Document:

ex10-6.htm

EXHIBIT 10.6

WARRANT

THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE NOT BEEN REGISTERED  UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"),  OR QUALIFIED UNDER ANY STATE OR FOREIGN SECURITIES  LAWS AND MAY NOT BE OFFERED FOR SALE, SOLD, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED  OR ASSIGNED UNLESS (I) A REGISTRATION  STATEMENT COVERING  SUCH SHARES IS EFFECTIVE  UNDER THE ACT AND IS QUALIFIED UNDER APPLICABLE STATE AND FOREIGN LAW OR (II) THE TRANSACTION IS EXEMPT FROM THE REGISTRATION  AND PROSPECTUS DELIVERY REQUIREMENTS UNDER THE ACT AND THE QUALIFICATION REQUIREMENTS UNDER APPLICABLE STATE AND FOREIGN LAW AND, IF THE CORPORATION REQUESTS, AN OPINION SATISFACTORY TO THE CORPORATION TO SUCH EFFECT HAS BEEN RENDERED BY COUNSEL.

 

Warrant Certificate No.: B-1

 

Original Issue Date: June 14, 2013

FOR VALUE RECEIVED, Principal Solar, Inc., a Delaware corporation (the "Company"), hereby certifies that Steuben Investment Company II, L.P., a Delaware limited partnership, or its registered assigns (the "Holder") is entitled to purchase from the Company 2,181,818 duly authorized, validly issued, fully paid and nonassessable shares of Common Stock at a purchase price per share of $1.00 (subject to adjustment as provided herein, the "Exercise Price"), all subject to the terms, conditions and adjustments  set forth below in this Warrant. Certain capitalized terms used herein are defined in Section 1 hereof.

 

This Warrant has been issued pursuant to the terms of the Subscription Agreement, dated as of or around the date hereof (the "Purchase Agreement"), between the Company and the Holder.

 

1.          Definitions. As used in this Warrant, the following terms have the respective meanings set forth below:

 

 

"Aggregate Exercise Price"  means an amount equal to the product of (a) the number of Warrant Shares in respect of which this Warrant is then being exercised

  

  

  

 

pursuant to Section 3 hereof, multiplied by (b) the Exercise Price in effect as of the Exercise Date in accordance with the terms of this Warrant. 

 

"Board" means the board of directors of the Company.

 

"Business Day" means any day, except a Saturday, Sunday or legal holiday, on which banking institutions in the city of Dallas, Texas are authorized or obligated by law or executive order to close.

 

"Common Stock"  means the common stock, $0.001 par value per share, of the Company, and any capital stock into which such Common Stock shall have been converted, exchanged or reclassified following the date hereof.

"Common Stock  Deemed  Outstanding" means, at any given time, the sum of (a) the number of shares of Common Stock actually outstanding at such time, plus (b) the number of shares of Common Stock issuable upon exercise of Options actually outstanding at such time, plus (c) the number of shares of Common Stock issuable upon conversion or exchange of Convertible Securities actually outstanding at such time (treating as actually outstanding any Convertible Securities issuable upon exercise of Options actually outstanding at such time), in each case, regardless of whether the Options or Convertible Securities are actually exercisable at such time; provided, that Common Stock Deemed Outstanding at any given time shall not include shares owned or held by or for the account of the Company or any of its wholly owned subsidiaries.

"Company" has the meaning set forth in the preamble.

"Convertible Securities" means any securities (directly or indirectly) convertible into or exchangeable  for Common Stock, but excluding Options.

"Excluded Issuances" means any issuance or sale (or deemed issuance or sale in accordance with Section  4(d)) by the Company after the Original Issue Date of: (a) shares of Common Stock issued upon the exercise of this Warrant; (b) up to an aggregate of 1,385,026 shares of Common Stock (as such number of shares is equitably adjusted for subsequent stock splits, stock combinations, stock dividends and recapitalizations) issued directly or upon the exercise of Options granted after the Original Issue Date to directors, officers, employees, or consultants of the Company in connection with their service as directors of the Company, their employment by the Company or their retention as consultants by the Company, in each case authorized by the Board and issued in accordance with the Company's standard compensation practices and equity plan then in effect, if any; or (c) shares of Common Stock issued upon the conversion or exercise of Options (other than Options covered by clause (b) above) or Convertible Securities issued prior to the Original Issue Date, provided that such securities are not amended after the date hereof to increase the number of shares of Common Stock issuable thereunder or to lower the exercise or conversion price thereof.]

 

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"Exercise Date"  means, for any given exercise of this Warrant, the date on which the conditions to such exercise as set forth in Section 3 shall have been satisfied at or prior to 5:00p.m., Dallas, Texas time, on a Business Day, including, without limitation, the receipt by the Company of the Exercise Agreement, the Warrant and the Aggregate Exercise Price.

"Exercise Agreement" has the meaning set forth in Section 3(a)(i). "Exercise Period" has the meaning set forth in Section 2. 

 

"Exercise Price" has the meaning set forth in the preamble.

 

"Fair Market Value"  means, as of any particular date: (a) the volume weighted average of the closing sales prices of the Common Stock for such day on all domestic securities exchanges on which the Common Stock may at the time be listed; (b) if there have been no sales of the Common Stock on any such exchange on any such day, the average of the highest bid and lowest asked prices for the Common Stock on all such exchanges at the end of such day; (c) if on any such day the Common Stock is not listed on a domestic securities exchange, the closing sales price of the Common Stock as quoted on Nasdaq, the OTC Bulletin Board or similar quotation system or association for such day; or (d) if there have been no sales of the Common Stock on Nasdaq, the OTC Bulletin Board or similar quotation system or association on such day, the average of the highest bid and lowest asked prices for the Common Stock quoted on Nasdaq, the OTC Bulletin Board or similar quotation system or association at the end of such day; in each case, averaged over twenty (20) consecutive Business Days ending on the Business Day immediately prior to the day as of which "Fair Market Value" is being determined; provided, that if the Common Stock is listed on any domestic securities exchange, the term "Business Day" as used in this sentence means Business Days on which such exchange is open for trading. If at any time the Common Stock is not listed on any domestic securities exchange or quoted on Nasdaq, the OTC Bulletin Board or similar quotation system or association, the "Fair Market Value" of the Common Stock shall be the fair market value per share as determined jointly by the Board and the Holder.

"Holder" has the meaning set forth in the preamble.

"Options" means any warrants or other rights or options to subscribe for or purchase Common Stock or Convertible Securities.

"Original Issue Date" means June 14, 2013.

 

"Nasdaq" means The Nasdaq Stock Market, Inc.

"OTC  Bulletin  Board" means the National Association  of Securities Dealers, Inc. OTC Bulletin Board.

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"Person" means any individual, sole proprietorship, partnership, limited liability company, corporation, joint venture, trust, incorporated organization or government or department or agency thereof.

 

"Purchase Agreement" has the meaning set forth in the preamble.

 

"Registration Rights Agreement" has the meaning set forth in Section 15. 

 

"Warrant" means this Warrant and all warrants issued upon division or combination of, or in substitution for, this Warrant.

"Warrant Shares" means the shares of Common Stock or other capital stock of the Company then purchasable upon exercise of this Warrant in accordance with the terms of this Warrant.

 

2.           Term of Warrant. Subject to the terms and conditions hereof, at any time or from time to time after the date hereof and prior to 5:00 p.m., Dallas time, on the tenth anniversary ofthe  Original Issue Date or, if such day is not a Business Day, on the next preceding Business Day (the "Exercise Period"), the Holder of this Warrant may exercise this Warrant for all or any part ofthe  Warrant Shares purchasable hereunder (subject to adjustment as provided herein).

3.           Exercise of Warrant.

(a)           Exercise Procedure. This Warrant may be exercised from time to time on any Business Day during the Exercise Period, for all or any part of the unexercised Warrant Shares, upon:

(i)           surrender of this Warrant to the Company at its then principal executive offices (or an indemnification undertaking with respect to this Warrant in the case of its loss, theft or destruction), together with an Exercise Agreement in the form attached hereto as Exhibit A (each, an "Exercise Agreement"), duly completed (including specifying the number of Warrant Shares to be purchased) and executed; and

(ii)           payment to the Company of the Aggregate Exercise Price in accordance with Section 3(b).

