Document:

Unassociated Document

    Exhibit
      10.3

    ABN
      AMRO BANK N.V.

    38/F,
      Cheung Kong Centre

    2
      Queen’s Road Central

    Hong
      Kong

    

    

    October
      11, 2007

    

    Synutra
      International, Inc.

    2275
      Research Blvd., Suite 500

    Rockville,
      Maryland 20850

    United
      States

    

    Re:
      US
      DOLLAR FACILITY FEE
      LETTER
      AGREEMENT

    

    Ladies
      and Gentlemen:

    

    This
      US
      Dollar Facility Fee Letter Agreement (this “Agreement”)
      is
      delivered to you in connection with the Loan Agreement to be entered into on
      the
      date hereof (the “Loan
      Agreement”)
      among
      Synutra International, Inc., as the Borrower (the “Borrower”),
      ABN
      AMRO Bank N.V., as the Arranger (the “Arranger”),
      ABN
      AMRO Bank N.V., as the Collateral Agent and the Administrative Agent (the
“Administrative
      Agent”),
      and
      the Lenders party thereto (the “Lenders”).

     

    WHEREAS,
      in
      order to induce the Arranger, the Administrative Agent and the Lenders to enter
      into the Loan Agreement, the Borrower has agreed to enter into this Agreement
      with the Arranger and the Administrative Agent.

     

    NOW,
      THEREFORE, in consideration of the premises and other good and valuable
      consideration, the receipt and sufficiency of which are hereby acknowledged,
      the
      parties hereto agree as follows:

     

    *     
      *      *

     

    Terms
      defined in the Loan Agreement and not otherwise defined herein have, as used
      herein, the respective meanings provided for therein.

     

    1.  FEES.
      In
      connection with the Loan Agreement, the Borrower agrees with the Arranger and
      the Administrative Agent as follows:

     

    (a)  The
      Borrower will pay to the Arranger for its own account, as contemplated by the
      Letter Agreement entered into between ABN AMRO Bank N.V., Hong Kong Branch
      and
      the Borrower dated March 29, 2007 (the “Commitment
      Letter”),
      a fee
      (the “Arrangement
      Fee”)
      of
      2.00% of the aggregate amount of the Commitment, as in effect on the Closing
      Date. The Arrangement Fee shall be for arranging the transactions contemplated
      in the Loan Agreement. The Arrangement Fee shall be earned upon the execution
      of
      the Loan Agreement. The Arrangement Fee shall be payable on the earlier of
      (x)
      the date of the first Credit Extension under the Loan Agreement and (y) the
      fifth Business Day after the Closing Date.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    (b)  The
      Borrower will pay to the Administrative Agent on behalf of the Lenders, as
      contemplated by the Commitment Letter, a fee (the “Participation
      Fee”)
      of
      0.75% of the aggregate amount of the Commitment, as in effect upon the Closing
      Date. The Participation Fee shall be for facilitating the participation of
      the
      Lenders in the transactions contemplated in the Loan Agreement. The
      Participation Fee shall be earned upon the execution of the Loan Agreement.
      The
      Participation Fee shall be payable on the earlier of (x) the date of the first
      Credit Extension under the Loan Agreement and (y) the fifth Business Day after
      the Closing Date. The Administrative Agent shall distribute the Participation
      Fee in accordance with its agreement with the Lenders at its sole discretion
      

     

    2.  TAX
      GROSS UP. For
      the
      avoidance of doubt, Section 3.01 of the Loan Agreement shall apply to any amount
      due under this Agreement.

     

    3.  GOVERNING
      LAW.
      (a)
      THIS
      AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF
      THE
      STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED ENTIRELY
      WITHIN SUCH STATE; PROVIDED
      THAT THE
      ARRANGER AND THE ADMINISTRATIVE AGENT SHALL RETAIN ALL RIGHTS ARISING UNDER
      FEDERAL LAW.

     

    (b)  ANY
      LEGAL
      ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT MAY BE BROUGHT IN THE COURTS
      OF THE STATE OF NEW YORK SITTING IN THE BOROUGH OF MANHATTAN, NEW YORK CITY
      OR
      OF THE UNITED STATES FOR THE SOUTHERN DISTRICT OF SUCH STATE, AND BY EXECUTION
      AND DELIVERY OF THIS AGREEMENT, EACH OF THE BORROWER, THE ARRANGER AND THE
      ADMINISTRATIVE AGENT CONSENTS, FOR ITSELF AND IN RESPECT OF ITS PROPERTY, TO
      THE
      NON-EXCLUSIVE JURISDICTION OF THOSE COURTS. EACH OF THE BORROWER, THE ARRANGER
      AND THE ADMINISTRATIVE AGENT IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED
      BY APPLICABLE LAW, ANY OBJECTION, INCLUDING ANY OBJECTION TO THE LAYING OF
      VENUE
      OR BASED ON THE GROUNDS OF FORUM
      NON CONVENIENS,
      WHICH
      IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY ACTION OR PROCEEDING IN
      SUCH
      JURISDICTION IN RESPECT OF THIS AGREEMENT OR OTHER DOCUMENT RELATED THERETO.
      EACH OF THE BORROWER, THE ARRANGER AND THE ADMINISTRATIVE AGENT WAIVES PERSONAL
      SERVICE OF ANY SUMMONS, COMPLAINT OR OTHER PROCESS, WHICH MAY BE MADE BY ANY
      OTHER MEANS PERMITTED BY THE LAW OF SUCH STATE. THE BORROWER AGREES THAT A
      FINAL
      JUDGMENT IN ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN SUCH A COURT SHALL
      BE
      CONCLUSIVE AND BINDING UPON IT AND WILL BE GIVEN EFFECT IN ANY OTHER
      JURISDICTION TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW AND MAY BE
      ENFORCED IN ANY COURT TO THE JURISDICTION OF WHICH THE BORROWER IS OR MAY BE
      SUBJECT BY A SUIT UPON SUCH JUDGMENT; PROVIDED
      THAT
      SERVICE OF PROCESS IS EFFECTED UPON IT IN ONE OF THE MANNERS SPECIFIED HEREIN
      OR
      AS OTHERWISE PERMITTED BY LAW.

