The Note will also allow the Buyer, as maker of the Note, to elect
to extend the Maturity Date of the Note from fifteen months beginning on the Closing Date to eighteen months beginning on the Closing
Date, if the maker notifies the holder of the Note of the maker’s wish to extend the Maturity Date, amounts owed under the
Note will bear interest at the rate of twelve percent per annum during the three month extension term.
(h)
All payments due under the Note will be made on Buyer’s behalf by, determined in Seller’s sole discretion,
either
(i)
Seller will at all times be entitled to direct that all payments made under the Note will be sent to one or more separate
bank accounts in the name of each of the persons referred to herein as “Seller,” in whatever relative amounts that
Jerry Hansen specifies.
1.4
Loan Payments. On the Closing Date, the Buyer will, in addition to the payments described above, pay off in full
the “Large Loan.” On the Closing Date, the Seller will use cash it receives as part of the initial Purchase Price payment
to pay off the intercompany payables owed by the Company to Jerry Hansen, Tracy Johnson and Hawks Rest, LLC in the approximate
amount of $460,000. On the date that is two months after the Closing Date, the
Buyer will contribute funds to the Company sufficient to allow the Company to pay off in full the “Small Loan.”
1.5
Closing Deliveries. In addition to the respective deliveries on the Closing Date set forth in Articles 6 and 7 hereof,
the Parties will deliver the following on the Closing Date:
(a)
Seller will deliver to the Buyer share certificates evidencing the Stock duly signed with signature medallion guaranteed
and further assign to the Buyer the Stock by a stock power in substantially the form of Exhibit F attached, or, in Seller’s
discretion by an Assignment and Bill of Sale covering the Stock, or, in Seller’s discretion, Seller may cause the Company
to cancel the Stock as of the Effective Date and issue and deliver to Buyer a new stock certificate registered in Buyer’s
name evidencing ownership of the Stock by Buyer. If requested by Seller, Buyer will endorse in blank or provide stock powers for
all stock certificates that Buyer receives from Seller and Buyer will deliver all such endorsed certificates and stock powers to
Seller at the Closing. Seller will be entitled to record the Mortgage encumbering the Fiber
Recovery Building in the real estate records of Marathon County, Wisconsin
and in any other offices or records as Seller will determines.
(b)
Buyer will deliver the Purchase Price by wire transfer of immediately available funds in accordance with the Seller’s
written wire instructions, together with the Note, the Security Agreement, the Stock Pledge Agreement, the Control Agreement and
the assurance from the Payment Agent, all as contemplated in Section 1.3 above.
ARTICLE II - REPRESENTATIONS AND WARRANTIES OF JERRY HANSEN AND TRACY JOHNSON
As an inducement to Buyer to enter into
this Agreement and to consummate the transactions contemplated hereby (subject to all of the terms of this Agreement), Jerry Hansen
and Tracy Johnson hereby represent and warrant to Buyer, in each case subject to their respective knowledge as of the Closing Date,
as follows. References below to Seller in this Article II are references to Jerry Hansen and Tracy Johnson only, and are not references
to the PI Fund. References to the Stock in this Article II are references only to Stock owned by Jerry Hansen and Tracy Johnson,
unless the context requires otherwise. The only representations and warranties made by the PI Fund under this Agreement are contained
in Article III below. All representations and warranties contained in this Article II are qualified by Schedules 2.12 and 2.13(b).
2.1
Organization of the Company. The Company is a corporation duly organized, validly existing and in good standing under
the laws of the State of Wisconsin and is duly qualified to transact business as
a foreign corporation and is in good standing in each of the jurisdictions requiring such qualification and in which the ownership,
leasing or operation of the Company’s assets or the conduct or nature of the Business requires such qualification. The Company
has full corporate power and authority to own its assets and conduct its business as now being conducted (the “Business”).
The Company owns no interest in any other corporation, partnership or other business other than the Business.
2.2
Status and Effect of Delivery of the Stock owned by Hansen and Johnson. Each Seller is the lawful owner of the Stock
and has good title thereto, free and clear of all liens, claims, security interests, pledges and encumbrances. Each Seller’s
sole ownership interest in the Company is represented by certificates issued by the Company that evidence ownership of the Stock.
Except for this Agreement, there are no outstanding rights, options, warrants,
subscriptions or agreements of any kind to acquire from Seller
any of the Stock. The sale and assignment of the Stock by Seller to Buyer in accordance with this Agreement will vest title to
the Stock in Buyer, free and clear of all liens, security interests, pledges and encumbrances.
2.3
Authority. Each Seller has full power and authority to enter into this Agreement, to consummate the transactions
contemplated hereby and to comply with the terms, conditions and provisions hereof. The execution, delivery and performance of
this Agreement by Seller do not require any consent or authorization by any other person. This Agreement is, and each other agreement
or instrument of Seller contemplated hereby will be, the legal, valid and binding agreement of Seller, each enforceable in accordance
with its respective terms except (a) as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium or similar law affecting the enforcement of creditors’ rights generally, (b) to the extent that such enforceability
is subject to the principles of equity (regardless of whether such enforcement is considered in a proceeding in equity or at law)
and (c) the discretion of the court before which any enforcement proceedings may be brought (the “Enforceability Exceptions”).
2.4
No Conflicts. Neither the execution and delivery of this Agreement nor the consummation of any of the transactions
contemplated hereby, nor compliance with or fulfillment of the terms, conditions and provisions hereof or thereof or of any agreement
or instrument contemplated hereby will, with or without the giving of notice or the passage of time, or both:
(a)
conflict with, result in a breach of the terms, conditions or provisions of, or constitute a default, an event of default
or an event creating rights of acceleration, termination or cancellation or loss of rights under, or result in the creation or
imposition of any security interest, lien or other encumbrance upon any of the assets or properties of Seller under, its Articles
of Incorporation or bylaws or any note, instrument, agreement, mortgage, lease, license, franchise, permit, judgment, order, award,
decree or other authorization, right, restriction or obligation to which Seller is a Party, or under any statute, other law or
regulatory provision affecting Seller, or
(b)
require the approval, consent, authorization or act of, or the making by Seller of any declaration, filing or registration
with, any third party or any foreign, federal, state or local court, governmental authority or body.
2.5
Performance of Obligations. Seller has delivered a true and correct copy of the Company’s Articles of Incorporation,
as amended, bylaws, and corporate minute books to Buyer (the “Organizational Documents”).
2.6
Stock. The Stock (including the Stock owned by the PI Fund and sold as provided in this Agreement represents all
of the issued and outstanding shares of common stock of the Company. The Company has 10,000,000 authorized and 5,000,244 issued
and outstanding shares of common stock. At the Closing, the Company will issue an 833,333 shares of newly issued stock to the Buyer.
All voting rights in the Company are vested exclusively in its shares of common stock. All of the issued and outstanding shares
of common stock of the Company are validly authorized and issued and are fully paid and non-assessable, free of preemptive rights
(except as may be otherwise provided in the Company’s
Articles of Incorporation or required or permitted under applicable law), and have not been issued in violation of federal or state
securities laws. There are no outstanding warrants, options, commitments or rights of any kind to acquire from the Company any
shares of its common stock or securities of any kind. Prior to the Closing Date, the Company has and will have no obligation to
acquire any of its issued and outstanding shares of common stock or any other security issued by it from any holder thereof. There
are no voting agreements, voting trust agreements or shareholder or similar agreements relating to any capital stock of the Company.
2.7
Financial Statements. Seller has delivered to Buyer true and correct copies of (a) the reviewed balance sheet of
the Company as of December 31, 2013 (the “2013 Balance Sheet”), the statement of operations for the Company’s
fiscal year ending December 31, 2013, statement of changes in stockholders’ equity and statement of cash flows for the fiscal
year ended December 31, 2013, together with all notes to such financial statements and the reports thereon as prepared by Brad
Bradley Company, the Company’s independent certified public accountants, and (b) the unaudited, internally prepared balance
sheet of the Company dated as of May 31, 2014 and the statement of operations, statement of changes in stockholders’ equity
and statement of cash flows for the five months ended May 31, 2014.
2.8
Operations Since December 31, 2013. Except as may be disclosed in Schedule 2.12 or 2.13(b), since December 31, 2013,
there has been (a) no material adverse change in the Company, the Business or its operations or financial condition except as noted
in the financial statements set forth in Section 2.7 above, and (b) no material damage, destruction, loss or claim, whether or
not covered by insurance, or condemnation or other taking adversely affecting in any material respect the assets or properties
of the Company or the Business. Since December 31, 2013, the Company has conducted its Business only in the ordinary course and
in conformity with past practice.
2.9
Taxes. The Company has timely filed all required federal, state, county and local income, excise, withholding, property,
sales, use, franchise and other tax returns, declarations and reports which are required to be filed on or before the Effective
Date and has paid or reserved for all taxes which have become due pursuant to such returns or pursuant to any assessment which
has become payable except for taxes which it has contested in good faith. True and correct copies of all federal income tax returns
of the Company for all tax years ending on or after December 31, 2013 have been furnished to the Buyer. The Company has not received
a notice that any examination of or proceeding with respect to any tax return or report of the Company is currently in progress
and there are no outstanding agreements or waivers extending the statutory period of limitations applicable to any tax return of
the Company.
2.10
Licenses. True and correct copies of all authorizations, grants, permits and other licenses (collectively, “Licenses”)
granted to the Company by governmental agencies as of the Effective Date have previously been delivered to Buyer. The Company is
the exclusive holder of each of the Licenses, all of which are in full force and effect and are not subject to any pending or threatened
challenge, revocation, amendment or forfeiture. No material default or breach exists with respect to any of the Licenses and no
event or condition exists which but for the lapse of time or notice or both would constitute a material default or breach with
respect to any of the Licenses. True and correct copies of all reports relating to the Licenses have been and will be
timely filed with the appropriate body, and true and correct
copies of such reports have been and will be delivered to Buyer.
2.11
Title to Property. The Company has good title to all of its assets and properties, free and clear of all liens, claims,
charges, encumbrances, security interests, defects in title, equities, covenants and other restrictions of any kind except for
(a) encumbrances which individually and in the aggregate do not have a material adverse effect on any asset individually or the
Business in the aggregate or (b) the lien of taxes not yet due and payable.
2.12
No Undisclosed Events, Liabilities, Developments or Circumstances. Except as disclosed in Schedule 2.12, no event,
liability, development or circumstance has occurred or exists, or is reasonably expected to occur or exist with respect to the
Company or any of its businesses, properties, liabilities, prospects, operations (including results thereof) or condition (financial
or otherwise), that could reasonably likely have a Material Adverse Effect. “Material Adverse Effect” means any material
adverse effect on (a) the business, properties, assets, liabilities, operations (including results thereof), condition (financial
or otherwise) or prospects of the Company, either individually or taken as a whole, (b) the transactions contemplated hereby; or
(c) the authority or ability of the Company to perform any of its obligations hereunder.
2.13
No Violations, Litigation or Regulatory Action.
(a)
The Company has complied in all material respects with all material laws, regulations, rules, writs, injunctions, ordinances,
franchises, decrees or orders of any court or of any federal, state, municipal or other government, governmental department, commission,
board, bureau, agency or instrumentality which are applicable to the Business or the Licenses;
(b)
Except as disclosed in Schedule 2.13(b), there are no lawsuits, claims, suits, proceedings or investigations pending or,
to the best of Seller’s knowledge, threatened against the Company relating to the Business or the Licenses.
(c)
There is no action, suit or proceeding pending or, to the best of Seller’s knowledge, threatened against Seller or
the Company, which questions the legality or propriety of the transactions contemplated by this Agreement or which may have a material
adverse effect on Seller’s ability to perform its obligations hereunder.
2.14
Personal Property. All of the material assets and properties of the Company are in good operating condition, ordinary
wear and tear excepted, and are sufficient to carry on the Business as it is now conducted.
2.15
Disclosure. Except as expressly set forth herein, Seller disclaims all express and implied warranties relating to
the Stock and the Company and the assets, agreements and other documents or status of the Company, including without limitation
any warranty regarding the Company’s future operations, financial requirements or performance.
