Document:

ex-10.3

 

 

 EXHIBIT A
 THESE SECURITIES AND THE UNDERLYING SHARES OF COMMON STOCK HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY.  THESE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT WITH A REGISTERED BROKER-DEALER OR OTHER LOAN WITH A FINANCIAL INSTITUTION THAT IS AN “ACCREDITED INVESTOR” AS DEFINED IN RULE 501(a) UNDER THE SECURITIES ACT.
 COMMON STOCK PURCHASE WARRANT
 

 To Purchase ____ Shares of Common Stock of
 

 SPINDLE, INC.
 

 THIS COMMON STOCK PURCHASE WARRANT CERTIFIES that, for value received, Richard G. Stewart (the “Holder”), is entitled, upon the terms and subject to the limitations on exercise and the conditions hereinafter set forth, at any time on or after the date hereof (the “Initial Exercise Date”) and on or prior to the close of business on the third anniversary of the Initial Exercise Date (the “Termination Date”) but not thereafter, to subscribe for and purchase from Spindle, Inc., a Nevada corporation (the “Company”), up to _____shares (the “Warrant Shares”) of the Company’s common stock, par value $0.001 per share (the “Common Stock”).  The purchase price of one share of Common Stock (the “Exercise Price”) under this Warrant shall be $0.50, subject to adjustment hereunder.  The Exercise Price and the number of Warrant Shares for which the Warrant is exercisable shall be subject to adjustment as provided herein.
 

 1.
 Title to Warrant.  Prior to the Termination Date and subject to compliance with applicable laws and Section 7 of this Warrant, this Warrant and all rights hereunder are transferable, in whole or in part, at the office or agency of the Company by the Holder in person or by duly authorized attorney, upon surrender of this Warrant together with the Assignment Form annexed hereto properly endorsed.  The transferee shall sign an investment letter in form and substance reasonably satisfactory to the Company.
 

 2.
 Authorization of Shares.  The Company covenants that all Warrant Shares which may be issued upon the exercise of the purchase rights represented by this Warrant will, upon exercise of the purchase rights represented by this Warrant, be duly authorized, validly issued, fully paid and nonassessable and free from all taxes, liens and charges in respect of the issue thereof (other than taxes in respect of any transfer occurring contemporaneously with such issue).
 

 
 

 3.
 Exercise of Warrant.  
 

 (a)
 Except as provided in Section 4 herein, exercise of the purchase rights represented by this Warrant may be made at any time or times on or after the Initial Exercise Date and on or before the Termination Date by the surrender of this Warrant and the Notice of Exercise Form annexed hereto duly executed, at the office of the Company (or such other office or agency of the Company as it may designate by notice in writing to the registered Holder at the address of such Holder appearing on the books of the Company).  Upon payment of the Exercise Price of the shares thereby purchased by wire transfer or cashier’s check drawn on a United States bank, the Holder shall be entitled to receive a certificate for the number of Warrant Shares so purchased.  Certificates for Warrant Shares purchased hereunder shall be delivered to the Holder within five (5) business days after the date on which this Warrant shall have been exercised as aforesaid. This Warrant shall be deemed to have been exercised and such certificate or certificates shall be deemed to have been issued, and Holder or any other person so designated to be named therein shall be deemed to have become a holder of record of such Warrant Shares for all purposes, as of the date the Warrant has been exercised by payment to the Company of the Exercise Price and all taxes required to be paid by the Holder, if any, pursuant to Section 5 prior to the issuance of such shares, have been paid.  If the Company fails to deliver to the Holder a certificate or certificates representing the Warrant Shares pursuant to this Section 3(a) by the fifth business day after the date of exercise, then the Holder will have the right to rescind such exercise by written notice to the Company.
 

 (b)
 If this Warrant shall have been exercised in part, the Company shall, at the time of delivery of the certificate or certificates representing Warrant Shares, deliver to Holder a new Warrant evidencing the rights of Holder to purchase the unpurchased Warrant Shares called for by this Warrant, which new Warrant shall in all other respects be identical with this Warrant. 
 

 4.
 No Fractional Shares or Scrip.  No fractional shares or scrip representing fractional shares shall be issued upon the exercise of this Warrant.  As to any fraction of a share which Holder would otherwise be entitled to purchase upon such exercise, the Company shall pay a cash adjustment in respect of such final fraction in an amount equal to such fraction multiplied by the Exercise Price.
 

 5.
 Charges, Taxes and Expenses.  Issuance of certificates for Warrant Shares shall be made without charge to the Holder for any issue or transfer tax or other incidental expense in respect of the issuance of such certificate, all of which taxes and expenses shall be paid by the Company, and such certificates shall be issued in the name of the Holder or in such name or names as may be directed by the Holder; provided, however, that in the event certificates for Warrant Shares are to be issued in a name other than the name of the Holder, this Warrant when surrendered for exercise shall be accompanied by the Assignment Form attached hereto duly executed by the Holder; and the Company may require, as a condition thereto, the payment of a sum sufficient to reimburse it for any transfer tax incidental thereto.
 

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 6.
 Closing of Books.  The Company will not close its stockholder books or records in any manner which prevents the timely exercise of this Warrant, pursuant to the terms hereof.
 7.
 Transfer, Division and Combination.  
 

 (a) 
 Subject to compliance with any applicable securities laws and the conditions set forth in Sections 1 and 7(e) hereof, this Warrant and all rights hereunder are transferable, in whole or in part, upon surrender of this Warrant at the principal office of the Company, together with a written assignment of this Warrant substantially in the form attached hereto duly executed by the Holder or its agent or attorney and funds sufficient to pay any transfer taxes payable upon the making of such transfer.  Upon such surrender and, if required, such payment, the Company shall execute and deliver a new Warrant or Warrants in the name of the assignee or assignees and in the denomination or denominations specified in such instrument of assignment, and shall issue to the assignor a new Warrant evidencing the portion of this Warrant not so assigned, and this Warrant shall promptly be cancelled.  A Warrant, if properly assigned, may be exercised by a new holder for the purchase of Warrant Shares without having a new Warrant issued.
 

