Document:

ex10-4.htm

EXHIBIT 10.4

 

	 PRINCIPAL SOLAR	  EMPLOYMENT AGREEMENT

 

Confidential Document

 

 

EMPLOYMENT AGREEMENT

 

THIS EMPLOYMENT AGREEMENT (the “Agreement”) is made between Principal Solar, Inc., a Delaware corporation (“The Company”), and R. Michael Martin (“Employee”) as of January 1, 2011.

 

The parties acknowledge that (i) The Company wishes to employ Employee as Executive Vice President of The Company and (ii) Employee wishes to be so employed, on the terms and conditions set forth in this Agreement. ACCORDINGLY, on the basis of the acknowledgements, representations and covenants contained in this Agreement, the parties agree as follows:

 

ARTICLE 1 - EMPLOYMENT AND TERM

 

1.1.           Employment.  The Company shall employ Employee as Executive Vice President of The Company and Employee accepts such employment, on the terms and conditions set forth in the Agreement.

 

1.2.           Term.  Unless the parties terminate or extend Employee’s employment in accordance with the terms of this Agreement, the term of Employee’s employment under this Agreement shall commence effective as of the date of this Agreement, and shall continue until such time as the Board of Directors (“Board”) of the Company direct otherwise or the Employee resigns.  The term of Employee’s employment under this Agreement is referred to herein as the “Term.”

 

ARTICLE 2 - DUTIES OF EMPLOYEE

 

2.1.           Duties.  During the Term, Employee agrees to serve as Executive Vice President of The Company.  Subject to the direction and authorization of the Board of Directors of The Company (other than Employee, if applicable), Employee shall, directly or indirectly, manage all Company business development activities and shall perform such other functions and undertake such other responsibilities, including participation as a member of appropriate management committees, as are customarily associated with his capacity as Executive Vice President.  Employee shall perform his duties hereunder faithfully and to the best of his ability.  In the event of any conflict between the provisions of this Agreement and any written internal rules and regulations governing the conduct of The Company’s employees, as established or modified from time to time, the provisions of this Agreement shall control.

 

2.2.           Exclusive Services.  During the Term, Employee will not, without the prior written approval of the Board, engage, directly or indirectly, in any other business activity which would materially interfere with the performance of his duties, services and responsibilities hereunder or which is in violation of policies established from time to time by the Board.  Subject to the prior approval of the Board, Employee shall be permitted to serve on the boards of directors of corporate, civic and/or charitable companies or organizations.

  

  

  

ARTICLE 3 - COMPENSATION

 

3.1.           Base Salary.  The Company shall pay to Employee a base salary at the annual rate defined in Schedule A (as adjusted from time to time, the “Base Salary”), less taxes required to be withheld and other applicable withholdings.  Thereafter, Employee shall be eligible for adjustments to compensation on such terms as may be mutually agreed upon by Employee and the Board.  The Base Salary shall be payable in accord with The Company’s regular payroll practices.

 

3.2.           Bonus.  Employee will be entitled to participate in the Company Bonus plan on a basis consistent with his (her) employment with the Company.

 

3.3.           Employee Benefits.  During the Term, Employee shall be entitled to employee benefits established from time to time by The Company for management personnel of The Company who are management-level employees of The Company and/or its subsidiaries at the same general management level as Employee (“Management Employees”), subject to satisfaction of any applicable waiting or eligibility period and the policies and procedures of The Company in effect, from time to time, regarding participation in such benefits.

 

3.4.           Reimbursement for Expenses.  During the Term, The Company shall reimburse Employee for documented travel, entertainment and other expenses reasonably incurred by Employee in connection with the performance of his duties under this Agreement consistent with reimbursement of expenses to other Management Employees and, in each case, in accordance with the rules, customs and usages promulgated by The Company from time to time in effect. The company shall pay up to $170 monthly for cell phone reimbursement and up to $1,000 for healthcare insurance reimbursement.

 

3.5.           Vacation.  Employee shall be entitled to FOUR (4) weeks of paid vacation time in each calendar year.  The Company has no vacation accrual program.  Any vacation days not taken shall be lost.  Should Employee leave the Company during the course of a year, Employee shall be eligible for repayment of existing vacation days not already taken.

 

ARTICLE 4 - TERMINATION

 

4.1.           Termination by The Company without Cause.

 

(a)            The Company may terminate Employee’s employment with or without Cause (as defined in Section 4.2 below) at any time during the Term.  If The Company terminates Employee’s employment without cause, The Company shall, immediately after the Termination Date, pay to Employee a lump sum in immediately available funds equal to all earned but unpaid Base Salary.  Further, after one year of employment, and upon termination without cause, Employee shall be eligible to receive Severance consisting of SIX (6) months of Employee’s Base Salary along with other such benefits to which the Employee was receiving prior to termination.  Any options not vested at the time of termination shall forfeit.

 

 

	 PRINCIPAL SOLAR	 2	  EMPLOYMENT AGREEMENT

 

  

  

  

4.2.           Termination for Cause.

 

Termination for “Cause” shall mean termination because of Employee’s (a) willful misconduct or habitual neglect in the performance of his duties under this Agreement, (b) conviction for any felony involving fraud, dishonesty or moral turpitude, (c) material breach of any material provision of this Agreement that remains uncured ten (10) days following receipt by Employee from The Company of written notice thereof, (d) material violation of The Company’s policies, the violation of which by other Management Employees would be grounds for termination of such other Management Employees, or (e) material dishonesty, moral turpitude, fraud or misrepresentation with respect to his material duties under this Agreement.  For purposes hereof, no act or failure to act on Employee’s part shall be “willful” unless done or omitted not in good faith and without actual belief that the action or omission was in the best interest of The Company.  Notwithstanding the foregoing, Employee shall not be deemed to have been terminated for Cause unless and until there shall have been delivered to him a notice of termination.  Employee shall not have the right to receive compensation or other benefits for any period after termination for Cause which have not vested or been earned as of the Termination Date.  Employee shall have the right to receive compensation or other benefits which have already vested or been earned as of the Termination Date for Cause, unless payment of such compensation or benefits is expressly prohibited by the terms of any plan, program or agreement governing such compensation or benefits.