2.16
Assumption of Risk Concerning Buyer’s Financial Condition. Seller is voluntarily assuming certain risks associated
with the sale of the Stock to the Buyer, as described in this Section 2.16 below. Specifically, each Seller agrees that (a) Buyer
has not made, and Seller disclaims the existence of or its reliance on, any representation by Buyer concerning the Buyer’s
financial condition or ability to pay the Note; (b) Seller is not relying on any disclosure or non-disclosure concerning the Buyer’s
financial condition made or not made, or the completeness thereof, in connection with or arising out of the sale of the Stock to
the Buyer; and (c) Seller agrees not to assert against Buyer or any of Buyer’s respective partners, representatives, agents
or affiliates claims that Buyer misrepresented or failed to disclose its financial condition to Seller prior to Closing. Notwithstanding
the foregoing acknowledgements and agreements by Seller, however, even though Seller has agreed not to assert claims of misrepresentation
concerning Buyer’s financial condition, nothing in this Section 2.16 will prevent Seller from exercising any and all remedies
at law or equity to which Seller is entitled under this Agreement and the Security Documents should a breach of any of them occur.
ARTICLE III - REPRESENTATIONS AND WARRANTIES OF the PI Fund
As an inducement to Buyer to enter into
this Agreement and to consummate the transactions contemplated hereby (subject to all of the terms of this Agreement), the PI Fund
hereby represents and warrants to Buyer, in each case subject to the PI Fund’s knowledge as of the Closing Date, as follows.
References to the Stock in this Article III are references only to Stock owned by the PI Fund.
3.1
Status and Effect of Delivery of the Stock owned by the PI Fund. The PI Fund is the lawful owner of the Stock that
it owns and has good title thereto, free and clear of all liens, claims, security interests, pledges and encumbrances. The PI Fund’s
sole ownership interest in the Company is represented by certificates issued by the Company that evidence ownership of the Stock.
Except for this Agreement, there are no outstanding rights, options, warrants, subscriptions or agreements of any kind to acquire
from The PI Fund any of the Stock. The sale and assignment of the Stock by The PI Fund to Buyer in accordance with this Agreement
will vest title to the Stock in Buyer, free and clear of all liens, security interests, pledges and encumbrances created by or
through the PI Fund.
3.2
Authority. The PI Fund has full power and authority to enter into this Agreement, to consummate the transactions
contemplated hereby and to comply with the terms, conditions and provisions hereof.
ARTICLE IV - REPRESENTATIONS AND WARRANTIES OF BUYER
As an inducement to Seller to enter into
this Agreement and to consummate the transactions contemplated hereby (subject to all of the terms of this Agreement), Buyer hereby
represents and warrants to all of the persons described herein as Seller as follows:
4.1
Organization of Buyer. Buyer is a corporation that is duly organized, validly existing and in good standing under
the laws of the State of Delaware.
4.2
Authority. Buyer has full power and authority to enter into this Agreement, to consummate the transactions contemplated
hereby and to comply with the terms, conditions and
provisions hereof. The execution, delivery and performance
of this Agreement by Buyer does not require any consent or authorization by any other person. This Agreement is, and each other
agreement or instrument of Buyer contemplated hereby will be, the legal, valid and binding agreement of Buyer, each enforceable
in accordance with its respective terms except for the Enforceability Exceptions. The Notes and Security Documents have been duly
authorized by the Buyer and, when duly executed and delivered in accordance with their respective terms by each of the parties
thereto, will constitute a valid and legally binding agreement of the Buyer, enforceable
against the Buyer in accordance with their respective terms.
4.3
No Conflicts. Neither the execution and delivery of this Agreement nor the consummation of any of the transactions
contemplated hereby, nor compliance with or fulfillment of the terms, conditions and provisions hereof or thereof or of any agreement
or instrument contemplated hereby will, with or without the giving of notice or the passage of time, or both:
(a)
conflict with, result in a breach of the terms, conditions or provisions of, or constitute a default, an event of default
or an event creating rights of acceleration, termination or cancellation or loss of rights under, or result in the creation or
imposition of any security interest, lien or other encumbrance upon any of the assets or properties of the Buyer under, its Articles
of Incorporation, bylaws or other governing documents, or any note, instrument, agreement, mortgage, lease, license, franchise,
permit, judgment, order, award, decree or other authorization, right, restriction or obligation to which the Buyer, or any owner
of Buyer is a party or by which any of the assets or properties of the Buyer is subject, or any statute, other law or regulatory
provision affecting Buyer, its assets or properties; or
(b)
require the approval, consent, authorization or act of, or the making by Buyer of any declaration, filing or registration
with, any limited partner of Buyer, any third party or any foreign, federal, state or local court, governmental authority or body.
4.4
No Litigation. There is no action, suit or proceeding pending or, to the best knowledge of Buyer, threatened which
questions the legality or propriety of the transactions contemplated by this Agreement.
4.5
Investment Representation. Buyer is purchasing the Stock for its own account and without any present view to distribute
or resell same, except as permitted under Section 10.5(a) hereof.
4.6
Accredited Investor Status. Such Buyer is an “accredited investor” as that term is defined in Rule 501(a)
of Regulation D. The Buyer understands that the Stock is being offered and sold to it in reliance on specific exemptions from the
registration requirements of United States federal and state securities laws and that the Company is relying in part upon the truth
and accuracy of, and such Buyer’s compliance with, the representations, warranties, agreements, acknowledgments and understandings
of such Buyer set forth herein in order to determine the availability of such exemptions and the eligibility of such Buyer to acquire
the Stock.
4.7
Information. The Buyer and its advisors, if any, have been furnished with all materials relating to the business,
finances and operations of the Company and materials relating to the offer and sale of the Stock which have been requested by the
Buyer. The Buyer understands that its investment in the Stock involves a high degree of risk. The Buyer has sought such accounting,
legal and tax advice as it has considered necessary to make an informed investment decision with respect to its acquisition of
the Stock. Buyer has received and reviewed the following:
4.10
Securities Laws. Except as disclosed in Section 4.10, Buyer is and all of the transactions contemplated in this Agreement
are, in full compliance with all applicable federal and state securities laws and with all laws, rules and regulations of any securities
exchange or market pursuant to which shares of stock of the Buyer are made.
4.11
Opportunity to Investigate. Buyer has also had the opportunity to ask questions of, and receive answers from, the
Company or an agent or a representative of the Company concerning the terms and provisions of the Business, the Company and the
Information, and the business and affairs of the Company and to obtain any additional information necessary to verify such information,
and Buyer has received such information concerning the Company as Buyer considers necessary or advisable in order to form a decision
concerning an investment in the Company. Buyer further represents and warrants that in making this investment, Buyer is not relying
on any representation or warranty of any person, entity or individual, other than the representations and warranties of the Company
set forth in this Agreement or otherwise provided in writing by an authorized officer of the Company to Buyer.
4.12
Information Provided to Buyer. Buyer understands and acknowledges that the Information which Buyer has received is
not a prospectus, private placement memorandum, offering circular, offering statement or similar Information. Buyer understands
that any Information that has been furnished to Buyer has been furnished only as part of an overall furnishing of information about
the Company and that Buyer has viewed the Information with a critical frame of mind and, to the extent that information contained
in any Information was deemed by Buyer to be important information in making an investment decision, Buyer has discussed such information
with the officers and other personnel of the Company in order to form a better judgment regarding the accuracy and adequacy of
such information. Buyer agrees that no statement in any Information, even if framed as a factual statement, will, of itself, constitute
a factual representation by the Company in light of the various purposes for which any such Information may have been created or
any such statement made.
4.13
Future Plans and Prospects of the Company. Buyer acknowledges and understands that any information provided about
the Company’s future plans and prospects is uncertain and subject to all of the uncertainties inherent in future predictions,
as well as the risks described in the Information. Buyer hereby agrees to accept all of the risks described in the Information.
4.14
No Governmental Review. Buyer understands that purchase or ownership of the Stock and the transactions contemplated
in this Agreement have not been scrutinized by the United States Securities and Exchange Commission (the “Commission”)
or by any state securities or other authority and, because of the small number of persons solicited to invest in the Company and
the private nature of the placement, that all documents, records and books pertaining to this investment have been made available
to Buyer and Buyer’s representatives, such as attorneys, accountants and/or purchaser representatives.
4.15
Investment Risks. Buyer realizes that this investment involves a high degree of risk, including the risk of loss
of all investment in the Company and including, without limitation, the risks listed in Schedule D attached.
4.16
Possible Loss of Investment. Buyer is able to bear the economic risk of the investment, including the total loss
of such investment.
4.17
Suitable Investment. Buyer believes, in light of the information provided pursuant to this Agreement and otherwise,
that investing funds pursuant to the terms of this Agreement is an appropriate and suitable investment for Buyer.
4.18
No Intent to Assign the Stock. Buyer’s current financial condition is such that (and Buyer expects Buyer’s
financial condition to be such that in the future) Buyer does not have any present or contemplated need to assign the Stock to
satisfy any existing or contemplated undertaking, need or indebtedness. Buyer agrees that the Stock is not transferable.
4.19
Qualifications of Buyer. Buyer. Buyer is experienced and knowledgeable in financial and business matters to the extent
that Buyer is capable of evaluating the merits and risks of the prospective investment in the Company. Buyer has obtained, to the
extent Buyer deems necessary, professional advice with respect to the risks inherent in the investment in the Company and acquisition
of the Stock in light of Buyer’s financial condition and investment needs. Buyer has been given access to full and complete
information regarding the Company and has utilized such access to Buyer’s satisfaction for the purpose of obtaining information
and, particularly, Buyer has obtained, and has had the opportunity to obtain, information from the Company as set forth in Section
4.12 above.
4.20
No Nominee Ownership of the Stock. The Stock is being purchased by the Buyer in Buyer’s name solely for Buyer’s
own beneficial interest and not as nominee for, on behalf of, for the beneficial interest of, or with the intention to transfer
to, any other person, trust or organization.
4.21
No General Solicitation. Buyer’s purchase of the Stock is not the result of any general solicitation or general
advertising, including, but not limited to (a) any advertisement, article, notice or other communication published in any
newspaper, magazine or similar media or broadcast over television or radio; and (b) any seminar or meeting whose attendees
have been invited by any general solicitation or general advertising.
4.22
Backup Withholding. Buyer certifies, under penalty of perjury, that Buyer is not subject to the backup withholding
provisions of the Internal Revenue Code of 1986, as amended. Buyer understands that Buyer is subject to backup withholding if:
(a) Buyer fails to furnish a
Social Security Number or Taxpayer Identification Number
herein; (b) the Internal Revenue Service notifies the Company that Buyer furnished an incorrect Social Security Number or
Taxpayer Identification Number; (c) Buyer is notified that it is subject to backup withholding; or (d) Buyer fails to certify
that Buyer is not subject to backup withholding or Buyer fails to certify Buyer’s Social Security Number or Taxpayer Identification
Number.)
4.23
Buyer’s Legal Counsel. Buyer understands that:
4.24
Buyer’s Financial Qualification. Buyer has, and on the Closing Date will have, the requisite financial resources
to fully and completely undertake and perform Buyer’s obligations under this Agreement, including the payment of the Purchase
Price and all amounts owed under the Note to Seller.
4.25
Disclosure. None of the representations or warranties of Buyer contained herein and none of the other information
or documents furnished or to be furnished to the Seller or any of its representatives by Buyer or its representatives, is false
or misleading in any material respect or omits to state a fact herein or therein necessary to make the statements herein or therein
not misleading in any material respect.
ARTICLE
V - ACTIONS PRIOR TO THE CLOSING DATE
Jerry Hansen, Tracy Johnson (referred
to collectively in this Article V as Seller) and the Buyer will take the following actions between the Effective Date and the Closing
Date:
5.1
Due Diligence Information by the Buyer. Seller will cause the Company to afford to the partners, officers, employees
and authorized representatives (including, without limitation, independent public accountants and attorneys) of the Buyer and its
agents, at Buyer’s sole expense, reasonable access upon reasonable notice and during normal business hours to contact employees
of Seller and the Company, to inspect and make copies of the Company’s books and records reasonably requested by Buyer, to
inspect the physical assets and operations of the Business and to contact the Company’s vendors, other parties to contracts
with the Company, customers, lenders, employees, agents and independent contractors. Information obtained by Buyer as described
in the preceding sentence is referred to herein as “Due Diligence Information.” Buyer agrees that it will keep and
maintain any and all Due Diligence Information obtained by it, its agents, and counsel, confidential, and will not make use of
any such information other than for its evaluation of the transactions contemplated herein and will return all such information,
and all copies thereof, to Seller if the transactions contemplated hereby do not close for any reason. Buyer agrees that its investigation
will be conducted in such a manner as not to materially interfere with the operations of the Business. Notwithstanding any other
provision of this Agreement, Buyer agrees not to contact or communicate with any customer,
supplier or employee of the Company without first notifying
the Company and providing it the opportunity to be present during such contact.