 (b)
 This Warrant may be divided or combined with other Warrants upon presentation hereof at the aforesaid office of the Company, together with a written notice specifying the names and denominations in which new Warrants are to be issued, signed by the Holder or its agent or attorney.  Subject to compliance with Section 7(a), as to any transfer which may be involved in such division or combination, the Company shall execute and deliver a new Warrant or Warrants in exchange for the Warrant or Warrants to be divided or combined in accordance with such notice.
 

 (c)
 The Company shall prepare, issue and deliver at its own expense (other than transfer taxes) the new Warrant or Warrants under this Section 7.
 

 (d)
 The Company agrees to maintain, at its aforesaid office, books for the registration and the registration of transfer of the Warrants.
 

 (e)
 If , at the time of the surrender of this Warrant in connection with any transfer of this Warrant, the transfer of this Warrant shall not be registered pursuant to an effective registration statement under the Securities Act and under applicable state securities or blue sky laws, the Company may require, as a condition of allowing such transfer, (i) that the Holder or transferee of this Warrant, as the case may be, furnish to the Company a written opinion of counsel reasonably acceptable to the Company (which opinion shall be in form, substance and scope customary for opinions of counsel in comparable transactions) to the effect that such transfer may be made without registration under the Securities Act and under applicable state securities or blue sky laws and (ii) that the holder or transferee execute and deliver to the Company an investment letter in form and substance acceptable to the Company. 
 

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 8.
 No Rights as Shareholder until Exercise.  This Warrant does not entitle the Holder to any voting rights or other rights as a shareholder of the Company prior to the exercise hereof.  Upon the surrender of this Warrant and the payment of the aggregate Exercise Price, the Warrant Shares so purchased shall be and be deemed to be issued to such Holder as the record owner of such shares as of the close of business on the later of the date of such surrender or payment. 
 

 9.
 Loss, Theft, Destruction or Mutilation of Warrant.  The Company covenants that upon receipt by the Company of evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of this Warrant or any stock certificate relating to the Warrant Shares, and in case of loss, theft or destruction, of indemnity or security reasonably satisfactory to it (which, in the case of the Warrant, shall not include the posting of any bond), and upon surrender and cancellation of such Warrant or stock certificate, if mutilated, the Company will make and deliver a new Warrant or stock certificate of like tenor and dated as of such cancellation, in lieu of such Warrant or stock certificate.
 

 10.
 Saturdays, Sundays, Holidays, etc.  If the last or appointed day for the taking of any action or the expiration of any right required or granted herein shall be a Saturday, Sunday or a legal holiday, then such action may be taken or such right may be exercised on the next succeeding day not a Saturday, Sunday or legal holiday.
 

 11.
 Adjustments of Exercise Price and Number of Warrant Shares.  The number and kind of securities purchasable upon the exercise of this Warrant and the Exercise Price shall be subject to adjustment from time to time upon the happening of any of the following.  In case the Company shall (i) pay a dividend in shares of Common Stock or make a distribution in shares of Common Stock to holders of its outstanding Common Stock, (ii) subdivide its outstanding shares of Common Stock into a greater number of shares, (iii) combine its outstanding shares of Common Stock into a smaller number of shares of Common Stock, or (iv) issue any shares of its capital stock in a reclassification of the Common Stock, then in each such case the number of Warrant Shares purchasable upon exercise of this Warrant immediately prior thereto shall be adjusted so that the Holder shall be entitled to receive the kind and number of Warrant Shares or other securities of the Company which it would have owned or have been entitled to receive had such Warrant been exercised in advance thereof.  Upon each such adjustment of the kind and number of Warrant Shares or other securities of the Company which are purchasable hereunder, the Holder shall thereafter be entitled to purchase the number of Warrant Shares or other securities resulting from such adjustment at an Exercise Price per Warrant Share or other security obtained by multiplying the Exercise Price in effect immediately prior to such adjustment by the number of Warrant Shares purchasable pursuant hereto immediately prior to such adjustment and dividing by the number of Warrant Shares or other securities of the Company resulting from such adjustment.  An adjustment made pursuant to this paragraph shall become effective immediately after the effective date of such event retroactive to the record date, if any, for such event.
 

 

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 12.
 Reorganization, Reclassification, Merger, Consolidation or Disposition of Assets.  In case the Company shall reorganize its capital, reclassify its capital stock, consolidate or merge with or into another corporation (where the Company is not the surviving corporation or where there is a change in or distribution with respect to the Common Stock of the Company), or sell, transfer or otherwise dispose of all or substantially all its property, assets or business to another corporation and, pursuant to the terms of such reorganization, reclassification, merger, consolidation or disposition of assets, shares of common stock of the successor or acquiring corporation, or any cash, shares of stock or other securities or property of any nature whatsoever (including warrants or other subscription or purchase rights) in addition to or in lieu of common stock of the successor or acquiring corporation (“Other Property”), are to be received by or distributed to the holders of Common Stock of the Company, then the Holder shall have the right thereafter to receive, at the option of the Holder, upon exercise of this Warrant, the number of shares of Common Stock of the successor or acquiring corporation or of the Company, if it is the surviving corporation, and Other Property receivable upon or as a result of such reorganization, reclassification, merger, consolidation or disposition of assets by a Holder of the number of shares of Common Stock for which this Warrant is exercisable immediately prior to such event.  In case of any such reorganization, reclassification, merger, consolidation or disposition of assets, the successor or acquiring corporation (if other than the Company) shall expressly assume the due and punctual observance and performance of each and every covenant and condition of this Warrant to be performed and observed by the Company and all the obligations and liabilities hereunder, subject to such modifications as may be deemed appropriate (as determined in good faith by resolution of the Board of Directors of the Company) in order to provide for adjustments of Warrant Shares for which this Warrant is exercisable which shall be as nearly equivalent as practicable to the adjustments provided for in this Section 12.  For purposes of this Section 12, “common stock of the successor or acquiring corporation” shall include stock of such corporation of any class which is not preferred as to dividends or assets over any other class of stock of such corporation and which is not subject to redemption and shall also include any evidences of indebtedness, shares of stock or other securities which are convertible into or exchangeable for any such stock, either immediately or upon the arrival of a specified date or the happening of a specified event and any warrants or other rights to subscribe for or purchase any such stock.  The foregoing provisions of this Section 12 shall similarly apply to successive reorganizations, reclassifications, mergers, consolidations or disposition of assets. 
 