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

     

    4.  WAIVER
      OF RIGHT TO TRIAL BY JURY.
      EACH
      PARTY TO THIS AGREEMENT HEREBY EXPRESSLY WAIVES, TO THE FULLEST EXTENT PERMITTED
      BY APPLICABLE LAW, ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION
      OR
      CAUSE OF ACTION ARISING UNDER THIS AGREEMENT OR IN ANY WAY CONNECTED WITH OR
      RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO OR ANY OF THEM
      WITH
      RESPECT TO THIS AGREEMENT, OR THE TRANSACTIONS RELATED THERETO, IN EACH CASE
      WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER FOUNDED IN CONTRACT
      OR
      TORT OR OTHERWISE; AND EACH PARTY HEREBY AGREES AND CONSENTS THAT ANY SUCH
      CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT
      A JURY, AND THAT ANY PARTY TO THIS AGREEMENT MAY FILE AN ORIGINAL COUNTERPART
      OR
      A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF
      THE
      SIGNATORIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.

     

    5.  PROCESS
      AGENT.
      Without
      prejudice to any other mode of service allowed under any relevant Law, the
      Borrower:

     

    (a)  irrevocably
      shall have appointed, on or prior to the first Credit Extension, CT Corporation
      System, located at 111 Eighth Avenue, New York, NY 10011, as its agent for
      service of process in relation to any proceedings before the courts of the
      State
      of New York sitting in the Borough of Manhattan, New York City or of the United
      States for the Southern District of New York in connection with this Agreement;
      and

     

    (b)  agrees
      that failure by its agent for service to notify the Borrower of the process
      will
      not invalidate the proceedings concerned.

     

    6.  MISCELLANEOUS.
      (a)
      The
      fees, costs and expenses described in this Agreement shall be fully earned
      upon
      becoming due and payable in accordance with the terms hereof, shall be
      nonrefundable for any reason whatsoever and shall be in addition to any other
      fees, costs and expenses payable pursuant to the Commitment Letter, the Loan
      Documents or any other definitive documentation existing or to be entered into
      among the Borrower and its Subsidiaries and Affiliates, the Arranger and its
      Affiliates and the Administrative Agent and its Affiliates. 

     

    (b)  The
      Borrower’s obligation to pay the fees or expense reimbursements described or
      referred to herein will not be subject to counterclaim or setoff for, or be
      otherwise affected by, any claim or dispute the Borrower or its Affiliates
      may
      have.

     

    (c)  The
      provisions of Section 10.18 of the Loan Agreement relating to obligations to
      make payments in US Dollars thereunder is hereby incorporated by reference
      herein.

     

    (d)  Nothing
      in this Agreement shall be construed to limit any of the rights of the Arranger
      or its Affiliates or of the Administrative Agent or its Affiliates under (x)
      the
      Commitment Letter dated March 29, 2007 between Synutra International, Inc.
      and
      ABN AMRO Bank N.V., Hong Kong Branch, (y) the Warrant Agreement dated April
      19,
      2007 among Synutra International, Inc., The Bank of New York, as Warrant Agent
      and ABN AMRO Bank N.V., Hong Kong Branch, as Initial Holder or (z) the US Dollar
      Facility Side Letter Agreement dated April 19, 2007 between Synutra
      International, Inc. and ABN AMRO Bank N.V., Hong Kong Branch.

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

     

    If
      the
      foregoing is in accordance with your understanding, please sign and return
      a
      counterpart of this Agreement whereupon it will become an enforceable agreement
      among us.

     

    
      	 	
              Very
                truly yours,

            
	 	 	 
	 	
              ABN
                AMRO BANK N.V., as Arranger

            
	 
 	 
 	 
 
	
            	By:  	
              /s/Augusto
                King

            
	 	 	
              
Name: Augusto
              King
	 	 	
              Title: Executive
                Directo

            
	 	 	 
	 	
              By:

            	
              /s/Anup
                Kuruvilla

            
	 	
              
                

              

              Name: Anup
                Kurivilla

            
	 	
              Title: Executive
                Director

            

    

     

    
       

      
        	 	 	 
	 	
                ABN
                  AMRO BANK N.V., as 

                Administrative
                  Agent

              
	 
 	 
 	 
 
	
              	By:  	
                /s/Yong
                  Peck Yuen

              
	 	 	
                

                Name: Yong
                  Peck Yuen

              
	 	 	
                Title: Senior
                  Vice President

              
	 	 	 
	 	
                By:

              	
                /s/Irene
                  Ng

              
	 	
                
                  

                

                Name: Irene
                  Ng

              
	 	
                Title: Assistant
                  Manager

              

      

       

       

      THE
        PROVISIONS OF THIS AGREEMENT ARE ACCEPTED AND 

      AGREED
        TO
        AS OF THE DATE FIRST ABOVE WRITTEN:

       

    

    
      	
              SYNUTRA
                INTERNATIONAL, INC. as Borrower

            	 	 	 
	 	 	 	 	 