5.2
Preservation of Representations and Warranties. Each of the Parties will refrain from taking any action which would
render any representation or warranty contained in this Agreement inaccurate or untrue as of the Closing Date and will use diligent
efforts to keep such representations and warranties true and correct. Each Party will promptly notify the other upon discovery
of any inaccuracy of any representation or warranty hereunder and will commence to diligently remedy such inaccuracy to the extent
such remedy is practical. Such notification will not be deemed a modification or waiver of the representation and warranty.
5.3
No Public Announcements. Neither of the Parties hereto will, without the approval of the other Party (which may be
unreasonably withheld), make any press release or other public announcement concerning the transaction contemplated by this Agreement,
except as and to the extent that such Party will be so obligated by law, in which case the other Party will be advised and the
Parties will use their best efforts to cause a mutually agreeable release or announcement to be issued.
5.4
Accounting Transition. After the Closing, the Parties will cooperate as reasonably necessary to effect a smooth accounting
transition of the Company to Buyer’s accountants and agents. The Parties will cause the financial books and records of the
Company to be closed as close as possible to the Closing Date. Accounting methods will be used in closing such books which will
be consistent with those methods used in prior years and which do not have the effect of distorting income or expenses. State,
local and other taxes based on items other than income or sales will be computed for the twelve (12) months beginning January 1,
2014 and will be prorated on a daily basis for the year in which the Closing Date occurs.
ARTICLE
VI - CONDITIONS TO OBLIGATIONS OF BUYER
The obligations of the Buyer to consummate
the transactions herein contemplated are subject to the satisfaction on or prior to the Closing Date of the following conditions,
unless waived in writing by the Buyer:
6.1
No Misrepresentation of Breach of Covenants and Warranties. There will have been no material breach by Seller in
the performance of any of its covenants and agreements herein; each of the representations and warranties of Seller contained or
referred to herein will be true and correct in all material respects on the Closing Date as though made on the Closing Date, except
for changes therein specifically permitted by this Agreement; and there will have been delivered to the Buyer a certificate or
certificates to that effect, dated the Closing Date, signed by and on behalf of Seller by its President.
6.2
Corporate Action. Seller will have taken all corporate action necessary to approve the transactions contemplated
by this Agreement, and Seller will have furnished the Buyer with certified copies of resolutions adopted by the Board of Directors
of Seller, authorizing the performance by Seller of the transactions contemplated hereby.
6.3
No Restraint or Litigation. No action, suit, investigation or proceeding will have been instituted or threatened
by any third party, governmental or regulatory agency to restrain, prohibit or otherwise challenge the legality or validity of
the transactions contemplated hereby.
ARTICLE
VII - CONDITIONS TO OBLIGATIONS OF SELLER
The obligations of the Seller to consummate
the transactions herein contemplated are subject to the satisfaction on or prior to the Closing Date of the following conditions
unless waived in writing by the Seller:
7.1
No Misrepresentations or Breach of Covenants and Warranties. There will have been no material breach by the Buyer
in the performance of any of its covenants and agreements herein; each of the representations and warranties of Buyer contained
or referred to herein will be true and correct in all material respects on the Closing Date as though made on the Closing Date
except for changes therein specifically permitted by this Agreement; and there will have been delivered to Seller a certificate
to such effect, dated the Closing Date, and signed on behalf of Buyer by any General Partner.
7.2
Corporate Action. Buyer will have taken all corporate action necessary to approve the transactions contemplated by
this Agreement, and Buyer will have furnished Seller with certified copies of resolutions adopted by the Board of Directors of
Seller, authorizing the performance by Buyer of the transactions contemplated hereby.
7.3
No Restraint or Litigation. No action, suit or proceeding will have been instituted or threatened by any third party
or governmental agency to restrain, prohibit or otherwise challenge the legality or validity of the transactions contemplated hereby.
ARTICLE
VIII - INDEMNIFICATION
8.1
Indemnification by Jerry Hansen and Tracy Johnson. Jerry Hansen and Tracy Johnson will indemnify, hold harmless,
defend and bear all costs of defending Buyer, together with its partners, and its and their successors, heirs, personal representatives,
trustees, beneficiaries, and assigns, from, against and with respect to any and all damage, loss, deficiency, expense (including,
but not limited to, any court costs or expenses, and reasonable attorneys’, accountants’ and expert witness fees or
expenses), action, suit, proceeding, demand, assessment or judgment (collectively, “Damages”) to or against Buyer arising
out of or in connection with any breach, inaccuracy or violation of or non-performance by Jerry Hansen and Tracy Johnson of any
of its representations, warranties, covenants or agreements contained in this Agreement or in any document, certificate or schedule
required to be furnished pursuant to this Agreement.
8.2
Indemnification by the Buyer. Buyer will indemnify, hold harmless, defend and bear all costs of defending Seller,
together with its successors and assigns, from, against and with respect to any and all Damages to or against Seller arising out
of or in connection with:
(a)
Any debt, obligation, liability or commitment of the Company after the Closing Date; and
(b)
Any breach, inaccuracy or violation of, or non-performance by, Buyer or any of its representations, warranties, covenants
or agreements contained in this Agreement or in any document, certificate or schedule required to be furnished pursuant to this
Agreement.
8.3
Notice of Claims. If any claim is made against a Party which, if sustained, would give rise to a liability of the
other hereunder, that latter Party (the “Indemnitee”) will promptly cause notice of the claim to be delivered to the
former Party (the “Indemnitor”) and will afford the Indemnitor and its counsel, at its sole expense, the opportunity
to defend or settle the claim (and the Indemnitee will have the right to participate at its sole expense). Any notice of a claim
will state specifically the representation, warranty, covenant or agreement with the alleged basis for the claim, and the amount
of liability asserted against the Indemnitor by reason of the claim and the Indemnitor must promptly acknowledge its indemnification
obligation. If such notice and opportunity are not given, or if any claim is compromised or settled without notice to and consent
of the other, no liability will be imposed by reason of such claim, but if notice is given and the Indemnitor fails to assume the
defense of the claim within fifteen (15) days of mailing thereof, the claim may be defended, compromised or settled (except for
a claim which does not involve a third party which cannot be settled without the consent of the Indemnitor) by the Indemnitee without
the consent of the Indemnitor and the Indemnitor will remain liable under this Article. During such fifteen (15) day period, the
Indemnitee will take all steps necessary to protect the interests of itself and the Indemnitor, including the filing of necessary
responsive pleadings, the seeking of emergency relief and other action necessary to maintain the status quo, subject to reimbursement
from the Indemnitor of its expenses in doing so. Notwithstanding the foregoing, the Indemnitee may, upon notice to Indemnitor,
take control of any and all action necessary to (a) prevent its assets from being seized, attached or otherwise encumbered as a
result of such third-Party action and (b) respond to and control any action requiring immediate response, such as prayers for injunctive
and other emergency relief, provided that Indemnitee may participate in such defense at its sole cost and expense.
8.4
Cooperation. The Parties will cooperate at all times in reasonable requests for documents, testimony and other forms
of assistance in connection with any claim pursuant to this Article. Indemnitor will not in the defense of any such claim consent
to the entry of any judgment against or affecting the Indemnitee (other than a judgment or a dismissal on the merits and without
costs) except for the written consent of the Indemnitee, or enter into any settlement (except with the written consent of the Indemnitee)
which does not include as an unconditional term thereof the giving by the claimant or the plaintiff to the Indemnitee of a full
release in respect to such claim.
8.5
Objections. If a claim for indemnification does not arise from the claim or demand of a third party, the Indemnitor
will have thirty (30) days after the receipt of the written notice of such claim to object to the claim by giving written notice
to the Indemnitee specifying the reasons for such objection or objections. If the Indemnitor does not so object to the claim, the
total amount of the claim will be promptly paid by the Indemnitor. If the Indemnitor objects to the claim and the Parties are unable
to settle any such dispute, then the Parties will have all rights and remedies at law or in equity, and either the Indemnitor or
the Indemnitee may commence an action or proceeding to resolve such dispute.
8.6
Limitation on Damages. The obligations described in Sections 8.1 and 8.2 will be subject to and limited by the following
principles and limitations:
(a)
All representations, warranties, covenants and obligations contained in this Agreement will survive the consummation of
the transactions contemplated by this Agreement through July 22, 2015 and will thereafter terminate.
(b)
Seller will not be responsible to Buyer under this Article unless and to the extent that the aggregate of all Damages suffered
by Buyer exceeds $1,000,000.00 and then only for the amount of such excess up to an amount not greater than the Purchase Price
less $1,000,000.00.
(c)
No Damages will be assessed or payment required of Seller except to the extent of the post-tax effect on Buyer (taking into
account Buyer’s actual net income or loss together with tax carry forwards and carry backs for the year in which Damages
are paid.
(d)
The indemnifications provided in this Article will be the sole and exclusive post-Closing remedy for damages available to
any Party hereto for any claim hereunder or arising in connection with the transactions contemplated hereby.
(e)
No Party will be liable to the other hereunder for any consequential, special or punitive damages.
(f)
No Party will be liable for Damages or otherwise to the other Party to the extent the claiming Party had actual knowledge
prior to the Closing of any breach of representation or warranty or agreement, inaccuracy of any representation or warranty, non-fulfillment
of agreement or condition or otherwise, and all such warranties, representations, agreements or conditions will be deemed modified
and amended to the extent of such actual knowledge.
ARTICLE
IX - TERMINATION
Anything contained in this Agreement
to the contrary notwithstanding, this Agreement may be terminated at any time prior to the Closing Date (individually, the “Terminating
Event”):
(a)
By the mutual written consent of Seller and Buyer;
(b)
By Buyer upon the material breach by Seller or the material inaccuracy or untruth of any of its covenants or agreements
or representations or warranties contained herein, provided that such breach is not due to the actions of Buyer and such breach
is not remedied within thirty (30) days after receipt of notice thereof from Buyer;
(c)
By Seller upon the material breach by Buyer or the material inaccuracy or untruth of any of its covenants or agreements
or representations or
warranties contained herein, provided that such breach
is not due to the actions of Buyer and such breach is not remedied within thirty (30) days after receipt of notice thereof from
Seller;
(d)
By Buyer, if any of the conditions to the obligations of Buyer set forth in this Agreement have not been satisfied by the
Closing Date and such condition or conditions have not been waived by Buyer; and
(e)
By Seller, if any of the conditions set forth in this Agreement have not been satisfied by the Closing Date, and such condition
or conditions have not been waived by Seller.
ARTICLE X - GENERAL PROVISIONS
10.1
Confidential Nature of Information. Each Party hereto agrees that it will treat in confidence all documents, materials
and other information which it will have obtained regarding any other Party during the course of the negotiations leading to the
consummation of the transactions contemplated hereby, the investigation provided for herein and the preparation of this Agreement
and other related documents, and, in the event the transactions contemplated hereby will not be consummated, all copies of non-public
documents and material which have been furnished in connection therewith will be promptly returned to the Party furnishing the
same, will continue to be treated as confidential information and will not be used for the benefit of the Party who returned such
confidential information.
10.2
Governing Law. This Agreement will be governed by and interpreted in accordance with the laws of the State of Wisconsin,
without giving effect to the provisions, policies or principles of the State of Wisconsin
relating to choice or conflict of laws.