(b)           Payment of the Aggregate Exercise Price. Payment of the Aggregate Exercise Price shall be made, at the option of the Holder as expressed in the Exercise Agreement, by the following methods:

(i)           by delivery to the Company of a certified or official bank check payable to the order ofthe  Company or by wire transfer of immediately available funds to an account designated in writing by the Company, in the amount of such Aggregate Exercise Price;

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(ii)           by instructing the Company to withhold a number of Warrant Shares then issuable upon exercise of this Warrant with an aggregate Fair Market Value as of the Exercise Date equal to such Aggregate Exercise Price;

(iii)           by surrendering to the Company (x) Warrant Shares previously acquired by the Holder with an aggregate Fair Market Value as of the Exercise Date equal to such Aggregate Exercise Price and/or (y) other securities of the Company having a value as of the Exercise Date equal to the Aggregate Exercise Price (which value in the case of debt securities shall be the principal amount thereof plus accrued and unpaid interest, in the case of preferred stock shall be the liquidation value thereof plus accumulated and unpaid dividends and in the case of shares of Common Stock shall be the Fair Market Value thereof); or

(iv)           any combination ofthe foregoing.

In the event of any withholding of Warrant Shares or surrender of other equity securities pursuant to clause (ii), (iii) or (iv) above where the number of shares whose value is equal to the Aggregate Exercise Price is not a whole number, the number of shares withheld by or surrendered to the Company shall be rounded up to the nearest whole share and the Company shall make a cash payment to the Holder (by delivery of a certified or official bank check or by wire transfer of immediately available funds) based on the incremental fraction of a share being so withheld by or surrendered to the Company in an amount equal to the product of (x) such incremental fraction of a share being so withheld or surrendered multiplied by (y) in the case of Common Stock, the Fair Market Value per Warrant Share as of the Exercise Date, and, in all other cases, the value thereof as of the

Exercise Date determined  in accordance with clause (iii)(y) above.

(c)           Delivery of Stock Certificates. Upon receipt by the Company of the Exercise Agreement, surrender of this Warrant and payment of the Aggregate Exercise Price (in accordance with Section 3(a) hereof), the Company shall, as promptly as practicable, and in any event within 15 Business Days thereafter, execute (or cause to be executed) and deliver (or cause to be delivered) to the Holder a certificate or certificates representing the Warrant Shares issuable upon such exercise, together with cash in lieu of any fraction of a share, as provided in Section 3(d) hereof. The stock certificate or certificates so delivered shall be, to the extent possible, in such denomination or denominations as the exercising Holder shall reasonably request in the Exercise Agreement and shall be registered in the name of the Holder or, subject to compliance with Section 6 below, such other Person's name as shall be designated in the Exercise Agreement. This Warrant shall be deemed to have been exercised and such certificate or certificates of Warrant Shares shall be deemed to have been issued, and the 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 Exercise Date.

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(d)           Fractional Shares. The Company shall not be required to issue a fractional Warrant Share upon exercise of any Warrant. As to any fraction of a Warrant Share that the Holder would otherwise be entitled to purchase upon such exercise, the Company shall pay to such Holder an amount in cash (by delivery of a certified or official bank check or by wire transfer of immediately available funds) equal to the product of (i) such fraction multiplied by (ii) the Fair Market Value of one Warrant Share on the Exercise Date.

 

(e)           Delivery  of New Warrant. Unless the purchase rights represented by this Warrant shall have expired or shall have been fully exercised, the Company shall, at the time of delivery of the certificate or certificates representing the Warrant Shares being issued in accordance with Section  3(c) hereof, deliver to the Holder a new Warrant evidencing the rights of the Holder to purchase the unexpired and unexercised Warrant Shares called for by this Warrant. Such new Warrant shall in all other respects be identical to this Warrant.

(f)        Valid Issuance of Warrant and Warrant Shares; Payment of Taxes. With respect to the exercise of this warrant, the Company hereby represents, covenants and agrees:

(i)           This Warrant is, and any Warrant issued in substitution for or replacement ofthis Warrant shall be, upon issuance, duly authorized and validly issued.

(ii)           All Warrant Shares issuable upon the exercise of this Warrant pursuant to the terms hereof shall be, upon issuance, and the Company shall take all such actions as may be necessary or appropriate in order that such Warrant Shares are, validly issued, fully paid and non-assessable,  issued without violation of any preemptive or similar rights of any stockholder of the Company and free and clear of all taxes, liens and charges.

(iii)           The Company shall take all such actions as may be necessary to ensure that all such Warrant Shares are issued without violation by the Company of any applicable law or governmental  regulation or any requirements of any domestic securities exchange upon which shares of Common Stock or other securities constituting Warrant Shares may be listed at the time of such exercise (except for official notice of issuance which shall be immediately delivered by the Company upon each such issuance).

(iv)           The Company shall use its best efforts to cause the Warrant Shares, immediately upon such exercise, to be listed on any domestic securities exchange upon which shares of Common Stock or other securities constituting Warrant Shares are listed at the time of such exercise.

(v)           The Company shall pay all expenses in connection with, and all taxes and other governmental charges that may be imposed with respect to, the issuance

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or delivery of Warrant Shares upon exercise of this Warrant; provided, that the Company shall not be required to pay any tax or governmental charge that may be imposed with respect to any applicable withholding or the issuance or delivery of the Warrant Shares to any Person other than the Holder, and no such issuance or delivery shall be made unless and until the Person requesting such issuance has paid to the Company the amount of any such tax, or has established to the satisfaction of the Company that such tax has been paid. 

 

(g)           Conditional  Exercise. Notwithstanding  any other provision hereof, if an exercise of any portion of this Warrant is to be made in connection with a public offering or a sale of the Company (pursuant to a merger, sale of stock, or otherwise), such exercise may at the election of the Holder be conditioned upon the consummation of such transaction,  in which case such exercise shall not be deemed to be effective until immediately prior to the consummation  of such transaction.

(h)           Reservation of Shares. During the Exercise Period, the Company shall at all times reserve and keep available out of its authorized but unissued Common Stock or other securities constituting Warrant Shares, solely for the purpose of issuance upon the exercise of this Warrant, the maximum number of Warrant Shares issuable upon the exercise of this Warrant, and the par value per Warrant Share shall at all times be less than or equal to the applicable Exercise Price. The Company shall not increase the par value of any Warrant Shares receivable upon the exercise of this Warrant above the Exercise Price then in effect, and shall take all such actions as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable shares of Common Stock upon the exercise of this Warrant.

4.           Adjustment to Exercise Price and Number of Warrant Shares. In order to prevent dilution of the purchase rights granted under this Warrant, the Exercise Price and the number of Warrant Shares issuable upon exercise of this Warrant shall be subject to adjustment from time to time as provided in this Section 4.

(a)           Adjustment  to Exercise Price Upon Issuance of Common Stock. Except as provided in Section 4(c) and except in the case of an event described in either Section 4(e) or Section 4(t), if the Company shall, at any time or from time to time after the Original Issue Date, issue or sell, or in accordance with Section 4(d) is deemed to have issued or sold, any shares of Common Stock without consideration or for consideration  per share less than the Exercise Price in effect immediately prior to such issuance or sale (or deemed issuance or sale), then immediately upon such issuance or sale (or deemed issuance or sale), the Exercise Price in effect immediately prior to such issuance or sale (or deemed issuance or sale) shall be reduced (and in no event increased) to an Exercise Price equal to the quotient obtained by dividing:

(i)                the sum of (A) the product obtained by multiplying the Common Stock Deemed Outstanding immediately prior to such issuance or sale (or deemed

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issuance or sale) by the Exercise Price then in effect plus (B) the aggregate consideration, if any, received by the Company upon such issuance or sale (or deemed issuance or sale); by

(ii)           the sum of (A) the Common Stock Deemed Outstanding immediately prior to such issuance or sale (or deemed issuance or sale) plus (B) the aggregate number of shares of Common Stock issued or sold (or deemed issued or sold) by the Company in such issuance or sale (or deemed issuance or sale).