	By:	
              /s/
                Liang Zhang

            	 	 	 
	 	
              

              Name: Liang
                Zhang

              
                Title: Chief
                  Executive Officer

              

            	 	 	
            

    

     

    

      -
        US
        Dollar Facility Fee Letter Agreement Signature Page -EX 10.1

    SUBSCRIPTION
      BOOKLET

     

    FOR
      THE
      PURCHASE OF 

     

    COMMON
      STOCK

     

    OF

     

    KAL
      ENERGY, INC.,

    a
      Delaware corporation

     

     

    (Non-U.S.
      Subscribers Only)

     

     

     

    PLEASE
      CAREFULLY REVIEW AND FOLLOW THE “INSTRUCTIONS

    TO
      SUBSCRIBERS” IMMEDIATELY FOLLOWING THIS COVER PAGE

    

    
 

    KAL
      ENERGY, INC.

    93-95
      Gloucester Place

    London,
      W1U 6JQ

    UNITED
      KINGDOM

    Telephone:
      +44 (0)20 7487 8426

    Fax:
      +44
      (0)20 7487 8402 

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    INSTRUCTIONS
      TO SUBSCRIBERS

     

    In
      order
      to subscribe to purchase shares of Common Stock of KAL ENERGY, Inc., a Delaware
      corporation (the “Company”),
      the
      following instructions need to be complied with:

     

    1.    Complete
      and return two (2) executed copies of the attached Subscription Agreement
      Stradling Yocca Carlson & Rauth, 660 Newport Center Drive, Suite 1600;
      Newport Beach, California 92660 (Attention: Shivbir S. Grewal).
Please
      note that incomplete documents will be returned to subscribers for
      completion.
      If you
      have any questions about completion of the documents, please contact Jorge
      Nigaglioni, Chief Financial Officer of KAL ENERGY, Inc. at 44 (0)20 7487
      8426.

     

    2.    Please
      print the name of the prospective investor, contact person, telephone number
      and
      facsimile number in the upper right-hand corner page 1 and fill in the amount
      of
      your aggregate investment.

     

    3.    In
      Section 1(b), please fill in the required subscription information.

     

    4.    In
      Section 4, please initial each investor category to which you belong.
Only
      investors who qualify as “non-U.S. persons” will be eligible to purchase Shares
      from the Company pursuant to this Subscription Agreement.

     

    5.    Note
      your
      obligations to update your representations and warranties, as set forth in
      the
      final paragraph of Section 5.

     

    6.    You
      should complete all required information
      on the
      signature page and sign the Subscription Agreement.

     

    7.    If
      you
      have not received copies of the Company’s SEC Filings referred to in
      Section 5 of the attached
      Subscription Agreement, please contact Jorge Nigaglioni, the Chief Financial
      Officer of the Company at 44 (0)20 7487 8426 and copies will be provided to
      you
      free of charge.

     

    8.    When
      you
      return your documents, please remit to KAL ENERGY, Inc., an amount equal to
      the
      aggregate amount of your investment by wire transfer of immediately available
      funds to:

     

    Account
      Name: KAL Energy, Inc.

    Bank
      Name: ___________________________

    Account
      Number:_______________________

    Swift
      or
      ABA Routing No.: ________________

    For
      credit to the account of: KAL Energy, Inc.

     

    TWO
      (2) COPIES OF THE SUBSCRIPTION AGREEMENT SHOULD BE TWO COPIES OF THE
      SUBSCRIPTION AGREEMENT SHOULD BE RETURNED OR DELIVERED AS SOON AS POSSIBLE
      TO:

     

    STRADLING
      YOCCA CARLSON & RAUTH

    Attn:
      Shivbir S. Grewal

    660
      Newport Center Drive, Suite 1600

    Newport
      Beach, CA 92660

    (949)
      725-4000

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

    Name
      of
      Prospective Investor: __________________________

    Contact
      Person: _____________________________________

    Telephone
      Number: __________________________________

    Fax
      Number: ________________________________________

    Amount:
      ___________________________________________

     

    KAL
      ENERGY, INC.,

    a
      Delaware corporation

     

    SUBSCRIPTION
      AGREEMENT

     

    TO:         
      KAL
      ENERGY, INC.

    Attn:
      Jorge Nigaglioni

    93-95
      Gloucester Place

    London,
      W1U 6JQ

    UNITED
      KINGDOM

     

    The
      undersigned (“Subscriber”),
      on
      the terms and conditions herein set forth, tenders this subscription to KAL
      Energy, Inc., a Delaware corporation (the “Company”),
      and
      hereby offers to purchase a specified number of shares of Common Stock of the
      Company (the “Shares”)
      as
      provided herein.

     

    1.    Subscription.

     

    (a) The
      Securities. This Subscription Agreement relates to the offer and sale by the
      Company of its Shares for a purchase price of $0.80 per Share (the “Subscription”).
      The
      Subscriber must subscribe to a minimum of 250,000 Shares. 

     

    (b) Subscription
      and Method of Payment. The Subscriber hereby agrees, on the terms and conditions
      set forth in this Subscription Agreement, to purchase __________ Shares (the
      “Interest”)
      at an
      aggregate purchase price of $____________ (the “Purchase
      Price”).
      The
      Subscriber acknowledges that by executing this Subscription Agreement the
      Subscriber is making an irrevocable offer to purchase the Interest from the
      Company against payment by him of the Subscription. This Subscription may be
      rejected by the Company in its sole discretion. The Subscriber hereby agrees
      to
      deliver to the Company the Subscription at the Closing by wire transfer of
      immediately available funds.