10.3
Notices. All notices or other communications required or permitted hereunder will be in writing and will be deemed
given or delivered when delivered personally, or when sent by registered or certified mail or prepaid overnight courier or by legible
facsimile addressed as follows:
If to Seller, to:
Jerry
Hansen
6
Shadow Wood Lane
Sandy,
Utah 84092
Tracy
Johnson
11470
Jolley Acres Circle
Sandy,
Utah 84092
Greg C. Zaugg
Attorney at Law
Callister Nebeker
& McCullough
Parkview Plaza
One
Suite 600
2180 South 1300
East
Salt Lake City,
Utah 84106
Telephone: 801-530-7300
Cell: 801-898-3116
Fax: 801-746-8607
With a copy, which shall
not constitute notice, to:
Mark E. Rinehart
Attorney at Law
Callister Nebeker
& McCullough
Parkview Plaza
One
Suite 600
2180 South 1300
East
Salt Lake City,
Utah 84106
Telephone: 801-530-7300
Cell: 801-898-3116
Fax: 801-746-8607
If to the Buyer, to
: Bo Linton
Fiber
Recovery, Inc.,
3001 N. Rocky Pt. RD.
Suite 200
Tampa, Florida,
33771
or to such address as any Party may
indicate by a notice delivered to the other Parties hereto. Notice is deemed received the same day (in the case of personal delivery
or email), three (3) days after mailing (in the case of registered mail) and the next business day (in the case of overnight courier
or facsimile or scanned or email transmission).
10.4
Successors and Assigns. The rights of the Parties under this Agreement are not be assignable.
10.5
Entire Agreement; Amendments. This Agreement and the Schedules and Exhibits referred to herein and the documents
delivered pursuant hereto, contain the entire understanding of the Parties hereto with regard to the subject matter contained herein
or therein, and supersede all prior agreements, understandings or letters of intent between or among any of the Parties hereto.
The Parties hereto, by mutual agreement in writing, may amend, modify and supplement this Agreement.
10.6
Waivers. Any term or provision of this Agreement may be waived, or the time for its performance may be extended,
by the Party entitled to the benefit thereof. The failure of
any Party hereto to enforce at any time any provision of
this Agreement will not be construed to be a waiver of such provision, nor in any way to affect the validity of this Agreement
or any part hereof or the right of any Party thereafter to enforce each and every such provision. No waiver of any breach of this
Agreement will be held to constitute a waiver of any other or subsequent breach.
10.7
Expenses. Each Party hereto will pay all of its respective costs and expenses incurred incident to its negotiation
and preparation of this Agreement and to its performance and compliance with all agreements and conditions contained herein on
its part to be performed or complied with, including the fees, expenses and disbursements of its counsel and accountants.
10.8
Severability. Should any provision of this Agreement for any reason be declared invalid or unenforceable by final
and non-appealable order of any court or regulatory body having jurisdiction there over, such decision will not affect the validity
of the remaining portions, which remaining portions will remain in force and effect as if this Agreement had been executed with
the invalid portion thereof eliminated. In the event any such provision of this Agreement is so declared invalid, the Parties will
promptly renegotiate in good faith new provisions to eliminate such invalidity and to restore this Agreement as nearly as possible
to its original intent and effect.
10.9
No Set-Off. All obligations of Buyer under this Agreement, the Note, the Security Agreement, the Control Agreement,
the Mortgage and the Stock Pledge Agreement will be paid by Buyer without notice, demand, counterclaim, setoff, deduction or defense
and without abatement, suspension, deferment, diminution or reduction, and such obligations of Buyer will in no way be released,
discharged or otherwise affected by reason of: any damage to or destruction or condemnation of or any loss of any asset of the
Company or any part thereof; or any action taken by the Town of Ringle or Marathon County
or the State of Wisconsin; any bankruptcy, insolvency, reorganization, composition, adjustment, dissolution, liquidation
or other like proceeding; any claim that Buyer has or might have against Seller; any default or failure on the part of Seller to
perform or comply with any of the terms of this Agreement; or any other occurrence whatsoever, whether similar or dissimilar to
the foregoing; in each case, whether or not Buyer will have notice or knowledge of any of the foregoing. Buyer waives all rights
now or hereafter conferred by statute or otherwise to any abatement, suspension, deferment, diminution or reduction of any of its
obligations under this Agreement.
10.10
Incorporation of Recitals and Exhibits. The recitals, exhibits and schedules hereto are hereby incorporated into
this Agreement. All references herein to this Agreement include references to all recitals, exhibits and schedules to this Agreement.
10.11
Execution of Counterparts. This Agreement may be executed in one or more counterparts, each of which will be considered
an original instrument, but all of which will be considered one and the same agreement, and will become binding when one or more
counterparts have been agreed by each of the Parties and delivered to Seller and Buyer.
10.12
Arbitration of Disputes. If any dispute, controversy or claim among the Parties or any of them arises out of or relates
to this Agreement or the breach, termination or validity thereof or the negotiation, execution or performance thereof (a “Dispute”),
the Parties will first
attempt to settle such Dispute in the first instance by mutual,
good faith discussion. All such discussion will be confidential and will be treated as compromise and settlement negotiations,
and no written or oral representations or statements made by the Parties during such discussion will be admissible for any purpose
in any subsequent proceedings. If such discussion does not resolve the Dispute within fourteen days after the Party initiating
arbitration asks the others to commence such discussion, the Parties will arbitrate the Dispute as follows.
(a)
The Party wishing to begin arbitration will give written notice (an “Arbitration Notice”) of the existence of
a Dispute to each of the other Parties. The other Parties will submit a written response (an “Arbitration Response”)
to each Party including the Party who sent the Arbitration Notice. Both the Arbitration Notice and the Arbitration Response will
include a statement of the submitting Party’s position with regard to the Dispute and a summary of arguments supporting that
position.
(b)
If not then resolved, the Dispute will be finally and exclusively resolved by arbitration in accordance with the then-prevailing
JAMS Streamlined Arbitration Rules and Procedures, except as modified herein (the “Rules”). There will be a single
arbitrator. The Parties will have fourteen days from commencement of the arbitration in accordance with the Rules to agree on a
single arbitrator. Failing timely agreement, the arbitrator will be selected by JAMS. The place of arbitration will be at the offices
of the Seller’s legal counsel in Wisconsin. There will be no discovery in the arbitration and the Parties will only be required
to produce in advance of the arbitration hearing on the merits any documents which they plan to introduce in evidence at the hearing.
The arbitral tribunal will not be empowered to award damages in excess of compensatory damages, and each Party hereby irrevocably
waives any right to recover punitive, exemplary or similar damages with respect to any Dispute. Any arbitration proceedings, decision
or award rendered hereunder and the validity, effect and interpretation of this arbitration agreement will be governed by the Federal
Arbitration Act, 9 U.S.C. §1 et seq. Any arbitration award will be final and binding upon the Parties and will be the
sole and exclusive remedy among the Parties regarding any claims, counterclaims, issues or accounting presented to the arbitral
tribunal. Judgment upon any arbitration award may be entered in any court having jurisdiction.
(c)
By agreeing to arbitration as provided in this Section 10.12, the Parties do not intend to deprive any court of its jurisdiction
to issue a pre-arbitral injunction, pre-arbitral writ of attachment, or other order in aid of arbitration proceedings or the enforcement
of any arbitration award. Without prejudice to such remedies as may be available under the jurisdiction of a court, the arbitral
tribunal will also have full authority to grant provisional remedies and to direct the Parties to request that any court modify
or vacate any temporary or preliminary relief issued by such court, and to award damages for the failure of any Party to respect
the arbitral tribunal’s orders to that effect. The Parties hereby submit to the exclusive jurisdiction of the courts of the
State of Wisconsin for the purpose of compelling arbitration, granting preliminary
relief in aid of arbitration
or for issuance of a preliminary injunction to maintain
the status quo or prevent irreparable harm prior to the appointment of the arbitrator(s), and to the non-exclusive jurisdiction
of any court with jurisdiction for the enforcement of any award issued hereunder.
(d)
By executing and delivering this Agreement, each Party irrevocably
(e)
The arbitrator will determine which Party is the prevailing Party in any Dispute. The arbitrator will award attorneys’
fees and all other costs of arbitrating the Dispute to the prevailing Party in the Dispute, which fees and costs will be paid by
the non-prevailing Party.
10.13
Time is of the Essence. Time is of the essence under this Agreement.
10.14
Further Assurances. The Parties will execute such additional documents including, without limitation, a consent to
assignment or similar document, and will cause such additional actions to be taken as may be required or, in the judgment of any
Party, be necessary or desirable, to effect or evidence the provisions of this Agreement and the transactions contemplated hereby.
10.15
Jurisdiction and Venue. Venue for and jurisdiction over any legal proceedings available to the Parties hereunder
will lie in the appropriate courts of the State of Wisconsin.
IN WITNESS WHEREOF, the Parties have
executed and delivered this Agreement on the dates set forth below, to be effective as of the Effective Date.
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JERRY HANSEN, an individual residing in the State of Utah |
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TRACY JOHNSON, an individual residing in the State of Utah |
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THE PI FOUNDATION, INC., a Utah nonprofit corporation |
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Scott
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Executive Director |
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KLEANGAS ENERGY TECHNOLOGIES, INC., a Delaware corporation |
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EXHIBIT A
Note
EXHIBIT B
Security Agreement
EXHIBIT C
Stock Pledge Agreement
EXHIBIT D
Control Agreement
EXHIBIT E
Mortgage
EXHIBIT F
Stock Power
Schedule 2.12
Events, Liabilities, Developments
and Circumstances
Schedule 2.13(b)
Lawsuits, Claims, Suits,
Proceedings and Investigations
Exhibit 10.2
SECURED PROMISSORY NOTE
| $7,062,004.00 |
Utah |
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July 22, 2014 |
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This SECURED PROMISSORY NOTE (this “Note”),
effective as of July 22, 2014 (the “Effective Date”), is made and delivered by KLEANGAS ENERGY TECHNOLOGIES, INC.,
a Delaware corporation (“Maker”), payable to the order of JERRY HANSEN, an individual residing in the State of Utah
(“Jerry Hansen”), TRACY JOHNSON, an individual residing in the State of Utah (“Tracy Johnson”), and THE
PI FOUNDATION, a Utah nonprofit corporation (collectively herein, severally and not jointly, “Holder”). Unless otherwise
defined herein, capitalized terms used in this Note have the meanings given in the Transaction Documents described below.
FOR
VALUE RECEIVED, Maker promises to pay to the order of Holder, or Holder’s successors and assigns, the principal sum of Seven
Million Sixty-Two Thousand and Four Dollars ($7,062,004.00) (the “Note Amount”) together with interest and other amounts
as provided herein.
1.
Interest Rate. Amounts due under this Note shall not bear interest.
2.
Effective Date. Before delivery of this Note to Holder, this Note will be held in escrow for up to ninety days, during
which time Maker will be entitled to raise funds to make the initial payments described in Section 3 below. This Note, along with
other closing documents, will be delivered out of escrow to Holder on or around the date within such ninety day period when Holder
deposits such funds into escrow. The date of delivery of this Note out of escrow is referred to herein as the “Effective
Date” of this Note.
3.
Payments. Beginning one month after the Effective Date, Borrower will make sixteen monthly payments in the amounts
and on the dates shown in Exhibit A attached. All payments due under this Note will be made on Buyer’s behalf by, as determined
by Holder in Holder’s sole discretion, Buyer or Buyer’s payment agent, Pyrenees Investments, LLC, a line of credit
lender to Buyer. Holder will at all times be entitled to direct that all payments made under this Note be sent to one or more separate
bank accounts in the name of each of the persons referred to herein as “Seller,” in whatever relative amounts that
Jerry Hansen specifies.
4.
Maturity Date. If not sooner payable, the outstanding principal balance under this Note, all accrued and unpaid
interest, and all other indebtedness of Maker and all other amounts owing under this Note, the agreements that secure this Note
and any other documents relating to the transactions contemplated in a Stock Purchase Agreement and its exhibits of even date
herewith (collectively, the “Transaction Documents”) shall be due and payable in full on the date (the “Maturity
Date”) that is fifteen months after the Effective Date. However, notwithstanding the preceding sentence: (a) Maker shall
be entitled to elect to miss up to two monthly payments without penalty or interest during this Note’s initial fifteen month
term, and
Holder of Maker’s wish to extend the Maturity Date,
and
5.