(b)           Adjustment to Number of Warrant Shares Upon Adjustment to Exercise Price. Upon any and each adjustment of the Exercise Price as provided in Section 4(a}, the number of Warrant Shares issuable upon the exercise ofthis  Warrant immediately prior to any such adjustment shall be increased to a number of Warrant Shares equal to the quotient obtained by dividing:

(i)           the product of (A) the Exercise Price in effect immediately prior to any such adjustment multiplied by (B) the number of Warrant Shares issuable upon exercise of this Warrant immediately prior to any such adjustment; by

(ii)           the Exercise Price resulting from such adjustment.

(c)           Exceptions To Adjustment Upon Issuance of Common Stock. Anything herein to the contrary notwithstanding, there shall be no adjustment to the Exercise Price or the number of Warrant Shares issuable upon exercise of this Warrant with respect to any Excluded Issuance.

(d)           Effect of Certain  Events on Adjustment to Exercise Price. For purposes of determining the adjusted Exercise Price under Section 4(a) hereof, the following shall be applicable:

(i)           Issuance of Options. Ifthe  Company shall, at any time or from time to time after the Original Issue Date, in any manner grant or sell (whether directly or by assumption in a merger or otherwise) any Options, whether or not such Options or the right to convert or exchange any Convertible Securities issuable upon the exercise of such Options are immediately exercisable, and the price per share (determined as provided in this paragraph and in Section 4(d)(v)) for which Common Stock is issuable upon the exercise of such Options or upon the conversion or exchange of Convertible Securities issuable upon the exercise of such Options is less than the Exercise Price in effect immediately prior to the time of the granting or sale of such Options, then the total maximum number of shares of Common Stock issuable upon the exercise of such Options or upon conversion or exchange ofthe total maximum amount of Convertible Securities issuable upon the exercise of such Options shall be deemed to have been issued as of the date of granting or sale of such Options (and thereafter shall be deemed to be outstanding for purposes of adjusting the Exercise Price under Section 4(a)), at a price

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per share equal to the quotient obtained by dividing (A) the sum (which sum shall constitute the applicable consideration  received for purposes of Section 4(a)) of (x) the total amount, if any, received or receivable by the Company as consideration  for the granting or sale of all such Options, plus (y) the minimum aggregate amount of additional consideration  payable to the Company upon the exercise of all such Options, plus (z), in the case of such Options which relate to Convertible Securities, the minimum aggregate amount of additional consideration,  if any, payable to the Company upon the issuance or sale of all such Convertible Securities and the conversion or exchange of all such Convertible Securities, by (B) the total maximum number of shares of Common Stock issuable upon the exercise of all such Options or upon the conversion or exchange of all Convertible Securities issuable upon the exercise of all such Options. Except as otherwise provided in Section 4(d)(iii), no further adjustment of the Exercise Price shall be made upon the actual issuance of Common Stock or of Convertible Securities upon exercise of such Options or upon the actual issuance of Common Stock upon conversion or exchange of Convertible Securities issuable upon exercise of such Options.

(ii)           Issuance of Convertible Securities. Ifthe Company shall, at any time or :from time to time after the Original Issue Date, in any manner grant or sell (whether directly or by assumption  in a merger or otherwise) any Convertible Securities, whether or not the right to convert or exchange any such Convertible Securities is immediately exercisable, and the price per share (determined as provided in this paragraph and in Section 4(d)(v)) for which Common Stock is issuable upon the conversion or exchange of such Convertible Securities is less than the Exercise Price in effect immediately prior to the time of the granting or sale of such Convertible Securities, then the total maximum number of shares of Common Stock issuable upon conversion or exchange of the total maximum amount of such Convertible Securities shall be deemed to have been issued as of the date of granting or sale of such Convertible Securities (and thereafter shall be deemed to be outstanding for purposes of adjusting the Exercise Price pursuant to Section 4(a)), at a price per share equal to the quotient obtained by dividing (A) the sum (which sum shall constitute the applicable consideration received for purposes of Section 4(a)) of(x) the total amount, if any, received or receivable by the Company as consideration  for the granting or sale of such Convertible Securities, plus (y) the minimum aggregate amount of additional consideration, if any, payable to the Company upon the conversion or exchange of all such Convertible Securities, by (B) the total maximum number of shares of Common Stock issuable upon the conversion or exchange of all such Convertible Securities. Except as otherwise provided in Section 4(d)(iii), (A) no further adjustment ofthe Exercise Price shall be made upon the actual issuance of Common Stock upon conversion or exchange of such Convertible Securities and (B) no further adjustment of the Exercise Price shall be made by reason of the issue or sale of Convertible Securities upon exercise of any Options to purchase any such Convertible Securities for which adjustments of the Exercise Price have been made pursuant to the other provisions of this Section 4(d).

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(iii)          Change in Terms of Options or Convertible Securities. Upon any change in any of (A) the total amount received or receivable by the Company as consideration  for the granting or sale of any Options or Convertible Securities referred to in Section 4(d)(i)  or Section 4(d)(ii) hereof, (B) the minimum aggregate amount of additional consideration,  if any, payable to the Company upon the exercise of any Options or upon the issuance, conversion or exchange of any Convertible Securities referred to in Section 4(d)(i)  or Section 4(d)(ii) hereof, (C) the rate at which Convertible Securities referred to in Section 4(d)(i)  or Section 4(d)(ii) hereof are convertible into or exchangeable  for Common Stock, or (D) the maximum number of shares of Common Stock issuable in connection with any Options referred to in Section 4(d)(i)  hereof or any Convertible Securities referred to in Section 4(d)(ii) hereof (in each case, other than in connection with an Excluded Issuance), then (whether or not the original issuance or sale of such Options or Convertible Securities resulted in an adjustment to the Exercise Price pursuant to this Section 4) the Exercise Price in effect at the time of such change shall be adjusted or readjusted, as applicable, to the Exercise Price which would have been in effect at such time pursuant to the provisions of this Section 4 had such Options or Convertible Securities still outstanding provided for such changed consideration, conversion rate or maximum number of shares, as the case may be, at the time initially granted, issued or sold, but only if as a result of such adjustment or readjustment the Exercise Price then in effect is reduced, and the number of Warrant Shares issuable upon the exercise of this Warrant immediately prior to any such adjustment or readjustment shall be correspondingly adjusted or readjusted pursuant to the provisions of Section 4(b).

(iv)          Treatment of Expired or Terminated Options or Convertible Securities. Upon the expiration or termination of any unexercised Option (or portion thereof) or any unconverted or unexchanged Convertible Security (or portion thereof) for which any adjustment (either upon its original issuance or upon a revision of its terms) was made pursuant to this Section 4 (including without limitation upon the redemption or purchase for consideration  of all or any portion of such Option or Convertible Security by the Company), the Exercise Price then in effect hereunder shall forthwith be changed pursuant to the provisions of this Section 4 to the Exercise Price which would have been in effect at the time of such expiration or termination had such unexercised Option (or portion thereof) or unconverted or unexchanged Convertible Security (or portion thereof), to the extent outstanding immediately prior to such expiration or termination, never been issued.