     

    (c) For
      each
      Share that the Subscriber purchases hereunder, the Subscriber shall receive
      a
      warrant to purchase one Share with an exercise price equal to the closing offer
      price of the Shares on the OTC Bulletin Board on the date of Closing (as
      hereinafter defined), plus a premium of five percent (5%). The warrant shall
      have a two (2) year exercise period.

     

    2.    Acceptance
      of Agreement.
      The
      Company proposes to issue an aggregate of 1,000,000 shares of Common Stock
      to
      non-U.S. Subscribers, for an aggregate purchase price of U.S.$800,000. The
      Company shall have the right to accept or reject this Subscription, in whole
      or
      in part, in its sole and absolute discretion. In addition, the Company shall
      have the right to reject this Subscription Agreement if it believes for any
      reason that Subscriber is not a “non-U.S. person” within the meaning of
      Regulation

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

    S
      (“Regulation
      S”)
      promulgated by the Securities Act of 1933, as amended (the “Securities
      Act”).
      This
      Subscription Agreement shall be deemed to be accepted by the Company only when
      the Company executes the Subscription Agreement in the space provided. Upon
      execution of this Subscription Agreement by the Company, the Company will
      forward a fully executed copy of same to Subscriber’s address as set forth on
      the signature page hereof.

     

    3.    Closing:
      Conditions to Closing.

     

    (a) Time
      and Place of Closing.
      Subject
      to Section 3(b) below, the closing of the sale and purchase of the Shares and
      the payment by Subscriber of the Purchase Price therefor shall take place in
      the
      offices of the Company on such date and at such time as shall be selected by
      the
      Company (the “Closing”).

     

    (b) Subscriber’s
      Conditions to Closing.
      Subscriber’s obligations hereunder are subject to the fulfillment, prior to or
      at the Closing, of each of the following conditions:

     

    (i) Representations
      and Warranties.
      The
      representations and warranties of the Company contained in this Agreement shall
      be true and correct, in all material respects, at the Closing.

     

    (ii) Performance
      of the Company.
      The
      Company shall have performed and complied with all agreements and conditions
      required by this Agreement to be performed or complied with by it prior to
      or at
      the Closing.

     

    (c) Company’s
      Conditions to Closing.
      The
      Company’s obligations hereunder are subject to acceptance by the Company of the
      Subscription, and to the fulfillment, prior to or at the Closing, of each of
      the
      following conditions:

     

    (i) Representations
      and Warranties.
      The
      representations and warranties of the Subscriber contained in this Agreement
      shall be true and correct at the Closing.

     

    (ii) Proceedings
      and Documents.
      The
      Company and Stradling Yocca Carlson & Rauth, its counsel, shall have
      received all such counterpart originals or certified or other copies of such
      documents as the Company may reasonably request.

     

    (iii) Contribution.
      The
      Company shall have received from Subscriber the Purchase Price.

     

    4.    Representation
      as to Investor Status. In
      order
      for the Company to offer and sell the Shares in compliance with Regulation
      S of
      the Securities Act the following information must be obtained regarding your
      investor status. Please
      initial each category applicable to you as
      an
      investor in the Company.

     

    ________ (a) SUBSCRIBER
      IS NOT A “U.S. PERSON” as defined in Exhibit A
      (“U.S.
      Person”)
      attached hereto. 

    

    ________ (b) At
      the
      time the offer to purchase the Shares was originated, Subscriber was outside
      the
      United States and is outside the United States as of the date of the execution
      and delivery of this Agreement. 

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

    ________ (c) Subscriber
      is purchasing the Shares for its own account and not on behalf of any U.S.
      Person and has no present intention of reselling the Shares into the United
      States. Subscriber has not pre-arranged a sale of the Shares to any U.S. Person.
      Subscriber will not use the Shares to cover short positions in the U.S. for
      at
      least a one (1) year period commencing on the date of the purchase (the
“Restricted
      Period”).

     

    5.    Other
      Representations and Warranties of the Undersigned.
      The
      undersigned hereby represents and warrants to the Company as
      follows:

     

    (a) Subscriber
      acknowledges and agrees that the offer and sales of the Shares have not been
      registered under the Securities Act and the Shares may not be offered or sold
      in
      the United States or to a U.S. Person during the Restricted Period except
      pursuant to a registration statement which has been declared effective under
      Section 5 of the Securities Act unless an exemption from the registration
      requirements of the Securities Act is available. Subscriber acknowledges and
      agrees that the certificates evidencing the Shares will contain a legend setting
      forth the foregoing restriction.

     

    (b) Subscriber
      acknowledges and agrees that any offer or sale in the United States or to a
      U.S.
      Person after expiration of the Restricted Period will be made in accordance
      with
      the requirements of the Securities Act. In that regard, any such offer or sale
      will be registered under the Securities Act or will be made pursuant to an
      exemption from such registration requirements. Subscriber hereby confirms that
      it is acquiring the Shares for investment purposes and not with a view to the
      distribution of the Shares.

     

    (c) The
      Shares are being acquired for the undersigned’s own account for investment, with
      no intention of distributing or selling any portion thereof within the meaning
      of the Securities Act, and will not be transferred by the undersigned in
      violation of the Securities Act or the then applicable rules or regulations
      thereunder. No one other than the undersigned has any interest in or any right
      to acquire the Shares. The undersigned understands and acknowledges that the
      Company will have no obligation to recognize the ownership, beneficial or
      otherwise, of such Shares by anyone but the undersigned.