Application of Payments. All payments on this Note shall, at the option of the Holder, be applied first to the payment
of accrued interest then to amounts (other than principal) owed hereunder, and then to payment of principal owed hereunder.
6.
Prepayment. Maker may prepay without penalty all amounts owed under this Note at any time prior to the Maturity Date.
7.
Collateral. This Note is secured by a Security Agreement of even date herewith, entered into by Holder and Maker,
that encumbers all of the personal property assets of Fiber Recovery, Inc. (the
Company”), and by a Mortgage of even date herewith that encumbers the building owned by Fiber
Recovery. This Note is also secured by a Stock Pledge Agreement of even date herewith, entered into by Holder and Maker,
that encumbers all of the issued and outstanding stock of the Company. The security interest granted by either of these documents
may be perfected and further evidenced and perfected by a Control Agreement, by endorsed share certificates of the Company or by
stock powers for share certificates of the Company and by a UCC-1 Financing Statement which, when filed in the official records
of the Division of Corporations and Commercial Code of the State of Utah and of the Secretary of State of the State of Wisconsin,
will perfect Holder’s security interests. All property of any kind that is encumbered in any way to secure this Note is referred
to herein as the “Collateral.”
8.
Acceleration. The occurrence of any Event of Default (as hereinafter defined) shall be a default under this Note.
Upon the occurrence of any Event of Default, all amounts then outstanding hereunder shall immediately and automatically become
due and payable.
9.
Events of Default. The occurrence of any one or more of the following, whatever the reason therefore, shall constitute
an “Event of Default” hereunder:
(a)
Maker shall fail to pay on the date and by the time of day specified above, any amount due to Holder pursuant to this Note
or any Transaction Document; or
(b)
Maker shall fail to perform or observe any term, covenant or agreement contained in this Note or in any other Transaction
Document; or
(c)
any representation or warranty contained in any Transaction Document made or delivered or agreed to or acknowledged by Maker
proves incorrect or to have been incorrect in any material respect when made; or
(d)
Maker is dissolved or liquidated, or otherwise ceases to exist, or all or substantially all of the assets of Maker are sold
or otherwise transferred without Holder’s written consent; or
(e)
Maker is the subject of a voluntary order for relief in any bankruptcy court, or is unable or admits in writing Maker’s
inability to pay Maker’s debts as they mature, or makes an assignment for the benefit of creditors;
or Maker applies for or consents to the appointment
of any receiver, trustee, custodian, conservator, liquidator, rehabilitator or similar officer (“Receiver”); or any
Receiver is appointed and the appointment continues undischarged or unstayed for thirty (30) calendar days; or Maker institutes
or consents to any bankruptcy, insolvency, reorganization, arrangement, readjustment of debt, dissolution, custodianship, conservatorship,
liquidation, rehabilitation or similar proceedings relating to Maker or to all or any part of Maker’s property under the
laws of any jurisdiction; or any similar proceeding is instituted and continues undismissed or unstayed for thirty (30) calendar
days; or any judgment, writ, attachment, execution or similar process is issued or levied against all or any part of the property
of Maker is not released, vacated or fully bonded within thirty (30) calendar days after such issue or levy; or
(f)
there shall occur a material adverse change in the financial condition of Maker after the Effective Date, as determined
by Holder in its reasonable discretion; or
(g)
any Transaction Document signed by Maker or any provision thereof, at any time after its execution and delivery and for
any reason other than the agreement of Holder or the satisfaction in full of all indebtedness and obligations of Maker under the
Transaction Documents, ceases to be in full force and effect or is declared null and void by a court of competent jurisdiction,
or Maker or any trustee, officer, director, shareholder or partner of any entity comprising or owning Maker or owned by Maker claims
that any Transaction Document is ineffective or unenforceable, in whole or in part, or denies any or further liability or obligation
under any Transaction Document, unless all indebtedness and obligations of Maker thereunder have been fully paid and performed;
or
(h)
a Notice of Default is recorded or a foreclosure or replevin proceeding is filed under any Transaction Document that encumbers
any part of the Collateral; or
(i)
Maker makes any transfer of the Collateral in whole or in part, except those transfers for which Maker has obtained the
prior written consent of Holder or transfers occurring by operation of law. Unless Holder is paid in full from the proceeds of
the transfer, Holder, in its sole discretion, may grant or withhold its consent to any transfer proposed by Maker. For purposes
of this Section 7(i) the term “transfer” shall be defined as any sale, grant, lease, conveyance, assignment, hypothecation,
or other transfer of, or any encumbrance, mortgage, lien or pledge against the Collateral, any interest in the Collateral, in each
instance whether voluntary or involuntary, direct or indirect, by operation of law, except as previously authorized, or otherwise
and as well as a merger or consolidation of the Maker into another entity.
(j)
an event of default or foreclosure occurs or commences under any other note, mortgage, document, instrument or agreement
secured by or securing
the Collateral or to which Maker is a party or by
which either Maker is bound or by which Maker’s assets are affected.
10.
Late Charge. Maker acknowledges that if any payment is not made when due or if the entire amount due under this Note
is not paid by the Maturity Date, the Holder will incur extra administrative expenses (i.e., in addition to expenses incident
to receipt of timely payment) and the loss of the use of funds in connection with the delinquency in payment. Because the actual
damages suffered by the Holder by reason of such extra administrative expenses and loss of use of funds would be impractical or
extremely difficult to ascertain, Maker agrees that ten percent (10%) of the then outstanding amount due under this Note increased
by interest and all other amounts then owing shall be the amount of damages to which such Holder is entitled, upon such breach,
in compensation therefore, in addition to interest on the unpaid amounts after the due dates and any other remedies to which Holder
is entitled as a result of any failure to pay amounts owed hereunder. Therefore, Maker shall, in the event any payment required
under this Note is not paid when due and payable, without notice or demand by Holder, pay to the Holder as such Holder’s
sole monetary recovery to cover such extra administrative expenses and loss of use of funds, liquidated damages in the amount of
ten percent (10%) of the then outstanding amount due under this Note increased by interest and all other amounts then owing, in
addition to interest on the unpaid amounts after the due dates and any other remedies to which Holder is entitled as a result of
any failure to pay amounts owed hereunder. Nothing in this Note shall be construed as an express or implied agreement by the Holder
to forbear in the collection of any delinquent payment or in exercising any of its other rights or remedies under the Transaction
Documents, or be construed as in any way giving Maker the right, express or implied, to fail to make timely payments hereunder,
whether upon payment of such damages or otherwise. The right of the Holder to receive payment of such liquidated and actual damages,
and receipt thereof, are without prejudice to the right of such Holder to collect such delinquent payments and any other amounts
provided to be paid hereunder or under any Transaction Document or security for this Note or to declare a default hereunder or
under any security for this Note or under any Transaction Document.
11.
Default Rate. From and after the Maturity Date, as it may be extended pursuant to the terms of this Note, at the
option of the Holder, all amounts owing under this Note and all sums owing under any and all of the Transaction Documents shall
bear interest at a default rate equal to ten percent (10%) per annum, compounded monthly (“Default Rate”). Such interest
shall be paid on the first day of each month thereafter, or on demand if sooner demanded.
12.
Waivers. Maker waives any right of offset it now has or may hereafter have against the Holder and its successors
and assigns. Maker waives presentment, demand, protest, notice of protest, notice of nonpayment or dishonor and all other notices
in connection with the delivery, acceptance, performance, default or enforcement of this Note. Any delay on Holder’s part
in exercising any right hereunder or under any of the Transaction Documents shall not operate as a waiver. Holder’s acceptance
of partial or delinquent payments or the failure of Holder to exercise any rights shall not waive any obligation of Maker or any
right of Holder, or modify this Note, or waive any other similar default.
13.
Costs of Collection. Maker agrees to pay all costs of collection as incurred by Holder and all costs incurred by
the Holder in exercising or preserving any rights or remedies in
connection with the enforcement and administration of this
Note or following a default by Maker, including but not limited to actual attorneys’ fees incurred by Holder in defending
or enforcing its rights under this Note or any other Transaction Document or both. If any suit or action is instituted to enforce
this Note, Maker promises to pay, in addition to the costs and disbursements otherwise allowed by law, such sum as the court may
adjudge reasonable attorneys’ fees in such suit or action.
14.
Usury. Maker hereby represents that this Note is part of a commercial business transaction and not for personal,
family or household purposes. It is the specific intent of the Maker and Holder that this Note bear a lawful rate of interest,
and if any court of competent jurisdiction should determine that the rate herein provided for exceeds that which is statutorily
permitted for the type of transaction evidenced hereby, the interest rate shall be reduced to the highest rate permitted by applicable
law, with any excess interest theretofore collected being applied against principal or, if such principal has been fully repaid,
returned to Maker upon written demand.
15.
Notices. All notices to be given pursuant to this Note shall be sufficient if given by personal service, email, by
guaranteed overnight delivery services, by telex, telecopy or telegram or by being mailed postage prepaid, certified or registered
mail, return receipt requested, to the described addresses of the parties hereto, or to such other address as a party may request
in writing. Any time period provided in the giving of any notice hereunder shall commence upon the date of personal service, the
date after delivery to the guaranteed overnight delivery service, the date of sending the telex, telecopy or telegram or two (2)
days after mailing certified or registered mail.
16.
Assignment By Holder. Holder may assign its rights hereunder or obtain, sell or grant participation interests in
this Note and/or the other Transaction Documents at any time, and any such assignee, successor or participant shall have all rights
of the Holder hereunder.
17.
Construction. This Note shall be governed by and construed in accordance with the laws of the state of Wisconsin.
This Note and all Transaction Documents executed in connection with this Note have been reviewed and negotiated by Maker and
Holder at arms’ length with the benefit of or opportunity to seek the assistance of legal counsel and shall not be construed
against either party.
18.
Partial Invalidity. If any section or provision of this Note is declared invalid or unenforceable by any court of
competent jurisdiction, said determination shall not affect the validity or enforceability of the remaining terms hereof. No such
determination in one jurisdiction shall affect any provision of this Note to the extent it is otherwise enforceable under the laws
of any other applicable jurisdiction.
19.
Acknowledgements. Maker acknowledges and agrees that interest and all other amounts due under this Note are reasonable
in light of the risks being taken by Holder in loaning funds to Maker and the circumstances surrounding the Loan. Maker acknowledges
that Maker has been fully advised of the terms of all of the Transaction Documents and has been afforded a full and fair opportunity
to seek legal, financial and other advice regarding the Transaction Documents and the terms of the Transaction Documents.
20.
Waivers / Further Acknowledgements. To the fullest extent allowed by law, Maker hereby waives and disclaims any and
all claims, dissent or objection to the terms or enforceability of the Transaction Documents on the grounds that the Transaction
Documents or the terms thereof are unconscionable, violate public policy or are otherwise unenforceable according to their terms.
21.
Jury Waiver. BORROWER HEREBY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING RELATING TO THIS
NOTE, THE DEEDS OF TRUST AND TO ANY OF THE LOAN DOCUMENTS, THE OBLIGATIONS HEREUNDER OR THEREUNDER, ANY COLLATERAL SECURING THE
OBLIGATIONS, OR ANY TRANSACTION ARISING THEREFROM OR CONNECTED THERETO. BORROWER REPRESENTS THAT THIS WAIVER IS KNOWINGLY, WILLINGLY
AND VOLUNTARILY GIVEN.
IN WITNESS WHEREOF,
Maker has executed and delivered this Note on the date set forth below, to be effective as of the date first set forth above.
KLEANGAS ENERGY TECHNOLOGIES, INC., a Delaware corporation
EXHIBIT A
Monthly Payments
Exhibit 10.3
STOCK PLEDGE AGREEMENT
This STOCK PLEDGE AGREEMENT (this “Agreement”)
is made and entered into on the dates set forth below, to be effective as of July 22,, 2014, by and among JERRY HANSEN, an individual
residing in the State of Utah (“Jerry Hansen”), TRACY JOHNSON, an individual residing in the State of Utah (“Tracy
Johnson”), and THE PI FOUNDATION, a Utah nonprofit corporation (the “PI Fund”) (collectively herein, severally
and not jointly “Secured Party”), and KLEANGAS ENERGY TECHNOLOGIES, INC., a Delaware corporation (“Pledgor”).