 13.
 Voluntary Adjustment by the Company.  The Company may at any time during the term of this Warrant reduce the then current Exercise Price to any amount and for any period of time deemed appropriate by the Board of Directors of the Company.
 

 14.
 Notice of Adjustment.  Whenever the number of Warrant Shares or number or kind of securities or other property purchasable upon the exercise of this Warrant or the Exercise Price is adjusted, as herein provided, the Company shall give notice thereof to the Holder, which notice shall state the number of Warrant Shares (and other securities or property) purchasable upon the exercise of this Warrant and the Exercise Price of such Warrant Shares (and other securities or property) after such adjustment, setting forth a brief statement of the facts requiring such adjustment and setting forth the computation by which such adjustment was made.
 

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 15.
 Notice of Corporate Action.  If at any time:
 

 (a)
 the Company shall take a record of the holders of its Common Stock for the purpose of entitling them to receive a dividend or other distribution, or any right to subscribe for or purchase any evidences of its indebtedness, any shares of stock of any class or any other securities or property, or to receive any other right, or
 

 (b)
 there shall be any capital reorganization of the Company, any reclassification or recapitalization of the capital stock of the Company or any consolidation or merger of the Company with, or any sale, transfer or other disposition of all or substantially all the property, assets or business of the Company to, another corporation or,
 

 (c)
 there shall be a voluntary or involuntary dissolution, liquidation or winding up of the Company;
 

 then, in any one or more of such cases (but not in such cases if the rights of the Holder or holders of Common Stock will not be materially affected thereby, as for example in the case of a merger to effect a change of domicile), the Company shall give to Holder (i) at least 5 business days’ prior notice of the date on which a record date shall be selected for such dividend, distribution or right or for determining rights to vote in respect of any such reorganization, reclassification, merger, consolidation, sale, transfer, disposition, liquidation or winding up, and (ii) in the case of any such reorganization, reclassification, merger, consolidation, sale, transfer, disposition, dissolution, liquidation or winding up, at least 5 business days’ prior notice of the date when the same shall take place.  Such notice in accordance with the foregoing clause also shall specify (i) the date on which any such record is to be taken for the purpose of such dividend, distribution or right, the date on which the holders of Common Stock shall be entitled to any such dividend, distribution or right, and the amount and character thereof, and (ii) the date on which any such reorganization, reclassification, merger, consolidation, sale, transfer, disposition, dissolution, liquidation or winding up is to take place and the time, if any such time is to be fixed, as of which the holders of Common Stock shall be entitled to exchange their Warrant Shares for securities or other property deliverable upon such disposition, dissolution, liquidation or winding up.  Each such written notice shall be sufficiently given if addressed to Holder at the last address of Holder appearing on the books of the Company and delivered in accordance with Section 18(d).
 

 16.
 Authorized Shares.  The Company covenants that during the period the Warrant is outstanding, it will reserve from its authorized and unissued Common Stock a sufficient number of shares to provide for the issuance of the Warrant Shares upon the exercise of any purchase rights under this Warrant.  The Company further covenants that its issuance of this Warrant shall constitute full authority to its officers who are charged with the duty of executing stock certificates to execute and issue the necessary certificates for the Warrant Shares upon the exercise of the purchase rights under this Warrant.  The Company will take all such reasonable action as may be necessary to assure that such Warrant Shares may be issued as provided herein without violation of any applicable law or regulation, or of any requirements of the trading market upon which the Common Stock may be listed. 
 

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 Except and to the extent as waived or consented to by the Holder, the Company shall not by any action, including, without limitation, amending its certificate of incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such actions as may be necessary or appropriate to protect the rights of Holder as set forth in this Warrant against impairment.  Without limiting the generality of the foregoing, the Company will (a) not increase the par value of any Warrant Shares above the amount payable therefor upon such exercise immediately prior to such increase in par value, (b) take all such action as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable Warrant Shares upon the exercise of this Warrant, and (c) use commercially reasonable efforts to obtain all such authorizations, exemptions or consents from any public regulatory body having jurisdiction thereof as may be necessary to enable the Company to perform its obligations under this Warrant.
 

 Before taking any action which would result in an adjustment in the number of Warrant Shares for which this Warrant is exercisable or in the Exercise Price, the Company shall obtain all such authorizations or exemptions thereof, or consents thereto, as may be necessary from any public regulatory body or bodies having jurisdiction thereof.
 

 17.
 Miscellaneous.
 

 (a)
 Jurisdiction.  This Warrant shall constitute a contract under the laws of Nevada, without regard to its conflicts of laws principles or rules.
 

 (b)
 Restrictions.  The Holder acknowledges that the Warrant Shares acquired upon the exercise of this Warrant, if not registered, will have restrictions upon resale imposed by state and federal securities laws.
 