     

    (d) The
      undersigned’s financial condition is such that the undersigned is able to bear
      the risk of holding the Shares for an indefinite period of time and the risk
      of
      loss of the undersigned’s entire investment in the Company.

     

    (e) The
      undersigned has had the opportunity to review the Company’s Annual Report on
      Form 10-K for the fiscal year ended May 31, 2006 (the “10-K”),
      the
      Company’s latest Quarterly Report on Form 10-Q for the quarter ended February
      28, 2007, and the other filings made by the Company with the United States
      Securities and Exchange Commission (the “SEC”)
      from
      time-to-time including, without limitation, the risk factors included in the
      10-K (the “SEC
      Filings”).

     

    (f) The
      Company has made available all additional information which the undersigned
      has
      requested in connection with the Company and its representatives, and the
      undersigned has been afforded an opportunity to make further inquiries of the
      Company and its representatives and the opportunity to obtain any additional
      information (to the extent the Company has such information or could acquire
      it
      without unreasonable effort or expense) necessary to verify the accuracy of
      information contained in the SEC Filings.

     

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

    (g) No
      representations or warranties have been made to the undersigned by the Company,
      or any representative of the Company. The undersigned expressly acknowledges
      that it has made its own investigation regarding the Company and is not relying
      on any other information regarding the Company other than as may be set forth
      in
      the SEC Filings and such information as may have been provided to the
      undersigned in writing to verify the accuracy of information contained in the
      SEC Filings pursuant to Section 5(f) above.

     

    (h) The
      undersigned has investigated the acquisition of the Shares to the extent the
      undersigned deemed necessary or desirable and the Company has provided the
      undersigned with any assistance the undersigned has requested in connection
      therewith.

     

    (i) The
      undersigned has such knowledge and experience in financial and business matters
      that the undersigned is capable of evaluating the merits and risks of an
      investment in the Shares and of making an informed investment decision with
      respect thereto.

     

    (j) The
      undersigned agrees that the Company may refuse to register any transfer of
      the
      Shares not made in accordance with the provisions of Regulation S pursuant
      to
      registration under the Securities Act and qualification under the securities
      laws of all applicable states, or pursuant to an exemption from such
      registration or qualification requirements.

     

    (k) The
      undersigned acknowledges that the undersigned is purchasing the Shares without
      being furnished any offering literature or prospectus other than the SEC Filings
      and this Subscription Agreement.

     

    (l) The
      undersigned has full power and authority to make the representations referred
      to
      herein, to purchase the Shares and to execute and deliver this Subscription
      Agreement.

     

    (m) The
      undersigned acknowledges and is aware of the following:

     

    (i) The
      investment in the Shares is speculative and involves a high degree of risk
      of
      loss of the entire investment in the Company.

     

    (ii) Certificates
      representing the Shares will carry substantially the following legend condition
      (in addition to any legends required under applicable state securities
      laws):

     

    THE
      OFFER
      AND SALE OF THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN
      REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, (THE “1933 ACT”) AND
      SUCH SECURITIES MAY NOT BE SOLD, TRANSFERRED, ASSIGNED OR HYPOTHECATED EXCEPT
      PURSUANT TO (i) THE PROVISIONS OF REGULATION S, PROMULGATED UNDER THE 1933
      ACT,
      (ii) AN EFFECTIVE REGISTRATION STATEMENT UNDER THE 1933 ACT COVERING THE OFFER,
      SALE OR OTHER TRANSFER OF SUCH SECURITIES OR (iii) AN OPINION OF COUNSEL,
      REASONABLY SATISFACTORY TO THE COMPANY, STATING THAT SUCH SALE, TRANSFER,
      ASSIGNMENT OR HYPOTHECATION IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS
      DELIVERY REQUIREMENTS OF THE 1933 ACT.

     

    (iii) There
      are
      substantial restrictions on the transferability of the Shares; the undersigned
      may not be able to take advantage of the provisions of Rule 144 adopted by
      the Securities and Exchange Commission under the Securities Act with respect
      to
      the resale of the Shares and

     

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

    accordingly
      may have to hold the Shares indefinitely, and it may not be possible for the
      undersigned to liquidate the investment in the Company.

     

    (iv) No
      state
      or federal agency has made any finding or determination as to the fairness
      of
      the terms of the sale of the Shares or any recommendation or endorsement
      thereof.

     

    (v) It
      never
      has been represented, guaranteed or warranted to the undersigned by the Company,
      its agents or employees or any other person, expressly or impliedly, any of
      the
      following:

     

    (A) The
      approximate or exact length of time that the undersigned will be required to
      remain as owner of the Shares; or

     

    (B) The
      profit or return, if any, to be realized by making an investment in the
      Company.

     

    (n) The
      undersigned understands that the foregoing representations and warranties are
      to
      be relied upon by the Company as a basis for exemption of the sale of the Shares
      under the Securities Act, under the securities laws of all applicable states
      and
      for other purposes.

     

    The
      foregoing representations and warranties are true and accurate as of the date
      hereof and shall survive such date. If
      in
      any respect such representations and warranties shall not be true and accurate
      prior to the acceptance of the Subscription by the Company, the undersigned
      shall give notice of such fact to the Company by facsimile with written
      confirmation of receipt, specifying which representations and warranties are
      not
      true and accurate and the reasons therefor.