Secured Party and Pledgor are referred to collectively herein as the “Parties” and sometimes individually as a “Party.”
Recitals
A. Pursuant to a Stock Purchase Agreement
of even date herewith (the “Stock Purchase Agreement”), Secured Party sold 5,000,244 issued and outstanding shares
of common stock of Fiber Recovery, Inc., a Wisconsin corporation (the “Corporation”),
to Pledgor. Also pursuant to the Stock Purchase Agreement, Pledgor acquired 833,333 shares of newly issued shares of common stock
of the Corporation. All of these shares of stock, totaling 5,833,577 shares of stock, constitute all of the issued and outstanding
stock of the Corporation and are referred to herein as the “Stock.” Unless otherwise defined in this Agreement, capitalized
terms used in this Agreement have the meanings given in the Stock Purchase Agreement.
B. Pledgor paid for the Stock by delivering
cash plus a promissory note (the “Note”) to Secured Party.
C. Pledgor and Secured Party wish
to enter into this Agreement to grant a security interest to Secured Party in the Stock, for the purpose of securing payment of
all amounts owed under the Stock Purchase Agreement, the Note and all of the documents and agreements contemplated in the Stock
Purchase Agreement (the “Transaction Documents”).
D. The Parties also wish to enter
into this Agreement to provide a mechanism for receipt of payments made by Pledgor under the Note and corresponding deliveries
to Pledgor of certificates evidencing ownership of Stock as such payments are made and as the Secured Party’s security interest
in pro rata portions of the pledged Stock is released.
Agreement
THEREFORE, in consideration of the mutual
covenants and conditions herein contained, and for other good and valuable consideration, the sufficiency and receipt of which
are hereby acknowledged, the Parties, intending to be legally bound, hereby agree as follows.
1.
Pledge. In consideration of Secured Party’s acceptance of the Note as partial payment of the Purchase Price
paid by Pledgor for the Stock, Pledgor hereby grants a security interest to the Secured Party in all of the shares of the Stock
(the “Shares”). The Pledgor, in the event of a default under the Note, hereby authorizes and appoints the Secured Party
as its attorney
in fact to arrange for the transfer
of the Shares on the books of the Corporation to the name of the Secured Party. The Shares shall not be encumbered or disposed
of while this Agreement is in force.
2.
Filing Notices. Secured Party may file such notices or statements as it may require to protect the Secured Party’s
interest in the Shares including any and all renewals thereof. The Pledgor will sign these notices, statements or renewals when
the Secured Party requests the Pledgor to do so. If the Pledgor fails to sign them, the Secured Party may sign them for the Pledgor,
and the Secured Party may record any documents the Secured Party deems necessary in order for the Secured Party to protect the
Secured Party’s lien on the Shares.
3.
Representations, Warranties and Covenants. Pledgor hereby represents, warrants and covenants that
4.
Events of Default. The following events shall be “Events of Default” hereunder and under the other Transaction
Documents:
(a)
The occurrence of an Event of Default under any of the Transaction Documents;
(b)
Pledgor shall fail to observe or perform any of its obligations hereunder; or
(c)
Any representation, warranty, certification or statement made by Pledgor hereunder or under any Transaction Document shall
prove to have been incorrect in any material respect when made.
5.
Rights and Remedies upon Default. Upon the occurrence of any Event of Default and at any time thereafter the Secured
Party may accelerate all the obligations secured hereby and shall have all of the rights remedies of secured party under the Wisconsin
Uniform Commercial Code and, in addition to all other rights and remedies provided herein or by law, the Secured Party may:
(a)
Sell the Shares, in which case sale can be at public or private sale. The Secured Party shall determine the terms of any
such sale in its sole discretion. A sale conducted according to the usual practice of banks selling similar security will be considered
reasonably conducted. Secured Party shall be entitled to use the proceeds of the sale towards the amounts that the Pledgor owes
the Secured Party under this Agreement or which the Pledgor owes under any of the Transaction Documents. The Secured Party may
add to what the Pledgor owes the Secured Party the expenses of collection, sale and delivery of the Shares and any other expenses,
including, but not limited
to, reasonable attorney’s fees and disbursements, costs, broker’s commission, any and all transfer fees and taxes.
The Pledgor will pay the Secured Party any difference between the proceeds which the Secured Party realizes from the sale and what
the Pledgor owes the Secured Party. The Secured Party may sell the Shares for immediate cash payment or on credit. If the sale
is on credit, the Secured Party shall retain the Shares until the sale price is paid in full. The Secured Party will not be liable
if the buyer fails to pay, and the Secured Party may then resell the Shares. Upon each such sale the Secured Party may purchase
all or any part of the collateral being sold, free from and discharged of all trusts, claims, right of redemption and equities
of Pledgor, which are hereby waived and released.
(b)
Elect to continue to hold the Shares, if the Secured Party determines that a better price may be obtained at a later date
and the Secured Party will not be liable to the Pledgor for any loss in value in the Shares. If the Secured Party has the right
to sell the Shares and has not begun to do so within ninety (90) days after the obligations of Pledgor under the Transaction Documents
have been accelerated, the Pledgor may demand in writing that the Secured Party proceed to sell the Shares. However, the Secured
Party will not be required to sell the Shares if in the Secured Party’s reasonable discretion the net proceeds would not
be enough to repay in full the obligations of Pledgor and the amounts due under this Agreement.
(c)
Complete, in connection with a sale, a stock power in order to transfer the Shares.
(d)
Terminate the Pledgor’s right to vote the Pledgor’s shares relating to the Shares and the Secured Party may
vote such shares in its discretion. By signing this Agreement, the Pledgor gives the Secured Party a right and proxy to vote the
Pledgor’s shares relating to the Shares, as the Pledgor’s agent, which cannot be revoked.
6.
Disposition of Sale Proceeds. If the Secured Party sells the Shares, the proceeds shall be applied as follows: (i)
to the expenses of collecting, selling and delivering the Shares, including (but not limited to) attorney’s fees, brokerage
commissions, auctioneer’s fees, transfer fees, disbursements and taxes; (ii) second, to the payment of the obligations of
Pledgor under the Transaction Documents: and (iii) finally, the surplus, if any, to the Pledgor.
7.
Responsibility for Shares. Pledgor assumes all liabilities and responsibility in connection with the Shares, and
the obligation of Pledgor hereunder and under the Transaction Documents shall in no way be affected or diminished by reason of
the loss, destruction, damage or theft of any of the Shares or its unavailability for any reason. The powers conferred upon Secured
Party herein are solely to protect its interest in the Shares and shall not impose upon the Secured Party any duty to exercise
any such powers.
8.
Costs and Expenses. Any and all out-of-pocket fees, costs and expenses, of whatever kind or nature, including the
reasonable attorneys’ fees and legal expenses incurred by the Secured Party, in connection with the preparation of this Agreement
and all other documents relating hereto and the consummation of this transaction, the filing or recording of financing statements
and other
documents (including all taxes in connection
therewith) in public offices, the payment or discharge of any taxes, insurance premiums, encumbrances or otherwise protecting,
maintaining or preserving the Shares, or the enforcing, foreclosing, retaking, holding, selling or otherwise realizing upon the
Shares and the Secured Party’s security interest therein, whether through judicial proceedings or otherwise, or in defending
or prosecuting any actions or proceedings arising out of or related to the transaction to which this Agreement relates, shall be
borne and paid by the Pledgor on demand by the Secured Party and until so paid shall be added to the Voting rights. During
the term of this Agreement, and so long as the Pledgor is not in default in the performance of any of the terms of this agreement
or in the payment of any amount due under the Note, the Pledgor shall have the right to vote the pledged Shares on all corporate
questions.
9.
Representations. The Pledgor warrants and represents that there are no restrictions upon the transfer of any of the
pledged Shares, other than may appear on the face of the certificates, and that the Pledgor has the right to transfer and encumber
such Shares to Secured Party as provided in this Agreement free and clear of any encumbrances other than the security interest
granted in this Agreement and without obtaining the consent of any other third party whatsoever.
10.
Adjustments. In the event that during the term of this Agreement any share dividend, reclassification, readjustment,
or other change is declared or made in the capital structure of the Corporation, all new, substituted, and additional Shares or
other securities issued by reason of any such change shall be delivered to and held by Secured Party under the terms of this agreement
in the same manner as the Shares originally pledged hereunder. Further, the percentage ownership of the pledged Shares on the date
hereof, which percentage is 100.00%, shall not be diminished or diluted by Pledgor for any reason for as long as any amounts remain
unpaid under the Note. Pledgor shall not allow the Corporation to issue new shares for any consideration or for any reason whatsoever
to any person or entity while amounts are unpaid under the Note, nor shall Pledgor allow the Corporation to merge with any other
entity or to change its capital structure in any whatsoever until all amounts owed under the Note have been paid in full and until
Pledgor shall have performed all of its obligations under the Transaction Documents. The number of Shares pledged to Secured Party
shall be deemed to increase automatically in order to maintain the percentage of ownership represented by the pledged Shares at
the 100.00% level stated above until all amounts owed under the Note are paid in full and until Pledgor shall have performed all
of its obligations under the Transaction Documents..
11.
Default. If the Pledgor defaults in the performance of any of the terms of this agreement, or in the payment at maturity
of the principal or interest of the Note, the Secured Party shall have the rights and remedies provided in the Uniform Commercial
Code in force in the State of Wisconsin at the date of this agreement, and in this
connection, the Secured Party may, upon 5 days’ written notice to the Pledgor, at the above stated address, sent by registered
mail and without liability for any diminution in price that may have occurred, sell all the pledged Shares in such manner and for
such price as the Secured Party may determine. At any bona fide public sale the Secured Party shall be free to purchase all or
any part of the pledged Shares. Out of the proceeds of any sale, the Secured Party may retain an amount equal to the principal
and interest then due on the loan, plus the amount of the expenses of the sale, plus reasonable attorneys’ fees and costs,
and shall pay any balance of such proceeds to the Pledgor. If the proceeds of any sale are insufficient to cover the principal
and interest of the loan plus expenses of the sale, the Pledgor shall remain liable to the Secured Party for any deficiency.
12.
Governing Law. 13.This Agreement shall be governed by and interpreted in accordance with the laws of the State of
Wisconsin, without giving effect to the provisions, policies or principles of the
State of Wisconsin relating to choice or conflict of laws.
14.
Successors and Assigns. 15. The rights of the Parties under this Agreement shall not be assignable.
16.
Waivers. 17.Any term or provision of this Agreement may be waived, or the time for its performance may be extended,
by the Party entitled to the benefit thereof. The failure of any Party hereto to enforce at any time any provision of this Agreement
shall not be construed to be a waiver of such provision, nor in any way to affect the validity of this Agreement or any part hereof
or the right of any Party thereafter to enforce each and every such provision. No waiver of any breach of this Agreement shall
be held to constitute a waiver of any other or subsequent breach.
18.
Expenses. 19.Each Party hereto will pay all of its respective costs and expenses incurred incident to its negotiation
and preparation of this Agreement and to its performance and compliance with all agreements and conditions contained herein on
its part to be performed or complied with, including the fees, expenses and disbursements of its counsel and accountants.
20.
Severability. 21.Should any provision of this Agreement for any reason be declared invalid or unenforceable by final
and nonappealable order of any court or regulatory body having jurisdiction there over, such decision shall not affect the validity
of the remaining portions, which remaining portions shall remain in force and effect as if this Agreement had been executed with
the invalid portion thereof eliminated. In the event any such provision of this Agreement is so declared invalid, the Parties shall
promptly renegotiate in good faith new provisions to eliminate such invalidity and to restore this Agreement as nearly as possible
to its original intent and effect.
22.
Incorporation of Recitals. 23. The recitals, exhibits and schedules hereto are hereby incorporated into this Agreement.
All references herein to this Agreement include references to all recitals, exhibits and schedules to this Agreement.
24.
Execution of Counterparts. 25. This Agreement may be executed in one or more counterparts, each of which shall be
considered an original instrument, but all of which shall be considered one and the same agreement, and shall become binding when
one or more counterparts have been agreed by each of the Parties and delivered to Seller and Buyer.
26.
Time is of the Essence. 27. Time is of the essence under this Agreement.
28.
