Purchase Order Financing Agreement

 

FACE AMOUNT   $250,000 INTEREST RATE   1% per month ISSUANCE DATE   May 15, 2012
MATURITY DATE   May 15, 2013

 

FOR VALUE RECEIVED, XZERES Corp., a Nevada corporation (the “Company”), (OTC BB:
XPWR) hereby promises to pay Dorothy D. Gage, Trustee under the Dorothy D. Gage
Living Trust and William N. & Jean S. Hagler Trust (the “Holder”) by May 15,
2013 (the “Maturity Date”), or earlier, the Face Amount of Two Hundred and Fifty
Thousand dollars ($250,000) U.S., plus accrued interest, in such amounts, at
such times and on such terms and conditions as are specified herein.

 

Article 1

 

Section 1.1 – Method of Payment/Interest

 

The Company shall pay one percent (1%) monthly coupon, compounded daily, on the
unpaid Face Amount, pro rata for partial periods. The Company shall pay a
minimum of two thousand dollars ($2,500) in interest on the funds (“Minimum
Interest”).

 

Upon execution of this agreement, the Company shall issue 50,000 warrants,
exercisable at $0.80 per share with a 3-year maturity to the Holder.

 

Section 1.2 – Prepayment

 

Prior to maturity, as the funds become available from the Purchase Orders listed
below in Exhibit A (“Collateral Orders”) (attached hereto and incorporated
herein by reference), the Company agrees to either; 1) pay to the Holder, within
five (5) days, in whole or part, that portion of funds from the Collateral
Orders as they become available in the Holder’s account or 2) submit new
Collateral with a value equal to or in excess of the current outstanding
principal, within five (5) days.

 

The Company may make payments prior to maturity (“Prepayment”) without any
penalties provided the Minimum Interest is paid. All payments to the Holder
shall be made via wire transfer.

 

Section 1.3 – Monthly Interest Payments

 

The Company agrees to make interest payments (the “Interest Payments”) in cash
on the outstanding principal balance each month on the anniversary of the
Financing Agreement during the term of the agreement. At the option of the
Holder, Interest Payments may be added to the Face Amount to fund replacement
Purchase Orders provided as Collateral under Section 1.2 of this Financing
Agreement.

 

 

If there is no outstanding balance on a given month, then no interest payment
will be made, provided the Minimum Interest has already been paid to Holder.

 

Article 2

 

Section 2.1 – Collateral

 

The Company’s obligation to the Holder shall be secured by the wind turbine and
associated equipment defined in Exhibit A (“Materials”) before shipment. When
the Materials are shipped the Company’s obligation shall be secured by all funds
receivable for the Materials defined in Exhibit A.

 

Article 3

 

Section 3.1 - Unpaid Amounts

 

In the event that on the Maturity Date, there is an outstanding balance on the
Face Amount, the Holder can exercise its right to increase the Face Amount by
ten percent (10%) as a penalty. The Company shall also continue to pay the
interest rate outlined in this Agreement. If the aforementioned occurs, the
Company will be in Default and remedies as described in Article 4 may be taken
at the Holder’s discretion.

 

Article 4

 

Section 4.1 - Defaults and Remedies

 

Events of Default. An “Event of Default” occurs if any of the following occur:

 

(a)

the Company does not make the Payment on the Face Amount of this Agreement
within ten (10) business days of the Maturity Date, as applicable, upon receipt
of Collateral or otherwise; or

 

(b)

any of the Company’s representations or warranties contained in this Agreement
were false when made and such failure continues for a period of ten (10)
business days; or,

 

(c)

the Company breaches any covenant or condition of this Agreement, and such
breach, if subject to cure, continues for a period of ten (10) business days.

 

Section 4.2 - Remedies.

 

In the Event of Default, the Holder may elect to secure a portion of the
Company's receivables and/or inventory in an amount equal to the outstanding
balance. In such event, the Company hereby agrees to pledge, assign and grant to
Holder a continuing security interest and lien in a portion of the Company’s
receivables and inventory sufficient enough to secure the outstanding owed
balance.