(v)           Calculation of Consideration Received. If the Company shall, at any time or from time to time after the Original Issue Date, issue or sell, or is deemed to have issued or sold in accordance with Section 4(d), any shares of Common Stock, Options or Convertible Securities: (A) for cash, the consideration  received therefor shall be deemed to be the net amount received by the Company therefor; (B) for consideration other than cash, the amount of the consideration other than cash received by the Company

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shall be the fair value of such consideration, except where such consideration  consists of marketable securities, in which case the amount of consideration received by the Company shall be the market price (as reflected on any securities exchange, quotation system or association or similar pricing system covering such security) for such securities as of the end of business on the date of receipt of such securities; (C) for no specifically allocated consideration  in connection with an issuance or sale of other securities of the Company, together comprising one integrated transaction, the amount of the consideration therefor shall be deemed to be the fair value of such portion of the aggregate consideration  received by the Company in such transaction as is attributable to such shares of Common Stock, Options or Convertible Securities, as the case may be, issued in such transaction;  or (D) to the owners of the non-surviving entity in connection with any merger in which the Company is the surviving corporation, the amount of consideration therefor shall be deemed to be the fair value of such portion of the net assets and business of the non-surviving entity as is attributable to such shares of Common Stock, Options or Convertible Securities, as the case may be, issued to such owners. The net amount of any cash consideration and the fair value of any consideration other than cash or marketable securities shall be determined in good faith jointly by the Board and the Holder.

(vi)           Record Date. For purposes of any adjustment to the Exercise Price or the number of Warrant Shares in accordance with this Section  4, in case the Company shall take a record of the holders of its Common Stock for the purpose of entitling them (A) to receive a dividend or other distribution payable in Common Stock, Options or Convertible Securities or (B) to subscribe for or purchase Common Stock, Options or Convertible Securities, then such record date shall be deemed to be the date of the issue or sale ofthe shares of Common Stock deemed to have been issued or sold upon the declaration of such dividend or the making of such other distribution or the date of the

granting of such right of subscription or purchase, as the case may be.

(vii)           Treasury Shares. The number of shares of Common Stock outstanding at any given time shall not include shares owned or held by or for the account of the Company or any of its wholly-owned subsidiaries, and the disposition of any such shares (other than the cancellation  or retirement thereof or the transfer of such shares among the Company and its wholly-owned subsidiaries) shall be considered an issue or sale of Common Stock for the purpose of this Section  4.

(e)           Adjustment to Exercise Price and Warrant Shares Upon Dividend, Subdivision or Combination of Common Stock. If the Company shall, at any time or from time to time after the Original Issue Date, (i) pay a dividend or make any other distribution upon the Common Stock or any other capital stock of the Company payable in shares of Common Stock or in Options or Convertible Securities, or (ii) subdivide (by any stock split, recapitalization or otherwise) its outstanding shares of Common Stock into a greater number of shares, the Exercise Price in effect immediately prior to any such

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dividend, distribution or subdivision shall be proportionately reduced and the number of Warrant Shares issuable upon exercise ofthis Warrant shall be proportionately increased. If the Company at any time combines (by combination, reverse stock split or otherwise) its outstanding shares of Common Stock into a smaller number of shares, the Exercise Price in effect immediately prior to such combination shall be proportionately  increased and the number of Warrant Shares issuable upon exercise of this Warrant shall be proportionately decreased. Any adjustment under this Section  4(e) shall become effective at the close of business on the date the dividend, subdivision or combination becomes effective.

(f)           Adjustment to Exercise Price and  Warrant Shares Upon Reorganization, Reclassification, Consolidation or Merger. In the event of any (i) capital reorganization  ofthe Company, (ii) reclassification ofthe stock of the Company (other than a change in par value or from par value to no par value or from no par value to par value or as a result of a stock dividend or subdivision, split-up or combination of shares), (iii) consolidation  or merger of the Company with or into another Person, (iv) sale of all or substantially all of the Company's assets to another Person or (v) other similar transaction  (other than any such transaction covered by Section  4(e)), in each case which entitles the holders of Common Stock to receive (either directly or upon subsequent liquidation) stock, securities or assets with respect to or in exchange for Common Stock, each Warrant shall, immediately after such reorganization, reclassification, consolidation,  merger, sale or similar transaction, remain outstanding and shall thereafter, in lieu of or in addition to (as the case may be) the number of Warrant Shares then exercisable  under this Warrant, be exercisable for the kind and number of shares of stock or other securities or assets of the Company or of the successor Person resulting from such transaction to which the Holder would have been entitled upon such reorganization, reclassification, consolidation, merger, sale or similar transaction if the Holder had exercised this Warrant in full immediately prior to the time of such reorganization, reclassification,  consolidation, merger, sale or similar transaction and acquired the applicable number of Warrant Shares then issuable hereunder as a result of such exercise (without taking into account any limitations or restrictions on the exercisability  of this Warrant); and, in such case, appropriate adjustment (in form and substance satisfactory to the Holder) shall be made with respect to the Holder's rights under this Warrant to insure that the provisions of this Section  4 hereof shall thereafter be applicable, as nearly as possible, to this Warrant in relation to any shares of stock, securities or assets thereafter acquirable upon exercise of this Warrant (including,  in the case of any consolidation, merger, sale or similar transaction in which the successor or purchasing Person is other than the Company, an immediate adjustment in the Exercise Price to the value per share for the Common Stock reflected by the terms of such consolidation,  merger, sale or similar transaction, and a corresponding immediate adjustment to the number of Warrant Shares acquirable upon exercise of this Warrant without regard to any limitations or restrictions on exercise, if the value so reflected is less than the Exercise Price in effect immediately prior to such consolidation,  merger,

 

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sale or similar transaction). The provisions of this Section  4(f) shall similarly apply to successive reorganizations, reclassifications,  consolidations, mergers, sales or similar transactions. The Company shall not effect any such reorganization, reclassification, consolidation,  merger, sale or similar transaction unless, prior to the consummation thereof, the successor Person (if other than the Company) resulting from such reorganization, reclassification, consolidation, merger, sale or similar transaction, shall assume, by written instrument substantially similar in form and substance to this Warrant and satisfactory to the Holder, the obligation to deliver to the Holder such shares of stock, securities or assets which, in accordance with the foregoing provisions, such Holder shall be entitled to receive upon exercise of this Warrant. Notwithstanding anything to the contrary contained herein, with respect to any corporate event or other transaction contemplated  by the provisions of this Section  4(f), the Holder shall have the right to elect prior to the consummation  of such event or transaction, to give effect to the exercise rights contained in Section  2 instead of giving effect to the provisions contained in this Section  4(f) with respect to this Warrant.

(g)           Certain Events. If any event of the type contemplated  by the provisions of this Section  4 but not expressly provided for by such provisions (including, without limitation, the granting of stock appreciation rights, phantom stock rights or other rights with equity features) occurs, then the Board shall make an appropriate adjustment in the Exercise Price and the number of Warrant Shares issuable upon exercise of this Warrant so as to protect the rights of the Holder in a manner consistent with the provisions of this Section  4; provided, that no such adjustment pursuant to this Section  4(g) shall increase the Exercise Price or decrease the number of Warrant Shares issuable as otherwise

determined pursuant to this Section  4.

(h)           Certificate as to Adjustment.

(i)           As promptly as reasonably practicable following any adjustment of the Exercise Price, but in any event not later than 15 Business Days thereafter, the Company shall furnish to the Holder a certificate of an executive officer setting forth in reasonable detail such adjustment and the facts upon which it is based and certifying the calculation thereof.

(ii)           As promptly as reasonably practicable following the receipt by the Company of a written request by the Holder, but in any event not later than 15 Business Days thereafter, the Company shall furnish to the Holder a certificate of an executive officer certifying the Exercise Price then in effect and the number of Warrant Shares or the amount, if any, of other shares of stock, securities or assets then issuable upon exercise of the Warrant.