 

4.3.           Employee Resignation of Employment

 

(a)           Employee shall have the right to elect to terminate his employment under this Agreement by resignation upon not less than thirty (30) days prior written notice.

 

(b)           Upon the occurrence of an Employee Resignation as described in 4.3.(a), The Company shall be obligated to pay Employee, those amounts and benefits which would be owed to Employee if The Company had terminated Employee's employment without Cause as described above in Sections 4.1(a) Such amount shall be in addition to any compensation or benefits earned by Employee or to which Employee was entitled prior to the Termination Date.  Such payments shall not be reduced in the event Employee obtains other employment following the Termination Date.

 

(c)           Should Employee elect to terminate his employment under this Agreement by resignation with less than thirty (30) days prior written notice, the company shall suspend all benefits as defined in section 4.2 above.

 

	 PRINCIPAL SOLAR	 3	  EMPLOYMENT AGREEMENT

 

  

  

  

4.4.           Termination By Employee or Death.  In the event the Employee dies during employment with the Company, or during a Severance, The Company shall pay to his beneficiary or beneficiaries or his estate, as the case may be, the Base Salary and prorated Target Annual Bonus, less taxes required to be withheld and other applicable withholdings, earned but unpaid pursuant to Sections 3.1 or 3.2 hereof through the Termination Date and the value of any earned but unused vacation time due to Employee pursuant to Section 3.5 hereof at the Termination Date.  Any such payments due Employee, under this Section 4.4 shall be paid no later than thirty (30) days after the Termination Date.  Employee's beneficiary or beneficiaries, shall not have the right to receive compensation or other benefits for any period after the Termination Date which have not vested or been earned as of the Termination Date. The Company shall be obligated to pay Employee, those amounts and benefits which would be owed to Employee if The Company had terminated Employee's employment without Cause as described above in Sections 4.1(a) Such amount shall be in addition to any compensation or benefits earned by Employee or to which Employee was entitled prior to the Termination Date or death.   Employee's beneficiary or beneficiaries, shall have the right to receive compensation or other benefits which have already vested or been earned as of the Termination Date, unless payment of such compensation or benefits is expressly prohibited by the terms of any plan, program or agreement governing such compensation or benefits.

 

4.5.           Termination for Disability.  If Employee becomes subject to a mental or physical condition which, in the opinion of the Board, with or without reasonable accommodation, renders Employee unable or incompetent to carry out his work responsibilities or duties which Employee had at the time such condition was incurred, which has existed for at least three (3) months and which in the opinion of a physician selected by the Board is expected to be permanent, to last for an indefinite duration or to last for a duration in excess of six (6) months (a “Disability”), The Company may terminate Employee’s employment hereunder as of the Termination Date specified in a written notice of termination from The Company to Employee.  If Employee’s employment is terminated by The Company pursuant to this Section 4.5, The Company promptly following the Termination Date shall pay to Employee, less taxes required to be withheld and other applicable withholdings, the Base Salary and prorated Target Annual Bonus earned but unpaid pursuant to Sections 3.1 and 3.2 hereof through the Termination Date and any earned but unused vacation time due to Employee pursuant to Section 3.5 hereof at the Termination Date.  In addition, Employee shall be entitled to receive benefits based on The Company’s applicable disability plans then in effect.  Employee shall not have the right to receive compensation or other benefits for any period after the Termination Date which have not vested or been earned as of the Termination Date.  Employee shall have the right to receive compensation or other benefits which have already vested or been earned as of the Termination Date, unless payment of such compensation or benefits is expressly prohibited by the terms of any plan, program or agreement governing such compensation or benefits.

 

4.6.           Termination of The Company’s Obligation.  If, at any time prior to the date twenty-four (24) months following termination of employment for any reason, Employee materially breaches any of Employee’s obligations under Articles 5 or 6 of this Agreement, then, in addition to any other remedy of The Company, The Company’s obligation, if any, to make severance payments under Sections 4.1 or 4.3 shall cease as of the date such material breach occurs.  Moreover, Employee acknowledges that a material breach of Articles 5 or 6 of this Agreement will cause irreparable harm to The Company and, if Employee fails to abide by these obligations, The Company will be entitled to seek specific performance, including immediate issuance of a temporary restraining order or preliminary injunction enforcing this Agreement, and to seek judgment for damages caused by Employee’s breach, and to seek other remedies provided by applicable law.

 

	 PRINCIPAL SOLAR	4	  EMPLOYMENT AGREEMENT

 

  

  

  

4.7.           Termination Date.  Any termination of Employee’s employment hereunder pursuant to this Article 4, other than a termination as a result of Employee’s death, shall be effected by written notice of termination.  Any written notice of termination shall indicate the specific termination provision in this Agreement relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of Employee’s employment under the provisions so indicated.   The effective date of any such termination (the “Termination Date”) shall be as follows:

 

(a)           In the event of a termination due to Employee’s death, the date of such death.

 

(b)           In the event of termination for any reason other than Employee’s death, the date specified in the written notice of termination which in no event shall be prior to the date of delivery of such notice.

 

ARTICLE 5 - CONFIDENTIALITY

 

5.1.           Nondisclosure.  Employee acknowledges that in the course of employment with The Company, Employee will have access to and will learn confidential information concerning The Company and its Affiliates.  Confidential information includes, but is not limited to:  (a) information about The Company’s and its Affiliates' customers and suppliers, the terms and conditions under which The Company or its Affiliates deal with customers and suppliers, pricing information, financing arrangements, research materials, manuals, computer programs, techniques, data, marketing plans and tactics, technical information, lists of asset sources, the processes and practices of The Company and its Affiliates, all information contained in electronic or computer files, all financial information, salary and wage information, and any other information that is designated in writing by The Company or its Affiliates as confidential or that Employee knows or should know is confidential; (b) information provided by third parties that The Company or any of its Affiliates is obligated to keep confidential; and (c) all other proprietary information of The Company or any of its Affiliates.  Employee acknowledges that all confidential information is and shall continue to be the exclusive property of The Company, whether or not prepared in whole or in part by Employee and whether or not disclosed to or entrusted to Employee in connection with employment by The Company.  Employee agrees not to disclose confidential information, directly or indirectly, under any circumstances or by any means, to any third persons without the prior written consent of The Company.  Employee agrees that he will not copy, transmit, reproduce, summarize, quote, or make any commercial or other use whatsoever of confidential information, except as may be necessary to perform work done by Employee for The Company.  Employee agrees to exercise the highest degree of care in safeguarding confidential information against loss, theft or other inadvertent disclosure and agrees generally to take all steps necessary or requested by The Company to ensure maintenance of the confidentiality of the confidential information.  Employee agrees in addition to the specific covenants contained herein to comply with all of The Company’s policies and procedures for the protection of confidential information.