 (c)
 Nonwaiver and Expenses.  No course of dealing or any delay or failure to exercise any right hereunder on the part of Holder shall operate as a waiver of such right or otherwise prejudice Holder’s rights, powers or remedies, notwithstanding all rights hereunder terminate on the Termination Date.  If the Company willfully and knowingly fails to comply with any provision of this Warrant, which results in any material damages to the Holder, the Company shall pay to Holder such amounts as shall be sufficient to cover any costs and expenses including, but not limited to, reasonable attorneys’ fees, including those of appellate proceedings, incurred by Holder in collecting any amounts due pursuant hereto or in otherwise enforcing any of its rights, powers or remedies hereunder.
 

 (d)
 Notices.  Any notice, request or other document required or permitted to be given or delivered pursuant to this Warrant shall be deemed to have been sufficiently given and received for all purposes when delivered by hand or by telecopy that has been confirmed as received by 5:00 P.M. on a business day, one (1) business day after being sent by nationally recognized overnight courier or received by telecopy after 5:00 P.M. on any day, or five (5) business days after being sent by certified or registered mail, postage and charges prepaid, return receipt requested, to the following addresses:
 

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 If to the Company:
 Spindle, Inc.
 8700 East Vista Bonita, Suite 260
 Scottsdale, AZ 85255
 Attention: William Clark, Chief Executive Officer and President
 

 If to the Holder:
 At the Holder’s address in the Company’s Warrant register.
 

 (e)
 Limitation of Liability.  No provision hereof, in the absence of any affirmative action by Holder to exercise this Warrant or purchase Warrant Shares, and no enumeration herein of the rights or privileges of Holder, shall give rise to any liability of Holder for the purchase price of any Common Stock or as a stockholder of the Company, whether such liability is asserted by the Company or by creditors of the Company.
 

 (f)
 Remedies.  Holder, in addition to being entitled to exercise all rights granted by law, including recovery of damages, will be entitled to specific performance of its rights under this Warrant.  The Company agrees that monetary damages would not be adequate compensation for any loss incurred by reason of a breach by it of the provisions of this Warrant and hereby agrees to waive the defense in any action for specific performance that a remedy at law would be adequate.
 

 (g)
 Successors and Assigns.  Subject to applicable securities laws, this Warrant and the rights and obligations evidenced hereby shall inure to the benefit of and be binding upon the successors of the Company and the successors and permitted assigns of Holder.  The provisions of this Warrant are intended to be for the benefit of all Holders from time to time of this Warrant and shall be enforceable by any such Holder or holder of Warrant Shares.
 

 (h)
 Amendment.  This Warrant may be modified or amended or the provisions hereof waived with the written consent of the Holder and the Company. 
 

 (i)
 Severability.  Wherever possible, each provision of this Warrant shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Warrant shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provisions or the remaining provisions of this Warrant.
 

 (j)
 Headings.  The headings used in this Warrant are for the convenience of reference only and shall not, for any purpose, be deemed a part of this Warrant.
 

 [The remainder of this page has been intentionally left blank.]
 

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 IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by its officer thereunto duly authorized.
 

 	 	
	 Dated:  ____________
	  

	  
	  SPINDLE, INC.

	  
	  

	  
	  

	  
	  

	  
	 By:_________________________________________

	  
	      Name: William Clark

	      
	      Title: Chief Executive Officer and President

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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 NOTICE OF EXERCISE
 

 TO:
 SPINDLE, INC.
 

 (1)
 The undersigned hereby elects to purchase ________ Warrant Shares of Spindle, Inc. pursuant to the terms of the attached Warrant (only if exercised in full), and tenders herewith payment of the exercise price in full, together with all applicable transfer taxes, if any.
 (2)
 Payment shall take the form of (check applicable box):
 [  ] in lawful money of the United States; or
 (3)
 Please issue said Warrant Shares in the name of the undersigned or in such other name as is specified below:
 _______________________________
 

 

 The Warrant Shares shall be delivered to the following DWAC Account Number:
 

 _______________________________
 

 _______________________________
 

 _______________________________
 

 (4)  Accredited Investor.  The undersigned is an “accredited investor” as defined in Regulation D promulgated under the Securities Act of 1933, as amended.
 

 [SIGNATURE OF HOLDER]
 

 Name of Investing Entity: ___________________________________________________________
 Signature of Authorized Signatory of Investing Entity: _____________________________________
 Name of Authorized Signatory: _______________________________________________________
 Title of Authorized Signatory: ________________________________________________________
 Date: ____________________________________________________________________________
 

 

 

 

 
 

 

 ASSIGNMENT FORM
 

 (To assign the foregoing warrant, execute
this form and supply required information. 
Do not use this form to exercise the warrant.)
 

 

 

 FOR VALUE RECEIVED, the foregoing Warrant and all rights evidenced thereby are hereby assigned to
 

 _______________________________________________ whose address is
 

 _______________________________________________________________.
 

 

 

 _______________________________________________________________
 

 Dated:  ______________, _______
 

 

 Holder's Signature:
 _____________________________
 

 Holder's Address:
 _____________________________
 

 _____________________________
 

 

 

 Signature Guaranteed:  ___________________________________________
 

 

 NOTE:  The signature to this Assignment Form must correspond with the name as it appears on the face of the Warrant, without alteration or enlargement or any change whatsoever, and must be guaranteed by a bank or trust company.  Officers of corporations and those acting in a fiduciary or other representative capacity should file proper evidence of authority to assign the foregoing Warrant.ex4-1.htm

 

Exhibit 4.1

 

Binding Term Sheet 

for Issuance of 

Principal Solar, Inc. Series A Convertible Redeemable Preferred Stock 

May 6, 2015

 

 

This Binding Term Sheet (the “Agreement”) sets forth the general terms and conditions of the purchase by SMCDLB, LLC, a Georgia limited liability company (“Purchaser”), of the Preferred Shares (defined below). This Agreement is intended to be, and is, binding on the parties hereto (“Parties”), subject only to the good faith negotiation and execution of definitive Transaction Documents (defined below), and the Parties agree to execute the Transaction Documents as expeditiously as possible, and no later than May 12, 2015. 