(i)           Notices. In the event:

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Stock (or other capital stock or securities at the time issuable upon exercise of the Warrant) for the purpose of entitling or enabling them to receive any dividend or other distribution, to vote at a meeting (or by written consent), to receive any right to subscribe for or purchase any shares of capital stock of any class or any other securities, or to receive any other security; or

(ii)           of any capital reorganization of the Company, any reclassification of the Common Stock of the Company, any consolidation or merger of the Company with or into another Person, or sale of all or substantially all of the Company's assets to another Person; or

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

then, and in each such case, the Company shall send or cause to be sent to the Holder at least 30 days prior to the applicable record date or the applicable expected effective date, as the case may be, for the event, a written notice specifying, as the case may be, (A) the record date for such dividend, distribution, meeting or consent or other right or action, and a description of such dividend, distribution or other right or action to be taken at such meeting or by written consent, or (B) the effective date on which such reorganization, reclassification, consolidation,  merger, sale, dissolution, liquidation or winding-up is proposed to take place, and the date, if any is to be fixed, as of which the books of the Company shall close or a record shall be taken with respect to which the holders of record of Common Stock (or such other capital stock or securities at the time issuable upon exercise ofthe Warrant) shall be entitled to exchange their shares of Common Stock (or such other capital stock or securities) for securities or other property deliverable upon such reorganization, reclassification,  consolidation, merger, sale, dissolution, liquidation or winding-up, and the amount per share and character of such exchange applicable to the Warrant and the Warrant Shares.

 

5. Purchase Rights. In addition to any adjustments pursuant to Section 4 above, if at any time the Company grants, issues or sells any shares of Common Stock, Options, Convertible Securities or rights to purchase stock, warrants, securities or other property pro rata to the record holders of Common Stock (the "Purchase Rights"), then the Holder shall be entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which the Holder would have acquired if the Holder had held the number of Warrant Shares acquirable upon complete exercise ofthis Warrant immediately before the date on which a record is taken for the grant, issuance or sale of such Purchase Rights, or, if no such record is taken, the date as of which the record holders of Common Stock are to be determined for the grant, issue or sale of such Purchase Rights. Anything herein to the contrary notwithstanding, the Holder shall not be entitled to the Purchase Rights granted herein with respect to any Excluded Issuance.

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6.         Transfer of Warrant. Subject to the transfer conditions referred to in the legend endorsed hereon, this Warrant and all rights hereunder are transferable, in whole or in part, by the Holder without charge to the Holder, upon surrender of this Warrant to the Company at its then principal executive offices with a properly completed and duly executed Assignment in the form attached hereto as Exhibit B, together with funds sufficient to pay any transfer taxes described in Section 3(f)(v) in connection with the making of such transfer. Upon such compliance, surrender and delivery 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 denominations  specified in such instrument of assignment, and shall issue to the assignor a new Warrant evidencing the portion of this Warrant, if any, not so assigned and this Warrant shall promptly be cancelled.

7.             Holder Not Deemed a Stockholder; Limitations on Liability. Except as otherwise specifically provided herein, prior to the issuance to the Holder of the Warrant Shares to which the Holder is then entitled to receive upon the due exercise of this Warrant, the Holder shall not be entitled to vote or receive dividends or be deemed the holder of shares of capital stock of the Company for any purpose as to such Warrant Shares, nor shall anything contained in this Warrant be construed to confer upon the Holder, as such, any of the rights of a stockholder of the Company or any right to vote, give or withhold consent to any corporate action (whether any reorganization, issue of stock, reclassification  of stock, consolidation,  merger, conveyance or otherwise), receive notice of meetings, receive dividends or subscription rights, or otherwise. In addition, nothing contained in this Warrant shall be construed as imposing any liabilities on the Holder to purchase any securities (upon exercise ofthis Warrant or otherwise) or as a stockholder of the Company, whether such liabilities are asserted by the Company or by creditors of the Company. Notwithstanding this Section 7, the Company shall provide the Holder with copies of the same notices and other information given to the stockholders of the

Company generally, contemporaneously with the giving thereof to the stockholders.

8.            Replacement on Loss; Division and Combination.

(a)           Replacement  of Warrant on Loss. Upon receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant and upon delivery of an indemnity reasonably satisfactory to it (it being understood that a written indemnification agreement or affidavit of loss ofthe Holder shall be a sufficient indemnity) and, in case of mutilation, upon surrender of such Warrant for cancellation to the Company, the Company at its own expense shall execute and deliver to the Holder, in lieu hereof, a new Warrant of like tenor and exercisable for an equivalent number of Warrant Shares as the Warrant so lost, stolen, mutilated or destroyed; provided, that, in the case of mutilation, no indemnity shall be required if this Warrant in identifiable form is surrendered to the Company for cancellation.

(b)           Division and Combination of Warrant. Subject to compliance with the applicable provisions of this Warrant and the Stockholders Agreement as to any transfer

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or other assignment which may be involved in such division or combination, this Warrant may be divided or, following any such division of this Warrant, subsequently combined with other Warrants, upon the surrender of this Warrant or Warrants to the Company at its then principal executive offices, together with a written notice specifying the names and denominations  in which new Warrants are to be issued, signed by the respective Holders or their agents or attorneys. Subject to compliance with the applicable provisions of this Warrant and the Stockholders Agreement as to any transfer or assignment which may be involved in such division or combination, the Company shall at its own expense execute and deliver a new Warrant or Warrants in exchange for the Warrant or Warrants so surrendered in accordance with such notice. Such new Warrant or Warrants shall be of like tenor to the surrendered  Warrant or Warrants and shall be exercisable  in the aggregate for an equivalent  number of Warrant Shares as the Warrant or Warrants so surrendered in accordance with such notice.

9.             No Impairment. The Company shall not, by amendment of its Certificate of Incorporation or Bylaws, 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 to be observed or performed by it hereunder, but shall at all times in good faith assist in the carrying out of all the provisions of this Warrant and in the taking of all such action as may reasonably be requested by the Holder in order to protect the exercise rights of the Holder against dilution or other impairment, consistent with the tenor and purpose of this Warrant.

10.          Compliance  with the Securities Act.

(a)           Agreement to Comply  with the Securities Act; Legend. The Holder, by acceptance ofthis Warrant, agrees to comply in all respects with the provisions of this Section 10 and the restrictive legend requirements set forth on the face ofthis Warrant and further agrees that such Holder shall not offer, sell or otherwise dispose of this Warrant or any Warrant Shares to be issued upon exercise hereof except under circumstances that will not result in a violation of the Securities Act of 1933, as amended (the "Securities Act"). This Warrant and all Warrant Shares issued upon exercise of this Warrant (unless registered under the Securities Act) shall be stamped or imprinted with a legend in substantially  the following form:

"THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR QUALIFIED UNDER ANY STATE OR FOREIGN SECURITIES LAWS AND MAY NOT BE OFFERED FOR SALE, SOLD, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED OR ASSIGNED UNLESS (I) A REGISTRATION STATEMENT COVERING SUCH SHARES IS EFFECTIVE UNDER THE ACT AND IS QUALIFIED UNDER APPLICABLE STATE AND FOREIGN LAW OR (II) THE TRANSACTION IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS

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DELIVERY REQUIREMENTS UNDER THE ACT AND THE QUALIFICATION REQUIREMENTS UNDER APPLICABLE STATE AND FOREIGN LAW AND, IF THE CORPORATION REQUESTS, AN OPINION SATISFACTORY TO THE CORPORATION TO SUCH EFFECT HAS BEEN RENDERED BY COUNSEL."

(b)           Representations of the Holder. In connection with the issuance of this Warrant, the Holder specifically represents, as of the date hereof, to the Company by acceptance of this Warrant as follows:

(i)           The Holder is an "accredited investor" as defined in Rule 501 of Regulation D promulgated under the Securities Act. The Holder is acquiring this Warrant and the Warrant Shares to be issued upon exercise hereof for investment for its own account and not with a view towards, or for resale in connection with, the public sale or distribution  of this Warrant or the Warrant Shares, except pursuant to sales registered or exempted under the Securities Act.

(ii)           The Holder understands and acknowledges that this Warrant and the Warrant Shares to be issued upon exercise hereof are "restricted securities" under the federal securities laws inasmuch as they are being acquired from the Company in a transaction not involving a public offering and that, under such laws and applicable regulations, such securities may be resold without registration under the Securities Act only in certain limited circumstances. In addition, the Holder represents that it is familiar with Rule 144 under the Securities Act, as presently in effect, and understands the resale limitations imposed thereby and by the Securities Act.