 

	 PRINCIPAL SOLAR	 5	  EMPLOYMENT AGREEMENT

 

  

  

  

5.2.           Exclusions.  Section 5.1 shall not apply to the following information:  (a) information previously, now or hereafter voluntarily disseminated by The Company or its Affiliates to the public or which otherwise becomes part of the public domain through lawful means; (b) information known to Employee prior to Employee’s employment with The Company; (c) information received by Employee from third parties not known by Employee to be subject to a confidentiality agreement with The Company or its Affiliates; or (d) information which is not principally derived from the business plans and activities of The Company or its Affiliates.

 

5.3.           Confidential Proprietary and Trade Secret Information of Others.  Employee represents that he has been a party regarding the confidential information of others and Employee understands that Employee’s employment by The Company will not require Employee to breach any such agreement.  Employee will not disclose such confidential information to The Company nor induce The Company to use any trade secret proprietary information received from another under an agreement or understanding prohibiting such use or disclosure.

 

5.4.           No Unfair Competition.  Employee hereby acknowledges that the sale or unauthorized use or disclosure of any of The Company’s or its Affiliates' confidential information (as described in Section 5.1 above) obtained by Employee by any means whatsoever, at any time before, during, or after the Term shall constitute unfair competition.  Employee shall not engage in any unfair competition with The Company or its Affiliates either during the Term or at any time thereafter.

 

ARTICLE 6 - THE COMPANY’S OWNERSHIP IN EMPLOYEE’S WORK

 

6.1.           The Company’s Ownership.  Employee agrees that all inventions, discoveries, improvements, trade secrets, formulae, techniques, processes, and know-how, whether or not patentable, and whether or not reduced to practice, that are conceived or developed during Employee’s employment with The Company, either alone or jointly with others, that are conceived or developed on The Company’s time and using The Company’s facilities, and that relate to The Company shall be owned exclusively by The Company, and Employee hereby assigns to The Company all Employee’s right, title, and interest in all such intellectual property.  Employee agrees that The Company shall be the sole owner of all domestic and foreign patents and all rights pertaining thereto, and further agrees to execute all documents that The Company reasonably determines to be necessary or convenient for use in applying for, prosecuting, perfecting, or enforcing patents or other intellectual property rights, including, without limitation, the execution of any assignments, patent applications, or other documents that The Company may reasonably request.  This provision is intended to apply only to the extent permitted by applicable law. 

 

	 PRINCIPAL SOLAR	 6	  EMPLOYMENT AGREEMENT

 

  

  

  

6.2.           Return of The Company’s Property and Materials.  Upon termination of employment with The Company, Employee shall deliver to The Company all The Company property and materials that are in Employee’s possession or control, including all of the information described as confidential information in Articles 5 or 6 of this Agreement and including all other information relating to any inventions, discoveries, improvements, trade secrets, formulae, processes, or know-how of The Company.

 

6.3.           Ventures.  If Employee, during employment with The Company, is engaged in or associated with the planning or implementation of any project, program, or venture involving The Company and any third parties, all rights in the project, program, or venture shall belong to The Company, and Employee shall not be entitled to any interest therein or to any commission, finder's fee, or other compensation in connection therewith other than the salary and other benefits to be paid or provided to Employee as provided in this Agreement.

 

ARTICLE 7 - ARBITRATION

 

Any claim or controversy between the parties which the parties are unable to resolve themselves, including any claim arising out of Employee's employment or the termination of that employment, and including any claim arising out of, connected with, or related to the formation, interpretation, performance or breach of this Agreement, and any claim or dispute as to whether a claim is subject to arbitration, shall be submitted to and resolved exclusively by expedited arbitration by a single arbitrator in accordance with the following procedures:

 

7.1.           In the event of a claim or controversy subject to this arbitration provision, the complaining party shall promptly send written notice to the other party identifying the matter in dispute and the proposed remedy.  Following the giving of such notice, the parties shall meet and attempt in good faith to resolve the matter.  In the event the parties are unable to resolve the matter within twenty-one (21) days, the parties shall meet and attempt in good faith to select a single arbitrator acceptable to both parties.  If a single arbitrator is not selected by mutual consent within ten (10) business days following the giving of the written notice of dispute, an arbitrator shall be selected from a list of nine persons each of whom shall be an attorney who is either engaged in the active practice of law or a recognized arbitrator and who, in either event, is experienced in serving as an arbitrator in disputes between employers and employees, which list shall be provided by the appropriate office of the American Arbitration Association (“AAA”) or of the Federal Mediation and Conciliation Service. If, within three (3) business days of the parties' receipt of such list, the parties are unable to agree upon an arbitrator from the list, then the parties shall each strike names alternatively from the list, with the first to strike being determined by the flip of a coin.  After each party has had four strikes, the remaining name on the list shall be the arbitrator.  If such person is unable to serve for any reason, the parties shall repeat this process until an arbitrator is selected.

 

7.2.           Unless the parties agree otherwise, within sixty (60) days of the selection of the arbitrator, a hearing shall be conducted before such arbitrator in the city of Dallas in the State of Texas, or, if different, the city, county and state where Employee is or has most recently been employed by The Company, or such other location as the parties mutually agree.  Within thirty (30) days of the conclusion of the arbitration hearing, the arbitrator shall issue an award, accompanied by a written decision explaining the basis for the arbitrator’s award.