Further Assurances. 29. The Parties shall execute such additional documents including, without limitation, a consent
to assignment or similar document, and shall cause such additional actions to be taken as may be required or, in the judgment of
any Party, be necessary or desirable, to effect or evidence the provisions of this Agreement and the transactions contemplated
hereby.
30.
Jurisdiction and Venue. 31. Venue for and jurisdiction over any legal proceedings available to the Parties hereunder
shall lie in the appropriate courts of the State of Wisconsin.
IN WITNESS WHEREOF, the Parties
have executed and delivered this Agreement on the dates set forth below, to be effective as of the date first set forth above.
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JERRY HANSEN, an individual residing in the State of Utah |
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TRACY JOHNSON, an individual residing in the State of Utah |
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THE PI FOUNDATION, INC., a Utah nonprofit corporation |
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Name: |
Scott
M. McCullough
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Title: |
Executive Director |
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KLEANGAS ENERGY TECHNOLOGIES, INC., a Delaware corporation |
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Accepted and agreed on the date set forth
below, to be effective as of the Effective Date. The undersigned agrees to perform and to assure the performance by Pledgor and
the Company of all obligations of Pledgor and the undersigned Company under this Agreement.
FIBER RECOVERY,
INC., a Wisconsin corporation
Exhibit 10.4
SECURITIES CONTROL AGREEMENT
This SECURITIES CONTROL AGREEMENT (this “Agreement”)
is made and entered into as of July 22, 2014, by and among KLEANGAS ENERGY TECHNOLOGIES, INC., a Delaware corporation (“Pledgor”),
and JERRY HANSEN, an individual residing in the State of Utah (“Jerry Hansen”), TRACY JOHNSON, an individual residing
in the State of Utah (“Tracy Johnson”), and the PI FUND, a donor advised fund (collectively herein, severally and not
jointly “Secured Party”), and FIBER RECOVERY, INC., a Wisconsin corporation
(the “Company”). Capitalized terms used but not otherwise defined herein shall have the respective meanings ascribed
to such terms in that certain Security Agreement of even date herewith, entered into by Pledgor and Secured Party and the Company.
(the “Security Agreement”). Pledgor, Secured Party and the Company are referred to collectively herein as the “Parties”
and sometimes individually as a “Party.” All references herein to the “UCC” shall mean the Uniform Commercial
Code as in effect in the State of Utah.
1.
Registered Ownership of Shares. The Company hereby confirms and agrees that, as of the date hereof, the Pledgor is the
registered owner of 5,000,244 plus an additional 833,333 shares of the Company’s common stock (the “Pledged Shares”).
The Company agrees not to change the registered owner of the Pledged Shares without the prior written consent of Secured Party.
2.
Instructions. If at any time the Company shall receive instructions originated by Jerry Hansen relating to the Pledged
Shares, the Company shall comply with such instructions without further consent by Pledgor or any other Person.
3.
Additional Representations and Warranties of the Company. The Company hereby represents and warrants to Secured Party
that:
(a)
the Company has not entered into, and until the termination of this Agreement will not enter into, any agreement (other
than this Agreement) with any Person relating to the Pledged Shares pursuant to which the Company agrees or will agree to comply
with instructions issued by any Person (other than Jerry Hansen).
(b)
the Company has not entered into, and until termination of this Agreement will not enter into, any agreement (other than
this Agreement) with the Pledgor or any other party purporting to limit or condition the obligation of the Company to comply with
Instructions as set forth in Section 2 hereof.
(c)
except for the claims and interest of Secured Party and Pledgor in the Pledged Shares, the Company does not know of any
claim to, or interest in, the Pledged Shares.
(d)
if any Person asserts any lien, encumbrance or adverse claim (including any writ, garnishment, judgment, warrant of attachment,
execution or similar process) against the Pledged Shares, the Company will promptly notify Secured Party and the Pledgor thereof.
(e)
this Agreement is the valid and legally binding obligation of the Company.
4.
Choice of Law. This Agreement shall be governed by the laws of the State of Utah, without reference to its conflicts
of laws principles.
5.
Conflict with Other Agreements. In the event of any conflict between the terms of this Agreement (or any portion
thereof) and the terms of any other agreement, the terms of this Agreement shall prevail. No amendment or modification of this
Agreement or waiver of any right hereunder shall be binding on any party hereto unless it is in writing and is signed by all of
the parties hereto.
6.
Voting Rights. Until such time as Secured Party shall otherwise instruct the Company in writing, the Pledgor shall
have the right to vote the Pledged Shares.
7.
Successors; Assignment. The terms of this Agreement shall be binding upon, and shall inure to the benefit of, the
parties hereto and their respective successors or heirs and personal representatives who obtain such rights solely by operation
of law. Secured Party may assign its rights hereunder only with the express written consent of the Company and by sending written
notice of such assignment to the Pledgor.
8.
Indemnification of Company. The Pledgor and Secured Party hereby agree that (a) the Company is released from
any and all liabilities to the Pledgor and Secured Party arising from the terms of this Agreement and the compliance by the Company
with the terms hereof, except to the extent that such liabilities arise from the Company’s negligence, and (b) the Pledgor,
its successors and assigns shall at all times indemnify and save harmless the Company from and against any and all claims, actions
and suits of others arising out of the terms of this Agreement or the compliance by the Company with the terms hereof, except to
the extent that such arises from the Company’s negligence, and from and against any and all liabilities, losses, damages,
costs, charges, counsel fees and other expenses of every nature and character arising by reason of the same until the termination
of this Agreement.
9.
Notices. Any notice, request or other communication required or permitted to be given under this Agreement shall
be in writing and deemed to have been properly given (a) when delivered in person, (b) when sent by telecopy or other
electronic means and electronic confirmation of error free receipt is received, or (c) two (2) Business Days after being sent
by certified or registered United States mail, return receipt requested, postage prepaid, addressed to the party at the address
set forth below.
If to Jerry Hansen or Tracy
Johnson, to:
Jerry Hansen and Tracy Johnson
9710
South 700 East
Sandy,
Utah 84070
Telephone
(801) 572-7800
With a copy, which shall
not constitute notice, to:
Mark E. Rinehart
Attorney at Law
Callister Nebeker
& McCullough
Parkview Plaza
One
Suite 600
2180 South 1300
East
Salt Lake City,
Utah 84106
Telephone: 801-530-7300
Cell: 801-898-3116
Fax: 801-746-8607
If to the PI Fund, to:
Greg C. Zaugg
Attorney at Law
Callister Nebeker
& McCullough
Parkview Plaza
One
Suite 600
2180 South 1300
East
Salt Lake City,
Utah 84106
Telephone: 801-530-7300
Cell: 801-898-3116
Fax: 801-746-8607
| If to the Buyer, to: |
Bo Linton c/o |
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Kleangas Energy Technologies, Inc. |
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3001 N. Rocky Pt. RD. Suite 200 |
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Tampa, Florida, 33771 |
Any party may change its
address for notices in the manner set forth above.
10.
Termination. The obligations of the Company to Secured Party pursuant to this Agreement shall continue in effect
until the security interests of Secured Party in the Pledged Shares have been terminated pursuant to the terms of the Security
Agreement and Secured Party has notified the Company of such termination in writing. Secured Party agrees to provide Notice of
Termination in substantially the form of Exhibit A hereto to the Company upon the request of the Pledgor on or after the termination
of Secured Party’s security interest in the Pledged Shares pursuant to the terms of the Security Agreement. The termination
of this Agreement shall not terminate the Pledged Shares or alter the obligations of the Company to the Pledgor pursuant to any
other agreement with respect to the Pledged Shares.
11.
WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO HEREBY AGREES TO WAIVE ITS RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY
CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING UNDER THIS AGREEMENT OR ANY DEALINGS BETWEEN THEM RELATING TO THE SUBJECT MATTER
OF THIS AGREEMENT. THE SCOPE OF THIS WAIVER IS INTENDED TO BE ALL-ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY BE FILED IN
ANY
COURT AND THAT RELATE TO THE SUBJECT MATTER OF THIS TRANSACTION
(INCLUDING, WITHOUT LIMITATION, CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS AND ALL OTHER COMMON LAW AND STATUTORY CLAIMS).
EACH PARTY HERETO ACKNOWLEDGES THAT (A) THIS WAIVER IS A MATERIAL INDUCEMENT TO ENTER INTO A BUSINESS RELATIONSHIP, (B) IT
HAS ALREADY RELIED ON THIS WAIVER IN ENTERING INTO THIS AGREEMENT, AND (C) IT WILL CONTINUE TO RELY ON THIS WAIVER IN ITS
RELATED FUTURE DEALINGS. EACH PARTY HERETO FURTHER REPRESENTS AND WARRANTS THAT IT HAS REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL
AND THAT IT KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. IN THE EVENT OF LITIGATION,
THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.
12.
Counterparts. This Agreement may be executed in multiple counterparts (any of which may be delivered by facsimile
signature), each of which shall constitute an original and all of which taken together shall constitute one and the same Agreement.
IN WITNESS WHEREOF, the Parties
have executed and delivered this Agreement on the dates set forth below, to be effective as of the Effective Date.
| Date: |
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JERRY HANSEN, an individual residing in the State of Utah |
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TRACY JOHNSON, an individual residing in the State of Utah |
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THE PI FUND |
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KLEANGAS ENERGY TECHNOLOGIES, INC., a Delaware corporation |
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FIBER RECOVERY, INC., a Wisconsin corporation |
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EXHIBIT A
[Letterhead of Secured Party]
[Date]
[Name and Address of Company]
__________________________
__________________________
Attention:__________________
Re: Termination of
Control Agreement
You are hereby notified that the Uncertificated
Securities Control Agreement, by and among you, [PLEDGOR] and the undersigned (the “Control Agreement”) is terminated
and you have no further obligations to the undersigned pursuant to the Control Agreement. Notwithstanding any previous instructions
to you, you are hereby instructed to accept all future directions with respect to Pledged Shares (as defined in the Control Agreement)
from [PLEDGOR]. This notice terminates any obligations you may have to the undersigned with respect to the Pledged Shares; provided,
however, nothing contained in this notice shall alter any obligations which you may otherwise owe to [PLEDGOR] pursuant
to any other agreement.
You are instructed to deliver a copy of this
notice by facsimile transmission to [PLEDGOR].
Very truly yours,
ESCROW AGREEMENT
| Escrow Agent: |
MARK E. RINEHART |
| Escrowing Parties: |
JERRY HANSEN, an individual residing in the State of Utah |
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TRACY JOHNSON, an individual residing in the State of Utah |
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THE PI FOUNDATION, INC., a Utah nonprofit corporation |
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KLEANGAS ENERGY TECHNOLOGIES, INC., a Delaware corporation |
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FIBER RECOVERY, INC., a Wisconsin corporation |
Effective Date: July 22, 2014
1. Establishment of Escrow. Subject
to all terms of this Escrow Agreement and in
accordance with separate Escrow Instructions that will be
given to Escrow Agent by the
Escrowing Parties, Escrow Agent agrees to hold certain documents
and other items and to
perform his obligations in accordance with the terms and
provisions of this Escrow Agreement
and the Escrow Instructions. The Escrow Instructions are
a part of this Escrow Agreement.
References herein to this Escrow Agreement are references
to both this Escrow Agreement and
the Escrow Instructions. The documents, funds or other items
from time to time deposited with
Escrow Agent hereunder are referred to herein as the “Escrowed
Items”.
2. Responsibility for Performance
by Escrowing Parties. Escrow Agent shall not be
responsible for any failure by any Escrowing Party to perform
the Escrowing Party’s obligations
in accordance with this Escrow Agreement, the Escrow Instructions,
the Stock Purchase
Agreement of even date herewith entered into by the Escrowing
Parties (the “Stock Purchase
Agreement”) or any “Transaction Document”
contemplated in the Stock Purchase Agreement, or
any related agreement.