(iii)           The Holder acknowledges  that it can bear the economic and financial risk of its investment for an indefinite period, and has such knowledge and experience in financial or business matters that it is capable of evaluating the merits and risks of the investment in the Warrant and the Warrant Shares. The Holder has had an opportunity to ask questions and receive answers from the Company regarding the terms and conditions of the offering of the Warrant and the business, properties, prospects and financial condition of the Company.

 

11.           Warrant Register. The Company shall keep and properly maintain at its principal executive offices books for the registration of the Warrant and any transfers thereof. The Company may deem and treat the Person in whose name the Warrant is registered on such register as the Holder thereof for all purposes, and the Company shall not be affected by any notice to the contrary, except any assignment, division, combination  or other transfer of the Warrant effected in accordance with the provisions of this Warrant.

 

12. Notices. All notices, requests, consents, claims, demands, waivers and other communications hereunder shall be in writing and shall be deemed to have been given: (a) when delivered by hand (with written confirmation of receipt); (b) when received by the addressee if sent by a nationally recognized overnight courier (receipt requested or (c)

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on the third day after the date mailed, by certified or registered mail, return receipt requested, postage prepaid. Such communications must be sent to the respective parties at the addresses indicated below (or at such other address for a party as shall be specified in a notice given in accordance with this Section 12).

 

If to the Company:               Principal Solar, Inc.

2700 Fairmount

Dallas, Texas 75201

 

If to the Holder:                    Steuben Investment Company II, L.P.

1900 North Akard Street

Dallas, Texas 75201

 

Attention:    David Hernandez

 

13.          Cumulative Remedies. Except to the extent expressly provided in Section 7 to the contrary, the rights and remedies provided in this Warrant are cumulative and are not exclusive of, and are in addition to and not in substitution for, any other rights or remedies available at law, in equity or otherwise.

14.           Equitable Relief. Each ofthe Company and the Holder acknowledges that a breach or threatened breach by such party of any of its obligations under this Warrant would give rise to irreparable harm to the other party hereto for which monetary damages would not be an adequate remedy and hereby agrees that in the event of a breach or a threatened breach by such party of any such obligations, the other party hereto shall, in addition to any and all other rights and remedies that may be available to it in respect of such breach, be entitled to equitable relief, including a restraining order, an injunction, specific performance  and any other relief that may be available from a court of competent jurisdiction.

15.           Entire Agreement. This Warrant, together with the Registration Rights Agreement dated on or around the date hereof (the "Registration Rights Agreement") between the Holder and the Company and the Purchase Agreement, constitutes the sole and entire agreement of the parties to this Warrant with respect to the subject matter contained herein, and supersedes all prior and contemporaneous understandings and agreements, both written and oral, with respect to such subject matter. In the event of any

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inconsistency between the statements in the body of this Warrant, the Registration Rights Agreement and the Purchase Agreement, the statements in the body of this Warrant shall control.

16.          Successor and Assigns. This Warrant and the rights evidenced hereby shall be binding upon and shall inure to the benefit of the parties hereto and the successors of the Company and the successors and permitted assigns of the Holder. Such successors and/or permitted assigns of the Holder shall be deemed to be a Holder for all purposes hereunder.

17.          No Third-Party Beneficiaries. This Warrant is for the sole benefit of the Company and the Holder and their respective successors and, in the case of the Holder, permitted assigns and nothing herein, express or implied, is intended to or shall confer upon any other Person any legal or equitable right, benefit or remedy of any nature whatsoever, under or by reason of this Warrant.

18.          Headings. The headings in this Warrant are for reference only and shall not affect the interpretation of this Warrant.

19.          Amendment and Modification; Waiver. Except as otherwise provided herein, this Warrant may only be amended, modified or supplemented by an agreement in writing signed by each party hereto. No waiver by the Company or the Holder of any of the provisions hereof shall be effective unless explicitly set forth in writing and signed by the party so waiving. No waiver by any party shall operate or be construed as a waiver in respect of any failure, breach or default not expressly identified by such written waiver, whether of a similar or different character, and whether occurring before or after that waiver. No failure to exercise, or delay in exercising, any rights, remedy, power or privilege arising from this Warrant shall operate or be construed as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege.

20.           Severability. If any term or provision of this Warrant is invalid, illegal or unenforceable in any jurisdiction, such invalidity, illegality or unenforceability shall not affect any other term or provision of this Warrant or invalidate or render unenforceable such term or provision in any other jurisdiction.

21.           Governing Law. This Warrant shall be governed by and construed in accordance with the internal laws of the State of Texas without giving effect to any choice or conflict oflaw  provision or rule (whether of the State of Texas or any other jurisdiction) that would cause the application of laws of any jurisdiction other than those of the State of Texas.

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22.           Submission  to Jurisdiction. The parties hereby irrevocably submit to the jurisdiction of any Texas State court or United States Federal court sitting in Dallas County over any action or proceeding arising out of or relating to this Warrant or any agreement contemplated  hereby, and the parties hereby irrevocably agree that all claims in respect of such action or proceeding may be heard and determined in such Texas State or Federal court.  The parties further waive any objection to venue in such State and any objection to an action or proceeding in such State on the basis of a non-convenient forum. The parties further agree that any action or proceeding brought against the other party hereto shall be brought only in Texas State or United States Federal courts sitting in Dallas County. THE PARTIES AGREE TO WAIVE THEIR RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT OR ANY DOCUMENT OR AGREEMENT CONTEMPLATED HEREBY.

23.           Waiver of Jury Trial. Each party acknowledges and agrees that any controversy which may arise under this Warrant is likely to involve complicated and difficult issues and, therefore, each such party irrevocably and unconditionally  waives any right it may have to a trial by jury in respect of any legal action arising out of or relating to this Warrant or the transactions contemplated hereby.

24.           Counterparts. This Warrant may be executed in counterparts, each of which shall be deemed an original, but all of which together shall be deemed to be one and the same agreement. A signed copy of this Warrant delivered by facsimile, e-mail or other means of electronic transmission  shall be deemed to have the same legal effect as delivery of an original signed copy of this Warrant.

25.           No Strict Construction. This Warrant shall be construed without regard to any presumption or rule requiring construction or interpretation against the party drafting an instrument or causing any instrument to be drafted.

[SIGNATURE PAGE FOLLOWS]

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IN WITNESS WHEREOF, the Company has duly executed this Warrant on the Original Issue Date.

 

	 	Principal Solar, Inc.
	 	 
	 	By: /s/ Michael Gorton
	 	Name: Michael Gorton
	 	Title: CEO

 

Accepted and agreed,

Steuben Investment  Company II, L.P.

By:  RLH Management,  Inc.

 

By: /s/ Elizabeth A. Lund

   Elizabeth A. Lund

   Vice President

By:  Steuben Co-GP, Inc.

 

By: /s/ Elizabeth A. Lund

   Elizabeth A. Lund

   Senior Vice President

 

 

21ex10-7.htm

EXHIBIT 10.7

REGISTRATION RIGHTS AGREEMENT

This Registration Rights Agreement (this "Agreement") dated as of June 14, 2013, is by and between PRINCIPAL SOLAR, INC. a Delaware corporation (the "Company"), and the undersigned holder ("Holder").

WITNESSETH:

WHEREAS, the Company has previously sold Holder 2,909,091 shares of common stock, $0.001 par value per share of the Company (together with all other shares of Company  common  stock  currently  owned  or  hereinafter  acquired  by  Holder,  the "Shares"), pursuant to that certain Subscription Agreement (the "Share Purchase Agreement"), dated effective June 14, 2013; and

WHEREAS, the Company desires to grant to Holder certain registration rights in connection with the resale of the Shares.