 

7.3.           In any arbitration hereunder, each party shall pay its own attorneys' fees, costs, expenses, and half of the fees associated with the arbitration, unless the arbitrator orders otherwise.  The prevailing party in such arbitration, as determined by the arbitrator, and in any enforcement or other court proceedings, shall be entitled, to the extent permitted by law, to reimbursement from the other party for all of the prevailing party's costs (including but not limited to the arbitrator's compensation), expenses, and attorneys' fees.  The arbitrator shall have no authority to add to or to modify this Agreement, shall apply all applicable law, and shall have no lesser and no greater remedial authority than would a court of law resolving the same claim or controversy. The arbitrator shall, upon an appropriate motion, dismiss any claim without an evidentiary hearing if the party bringing the motion establishes that it would be entitled to summary judgment if the matter had been pursued in court litigation.  The parties shall be entitled to reasonable discovery subject to the discretion of the arbitrator. 

 

	 PRINCIPAL SOLAR	 7	  EMPLOYMENT AGREEMENT

 

  

  

  

7.4.           The decision of the arbitrator shall be final, binding, and non-appealable, except as otherwise permitted by law, and may be enforced as a final judgment in any court of competent jurisdiction.

 

7.5.           The agreement in this Article 7 to resolve any disputes by arbitration shall extend to claims against any parent, subsidiary, or Affiliate of each party, and, when acting within such capacity, any officer, director, shareholder, employee or agent of each party, or of any of the above, and shall apply as well to claims arising out of state and federal statutes and local ordinances as well as to claims arising under the common law or under this Agreement.  Such agreement, however, shall not apply to claims for workers’ compensation or unemployment compensation benefits.

 

7.6.           Notwithstanding the foregoing, and unless otherwise agreed between the parties, either party may, in an appropriate matter, apply to a court for provisional relief, including a temporary restraining order or preliminary injunction, on the ground that the arbitration award to which the applicant may be entitled may be rendered ineffectual without provisional relief.

 

7.7.           Any arbitration hereunder shall be conducted in accordance with the employment rules and procedures of the AAA then in effect; provided, however, that, in the event of any inconsistency between the rules and procedures of the AAA and the terms of this Agreement, the terms of this Agreement shall prevail.

 

7.8.           If any of the provisions of this Article 7 are determined to be unlawful or otherwise unenforceable, in whole or in part, such determination shall not affect the validity of the remainder of this Article 7, and this Article 7 shall be reformed to the extent necessary to carry out its provisions to the greatest extent possible and to insure that the resolution of all conflicts between the parties, including those arising out of statutory claims, shall be resolved by neutral, binding arbitration.  If a court should find that the provisions of this Article 7 are not absolutely binding, then the parties intend any arbitration decision and award to be fully admissible in evidence in any subsequent action, given great weight by any finder of fact, and treated as determinative to the maximum extent permitted by law.

 

ARTICLE 8 - MISCELLANEOUS

 

8.1.           Severable Provisions.  The provisions of this Agreement are separate and distinct, and if any provisions are determined to be unenforceable, in whole or in part, the remaining provisions, and the enforceable parts of any partially unenforceable provisions, shall nevertheless be enforceable. 

 

	 PRINCIPAL SOLAR	 8	  EMPLOYMENT AGREEMENT

 

  

  

  

8.2.           Successors and Assigns.  The Company shall require any successor or assignee, whether direct or indirect, by purchase, merger, consolidation, or otherwise to all or substantially all of the business or assets of The Company to expressly assume and agree to perform in writing this Agreement in the same manner and to the same extent that The Company would be required to perform it if no such succession or assignment had taken place.  This Agreement shall inure to the benefit of and be binding upon The Company, its successors and assigns, and upon Employee and his heirs, executors, administrators and legal representatives.  Employee may not delegate his duties hereunder without the prior written consent of The Company.

 

8.3.           Governing Law.  The validity, interpretation, performance and enforcement of this Agreement shall be governed by the laws of the State of Texas, but only to the extent not superseded by federal law.

 

8.4.           Headings.  Article, section and subsection headings do not constitute part of this Agreement.  They are included solely for convenience and reference, and they in no way define, limit, or describe the scope of this Agreement or the intent of any of its provisions.

 

8.5.           Integration.  This Agreement constitutes the entire agreement between the parties and supersedes all prior oral and written agreements, understandings, negotiations, and discussions relating to the subject matter of this Agreement.  With this Agreement the parties rescind any previous employment agreements or arrangements.  Any supplement, modification, waiver, or termination of this Agreement is valid only if it is set forth in a writing signed by both parties.  The waiver of any provision of this Agreement shall not constitute a waiver of any other provisions and, unless otherwise stated, shall not constitute a continuing waiver.

 

8.6.           Notice.  Any notice or other communication required or permitted under this Agreement shall be in writing and shall be deemed to have been given (a) if personally delivered, when so delivered, (b) if mailed, one (1) week after having been placed in the United States mail, registered or certified, postage prepaid, addressed to the party to whom it is directed at the address listed below or (c) if given by facsimile, when the notice is transmitted to the facsimile number specified below, and the appropriate answerback or telephonic confirmation is received:

 

If to The Company:

PRINCIPAL SOLAR, INC

2700 Fairmont

Dallas, TX  75201    Telephone: 214-923-1921

If to Employee:

R. Michael Martin

6666 Lakewood Blvd

Dallas, TX  75214

 

In order for a party to change its address or other information for the purpose of this section, the party must first provide notice of that change in the manner required by this section. 

 

	 PRINCIPAL SOLAR	 9	  EMPLOYMENT AGREEMENT

 

  

  

  

EACH PARTY ACKNOWLEDGES that it has had an opportunity to negotiate, carefully consider, and receive advice on the terms of this Agreement before signing it.

 

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the date and year first written above.