 

***ALL SHARE COUNTS AND PER SHARE AMOUNTS HAVE BEEN ADJUSTED HEREIN TO REFLECT THE MAY 6, 2015, 1: 4 REVERSE SPLIT.***

 

	
Issuer:
	
Principal Solar, Inc. (the “Company”)

	
Purchaser:
	
SMCDLB, LLC, a Georgia limited liability company (the “Purchaser”)

	
Type of Security
	
The Company’s Series A Preferred Stock (the “Preferred Shares”)

	
Initial Purchase
	
Company hereby agrees to sell, and Purchaser hereby agrees to purchase, 250,000 Series A Preferred Shares for a purchase price of $1,000,000 (the “Initial Purchase Price”), with Purchaser’s funding of such purchase to occur on or before May 6, 2015 (the “Initial Purchase Date”).

	
Secondary Purchase
	
Purchaser shall purchase an additional 250,000 Series A Preferred Shares for a purchase price of $1,000,000, on the date (the “Secondary Purchase Date”) upon which BOTH of the following conditions are met: (a) notification of the "effectiveness" of the Company’s Registration Statement regarding its current offering on Registration Statement 333-203075 (the “IPO”), and (b) the Company’s receipt of a commitment from lenders and investors to finance Principal Sunrise IV.

	
Use of Proceeds
	
In accordance with the directions of the Company’s Board of Directors, the Company will use the proceeds from the sale of the Preferred Shares to pay off certain debt of the Company owed to Joyce Hodges, for product development and for other general corporate purposes, as further set forth on Exhibit C.

	
Dividends 
	
12% cumulative until the date the Company until redeemed or converted (the “Dividends”).

	
Conversion Feature
	
Each Preferred Share is convertible into one (1) share of the Company’s common stock (the “Common Shares”) if the Purchaser provides a conversion notice to the Company within three (3) days of the Company's receipt of funds from the IPO. All accrued Dividends unpaid may be applied towards the purchase of Common Shares at a purchase price of $1 per share.

	
Redemption Feature
	
The Company shall redeem the Preferred Shares and pay any and all accrued Dividends in the event that the Purchaser does not provide a notice of conversion within three (3) days of the completion of the IPO, provided that Company shall reserve at IPO closing from first money raised an amount sufficient to redeem the Preferred Shares and accrued Dividends. 

	
Warrants
	
The Purchaser will receive 187,500 warrants to purchase Common Shares at an exercise price of $6.00 per Common Share upon the Initial Purchase Date. The Purchaser will receive an additional 187,500 warrants to purchase Common Shares at an exercise price of $6.00 per Common Share upon the Secondary Purchase Date.

	
Transferred Shares
	
The Company’s Chief Executive Officer will transfer 43,750 Common Shares to the Purchaser on the Initial Purchase Date. The Company’s Chief Executive Officer will transfer an additional 43,750 Common Shares to the Purchaser on the Secondary Purchase Date. 

	
Advance of Initial Purchase Price
	
Purchaser agrees to advance the Initial Purchase Price to the Issuer on May 6th, 2015, in exchange for issuer’s commitment to finalize the Definitive Documents and perform all other obligations hereunder by May 15, 2015. This provision of this Agreement shall be binding on the Purchaser and the Issuer. 

	
Seniority
	
Within five (5) business days following purchase of the Preferred Shares any holder of debt, other than Alpha Capital Anstalt (“Alpha Capital”), Bridge Bank, National Association ("Bridge Bank"), and debt evidencing the financing of insurance premiums shall enter into a subordination agreement, in form and substance reasonably satisfactory to the Purchaser, subordinating such indebtedness with respect to payment and rights to the redemption of the Preferred Shares. 

	
Purchaser Protective Provisions
	
Until the Preferred Shares are redeemed or converted, the Company shall not do any of the following:

●Repay (i) any related party or (ii) other debts outside their current existing payment terms;

●Incur any new indebtedness; 

●Create, authorize, or issue any other preferred shares or any other equity senior to the Preferred Shares;

●Initiate bankruptcy or insolvency proceedings;

●amend, alter or repeal any provision of the Certificate of Incorporation or Bylaws of the Company;

●purchase or redeem (or permit any subsidiary to purchase or redeem) or pay or declare any dividend or make any distribution on, any shares of capital stock of the Company other than (i) redemptions of or dividends or distributions on the Preferred Shares as expressly authorized herein, (ii) dividends or other distributions payable on the Common Stock solely in the form of additional shares of Common Stock and (iii) repurchases of stock from former employees, officers, directors, consultants or other persons who performed services for the Company or any subsidiary in connection with the cessation of such employment or service at the lower of the original purchase price or the then-current fair market value thereof;

●adversely change any rights of the Preferred Shares; or

●effect any stock split, restructuring, or other modification to the Common Stock prior to the execution of the Transaction Documents other than the reverse stock split that has been approved by the Company and its stockholders and disclosed to Purchaser..

 

 

 

 

 

 

	
IPO Covenant
	
The IPO shall occur on or before July 1, 2015, with proceeds sufficient to fully redeem the Preferred Shares, with all accrued Dividends. Any failure to comply with this covenant shall be an Event of Default (see below). 

 

	Representations & Warranties	
       (a) Organization, Qualification, Authority. The Company is a corporation duly organized, validly existing and in good standing under the laws of the state of Delaware and has full corporate power and authority to (i) enter into this Agreement to carry out its obligations hereunder and to consummate the transactions contemplated hereby and (ii) own, operate or lease the properties and assets now owned, operated or leased by it and to carry on its business as it has been and is currently conducted. The Company and each subsidiary are duly licensed or qualified to do business and is in good standing in each jurisdiction in which the properties owned or leased by it or the operation of its business as currently conducted makes such licensing or qualification necessary. The execution and delivery by the Company of this Agreement, the performance by the Company of its obligations hereunder and the consummation by the Company of the transactions contemplated hereby have been duly authorized by all requisite corporate action on the part of the Company. This Agreement has been duly executed and delivered by the Company, and (assuming due authorization, execution and delivery by Investor) this Agreement constitutes a legal, valid and binding obligation of the Company enforceable against the Company in accordance with its terms.