     

    6.    Registration
      Rights

     

    (a) Registration
      on Form SB-2

     

    (i) Within
      one hundred and twenty (120) days from the date of the Closing, the Company
      shall use its best efforts to ensure that a registration statement on Form
      SB-2
      (the “Form
      SB-2”)
      is
      filed with the SEC and that of the Subscribers’ Shares are included in such
      Registration Statement; provided, however, that the Company shall not be
      obligated to effect any such registration, qualification or compliance, pursuant
      to this paragraph 6(b): (A) if the Form SB-2 is not available for such
      offering by the Subscribers; or, (B) if the Company shall furnish to the
      Subscriber a certificate signed by the President of the Company stating that
      in
      the good faith judgment of the Board of Directors of the Company, it would
      be
      seriously detrimental to the Company and its stockholders for such Form SB-2
      Registration to be effected at such time, in which event the Company shall
      have
      the right to defer the filing of the Form SB-2 Registration Statement or
      proportionally reduce the number of Shares included in such filing.

     

    (ii) Subject
      to the foregoing, the Company shall use its best efforts to ensure that a
      registration statement covering the Shares is filed as soon as practicable
      after
      receipt of the request or requests of the Subscriber. If the Form SB-2 is not
      available for such offering by the Subscriber, the Company shall use its best
      efforts to ensure that a registration statement on Form S-1 or other available
      form of registration statement is filed within one hundred fifty (150) days
      from
      the date of the Closing. 

     

    (b) “Piggy
      Back” Registration.
      If at
      any time prior to the filing of the Form SB-2 the Company shall determine to
      register under the Securities Act the offer and sale of any of its
      Shares

     

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

    (other
      than a registration relating solely to the sale of securities to participants
      in
      a Company employee benefits plan, a registration on any form which does not
      include substantially the same information as would be required to be included
      in a registration statement covering the sale of the Shares or a registration
      in
      which the offer and sale of the only Common Stock being registered is Common
      Stock issuable upon conversion of debt securities which are also being
      registered), it shall send to each Subscriber written notice of such
      determination and, if within fifteen (15) days after receipt of such notice,
      such Subscriber shall so request in writing, the Company shall use its best
      efforts to ensure that such registration statement includes all or any part
      of
      the Shares that such Subscriber requests to be registered. If the total amount
      of shares requested by Subscriber to be included in such offering exceeds the
      amount of securities that the managing underwriter determines in its sole
      discretion is compatible with the success of the offering, then the Company
      shall be required to include in the offering only that number of such
      securities, including the Shares, which the managing underwriter determines
      in
      its sole discretion will not jeopardize the success of the offering (the
      securities so included to be (A) first, to the Company, and (B) among
      Subscribers of the Shares requesting to sell the Shares and to other Subscribers
      of Common Stock holding registration rights, pro rata among the selling
      shareholders according to the total amount of securities owned by each such
      shareholder); all of the Company’s selling shareholders, including
      Subscriber(s), shall not be reduced below 20% of the total number of securities
      to be provided in the registration. For purposes of the preceding parenthetical
      concerning apportionment, for any selling Subscriber which is a Subscriber
      of
      registrable Shares and which is a partnership or corporation, the partners,
      retired partners and shareholders of such holder, or the estates and family
      members of any such partners and retired partners and any trusts for the benefit
      of any of the foregoing persons shall be deemed to be a single “selling
      shareholder”, and any pro rata reduction with respect to such “selling
      shareholder” shall be based upon the aggregate amount of shares carrying
      registration rights owned by all entities and individuals included in such
      “selling shareholder,” as defined in this sentence. If any Subscriber
      disapproves of the terms of such underwriting, he may elect to withdraw
      therefrom by written notice to the Company and the underwriter.

     

    (c) Expenses.
      In the
      case of a registration under this Section 6, the Company shall bear all costs
      and expenses of such registration, including, but not limited to, SEC filing
      fees, “blue sky” fees and expenses, and all OTC Bulletin Board, stock exchange
      listing and qualification fees; provided, however, that the Company shall nave
      no obligation to pay or otherwise bear (i) any portion of the underwriter’s
      commissions or discounts attributable to the Shares being offered and sold
      by
      the Subscribers of the Shares, (ii) any stock transfer taxes,
      (iii) any fees of counsel for the selling Subscribers, or (iv) any of such
      expenses if the payment of such expenses by the Company is prohibited by the
      laws of a state in which such offering is qualified and only to the extent
      so
      prohibited; provided, however, that the Company shall not be required to pay
      for
      any expenses of any registration proceeding begun if the registration request
      is
      subsequently withdrawn at the request of the Subscribers initiating such
      registration (in which case, all Subscribers initiating such registration shall
      bear such expenses pro rata based upon the total number of Shares requested
      to
      be included therein by each such Subscriber.

     

    (d) Transfer
      of Registration Rights.
      The
      registration rights of a Subscriber of Shares under this Section 6 may be
      transferred to any transferee provided that the transferor shall provide the
      Company with prompt written notice of such transfer. Notwithstanding the
      foregoing, the registration rights of a Subscriber under this Subscription
      Agreement may not be transferred to an entity, or a person controlled by, under
      common control with or controlling such entity, which is a direct competitor
      of
      the Company.

     

    (e) Termination
      of Registration Rights.
      The
      obligations of the Company to register any Subscriber’s registrable Shares
      pursuant to this Section 6 shall terminate at such time as all Shares held
      by
      and issuable to such Subscriber (and its affiliates, partners, former partners,
      members and

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

    former
      members) may be sold pursuant to Rule 144, or pursuant to Regulation S, during
      any ninety (90) day period.