 

	
 

THE COMPANY:

 

 

 

 

 

 

 

 

EMPLOYEE:

 

	
 

PRINCIPAL SOLAR, INC.,

a Delaware corporation

 

 

By_________________________                                                      

Michael Gorton, CEO

 

 

 

By /s/ R Michael Martin                                        

R. Michael Martin

 

 

	 PRINCIPAL SOLAR	 10	  EMPLOYMENT AGREEMENT

 

  

  

  

Schedule A

Specific Compensation Terms

 

 

 

	Paid Compensation (1): 	$16,000 per month
	Healthcare: 	Up to $1,000 per month
	Cell Phone 	$170 per month

 

 

 

 

 

	 PRINCIPAL SOLAR	 11	  EMPLOYMENT AGREEMENTex10-5.htm

EXHIBIT 10.5

THIS WARRANT AND THE SHARES OF STOCK THAT MAY BE PURCHASED UPON THE EXERCISE OF THIS WARRANT HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT FOR DISTRIBUTION, AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”). SUCH SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, PLEDGED OR HYPOTHECATED, OR OTHERWISE TRANSFERRED UNLESS AND UNTIL REGISTRATION UNDER THE ACT OR AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE ACT IS AVAILABLE FOR SUCH OFFER, SALE, PLEDGE, HYPOTHECATION, OR TRANSFER IN THE OPINION OF LEGAL COUNSEL REASONABLY SATISFACTORY TO THE COMPANY.

PRINCIPAL SOLAR, INC. COMMON STOCK WARRANT

Warrant Stock: 151,050

Date of Issuance: June 17, 2013

Principal Solar, Inc., a Delaware Company (the “Company”), for valid consideration received, hereby certifies that Bridge Bank, National Association, or its registered assigns (in each case “Holder”), is entitled, subject to the terms set forth below, to purchase from the Company, prior to termination as provided in Section 5 hereof, up to 151,050 shares of common stock of the Company (the “Common Stock”).  The exercise price per share will equal one dollar ($1.00) per share.  The shares purchasable upon exercise of this warrant (this “Warrant”), and the purchase price per share as described in this paragraph, each as adjusted from time to time pursuant to the terms of this Warrant, are hereinafter referred to as the “Warrant Stock” and the “Purchase Price,” respectively.

1.  Exercise.

A.  This Warrant may be exercised by Holder in whole or in part prior to termination as provided in Section 5 hereof, by surrendering this Warrant, with the purchase form appended hereto as  Exhibit A completed in accordance with the instructions thereto and duly executed by such  Holder  or  by  such  Holder’s  duly  authorized  attorney,  at  the  principal  office  of  the Company, or at such other office or agency as the Company may designate, accompanied by payment in full by cash, check or wire transfer of the Purchase Price payable in respect of the number of shares of Warrant Stock purchased upon such exercise.

B.  The exercise of this Warrant shall be deemed to have been effected immediately prior to the close of business on the day on which this Warrant shall have been surrendered to the Company as provided in Section 1(A) above or 1(C) below, as applicable.  If Holder exercises this Warrant in connection with the initial public offering of the Common Stock or a Change of Control Transaction (as defined in Section 5 below), Holder may designate that the exercise date be deemed the closing date of such public offering of the Common Stock or Change of Control Transaction, as applicable, and conditional upon the occurrence of such event. At such time, the

  

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person or persons in whose name or names any certificates for Warrant Stock shall be issuable upon such exercise shall be deemed to have become Holder or holders of record of the Warrant Stock represented by such certificates.

C.  Net Issue Exercise.

(i)     In lieu of exercising this Warrant in the manner provided above in Section 1(A), Holder may elect to receive shares equal to the value of this Warrant (or the portion thereof being canceled) by surrendering this Warrant, with the purchase form appended hereto as  Exhibit A completed in accordance with the instructions thereto and duly executed by such  Holder  or  by  such  Holder’s  duly  authorized  attorney,  at  the  principal  office  of  the Company, or at such other office or agency as the Company may designate, in which event the Company shall issue to Holder a number of shares of Warrant Stock computed using the following formula:

	
  

	
X = Y (A - B) 

              A

	
  

	
Where

	
X = The number of shares of Warrant Stock to be issued to Holder pursuant to this net exercise.

	
 

	
  

	
Y = The number of shares of Warrant Stock in respect of which the net issue election is made (at the date of such calculation).

	
  

	
A = The fair market value of one share of Common Stock (at the date of such calculation).

 

	 	

   B =  The Purchase Price (as adjusted to the date of such calculation).

(ii)     For purposes of this Section 1(C), “fair market value” of a share of Common Stock as of a particular date (the “Determination Date”) shall mean (A) if shares of Common Stock are traded on a national securities exchange (an “Exchange”), the average of the closing price of a share of the Common Stock of the Company on the last twenty (20) trading days prior to the Determination Date reported on such Exchange as reported in The Wall Street Journal, or (B) if shares of Common Stock are not traded on an Exchange but trade in the over- the-counter market and such shares are quoted on the OTC Bulletin Board (the “OTCBB”), (I) the average of the last sales prices reported on the OTCBB or (II) if such shares are an issue for which last sale prices are not reported on the OTCBB, the average of the closing bid and ask prices, in each case on the last twenty (20) trading days (or if the relevant price or quotation did not exist on any of such days, the relevant price or quotation on the next preceding business day on which there was such a price or quotation) prior to the Determination Date as reported at www.otcbb.com; or (C) if the shares of Common Stock are neither traded on an exchange or in the over-the-counter market, then as determined in good faith by the board of directors of the Company; provided, that, if the Warrant is being exercised upon the closing of the issuance and sale of shares of Common Stock in the Company’s first underwritten public offering pursuant to an effective registration statement under the Act, the value will be the initial “Price to Public” of one share of Common Stock specified in the final prospectus with respect to such offering.

  

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D.  As soon as practicable after the exercise of this Warrant, the Company shall cause to be issued in the name of, and delivered to, Holder, or as such Holder may direct, a certificate or certificates for the number of shares of Warrant Stock to which such Holder shall be entitled. Issuance of certificates pursuant to this Section 1(D) shall be made without charge to Holder for any issue or transfer tax or other incidental expenses in respect of the issuance of such certificate, all of which taxes and expenses shall be paid by the Company.

E.  Each certificate for Warrant Stock or for any other security issued or issuable upon exercise of this Warrant shall bear the following legend:

“THE SECURITIES REPRESENTED HEREBY HAVE BEEN ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”).  SUCH SECURITIES MAY NOT BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION UNLESS THE COMPANY RECEIVES AN OPINION OF COUNSEL REASONABLY ACCEPTABLE TO THE COMPANY STATING THAT SUCH SALE, PLEDGE OR TRANSFER IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF THE ACT UNLESS SOLD PURSUANT TO RULE 144 PROMULGATED UNDER THE ACT.

THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A LOCK-UP PERIOD OF UP TO 180 DAYS FOLLOWING THE EFFECTIVE DATE OF A REGISTRATION STATEMENT OF THE COMPANY FILED UNDER THE ACT, AS SET FORTH IN AN AGREEMENT BETWEEN THE ISSUER AND THE ORIGINAL HOLDER OF THESE SHARES, A COPY OF WHICH MAY BE OBTAINED AT THE PRINCIPAL OFFICE OF THE ISSUER. SUCH LOCK-UP PERIOD IS BINDING ON TRANSFEREES OF THESE SHARES.”

F.  The Company covenants that the Warrant Stock, when issued pursuant to the exercise of this Warrant, will be duly and validly issued, fully paid and nonassessable and free from all taxes, liens and charges with respect to the issuance thereof.

2.  Redemption.

The Company may redeem this Warrant by providing written notice to Holder within two years from the date of issuance of this Warrant for six hundred and four thousand, two hundred dollars ($604,200) (the “Redemption Price”).

3.  Adjustments.

A.  If outstanding shares of Common Stock shall be subdivided into a greater number of shares or a stock dividend shall be paid in respect of Common Stock, the Purchase Price in effect immediately prior to such subdivision or at the record date of such dividend, as the case may be, shall simultaneously with the effectiveness of such subdivision or immediately after the

  

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record date of such dividend be proportionately reduced. If outstanding shares of Common Stock shall be combined into a smaller number of shares, the Purchase Price in effect immediately prior to such combination shall, simultaneously with the effectiveness of such combination, be proportionately increased. When any adjustment is required to be made in the Purchase Price, the number of shares of Warrant Stock purchasable upon the exercise of this Warrant shall be changed to the number determined by dividing (i) an amount equal to the number of shares of Warrant Stock issuable upon the exercise of this Warrant immediately prior to such adjustment, multiplied by the Purchase Price in effect immediately prior to such adjustment, by (ii) the Purchase Price in effect immediately after such adjustment. Any adjustment under this Section 2(A) shall become effective at the close of business on the date the subdivision or combination becomes effective, or as of the record date of such dividend, or in the event that no record date is fixed, upon the making of such dividend.

B.  In case of any reclassification, change or conversion of securities of the Company of the class issuable upon the exercise of this Warrant or in case of any reorganization of the Company on or after the date hereof, other than upon a Change of Control Transaction and other than as a result of a subdivision, combination or stock dividend provided for in Section 2(A) above, then and in each such case Holder of this Warrant, upon the exercise hereof at any time after the consummation of such reclassification, change, conversion or reorganization shall be entitled to receive (and upon written request, the Company shall provide Holder duly executed documents evidencing the same), in lieu of the stock or other securities and property receivable upon the exercise hereof prior to such consummation, the stock or other securities or property to which such Holder would have been entitled upon such consummation if such Holder had exercised this Warrant immediately prior thereto, at an aggregate exercise price not more than that payable upon the exercise if this Warrant prior to such consummation, all subject to further adjustment as provided in Section 2(A) above; and in each such case, the terms of this Section 2 shall be applicable to the shares of stock or other securities properly receivable upon the exercise of this Warrant after such consummation.

C.  If the Company engages in an offering of equity (including, without limitation, debt, warrants, options and other securities convertible into equity) of the Company (the “Subsequent Financing”) then the Purchase Price shall be adjusted to the price per share of Common Stock issued (or deemed issued) in the Subsequent Financing (assuming the conversion of any securities or exercise of options or warrants of the Company issued in the Subsequent Financing that are convertible into or exercisable for Common Stock or securities convertible into Common Stock) if such price is less than the Purchase Price in effect immediately prior to the Subsequent Financing.  When any adjustment is required to be made in the Purchase Price, the number of shares of Warrant Stock purchasable upon the exercise of this Warrant shall be changed to the number determined by dividing (i) an amount equal to the number of shares of Warrant Stock issuable upon the exercise of this Warrant immediately prior to such adjustment, multiplied by the Purchase Price in effect immediately prior to such adjustment, by (ii) the Purchase Price in effect immediately after such adjustment.  Any adjustment under this Section 2(C) shall become effective at the close of business on the date the Subsequent Financing becomes effective.

D.  Whenever the Purchase Price or the number of shares of Warrant Stock purchasable hereunder shall be adjusted pursuant to Section 2 hereof, the Company shall

  

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promptly give written notice thereof to Holder in the form of a certificate, signed by the chief executive officer and the executive officer responsible for the creation of such certificate, setting forth, in reasonable detail, the event requiring the adjustment, the amount of the adjustment, the method by which such adjustment was calculated, and the Purchase Price and the number of shares of Warrant Stock purchasable hereunder after giving effect to such adjustment. Such certificate shall be delivered to Holder within thirty (30) days of such adjustment, in accordance with Section 10 hereof.

4. Transfers. Each Holder of this Warrant acknowledges that this Warrant and the Warrant Stock have not been registered under the Act, and agrees not to offer for sale, sell, pledge, distribute, transfer or otherwise dispose of this Warrant and agrees not to offer for sale, sell, pledge, distribute, transfer or otherwise dispose of any Warrant Stock issued upon its exercise in the absence of (i) an effective registration statement under the Act as to this Warrant and the Warrant Stock and registration or qualification of under any applicable Blue Sky or state securities law then in effect, or (ii) an opinion of counsel, reasonably satisfactory to the Company, that such registration and qualification are not required; provided, however, that no opinion need be obtained with respect to a transfer to (A) a partner or member, active or retired, of Holder, (B) the estate of any such partner or member, (C) an “affiliate” of Holder as that term is defined in Rule 405 promulgated by the U.S. Securities and Exchange Commission (the “SEC”) under the Act, or (D) the spouse, children, grandchildren or spouse of such children or grandchildren of Holder or to trusts for the benefit of Holder or such persons, in each case if the transferee agrees to be subject to the terms hereof. Notwithstanding the foregoing, any transferee receiving shares that (A) have been registered under the Act or (B) are resaleable under Rule 144 promulgated under the Act shall not be required to agree in writing to be subject to the terms of this Section 3.