 

        (b) No Conflicts; Consents. The execution, delivery and performance by the Company of this Agreement and the consummation of the transactions contemplated hereby do not and will not: (i) conflict with or result in a violation or breach of, or default under, any provision of the certificate of formation, by-laws or other organizational documents of the Company; (ii) conflict with or result in a violation or breach of any provision of any Law or Governmental Order applicable to the Company; (iii) require the consent or waiver of, notice to or other action by any Person under, conflict with, result in a violation or breach of, constitute a default or an event that, with or without notice or lapse of time or both, would constitute a default under, result in the acceleration of or create in any party the right to accelerate, terminate, modify or cancel any Contract to which the Company is a party or by which the Company is bound or to which any of its properties and assets are subject or any Permit affecting the properties, assets or business of the Company; or (iv) result in the creation or imposition of any Encumbrance other than Permitted Encumbrances on any properties or assets of the Company. No consent, approval, Permit, Governmental Order, declaration or filing with, or notice to, any Governmental Authority is required by or with respect to the Company in connection with the execution and delivery of this Agreement and the consummation of the transactions contemplated hereby.       

 

       (c) SEC Reports. The Company has filed all reports, schedules, forms, statements and other documents required to be filed by the Company under the Securities Act and the Exchange Act, including pursuant to Section 13(a) or 15(d) thereof (the foregoing materials, including the exhibits thereto and documents incorporated by reference therein, being collectively referred to herein as the “SEC Reports”) on a timely basis or has received a valid extension of such time of filing and has filed any such SEC Reports prior to the expiration of any such extension. As of their respective dates, the SEC Reports complied in all material respects with the requirements of the Securities Act and the Exchange Act, as applicable, and none of the SEC Reports, when filed, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided, however that the Company has previously disclosed in its SEC Reports that it had “blank check preferred” stock available for issuance and has recently discovered that this disclosure was not correct. Except as listed herein, as of the date hereof, the Company is not aware of any event occurring on or prior to the date hereof, or that is reasonably expected to occur prior to the closing of the transaction contemplated by the Transaction Documents, that requires the filing of a Form 8-K after the closing of the transaction contemplated by the Transaction Documents. The financial statements of the Company included in the SEC Reports comply in all material respects with applicable accounting requirements and the rules and regulations of the Securities and Exchange Commission with respect thereto as in effect at the time of filing. Such financial statements have been prepared in accordance with United States generally accepted accounting principles applied on a consistent basis during the periods involved (“GAAP”), except as may be otherwise specified in such financial statements or the notes thereto and except that unaudited financial statements may not contain all footnotes required by GAAP, and fairly present in all material respects the financial position of the Company and its consolidated subsidiaries as of and for the dates thereof and the results of operations and cash flows for the periods then ended, subject, in the case of unaudited statements, to normal, immaterial, year-end audit adjustments. All material agreements to which the Company is a party or to which the property or assets of the Company are subject are included as part of or specifically identified in the SEC Reports. The SEC Reports included all certificates required to be included therein pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002, as amended, and the rules and regulations promulgated thereunder (“SOX”), and the internal control report and attestation of the Company’s outside auditors to the extent required by Section 404 of SOX. As of the date of this Agreement, there are no outstanding or unresolved comments in the comment letters received from the SEC staff with respect to the SEC Reports other than a verbal comment to the Company’s Registration Statement regarding its current offering on Registration Statement 333-203075 (the “Registration Statement”) that the Company will respond to in its next amendment to the Registrations. Other than the Registration Statement, none of the SEC Reports is the subject of an SEC review.

 

Expected 8-K filings:

        ●The transaction contemplated herein 

●Announcement of a supply agreement with a panel manufacturer

 

 

 

 

 

	
 
	
       (d) Material Changes; Undisclosed Events, Liabilities or Developments. Since the date of the latest SEC Report, (i) there has been no event, occurrence or development that has had or that could reasonably be expected to result in a Material Adverse Effect, (ii) the Company has not declared or made any dividend or distribution of cash or other property to its stockholders or purchased, redeemed or made any agreements to purchase or redeem any shares of its capital stock, except as contemplated by this Agreement, and (iii) the Company has not issued any New Securities. Except for the issuance of the Shares contemplated by this Agreement, no event, liability or development has occurred or exists with respect to the Company or its business, properties, operations or financial condition that would be required to be disclosed by the Company that has not been disclosed. Fur purposes hereof, “Material Adverse Effect” means any event, occurrence, fact, condition or change that is, or could reasonably be expected to become, individually or in the aggregate, materially adverse to the business, results of operations, prospects, condition (financial or otherwise) or assets of the Company and each subsidiary.

 

       (e) Valid Issuance. The Preferred Shares, when issued, sold and delivered in accordance with the terms and for the consideration set forth in this Agreement, will be validly issued, fully paid and nonassessable and free of restrictions on transfer, except for applicable state and federal securities laws and liens or encumbrances created by or imposed by a Purchaser. The Preferred Shares will be issued in compliance with all applicable federal and state securities laws. The Common Stock issuable upon conversion of the Preferred Shares has been duly reserved for issuance, and upon issuance in accordance with the terms of the Company’s Certificate of Incorporation, as amended, will be validly issued, fully paid and nonassessable and free of restrictions on transfer other than restrictions on transfer applicable federal and state securities laws and liens or encumbrances created by or imposed by a Purchaser. The Common Stock issuable upon conversion of the Shares will be issued in compliance with all applicable federal and state securities laws.