 

 

For each Event of Default, as outlined in this Agreement, the Holder can
exercise its right to increase the Face Amount ten percent (10%) as penalty. In
addition, the Holder may elect to increase the Face Amount by two percent (2%)
per month paid as a penalty for Liquidated Damages in addition to the current
Interest being paid on the Note. The Liquated Damages will be compounded daily.
It is the intention and acknowledgement of both parties that the Liquidated
Damages not be deemed as interest.

Article 5

 

Notice.

 

Any notices, consents, waivers or other communications required or permitted to
be given under the terms of this Agreement must be in writing and will be deemed
to have been delivered (i) upon receipt, when delivered personally; (ii) upon
receipt, when sent by facsimile (provided a confirmation of transmission is
mechanically or electronically generated and kept on file by the sending party);
or (iii) one (1) day after deposit with a nationally recognized overnight
delivery service, in each case properly addressed to the party to receive the
same. The addresses and facsimile numbers for such communications shall be:

 

If to the Company:

 

XZERES Corp

9025 SW Hillman Ct., Suite 3126

Wilsonville, OR 97070

 

If to the Holder:

 

Dorothy D. Gage, Trustee under the Dorothy D. Gage Living Trust

William N. & Jean S. Hagler Trust

 

Each party shall provide five (5) business days prior notice to the other party
of any change in address, phone number or facsimile number.

 

Where this Agreement authorizes or requires the payment of money or the
performance of a condition or obligation on a Saturday or Sunday or a public
holiday, or authorizes or requires the payment of money or the performance of a
condition or obligation within, before or after a period of time computed from a
certain date, and such period of time ends on a Saturday or a Sunday or a public
holiday, such payment may be made or condition or obligation performed on the
next succeeding business day, and if the period ends at a specified hour, such
payment may be made or condition performed, at or before the same hour of such
next succeeding business day, with the same force and effect as if made or
performed in accordance with the terms of this Agreement. A “business day” shall
mean a day on which the banks in New York are not required or allowed to be
closed.

 

Article 6

 

No Assignment

 

This Agreement and the terms and conditions herein, shall not be assignable.

 

 

Article 7

 

Governing Law

 

The validity, terms, performance and enforcement of this Agreement shall be
governed and construed by the provisions hereof and in accordance with the laws
of the State of Oregon applicable to agreements that are negotiated, executed,
delivered and performed solely in the State of Oregon.

 

Article 8

 

Litigation

 

No party to this agreement will challenge the jurisdiction or venue provisions
as provided in this section. Nothing in this section shall limit the Holder's
right to obtain an injunction for a breach of this Agreement from a court of
law.

 

Article 9

 

Conditions to Closing

 

The Company shall have delivered the proper Collateral to the Holder before
Closing.

 

Article 10

 

Indemnification

 

In consideration of the Holder's execution and delivery of this Agreement and
the acquisition and funding by the Holder hereunder and in addition to all of
the Company's other obligations under the documents contemplated hereby, the
Company shall defend, protect, indemnify and hold harmless the Holder and all of
their shareholders, officers, directors, employees, counsel, and direct or
indirect investors and any of the foregoing person's agents or other
representatives (including, without limitation, those retained in connection
with the transactions contemplated by this Agreement) (collectively, the
"INDEMNITEES") from and against any and all actions, causes of action, suits,
claims, losses, costs, penalties, fees, liabilities and damages, and expenses in
connection therewith (irrespective of whether any such Indemnitee is a party to
the action for which indemnification hereunder is sought), and including
reasonable attorneys' fees and disbursements (the “INDEMNIFIED LIABILITIES’),
incurred by any Indemnitee as a result of, or arising out of, or relating to (i)
any misrepresentation or breach of any representation or warranty made by the
Company in the Agreement, or any other certificate, instrument or document
contemplated hereby or thereby (ii) any breach of any covenant, agreement or
obligation of the Company contained in the Agreement or any other certificate,
instrument or document contemplated hereby or thereby, except insofar as any
such misrepresentation, breach or any untrue statement, alleged untrue
statement, omission or alleged omission is made in reliance upon and in
conformity with written information furnished to the Company by, or on behalf
of, the Holder or based on illegal or alleged illegal trading of the Shares by
the Holder. To the extent that the foregoing undertaking by the Company may be
unenforceable for any reason, the Company shall make the maximum contribution to
the payment and satisfaction of each of the Indemnified Liabilities which is
permissible under applicable law. The indemnity provisions contained herein
shall be in addition to any cause of action or similar rights the Holder may
have, and any liabilities the Holder may be subject to.