NOW, THEREFORE, in consideration of the premises and the mutual covenants contained herein, and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows:

 

ARTICLE ONE 

Shelf Registration

SECTION 1.1 Shelf Registration. The Company shall:

(a)       cause to be filed a shelf registration statement (the "Shelf Registration Statement") pursuant to Rule 415 under the Securities Act of 1933, as amended (the "Securities Act") with the United States Securities and Exchange Commission (the "Commission"), as soon as possible, but in no event later than ninety (90) days after the date hereof, which Shelf Registration Statement shall provide for the resale of all Shares of Holder;

(b)       use its best efforts to cause the Shelf Registration Statement to be declared effective by the Commission within one-hundred eighty (180) days after the date hereof; and

(c)       use its best efforts to keep the Shelf Registration Statement continuously effective, supplemented and amended to the extent necessary to ensure that it is available for the resale of all Shares of Holder, and to ensure that it conforms in all material respects with the requirements of this Agreement, the Securities Act and the policies, rules and regulations of the Commission as announced from time to time, during the remaining term of this Agreement.

SECTION 1.2  Provision  of Information. In connection with the Shelf Registration Statement, Holder shall furnish to the Company such information as the Company may reasonably  request  for  use  in  connection  with  the  Shelf  Registration  Statement  or

 

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prospectus or preliminary prospectus included therein.  Holder agrees to furnish to the Company all information required to be disclosed in order to make the information previously furnished to the Company by Holder not materially misleading.

SECTION 1.3  Suspension.   Notwithstanding anything to the contrary and subject to the limitations set forth in this Section 1.3, at any time after the effectiveness of the Shelf Registration Statement, the Company shall be entitled to suspend its obligation to file any amendment to the Shelf Registration Statement, furnish any supplement or amendment to a prospectus included in the Shelf Registration Statement, make any other filing with the Commission, cause the Shelf Registration Statement to remain effective or take any similar action (collectively, "Registration Actions") upon (a) the issuance by the Commission of a stop order suspending the effectiveness of the Shelf Registration Statement or the initiation of proceedings with respect to the Shelf Registration Statement under Section 8(d) or 8(e) of the Securities Act, (b) the occurrence of any event or the existence of any fact as a result of which the Shelf Registration Statement would or shall contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, or (c) the occurrence or existence of any corporate development that, in the reasonable judgment of the Company, would have a material adverse effect on the business or operations of the Company. Upon the occurrence of any of the conditions described in clause (a), (b) or (c) above, the Company shall give prompt written notice thereof (a "Suspension Notice") to Holder. Upon the termination of such condition, the Company shall give prompt written notice thereof to Holder  and shall as promptly as practicable proceed with  all Registration Actions that were  suspended pursuant to this  Section 1.3.   The  Company may only suspend Registration  Actions  pursuant  to  the  preceding paragraph  for  one  or  more periods (each, a "Suspension Period") not to exceed, in the aggregate, thirty (30) days in any in any six (6) month period, during which no Penalty (as defined in Section 1.4) shall be payable.  Each Suspension Period shall be deemed to begin on the date of the relevant Suspension Notice is given to Holder and shall be deemed to end on the earlier to occur of (1) the date on which the Company gives Holder a written notice that the Suspension Period has terminated and (2) the date on which the number of days during which a Suspension Period has been in effect exceeds, in the aggregate, thirty (30) days in any six (6) month period.

SECTION 1.4  Penalty.  Subject to the Company's ability to declare Suspension Periods in  accordance  with  Section  1.3  with  respect  to  clause  (c)  below,  if  (a)  the  Shelf Registration Statement is not filed with the Commission within one-hundred twenty (120) days after the date hereof, (b) the Shelf Registration Statement has not been declared effective by the Commission within two-hundred ten (210) days after the date hereof, or (c) the Shelf Registration Statement is filed and declared effective but thereafter ceases to be effective or fails to be usable for its intended purpose (each such event referred to in clauses (a) through (c), a "Registration Default"; provided, however, that in the case of clause (c), such Registration Default shall be deemed not to have occurred and be continuing if such Registration Default is succeeded promptly by a post-effective amendment to the Shelf Registration Statement that cures such failure and that is itself declared effective within thirty (30) days; and provided, further, that in the case of clause

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(c), if such Registration Default occurs for a continuous period in excess of thirty (30) days of such Registration Default, the Penalty shall be payable in accordance with this Section 1.4 from the day such Registration Default occurs until such Registration Default is cured), the Company hereby agrees to pay to Holder a penalty (the "Penalty") in an amount equal to $16,000 per month for the period of occurrence of the Registration Default  until such  time as  no Registration Default is  in effect, which  amount shall increase by $8,000 per month for each subsequent 90-day period during which such Registration  Default continues.   Following the cure of  all Registration  Defaults, the Penalty will cease to accrue from the date of such cure; provided, however, that, if after the date on which such Penalty ceases to accrue, a different Registration Default occurs, the Penalty may again commence accruing pursuant to the foregoing provisions.

SECTION 1.5  Selection  of  Underwriter.    If  any  of  the  Shares  are  sold  in  an underwritten offering under the Shelf Registration Statement, Holder shall have the right to designate the lead managing underwriter or underwriters to manage the underwritten offering, provided that such underwriter or underwriters is or are reasonably acceptable to the Company, which approval by the Company shall not be unreasonably withheld or delayed.

 

ARTICLE TWO 

Demand Registration

SECTION 2.1  Demand  Right.    In  addition  to  and  not  in  limitation  of  the  rights provided to Holder under Article One and Article Three, at any time, Holder may demand registration of one hundred percent (100%) of the Shares, or any portion thereof, and the Company shall use its best efforts to effect the requested registration of such Shares as promptly as practicable.

(a)       Holder may require the Company to register under the Securities Act all or any portion of the Shares held by Holder for sale in the manner specified in such notice (the "Registration Request"), and the Company shall use its best efforts to effect the requested registration of such Shares as promptly as practicable;

(b)       if the Company is a registrant entitled to use Form S-3 or any successor form thereto, Holder may issue unlimited Registration Requests requiring the Company to register any or all of the Shares on Form S-3 or any successor form thereto (which may, at Holder's  request, be shelf registrations pursuant to Rule 415 promulgated under the Securities Act), and the Company shall use its best efforts  to  effect  the  requested  registration  of  such  Shares  as  promptly  as practicable; and

(c)       for the avoidance of doubt, Holder may include in its Registration Request any or all shares of Company common stock owned by Holder at the time of the Registration Request.

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SECTION 2.2  

Limitations and Exceptions.

(a)       If, within two business days of receipt of a Registration Request, Holder is advised in writing by a managing underwriter (the "Underwriter's  Opinion") that the Company has in good faith commenced the preparation of a registration statement for an underwritten public offering (in which Holder has been or will be permitted  to  include  all  of  the Shares)  prior  to  receipt  of  such  Registration Request and the managing underwriter of the proposed offering has determined that in such firm's good faith opinion, a registration at the time and on the terms requested (a "Demand Registration") would materially and adversely affect such underwritten public offering, then the Company shall not be required to effect such Demand Registration until the earliest of:

(i)        the  abandonment  of  such  underwritten  public  offering  by  the Company,

(ii)       60  days  after  receipt of  the  Underwriter's  Opinion  by  Holder, unless the registration statement for such offering has become effective and such offering has commenced on or prior to such 60th day, or

(iii)     the date on which the registration statement for such offering has become effective and such offering has commenced; provided, however, that the Company shall not be permitted to defer a Demand Registration in reliance on this Section 2.2(a) more than once.

(b)       If Holder is advised in writing by an executive officer of the Company that, while a Demand Registration is pending, the Company has determined, upon reasonable advice from its legal counsel, that the filing of a registration statement would require the disclosure of material information that the Company has a bona fide business purpose for preserving as confidential and the disclosure of which the Company determines reasonably and in good faith would have a material adverse effect on the Company, the Company shall not be required to effect such registration until the earlier of (i) the date upon which such material information is otherwise disclosed to the public or ceases to be material and (ii) 60 days after the Company makes such determination.  The Company shall not be permitted to defer a Demand Registration in reliance on this Section 2.2(b) more than once.

(c)       The Company shall not be obligated to file a Demand Registration:

(i)        within a period of 60 calendar days after the effective date of any other Demand Registration requested by Holder, or

(ii)       on a total of more than four (4) occasions, including no more than two  (2)  occasions  in  any  one  12-month  period  (other  than  requests pursuant to Section 2.1(b), which are unlimited in number and timing).