5. No Impairment. The Company will not, by amendment of its certificate of Incorporation or through reorganization, consolidation, merger, dissolution, sale of assets 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 action as may be reasonably necessary or appropriate in order to protect the rights of Holder of this Warrant against impairment.

6.  Termination.

A.  This Warrant (and the right to purchase securities upon exercise hereof) shall terminate upon the earliest of: (i) the date which is ten (10) years after the date of issuance (the “Expiration Date”), (ii) the closing of the Company’s initial public offering of Common Stock, and (iii) the closing of a liquidation, dissolution or winding up of the Company. For purposes of this Warrant, each of the following transactions shall be deemed to be a liquidation, dissolution or winding up of the Company: (i) a sale, exclusive lease, exclusive license or other disposition of all or substantially all of the assets of the Company; or (ii) any reorganization, consolidation, merger, stock sale, reorganization or similar transaction in which the Company is a constituent corporation or is a party if, as a result of such transaction, the voting securities of the Company that are outstanding immediately prior to such transaction do not represent, or are not converted into, securities of the resulting or surviving corporation that together represent a majority of the

  

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voting power of the surviving or resulting corporation in such a transaction (a “Change of Control Transaction”).

B.   This Warrant shall be deemed to be exercised automatically in full pursuant to the provisions of Section 1(C) hereof, without any further action on behalf of Holder, immediately prior to the time this Warrant would otherwise terminate pursuant to Section 5(A) above.

7.  Notices of Certain Transactions.

A.   In the event:

 

(i)    that the Company takes a record of Holders of its Common Stock (or other stock or securities at the time deliverable upon the exercise of this Warrant) for the purpose of entitling or enabling them to receive any dividend or other distribution, or to receive any right to subscribe for or purchase any shares of stock of any class or any other securities, or to receive any other right to subscribe for or purchase any shares of stock of any class or any other securities, or to receive any other right;

 

(ii)    that the Company makes any change to the Company’s certificate of incorporation; 

 

(iii)   of the filing of the Company’s first registration statement under the Act with the SEC;

 

(iv)   of any capital reorganization of the Company, any reclassification of the capital stock of the Company, any Change of Control Transaction, any other consolidation or merger of the Company with or into another corporation, or any other transaction or series of related transactions pursuant to which the Company’s stockholders immediately prior thereto will possess a minority of the voting power of the surviving or acquiring entity immediately thereafter, or any transfer of all or substantially all of the assets of the Company; or

 

(v)     of the voluntary or involuntary dissolution, liquidation or winding-up of the Company;

 

then, and in each such case, the Company will mail or cause to be mailed to Holder a notice specifying, as the case may be, (i) the date on which a record is to be taken for the purpose of such dividend, distribution or right, and stating the amount and character of such dividend, distribution or right, (ii) a certified copy of the Company’s current certificate of incorporation, (iii) the anticipated date on which the Company expects its first registration statement with the SEC to become effective, or (iv) the effective date on which such reorganization, reclassification, consolidation, merger, transfer, Change of Control Transaction, dissolution, liquidation, winding-up or redemption is to take place, and the time, if any is to be fixed, as of which Holders of record of Common Stock (or such other stock or securities at the time deliverable upon such reorganization, reclassification, consolidation, merger, transfer, dissolution, liquidation, winding- up or redemption) shall be determined. Such notice shall be mailed at least twenty (20) days prior to the record date or effective date for the event specified in such notice.

  

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B.  The Company shall mail or cause to be mailed to the Holder, by certified mail, return receipt requested, notice of the Expiration Date of the Warrant, no later than twenty (20) days prior to the Expiration Date.

8.  Reservation of  Stock. The Company will at all times reserve and keep available, solely for the issuance and delivery upon the exercise of this Warrant, such shares of Warrant Stock and other stock, securities and property, as from time to time shall be issuable upon the exercise of this Warrant and conversion of the Warrant Stock.  The Company covenants and agrees that all shares of Warrant Stock which may be issued upon the exercise of the rights represented by this Warrant will, upon issuance, be duly authorized, validly issued, fully paid (assuming payment of the exercise price by Holder) and nonassessable and free from all preemptive rights of any stockholder and free of all taxes, liens and charges with respect to the issue thereof.  The Company will take all such action as may be reasonably necessary to assure that such shares of Warrant Stock may be issued as provided herein without violation of any applicable law or regulation, or of any requirements of any domestic securities exchange upon which the securities of the Company may be listed;  provided,  however, that the Company shall not be required to effect a registration under Federal or state securities laws with respect to such exercise.

9.  Exchange of Warrants. Upon the surrender by Holder of any Warrant, properly endorsed, to the Company at the principal office of the Company, the Company will, subject to the provisions of Section 3 hereof, issue and deliver to or upon the order of such Holder, at Holder’s expense, a new Warrant of like tenor, in the name of such Holder or as such Holder (upon payment by such Holder of any applicable transfer taxes) may direct, calling in the aggregate on the face or faces thereof for the number of shares of Warrant Stock called for on the face or faces of the Warrant so surrendered.

10. Replacement of Warrants.  Upon receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant and (in the case of loss, theft or destruction) upon delivery of an indemnity agreement (with surety if reasonably required) in an amount reasonably satisfactory to the Company, or (in the case of mutilation) upon surrender and cancellation of this Warrant, the Company will issue, in lieu thereof, a new Warrant of like tenor at Holder’s expense.

11. Notices. All notices and other communications required or permitted hereunder shall be in writing and delivered, mailed or transmitted by any standard form of telecommunication. Notices and other communications to Holder shall be directed to it at its address set forth on the signature page hereto; and notices and other communications to the Company shall be directed to it at its address set forth on the signature page hereto; or as to each party, at such other address as shall be designated by such party in a written notice to the other party pursuant hereto. Any such notice or other communication shall be deemed to have been duly given (a) when sent by Federal Express  or  other  overnight  delivery  service  of  recognized  standing,  on  the  business  day following deposit with such service; (b) when mailed by registered or certified mail, first class postage prepaid and addressed as aforesaid through the United States Postal Service, upon receipt; (c) when delivered by hand, upon delivery; and (d) when telecopied, upon confirmation of receipt.   Any party hereto may by notice so given change its address for future notice hereunder.