 

 

Article 11

 

Miscellaneous

 

a.

All pronouns and any variations thereof used herein shall be deemed to refer to
the masculine, feminine, impersonal, singular or plural, as the identity of the
person or persons may require.

 

b.

Neither this Agreement nor any provision hereof shall be waived, modified,
changed, discharged, terminated, revoked or canceled, except by an instrument in
writing signed by the party effecting the same against whom any change,
discharge or termination is sought.

 

c.

Notices required or permitted to be given hereunder shall be in writing and
shall be deemed to be sufficiently given when personally delivered or sent by
facsimile transmission: (i) if to the Company, at its executive offices or (ii)
if to the Holder, at the address for correspondence set forth in the Article 6,
or at such other address as may have been specified by written notice given in
accordance with this paragraph.

 

d.

This Agreement may be executed in two or more counterparts, all of which taken
together shall constitute one instrument. Execution and delivery of this
Agreement by exchange of facsimile copies bearing the facsimile signature of a
party shall constitute a valid and binding execution and delivery of this
Agreement by such party. Such facsimile copies shall constitute enforceable
original documents.

 

e.

This Written Agreement represent the FINAL AGREEEMENT between the Company and
the Holders and may not be contradicted by evidence of prior, contemporaneous,
or subsequent oral agreements of the parties, there are no unwritten oral
agreements among the parties.

 

 

f.

The execution, delivery and performance of this Agreement by the Company and the
consummation by the Company of the transactions contemplated hereby and thereby
will not (i) result in a violation of the Articles of Incorporation, any
Certificate of Designations, Preferences and Rights of any outstanding series of
preferred stock of the Company or the By-laws or (ii) conflict with, or
constitute a material default (or an event which with notice or lapse of time or
both would become a material default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of, any material agreement,
contract, indenture mortgage, indebtedness or instrument to which the Company or
any of its Subsidiaries is a party, or result in a violation of any law, rule,
regulation, order, judgment or decree, including United States federal and state
securities laws and regulations and the rules and regulations of the principal
securities exchange or trading market on which the Common Stock is traded or
listed (the “Principal Market”), applicable to the Company or any of its
Subsidiaries or by which any property or asset of the Company or any of its
Subsidiaries is bound or affected. Neither the Company nor its Subsidiaries is
in violation of any term of, or in default under, the Articles of Incorporation,
any Certificate of Designations, Preferences and Rights of any outstanding
series of preferred stock of the Company or the By-laws or their organizational
charter or by-laws, respectively, or any contract, agreement, mortgage,
indebtedness, indenture, instrument, judgment, decree or order or any statute,
rule or regulation applicable to the Company or its Subsidiaries, except for
possible conflicts, defaults, terminations, amendments, accelerations,
cancellations and violations that would not individually or in the aggregate
have a Material Adverse Effect. The business of the Company and its Subsidiaries
is not being conducted, and shall not be conducted, in violation of any law,
statute, ordinance, rule, order or regulation of any governmental authority or
agency, regulatory or self-regulatory agency, or court, except for possible
violations the sanctions for which either individually or in the aggregate would
not have a Material Adverse Effect. The Company is not required to obtain any
consent, authorization, permit or order of, or make any filing or registration
(except the filing of a registration statement) with, any court, governmental
authority or agency, regulatory or self-regulatory agency or other third party
in order for it to execute, deliver or perform any of its obligations under, or
contemplated by, this Agreement in accordance with the terms hereof or thereof.
All consents, authorizations, permits, orders, filings and registrations which
the Company is required to obtain pursuant to the preceding sentence have been
obtained or effected on or prior to the date hereof and are in full force and
effect as of the date hereof. The Company and its Subsidiaries are unaware of
any facts or circumstances which might give rise to any of the foregoing. The
Company is not, and will not be, in violation of the listing requirements of the
Principal Market as in effect on the date hereof and on each of the Closing
Dates and is not aware of any facts which would reasonably lead to delisting of
the Common Stock by the Principal Market in the foreseeable future.