     

    7.    Indemnification.
      The
      undersigned acknowledges that the undersigned understands the meaning and legal
      consequences of the representations and warranties made by the undersigned
      herein, and that the Company is relying on such representations and warranties
      in making the determination to accept or reject this Subscription. The
      undersigned hereby agrees to indemnify and hold harmless the Company and each
      employee and agent thereof from and against any and all loss, damage or
      liability due to or arising out of a breach of any representation or warranty
      of
      the undersigned contained in this Subscription Agreement.

     

    8.    Transferability.
      The
      undersigned agrees not to transfer or assign this Subscription Agreement, or
      any
      interest herein, unless in accordance with applicable federal and state
      securities laws.

     

    9.    No
      Revocation.
      The
      undersigned agrees that this Subscription Agreement and any agreement of the
      undersigned made hereunder is irrevocable, and that this Subscription Agreement
      shall survive the death or disability of the undersigned, except as provided
      below in Section 10.

     

    10.    Termination
      of Agreement.
      If this
      Subscription is rejected by the Company, then and in any such event this
      Subscription Agreement shall be null and void and of no further force and
      effect, and no party shall have any rights against any other party hereunder,
      and the Company shall promptly return or cause to be returned to the undersigned
      this Subscription Agreement and the Purchase Price tendered
      hereunder.

     

    11.    Notices.
      All
      notices or other communications given or made hereunder shall be in writing
      and
      shall be delivered or mailed by registered or certified mail, return receipt
      requested, postage prepaid, or delivered by facsimile with written confirmation
      of receipt to the undersigned at the address set forth below and to the Company
      at the address set forth on the cover hereof, or at such other place as the
      Company or the undersigned may designate by written notice to the other
      party.

     

    12.    Expenses.
      The
      undersigned will pay the undersigned’s own expenses relating to this
      Subscription Agreement, the ancillary documents attached hereto and the purchase
      of the Shares.

     

    13.    Amendments.
      Unless
      otherwise expressly provided herein or any document attached hereto, neither
      this Subscription Agreement nor any term hereof may be changed, waived,
      discharged or terminated orally but only with the written consent of the
      undersigned and the Company.

     

    14.    Counterparts;
      Facsimile.
      This
      Subscription Agreement may be executed in any number of counterparts and may
      be
      delivered by telecopy or facsimile, each of which shall be an original but
      all
      of which taken together shall constitute one Subscription
      Agreement.

     

    15.    Governing
      Law; Venue.
      This
      Agreement shall in all respects be governed by and construed in accordance
      with
      the laws of the State of California, without regard to its conflicts of law
      doctrine. Seller hereby agrees to submit to the personal jurisdiction of the
      state or federal courts located in the County of Orange, State of California,
      U.S.A. for any lawsuit filed, arising from or related to this Subscription.
      

     

    16.    Headings.
      The
      headings in this Subscription Agreement are for convenience of reference, and
      shall not by themselves determine the meaning of this Subscription Agreement
      or
      of any part hereof.

     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

    17.    Obligations
      of Subscriber.
      The
      Subscriber hereby acknowledges and agrees that the Subscription hereunder is
      irrevocable, that the Subscriber is not entitled to cancel, terminate or revoke
      this Subscription Agreement or any agreements of the Subscriber hereunder and
      that this Subscription Agreement and such other agreements shall survive the
      death or disability of the Subscriber and shall be binding upon and inure to
      the
      benefit of the parties and their respective heirs, executors, administrators,
      successors, legal representatives and permitted assigns. If the Subscriber
      is
      more than one person, the obligations of such persons hereunder shall be joint
      and several and the representations, warranties, covenants, agreements and
      acknowledgments of the Subscriber herein contained shall be deemed to be made
      by
      and be binding upon each such person and his or her respective heirs, executors,
      administrators, successors, legal representatives and permitted
      assigns.

     

    18.    Severability.
      In case
      any provision of this Subscription Agreement shall be invalid, illegal or
      unenforceable, the validity, legality and enforceability of the remaining
      provisions of this Subscription Agreement shall not in any way be affected
      or
      impaired thereby.

     

    19.    Gender,
      Number and Headings. As
      used
      in this Subscription Agreement, the masculine gender will include the feminine
      and neuter, and vice versa, as the context so requires; and the singular number
      will include the plural, and vice versa, as the context so requires. As used
      in
      this Subscription Agreement, section and subsection headings are for convenience
      of reference only and shall not be used to modify, interpret, limit, expand
      or
      construe the terms of this Subscription Agreement.

     

    20.    Attorneys
      Fees.
      If any
      action or proceeding relating to this Agreement, or the enforcement of any
      provision of this Agreement is brought by a party hereto against any party
      hereto, the prevailing party shall be entitled to recover reasonable attorneys’
fees, costs and disbursements (in addition to any other relief to which the
      prevailing party may be entitled).

     

    [Signature
      on following page.]

     

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

    IN
      WITNESS WHEREOF, the parties have executed this Subscription Agreement this
      ____
      day of _____, 2007.

     

    TYPE
      OF
      OWNERSHIP (CHECK ONE)

     

    
      	INDIVIDUAL
              SUBSCRIBER(S)	ENTITY
              SUBSCRIBER
	 	 
	
              _____
                Individual Ownership

            	
              _____
                Corporation

              (Please
                affix corporate seal on signature page)

            
	
              _____
                Joint Tenants with Right of Survivorship (both Tenants must
                sign)

            	
              _____
                Partnership

               

              _____
                Trust:

              Name
                of Trustee:

               

              ____________________________

            
	
              _____
                Husband and Wife as Community Property (both Spouses must
                sign)

            	
              Name
                of Trust:

               

              ____________________________

            
	 
	
              _____
                Tenants-in-Common (all

              Tenants
                must sign)

            	
              Date
                of Trust Instrument:

            
	 
	
              _____
                A Married (Man) (Woman) as (His) (Her) Separate Property

            	
              Beneficiary(ies):

               

              ___________________________

               

              _____
                Other (Explain):

               

              State
                of Formation

              of
                Entity:

            
	 

    

    

    
      	
              A.