 

       (f) Legal Proceedings. Except as disclosed in an SEC Report, there are no Actions pending or, threatened against or by the Company affecting any of its properties or assets (or by or against the Company or any Affiliate thereof and relating to the Company). There are no outstanding governmental orders and no unsatisfied judgments, penalties or awards against or affecting the Company or any of its properties or assets.

 

       (g) Compliance with Laws; Permits. The Company has complied, and is now complying, with all Laws applicable to it or its business, properties or assets. All permits and licenses required for the Company to conduct its business have been obtained by it and are valid and in full force and effect. 

 

       (h) Usury. It is the intent of Purchaser and the Company, that in the event that the Preferred Shares are redeemed following an Event of Default, or the purchase of the Preferred Shares otherwise is treated as debt, in such case, to conform to and contract in strict compliance with applicable usury law from time to time in effect. In no way, nor in any event or contingency (including but not limited to prepayment, default, demand for payment, or acceleration of the maturity of any obligation), shall the rate of interest taken, reserved, contacted for, charged or received under this Agreement and or other agreement between the parties exceed the highest lawful interest rate permitted under applicable law (the “Maximum Lawful Rate”). If Purchaser shall ever receive anything of value which is characterized as interest under applicable law and which would apart from this provision be in excess of the Maximum Lawful Rate, an amount equal to the amount which would have been excessive interest shall, without penalty, be applied to the reduction of the principal amount owing to the Purchaser in the inverse order of its maturity and not to the payment of interest, or refunded to the Company or the other payor thereof if and to the extent such amount which would have been excessive exceeds such unpaid principal. All amounts paid or agreed to be paid to the holder hereof shall, to the extent permitted by applicable law, be amortized, prorated, allocated and spread throughout the full stated term (including any renewal or extension) of the transaction so that the amount of interest on account of such obligation does not exceed the Maximum Lawful Rate. As used in this Section, the term “applicable law” shall mean the laws of the State of Texas or the federal laws of the United States, whichever laws allow the greater interest, as such laws now exist or may be changed or amended or come into effect in the future. 

 

       (i) No Liens. Other than with respect to the liens securing the indebtedness held by Alpha Capital and Bridge Bank, the property and assets that the Company and each subsidiary owns are free and clear of all mortgages, deeds of trust, liens, loans and encumbrances, except for statutory liens for the payment of current taxes that are not yet delinquent and encumbrances and liens that arise in the ordinary course of business and do not materially impair the Company’s and each subsidiary ownership or use of such property or assets. 

 

       (j) Certificate of Incorporation. Attached hereto as Exhibit B is the Certificate of Incorporation and any amendments thereto, as of the date hereof, as certified by the Secretary of State of Delaware.

 

        (k) Full Disclosure.  As of the date hereof, there is no known material fact or information relating to the business, condition (financial or otherwise), affairs, operations or assets of Seller that has not been disclosed in writing to Purchaser by Company. No representation or warranty by the Company in this Agreement or any certificate or other document furnished or to be furnished to Investor pursuant to this Agreement contains any untrue statement of a material fact, or omits to state a material fact necessary to make the statements contained therein, in light of the circumstances in which they are made, not misleading.

 

 

 

 

 

	
Event of Default
	

The occurrence of any one or more of the following shall constitute an “Event of Default” as said term is used herein:

	 	 
	 	(a)	The Transaction Documents are not executed and delivered by the Company prior to May 15, 2015;
	 	(b)	The failure of the Company to satisfy the “IPO Covenant” as set forth above;
	 	(c)	If any warranty, representation, statement, report or certificate made now or hereafter by the Company is untrue or incorrect at the time made or delivered, provided that if such breach is reasonably susceptible of cure, then no Event of Default shall exist so long as the Company cures said breach within five (5) days for a breach that can be cured by the payment of money;
	 	(d)	The breach by the Company of any term or covenant contained herein;
	 	(e)	The Company shall commence a voluntary case concerning the Company under the Bankruptcy Code; or an involuntary proceeding is commenced against the Company under the Bankruptcy Code and relief is ordered against the Company, or the petition is controverted but not dismissed or stayed within sixty (60) days after the commencement of the case, or a custodian (as defined in the Bankruptcy Code) is appointed for or takes charge of all or substantially all of the property of the Company; or the Company commences any other proceedings under any reorganization, arrangement, readjustment of debt, relief of debtors, dissolution, insolvency or liquidation or similar Law of any jurisdiction whether now or hereafter in effect relating to the Company; or there is commenced against the Company any such proceeding which remains undismissed or unstayed for a period of sixty (60) days; or the Company fails to controvert in a timely manner any such case under the Bankruptcy Code or any such proceeding, or any order of relief or other order approving any such case or proceeding is entered; or the the Company by any act or failure to act indicates its consent to, approval of, or acquiescence in any such case or proceeding or the appointment of any custodian or the like of or for it for any substantial part of its property or suffers any such appointment to continue undischarged or unstayed for a period of sixty (60) days;
	 	(f)	If the Company shall fail to pay any debt owed by it or is in default under any agreement with Purchaser or any other party and such failure or default continues after any applicable grace period specified in the instrument or agreement relating thereto;
	 	(g)	A change of control shall occur;
	 	(h)	A Material Adverse Effect occurs with respect to the Company.
	 	 	 