g.

The Company and its “Subsidiaries” (which for purposes of this Agreement means
any entity in which the Company, directly or indirectly, owns capital stock or
holds an equity or similar interest) are corporations duly organized and validly
existing in good standing under the laws of the respective jurisdictions of
their incorporation, and have the requisite corporate power and authorization to
own their properties and to carry on their business as now being conducted. Both
the Company and its Subsidiaries are duly qualified to do business and are in
good standing in every jurisdiction in which their ownership of property or the
nature of the business conducted by them makes such qualification necessary,
except to the extent that the failure to be so qualified or be in good standing
would not have a Material Adverse Effect. As used in this Agreement, “Material
Adverse Effect” means any material adverse effect on the business, properties,
assets, operations, results of operations, financial condition or prospects of
the Company and its Subsidiaries, if any, taken as a whole, or on the
transactions contemplated hereby or by the agreements and instruments to be
entered into in connection herewith, or on the authority or ability of the
Company to perform its obligations under the Agreement.

 

 

h.

Authorization; Enforcement; Compliance with Other Instruments. (i) The Company
has the requisite corporate power and authority to enter into and perform this
Agreement, and to issue the Agreement in accordance with the terms hereof and
thereof, (ii) the execution and delivery of the Agreement by the Company and the
consummation by it of the transactions contemplated hereby and thereby, have
been duly and validly authorized by the Company's Board of Directors and no
further consent or authorization is required by the Company, its Board of
Directors, or its shareholders, (iii) the Agreement has been duly and validly
executed and delivered by the Company, and (iv) the Agreement constitutes the
valid and binding obligations of the Company enforceable against the Company in
accordance with their terms, except as such enforceability may be limited by
general principles of equity or applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar laws relating to, or
affecting generally, the enforcement of creditors' rights and remedies.

 

i.

The execution and delivery of this Agreement shall not alter any prior written
agreements between the Company and the Holder.

 

j.

There are no disagreements of any kind presently existing, or reasonably
anticipated by the Company to arise, between the Company and the accountants,
auditors and lawyers formerly or presently employed by the Company, including
but not limited to disputes or conflicts over payment owed to such accountants,
auditors or lawyers.

 

k.

All representations made by or relating to the Company of a historical nature
and all undertaking described herein shall relate and refer to the Company, its
predecessors, and the Subsidiaries.

 

l.

The Company hereby represent and warrants to the Holder that: (i) it has
voluntarily entered into this Agreement of its own freewill, (ii) it is not
entering into this Agreement under economic duress, (iii) the terms of this
Agreement are reasonable and fair to the Company, and (iv) the Company has had
independent legal counsel of its own choosing review this Agreement, advise the
Company with respect to this Agreement, and represent the Company in connection
with its entering into this Agreement.

 

SIGNATURES

 

IN WITNESS WHEREOF, the Company has duly executed this Debenture as of the date
first written above.

 

XZERES CORP   By: /s/ Frank Greco Name: Frank Greco Title: Chief Executive
Officer  

(Holder)

 

By: /s/ Dorothy D. Gage, Trustee under the Dorothy D. Gage Living Trust   By:
/s/ William N. & Jean S. Hagler Trust

 

 

Exhibit A