  

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12. No Rights as Stockholder. Until the exercise of this Warrant, Holder of this Warrant shall not have or exercise any rights by virtue hereof as a stockholder of the Company.  Without limiting the generality of the foregoing, and except as otherwise provided in Section 2 hereof, no dividends shall accrue to the shares of Warrant Stock underlying this Warrant until the exercise hereof and the purchase of the underlying shares of Warrant Stock, at which point dividends shall begin to accrue with respect to such purchased shares of Warrant Stock from and after the date such shares of Warrant Stock are so purchased.  Nothing in this Section 11 shall limit the right of Holder to be provided the notices required to be provided pursuant to the terms of this Warrant.

13. Lock-up Agreement. Holder agrees that, if, in connection with the Company’s initial public offering of the Company’s securities, the Company or the underwriters managing the offering so request, Holder shall not publicly sell, make any short sale of, loan, grant any option for the purchase of, or otherwise publicly dispose of any securities of the Company without the prior written consent of the Company or such underwriters, as the case may be, for through the end of the 180-day period following the effective date of such registration statement (or such other period as may be requested by the Company or the underwriters to accommodate regulatory restrictions on (i) the publication or other distribution of research reports and (ii) analyst recommendations and opinions, including, but not limited to, the restrictions contained in NASD Rule 2711(f)(4) or NYSE Rule 472(f)(4), or any successor provisions or amendments thereto). This Section 12 shall be binding on all transferees or assignees of this Warrant or the Warrant Stock.

14. Registration Rights Agreement. The registration rights of Holder (including Holder’s successors) with respect to the Common Stock issuable upon conversion of the Warrant Stock issuable upon exercise of this Warrant, and the associated obligations, shall be the same as granted to purchasers in the first financing transaction in which purchasers are granted registration rights, as the same may be amended from time to time; provided that Holder's rights under this Section 13 are conditioned upon Holder executing such further documentation as is required to be signed by other investors in such financing to receive such rights.

15. No  Fractional  Shares.  No  fractional  shares  of  Warrant  Stock  will  be  issued  in connection with any exercise hereunder.  In lieu of any fractional shares which would otherwise be issuable, the Company shall pay cash equal to the product of such fraction multiplied by the purchase price per share of Warrant Stock.

16. Headings. The headings in this Warrant are for purposes of reference only and shall not limit or otherwise affect the meaning of any provision of this Warrant.

17. Governing Law. This Warrant and all actions arising out of or in connection with this Warrant shall be governed by and construed in accordance with the laws of the State of Delaware, without application of conflicts of law principles thereunder.

18. Amendment or Waiver. Any provision of this Warrant may be amended, waived or modified (either generally or in a particular instance, either retroactively or prospectively, and either for a specified period of time or indefinitely) only by an instrument in writing signed by the Company and Holder.  Any amendment, waiver or modification effected in accordance with

  

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this Section 17 shall be binding upon Holder, each future holder of the Warrant or the Warrant Stock and the Company.

19. Sundays and  Holidays. This Warrant shall be exercisable as provided for herein, except that in the event that the expiration date of this Warrant shall fall on a Saturday, Sunday and/or and United States federally recognized Holiday, the expiration date for this Warrant shall be extended to 5:00 p.m. Pacific time on the business day following such Saturday, Sunday or recognized Holiday.

20. Successor and Assigns. The terms and provisions of this Warrant and the Purchase Agreement shall incur to the benefit of, and be binding upon, the Company and each Holder hereof and their respective permitted successors and assigns.

21. Attorneys’ Fees.  If any action at law or in equity is necessary to enforce or interpret the  terms of  this Warrant the  adjudicating party may in  its  discretion order that  the  non- prevailing party, as determined by such adjudicating party, reimburse the prevailing party for reasonable attorney’s fees and costs in addition to any other relief to which such prevailing party may be entitled.

[Remainder of Page Intentionally Left Blank]

  

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IN WITNESS WHERETO, the Company has caused this Warrant to be signed by its duly authorized officer as of the date first written above.

 

	 	PRINCIPAL SOLAR, INC.

 

	 	By: /s/ Michael Gorton
	 	Name: Michael Gorton
	 	Title: Chief Executive Officer
	 	 
	  	
Principal Solar, Inc

	  	
2700 Fairmont

	  	
Dallas, TX 75201

	  	
Attention: Michael Gorton, CEO

By its counter-signature below, Holder hereby agrees to the foregoing terms and conditions set forth in this Warrant.

 

 

"HOLDER"

BRIDGE BANK, NATIONAL ASSOCIATION

By: ________________________________                                                             

Name: Scott Reising

Title:   Senior Vice President

 

Bridge Bank, National Association

55 Almaden Boulevard

San Jose, CA 95113

Attn:  Energy & Infrastructure Group

Facsimile No.: (408) 282-1681

Email:  EIG@bridgebank.com

  

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EXHIBIT A

PURCHASE FORM

To:           PRINCIPAL SOLAR, INC.                                                                                                  Dated:                                     

(1)           By checking the applicable box below (please check only one), the undersigned hereby irrevocably elects:

 

	  o	
to purchase______ shares of the Warrant Stock covered by the attached Warrant and herewith makes payment of $________ by cash, check or wire transfer, representing the full purchase price for such shares at the price per share provided for in such Warrant, pursuant to Section 1(A) thereof; OR

 

	  o	
to  exercise  the  attached  Warrant  pursuant  to  Section  1(C)  thereof.  The number of shares of Warrant Stock in respect of which this net issue election is made is _________.

 

 (2)           Please issue a certificate or certificates representing said shares of Warrant Stock in the name of the undersigned or in such other name as is specified below:

 

	 
	(Name)
	 
	 
	 
	 
	 
	(Address)

 

(3)       The undersigned represents that the aforesaid shares of Warrant Stock are being acquired for the account of the undersigned for investment and not with a view to, or for resale in connection with, the distribution thereof and that the undersigned has no present intention of distributing or reselling such shares except in compliance with applicable securities laws.

 

	 	 	 
	(Date) 	 	(Signature)
	 	 	 
	 	 	 
	 	 	 
	 	 	(Name) 

 

 

 

-11-

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