	 	Upon the occurrence of an Event of Default, Purchaser may pursue any one or more of the following remedies concurrently or successively, it being the intent hereof that none of such remedies shall be to the exclusion of any other:
	 	 	 
	 	(a)	The Purchaser may elect to prepay the indebtedness owed to Alpha Capital (the “Alpha Indebtedness”) on behalf of the Company prior to the maturity thereof or pay the Alpha Indebtedness on the maturity thereof (the “Alpha Repayment”) in accordance with the terms of the 8% Senior Secured Convertible Debenture and the Company shall cooperate fully with the requirements of such Alpha Prepayment. Upon the Alpha Prepayment, the Company shall issue to Purchaser a senior secured promissory note in the principal amount of the Alpha Repayment in form and substance reasonably acceptable to the Purchaser, including, without limitation, the granting of a security interest on all assets of the Company and any subsidiaries excluding Powerhouse One and all interest in its operations, its assets, and proceeds or distributions therefrom. 
	 	(b)	The Purchaser may elect by delivery of written notice to cause the Company to redeem the Preferred Shares at a redemption price equal to the purchase price paid on the Initial Purchase Date and the Secondary Purchase Date (the “Redemption Price”). In addition, the Purchaser may elect, in its sole discretion and in lieu of a lump sum payment of the Redemption Price, to receive payment of the Redemption Price, the Company shall issue to the Purchaser a senior secured promissory note in the principal amount of the Redemption Price in form and substance reasonably acceptable to the Purchaser and in no way interferes with or disturbs other debts outstanding on the date of this agreement;
	 	(c)	Purchaser shall elect to have the Initial Purchase Price refunded by the Company to the Purchaser within five (5) business days following delivery of written notice.
	 	(d)	The Company’s board of directors will aggressively seek strategic alternatives including, without limitation, marketing the Company to a private equity group, seeking out a strategic purchaser, seeking a merger of equals, or selling its interest in one or more of the solar projects.
	 	(e)	Exercise or pursue any other remedy or cause of action permitted under this Agreement or conferred upon Purchaser by operation of Law 
	 	 	 
	 	For the avoidance of doubt, the parties acknowledge and agree that notwithstanding anything contained herein, the damages incurred by Purchaser upon the occurrence of an Event of Default may exceed the Initial Purchase Price, and Purchaser shall in no way be limited in seeking damages in excess thereof.

 

 

 

 

 

 

	
 Miscellaneous
	
Transaction Documents. The final legal obligations of the parties with respect to the purchase of the Preferred Shares by the Purchaser and all other obligations contained in this Agreement will be contained in definitive transaction documents (collectively, the “Transaction Documents”). 

 

 

Simultaneously with the closing of the transactions contemplated by the Transaction Documents, the Company shall deliver, among other closing delivers, to Purchaser a certificate representing the Shares being purchased by such Purchaser at the Closing against payment of the purchase price therefor by wire transfer to a bank account designated by the Company and the Company shall adopt and file with the Secretary of State of the State of Delaware the Certificate of Designation in form and substance satisfactory to Purchaser setting forth the rights and terms of the Preferred Shares.

 

 

In addition to the general terms and conditions outlined in this Agreement, the Transaction Documents will contain terms and conditions customary for transactions similar to this transaction, including additional representations and warranties and indemnification.

 

 

Expenses. The Company will bear its own expenses and the reasonable expenses of the Purchaser (including legal counsel) incurred in connection with the transaction.

 

 

Governing Law. This Agreement is governed by and construed in accordance with the laws of the State of Georgia TO THE GREATEST EXTENT PERMITTED BY LAW, COMPANY IRREVOCABLY (A) SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF THE STATE AND FEDERAL COURTS HAVING JURISDICTION IN THE CITY OF ATLANTA, AND STATE OF GEORGIA, AND (B) WAIVES ANY OBJECTION WHICH IT MAY HAVE AT ANY TIME TO THE LAYING OF VENUE OF ANY PROCEEDING BROUGHT IN ANY SUCH COURT, WAIVES ANY CLAIM THAT ANY PROCEEDING HAS BEEN BROUGHT IN AN INCONVENIENT FORUM AND FURTHER WAIVES THE RIGHT TO OBJECT, WITH RESPECT TO SUCH PROCEEDING, THAT SUCH COURT DOES NOT HAVE JURISDICTION OVER SUCH PARTY. NOTHING IN THIS AGREEMENT SHALL PRECLUDE LENDER FROM BRINGING A PROCEEDING IN ANY OTHER JURISDICTION NOR WILL THE BRINGING OF A PROCEEDING IN ANY ONE OR MORE JURISDICTIONS PRECLUDE THE BRINGING OF A PROCEEDING IN ANY OTHER JURISDICTION. COMPANY FURTHER AGREES AND CONSENTS THAT, IN ADDITION TO ANY METHODS OF SERVICE OF PROCESS PROVIDED FOR UNDER APPLICABLE LAW, ALL SERVICE OF PROCESS IN ANY PROCEEDING IN ANY GEORGIA STATE OR UNITED STATES COURT SITTING IN THE CITY OF ATLANTA MAY BE MADE BY CERTIFIED OR REGISTERED MAIL, RETURN RECEIPT REQUESTED, DIRECTED TO COMPANY AT THE ADDRESS INDICATED BELOW, AND SERVICE SO MADE SHALL BE COMPLETE UPON RECEIPT; EXCEPT THAT IF COMPANY SHALL REFUSE TO ACCEPT DELIVERY, SERVICE SHALL BE DEEMED COMPLETE FIVE (5) DAYS AFTER THE SAME SHALL HAVE BEEN SO MAILED.

 

 

Counterparts. This Agreement may be executed in one or more counterparts, each of which will be deemed to be an original and all of which, when taken together, will be deemed to constitute one and the same agreement. Faxed or emailed copies of this Agreement or executed pages hereof shall be accepted for all purposes as originals thereof.

 

 

 

 

 

 

 

In advance of preparing and executing Definitive Documents, the parties hereto intend to be legally bound by this Agreement.

 

 

 

	
PRINCIPAL SOLAR, INC. 
	
SMCDLB, LLC, Purchaser 

	
 
	
 

	
 
	
 

	
 
	
 

	
/s/ Michael Gorton 
	
/s/ Dan Brooks 

	
 
	
 

	
Michael Gorton 
	
By: Dan Brooks 

	
 
	
 

	
Chief Executive Officer 
	
Its: Chief Executive Officer

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