            	
              Number
                of Shares for which Subscriber is subscribing:
                _________________

            

    

     

    
      	
              B.

            	
              Subscription
                Amount (the number filled in A. multiplied by U.S.$1.00):
                U.S.$_______________

            

    

     

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

    

    
      	
              (FOR
                INDIVIDUAL SUBSCRIBER(S))

            	 	
              (FOR
                ENTITY SUBSCRIBER)

            
	   
	 	  

	
              Signature

            	 	
              Signature
                and Capacity

            
	  
	 	  

	
              Signature

            	 	
              Signature
                and Capacity

            
	  
	 	  

	
              Name(s)
                Typed or Printed

            	 	
              Name(s)
                Typed or Printed

            
	  
	 	  

	
              Social
                Security No.(s)

            	 	
              Tax
                Identification or Social Security Numbers

            
	  
	 	  

	
              Residence
                Address

            	 	
              Address

            
	  
	 	  

	
              City,
                State and Zip Code

            	 	
              City,
                State and Zip Code

            
	   
	 	  

	
              Mailing
                Address, if different

            	 	Mailing
              Address, if different
	  
	 	  

	City,
              State and Zip Code	 	City,
              State and Zip Code

    

     

     

    
      	
              ACCEPTED
                AS

              OF
                __________ ____, 2007:

               

              KAL
                ENERGY, INC., a Delaware corporation

               

              By: 
                ___________________________________

              Its: 
                ___________________________________

            	 

    

     

     

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

       

      EXHIBIT
        A

    

     

    “U.S.
      person” shall mean:

     

    
      	 	
              a.

            	
              any
                natural person resident in the United
                States;

            

    

     

    
      	 	
              b.

            	
              any
                partnership or corporation organized or incorporated under the laws
                of the
                United States;

            

    

     

    
      	 	
              c.

            	
              any
                estate of which any executor or administrator is a U.S.
                person;

            

    

     

    
      	 	
              d.

            	
              any
                trust of which the trustee is a U.S.
                person;

            

    

     

    
      	 	
              e.

            	
              any
                agency or branch of a foreign entity located in the United
                States;

            

    

     

    
      	 	
              f.

            	
              any
                non-discretionary account or similar account (other than an estate
                or
                trust) held by a dealer or other fiduciary organized, incorporated,
                or (if
                an individual) resident in the United
                States;

            

    

     

    
      	 	
              g.

            	
              any
                discretionary account or similar account (other than an estate or
                trust)
                held by a dealer or other fiduciary organized, incorporated, or (if
                an
                individual) resident in the United States;
                and

            

    

     

    
      	 	
              h.

            	
              any
                partnership or corporation if:

            

    

     

    
      	 	
              i)

            	
              organized
                or incorporated under the laws of any foreign jurisdiction;
                and

            

    

     

    
      	 	
              ii)

            	
              formed
                by a U.S. person principally for the purpose of investing in securities
                not registered under the Securities Act, unless it is organized or
                incorporated, and owned, by accredited investors (as defined in
                Rule 501(a) of the Securities Act) who are not natural persons,
                estates or trusts

            

    

     

    “U.S.
      person” shall not include:

     

    
      	 	
              a.

            	
              any
                discretionary account or similar account (other than an estate or
                trust)
                held for the benefit or account of a non-U.S. person by a dealer
                or other
                professional fiduciary organized, incorporated, or (if an individual)
                resident in the United States;

            

    

     

    
      	 	
              b.

            	
              any
                estate of which any professional fiduciary acting as executor or
                administrator is a U.S. person, if:

            

    

     

    
      	 	
              i)

            	
              an
                executor or administrator of the estate who is not a U.S. person
                has sole
                or shared investment discretion with respect to the assets of the
                estate;
                and

            

    

     

    
      	 	
              ii)

            	
              the
                estate is governed by foreign law;

            

    

     

    
      	 	
              c.

            	
              any
                trust of which any professional fiduciary acting as trustee is a
                U.S.
                person, if a trustee who is not a U.S. person has sole or shared
                investment discretion with respect to the trust assets, and no beneficiary
                of the trust (and no settlor if the trust is revocable) is a U.S.
                person;

            

    

     

    
      
        
        

      

      
        A-1

        
          

        

      

      
        
        

      

    

    
      	 	
              d.

            	
              an
                employee benefit plan established and administered in accordance
                with the
                law of a country other than the United States and customary practices
                and
                documentation of such country;

            

    

     

    
      	 	
              e.

            	
              any
                agency or branch of a U.S. person located outside the United States,
                if:

            

    

     

    
      	 	
              i)

            	
              the
                agency or branch operates for valid business reasons;
                and

            

    

     

    
      	 	
              ii)

            	
              the
                agency or branch is engaged in the business of insurance or banking
                and is
                subject to substantive insurance or banking regulation, respectively,
                in
                the jurisdiction where located; and

            

    

     

    
      	
            	f.	
              the
                International Monetary Fund, the International Bank for Reconstruction
                and
                Development, the Inter-American Development Bank, the Asian Development
                Bank, the African Development Bank, the United Nations, and their
                agencies, affiliates and pension plans, and any other similar
                international organizations, their agencies, affiliates and pension
                plans.

            

    

     

     

    
      
        
        

      

      A-2

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