3. Instructions to Escrow Agent.
Escrow Agent shall be protected in acting upon any
written instruction given him by the Escrowing Parties, not
only as to due execution and validity
and the effectiveness of any such instruction’s provisions,
but also as to the truth and accuracy of
any information therein contained. Where emailed or other
electronic instructions are permitted,
Escrow Agent may rely on the genuineness of messages purportedly
coming from an email
address previously used by a party or specified by the party
for the giving of notice without
further investigation. Should it be necessary for Escrow
Agent to act upon any instructions,
directions, documents or instruments issued or signed by
or on behalf of any corporation,
partnership, fiduciary or individual acting on behalf of
any Escrowing Party, it shall not be
necessary for Escrow Agent to inquire into such Escrowing
Party’s authority. Escrow Agent is
relieved of the necessity of satisfying himself as to the
authority of the persons executing this
Escrow Agreement or any Escrow Instructions in a representative
capacity on behalf of any of
the Escrowing Parties.
4. Escrow Agent’s
Role as Legal Counsel. Escrow Agent and/or Escrow Agent’s
law firm is legal counsel to Jerry
Hansen, Tracy Johnson and The PI Foundation. Each of the
Escrowing Parties waives any conflict
of interest that might be involved in that relationship as it
may relate to the role of Escrow Agent hereunder. Escrow
Agent shall be compensated for his
services by deducting his fees, at his normal hourly rates,
from any Escrowed Items or funds
including earnest money, held by him. Each of the Escrowing
Parties hereby waives any conflict
of interest that might otherwise be involved in Escrow Agent’s
role under this Escrow
Agreement and Escrow Agent’s or his law firm’s
past, present or future representation of Jerry
Hansen, Tracy Johnson and The PI Foundation, and/or Escrow
Agent’s past or present
representation of Fiber Recovery, Inc., and each Escrowing
Party agrees that Escrow Agent and
his law firm shall be entitled to continue to represent Jerry
Hansen, Tracy Johnson and The PI
Foundation at all times in the future without any conflict
of interest, regardless of whether any
dispute arises under this Escrow Agreement or any matter
contemplated in this Escrow
Agreement.
5. Liability. Escrow Agent shall
not be liable for anything which he may do or
refrain from doing in connection herewith, except for his
own gross negligence, bad faith or
willful misconduct.
6. Escrow Agent’s Legal Counsel.
Escrow Agent may consult with, and obtain
advice from, legal counsel (which may include other attorneys
in Escrow Agent’s law firm at
their standard hourly rate) in the event of any question
as to any of the provisions hereof or his
duties hereunder, and he shall incur no liability and shall
be fully protected in acting in good
faith in accordance with the opinion and instructions of
such counsel. The Escrowing Parties
(other than the PI Foundation) shall share equally, and shall
pay upon written demand, the cost
and expense of any such consultation.
7. Limitation of Duties. Escrow Agent
in his capacity as such shall have no duties
except those which are expressly set forth herein and in
the Escrow Instructions signed by
Escrow Agent, and Escrow Agent shall not be bound by any
other agreements of the Escrowing
Parties (whether or not Escrow Agent has any knowledge thereof)
nor shall any additional duties
be implied. Escrow Agent shall not be deemed a fiduciary
of any Escrowing Party.
Notwithstanding any other provision of this Escrow Agreement,
in no event shall Escrow Agent
be liable, directly or indirectly, for any (a) damages or
expenses arising out of the services
provided hereunder, or (b) special or consequential damages,
even if Escrow Agent has been
advised of the possibility of such damages. Except as specifically
set forth in Section 4 of this
Escrow Agreement, neither Escrow Agent nor his law firm is
acting as legal counsel to any
Escrowing Party.
8. Resignation or Termination of
Escrow Agent. Escrow Agent shall have the right
to resign at any time by giving five days prior written notice
of such resignation to the Escrowing
Parties. The Escrowing Parties shall have the right to terminate
the services of Escrow Agent
hereunder at any time by giving joint, written notice (with
such written notice being signed by
each of the Escrowing Parties) of such termination to Escrow
Agent, in each case specifying the
effective date of such resignation or termination. Within
five days after receiving or delivering
the aforesaid notice, as the case may be, the Escrowing Parties
will appoint a successor escrow
agent to which Escrow Agent shall distribute the property
then held hereunder in accordance
with the terms hereof, less any fees and expenses that may
be payable to Escrow Agent. If a
successor escrow agent has not been appointed and accepted
such appointment by the end of
such five day period, Escrow Agent may interplead the Escrowed
Items or otherwise deliver or
apply to any court of competent jurisdiction for the appointment
of a successor escrow agent, and
the reasonable costs and expenses which are incurred in connection
with any such proceeding
shall be paid out of the Escrowed Items or by the Escrowing
Parties, jointly and severally.
Except as otherwise agreed in writing by the Escrowing Parties,
the resignation or termination of
Escrow Agent shall not cause or permit any Escrowed Items
to be released from this Escrow
Agreement unless interpleaded with the court or unless and
until a successor escrow agent has
been appointed in accordance with this Section 8. Upon interpleader
or the appointment of a
successor escrow agent and the delivery of all Escrowed Items
held hereunder (other than fees
and expenses payable to Escrow agent) to such successor escrow
agent, Escrow Agent shall be
released from any and all liabilities arising hereunder.
9. Discharge of Escrow Agent. Upon
delivery of all of the Escrowed Items pursuant
to the terms of Section 8 above or pursuant to the Escrow
Instructions, Escrow Agent shall
thereafter be discharged from any further obligations hereunder.
Escrow Agent is hereby
authorized, in any and all events, to comply with and obey
any and all judgments, orders and
decrees of any court of competent jurisdiction which may
be filed, entered or issued, and all final
arbitration awards and, if he shall so comply or obey, he
shall not be liable to any other person
by reason of such compliance or obedience.
10. Interpleading of Assets upon
Dispute. In the event that (a) any dispute shall arise
between the Escrowing Parties with respect to the disposition
or disbursement of any of the
Escrowed Items held hereunder, or (b) Escrow Agent shall
be uncertain as to how to proceed in a
situation not explicitly addressed by the terms of this Escrow
Agreement whether because of
conflicting demands by the Escrowing Parties hereto or otherwise,
or (c) for any other reason in
Escrow Agent’s sole discretion, Escrow Agent shall
be entitled to interplead all of the Escrowed
Items held hereunder to a court of competent jurisdiction,
and thereafter Escrow Agent shall be
fully relieved from any and all liability or obligation with
respect to such interpleaded assets or
compliance with the terms of this Escrow Agreement or any
Escrow Instructions. The Escrowing
Parties agree to pursue any redress or recourse in connection
with such a dispute, without making
Escrow Agent a party to the same, and agree to waive and
hereby waive any potential conflicts
of interest Escrow Agent may have with relation to Escrow
Agent’s relationship with any
Escrowing Party hereto, and, provided that Escrow Agent has
interplead the assets held
hereunder according to this Section 10, each of the Escrowing
Parties hereby specifically waives
any objection to Escrow Agent acting as legal counsel to
Jerry Hansen, Tracy Johnson or The PI
Foundation with relation to any dispute arising hereunder
or to any matters relating to the
Transaction Documents.
11. Agents of Escrow Agent. Escrow
Agent shall have the right to perform any of his
duties hereunder through agents, attorneys, custodians or
nominees.
12. Garnishment of Escrowed Items.
If any of the Escrowed Items shall be attached,
garnished or levied upon by any court order, or the delivery
thereof shall be stayed or enjoined
by an order of a court, or any order, judgment or decree
shall be made or entered by any court
order affecting the property deposited under this Escrow
Agreement, Escrow Agent is hereby
expressly authorized, in his sole discretion, to obey and
comply with all writs, orders or decrees
so entered or issued, which he is advised by legal counsel
of his own choosing is binding upon
him, whether with or without jurisdiction, and in the event
that Escrow Agent obeys or complies
with any such writ, order or decree he shall not be liable
to any of the Escrowing Parties hereto
or to any other person, firm or corporation, by reason of
such compliance notwithstanding such
writ, order or decree be subsequently reversed, modified,
annulled, set aside or vacated.
13. Indemnification. The Escrowing
Parties agree, severally and jointly, to indemnify
Escrow Agent for and to hold him harmless from and against
any loss, liability or reasonable
expense (including reasonable attorneys’ fees and expenses,
including fees of Escrow Agent’s
law firm) incurred by Escrow Agent arising out of or in connection
with his performance under
this Escrow Agreement. Escrow Agent shall have a lien or
right of setoff on all funds, monies or
other assets held hereunder to pay all of his fees and reimbursable
expenses or fees or any other
item payable to or for Escrow Agent as permitted under this
Escrow Agreement. The obligations
of the Escrowing Parties under this Section 13 shall survive
the termination of this Escrow
Agreement or the resignation or removal of Escrow Agent for
any reason.
14. Escrow Costs. Escrow Agent shall
be entitled to be paid fees for his services
under this Escrow Agreement, and in addition to such fee
to be reimbursed for his reasonable
costs and expenses incurred in connection with maintaining
the Escrowed Items hereunder.
Escrow Agent shall be entitled and is hereby granted the
right to set off and deduct from the
Escrowed Items any unpaid fees, non-reimbursed expenses and
unsatisfied indemnification
rights from such Escrowed Items, and Escrow Agent may include
in any deduction from the
Escrowed Items any bank imposed fee related to the wire-transfer
of funds to Escrow Agent’s
account. In the event that Escrow Agent is made a party to
litigation with respect to any Escrow
Item or this Escrow Agreement, or brings an action in interpleader
or in the event that the
conditions of the Escrow Instructions are not promptly fulfilled,
or Escrow Agent is required to
render any service not provided for in this Escrow Agreement,
or there is any assignment of the
interest of this escrow or any modification hereof, Escrow
Agent shall be entitled to reasonable
compensation for all such services and reimbursement for
all fees, costs, liability and expenses,
including reasonable attorneys’ fees.
15. Limitations on Rights to Escrowed
Items. None of the Escrowing Parties shall
have any right, title or interest in or to, or possession
of, the Escrowed Items and therefore shall
not have the ability to pledge, convey, hypothecate or grant
as security all or any portion of the
Escrowed Items unless and until such Escrowed Items have
been released pursuant to applicable
provisions of this Escrow Agreement. Accordingly, Escrow
Agent shall be in sole possession of
the Escrowed Items and shall not act as custodian or agent
of the Escrowing Parties under this
Escrow Agreement for the purposes of perfecting a security
interest therein, and no creditor of
any of the Escrowing Parties shall have any right to have
or to hold or otherwise attach or seize
all or any portion of the Escrowed Items as collateral for
any obligation and shall not be able to
obtain a security interest in any of the Escrowed Items unless
and until such Escrowed Items
have been released pursuant to applicable provisions of this
Escrow Agreement.
16. Notice. Any notice required or
permitted to be given hereunder shall be made in
the same manner as notices under the Stock Purchase Agreement.
Notices to any Escrowing
Party shall be delivered to the address of such party specified
in the Stock Purchase Agreement.
Notices to Escrow Agent shall be delivered to Mark E. Rinehart,
Callister Nebeker &
McCullough, 2180
S. 1300 East, Suite 600, Salt Lake City, Utah 84109.
17. Governing Law, Jurisdiction and
Venue. This Escrow Agreement shall be
governed by and interpreted under the laws of the State of
Utah. In the event that any party
hereto commences a lawsuit or other proceeding relating to
or arising from this Escrow
Agreement, the parties hereto agree to the exclusive personal
jurisdiction by and exclusive venue
in the state and federal courts in the State of Utah and
waive any objection to such jurisdiction or
venue. The parties hereto consent to and agree to submit
to the jurisdiction of any of the courts
specified herein and agree to accept service of process to
vest personal jurisdiction over them in
any of these courts.
IN WITNESS WHEREOF, the Escrowing
Parties have executed and delivered this
Agreement on the dates set forth below, to be effective as
of the Effective Date.
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JERRY HANSEN, an individual residing in the State of Utah |
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TRACY JOHNSON, an individual residing in the State of Utah |
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THE PI FOUNDATION, INC., a Utah nonprofit corporation |
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By: |
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Name: |
Scott
M. McCullough
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Title: |
Executive Director |
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KLEANGAS ENERGY TECHNOLOGIES, INC., a Delaware corporation |
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By: |
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Name: |
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Title: |
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FIBER
RECOVERY, INC., a Wisconsin
corporation
Accepted and agreed to on the date set forth below, to be
effective as of the Effective Date.
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MARK E. RINEHART, Escrow Agent |
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