 

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SECTION 2.3  Compliance with Registration Request.   Notwithstanding any other provision of this Agreement to the contrary, a Demand Registration shall not be deemed to have been effected (and, therefore, not requested for purposes of Section 2.2(c)):

(a)       unless and until the registration statement filed in connection therewith has become  effective  and  remains  effective  until  the  earlier  to  occur  of  (i)  all registered Shares having been sold or (ii) the first anniversary of the effectiveness of such registration statement,

(b)       if  after  such  registration  statement  has  become effective,  it  becomes subject to any stop order, or there is issued an injunction or other order or decree of the Commission or other governmental agency or court for any reason other than a material misrepresentation or omission by Holder, which injunction, order or decree prohibits or otherwise materially and adversely affects the offer and sale of the Shares so registered prior to the completion of the distribution thereof in accordance with the plan of distribution set forth in the registration statement,

(c)      if the conditions to closing specified in the purchase agreement or underwriting  agreement entered into  in  connection with  such Demand Registration are not satisfied by reason of some act, misrepresentation or omission by the Company and are not waived by the purchasers or underwriters, or

(d)       if Holder has notified the Company that it is withdrawing its Registration Request prior to the effectiveness of such registration.

SECTION 2.4  Notice to Other Holders.  Promptly (and in any event within ten (10) days) upon the receipt of a Registration Request, the Company may notify all holders of Company common stock who have registration rights, other than Holder, and, subject to Section 2.6 hereof, may include in the applicable Demand Registration registrable shares of common stock of the Company owned by all such other holders responding to such notice within twenty (20) days on the same basis as the Shares owned by Holder.

SECTION 2.5  Selection of Underwriter.  In the event that any Demand Registration shall involve, in whole or in part, an underwritten offering, Holder shall have the right to designate the lead managing underwriter or underwriters to manage the underwritten offering, provided that such underwriter or underwriters is or are reasonably acceptable to the Company, which approval by the Company shall not be unreasonably withheld or delayed.

SECTION 2.6  Additional Securities.  The Company shall have the right to cause the registration of additional securities for sale for the account of any person (including the Company or any other holder of Company common stock timely responding to the notice as set forth in Section 2.4) in any Demand Registration  only to the extent the managing underwriter for such offering advises Holder in writing that inclusion of the additional securities proposed to be sold will not materially and adversely affect the offering or sale of the Shares to be registered in accordance with the intended method or methods of disposition then contemplated by such Demand Registration. For the avoidance of doubt,

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in the event that the managing underwriter advises Holder or the Company that the offering or sale of the Shares pursuant to the Demand Registration would be materially and adversely affected by inclusion of all or any portion of such additional shares of other persons, the shares to be included in the registration shall first include the Shares owned by Holder and only then, if in the opinion of the managing underwriter additional shares may be registered without materially and adversely affecting the Demand Registration, shall also include the number of shares of such other persons that in the opinion of the managing  underwriter  may  be  included  in  the  registration  without  materially  and adversely affecting the Demand Registration.

ARTICLE THREE 

Piggyback Registration

SECTION 3.1  Piggyback Registration Rights Available.  The Company agrees to provide Holder with respect to the Shares and any other shares of common stock issued or issuable at any time or from time to time upon a stock split, stock dividend, recapitalization or other similar event involving the Company, piggyback registration rights subject to the provisions of this Agreement (the piggyback registration right is referred to herein as the "Piggyback Right" and, together with the demand registration right pursuant to Article Two and the right to shelf registration pursuant to Article One, is referred to herein as the "Registration Right").

SECTION 3.2 Piggyback Registration. With respect to Holder's Piggyback Right pursuant to Section 3.1, the parties agree that each time the Company proposes to file a registration statement with respect to any class of equity or equity-related security (other than in connection with an offering to the Company's employees or in connection with an acquisition, merger or similar transaction) under the Securities Act, in a primary registration on behalf of the Company and/or in a secondary registration on behalf of holders of such securities, the Company will give prompt written notice to Holder of its intention to file a registration statement and will offer to include in such registration statement, such number of Shares with respect to which the Company has received written request for inclusion therein from Holder within twenty (20) days after the receipt of notice from the Company. The Company will use its best efforts to cause all such Shares as requested by Holder to be included in the registration on the same terms and conditions as the securities otherwise being sold in the registration. Provided, that if in the reasonable, good faith written opinion of the managing underwriter the total amount of such shares to be so registered will exceed the maximum amount of the Company's securities which can be effectively marketed: (i) at a price reasonably related to the then current market value of such securities; or (ii) without otherwise materially and adversely affecting the entire offering; or the total amount of such securities to be registered may jeopardize the Company's ability to gain effectiveness of such registration statement, then the Company shall be entitled to reduce the number of Shares subject to the Piggyback Right as set forth in this Section 3.2, in the reasonable discretion of the managing underwriter. In the event of such a reduction, such reduction shall proportionately reduce all shares of common stock which may be registered on behalf of each holder other than any holder that had a demand right with respect to such registration.This Section is not applicable to a registration statement filed by the

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Company on Forms S-4 or S-8 or any successor forms. For the avoidance of doubt, there is no limitation on the number of Piggyback Rights, and no registration pursuant to a Piggyback Right shall relieve the Company of its obligations to effect registrations pursuant to Article One or Article Two.

 

ARTICLE FOUR 

Registration Procedures

SECTION 4.1 Registration  Procedure.  With respect to the Registration Right, the following provisions shall apply:

(a)       Holder shall be obligated to furnish to the Company and the underwriters (if any) such information regarding the Shares and the proposed manner of distribution of the Shares as the Company and the underwriters (if any) may reasonably request in writing and as shall be required in connection with any registration, qualification or compliance referred to herein and shall otherwise reasonably  cooperate  with  the  Company  and  the  underwriters  (if  any)  in connection with such registration, qualification or compliance.  Notwithstanding the foregoing, Holder shall not be required to make any representations or warranties in connection with any registration other than representations and warranties as to (i) Holder's ownership of the Shares to be sold or transferred free and clear of all liens, claims and encumbrances, (ii) Holder's power and authority to effect such transfer and (iii) such matters pertaining to Holder's  compliance with securities laws as may be reasonably requested.   Further, any obligation of Holder to indemnify pursuant to any underwriting arrangements shall be several, not joint and several, among such persons selling Company securities in the offering, and the liability of Holder will be limited to the net amount received by Holder from the sale of its Shares pursuant to such registration and shall only apply to claims arising out of or based on an untrue statement or alleged untrue statement or omission or alleged omission made in any registration statement, preliminary prospectus, final prospectus, summary prospectus, amendment or supplement in reliance on and in conformity with written information furnished to the Company through an instrument duly executed by Holder specifically stating that it is for use in the preparation thereof.

(b)       With  a  view  to  making  available  the  benefits  of  certain  rules  and regulations of the Commission which may at any time permit the sale of the Restricted Securities (used herein as defined in Rule 144 under the Securities Act) to the public without registration, the Company agrees to:

(i)            Make and keep public information available, as those terms are understood and defined in Rule 144 under the Securities Act, at all times after the date of effectiveness of the Company's first registration statement under the Securities Act (the "First Effective Date");

(ii)           File with the Commission in a timely manner all reports and other documents required of the Company under the Securities Act and the Securities Exchange Act of 1934, as amended (the "Exchange Act") (at all times during which the Company is subject to such reporting requirements, if ever); and

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(iii)      furnish  to  Holder  upon  request  (A)  a  written  statement  by  the Company that it has complied with the reporting requirements of Rule 144 (at any time after ninety (90) days after the First Effective  Date), and of the Securities  Act and the Exchange Act (at any time after it has become subject  to  such  reporting  requirements),  (B)  a copy  of  the  most  recent annual or quarterly report of the Company, (C) such other reports and documents  of the Company and other information  in the possession  of or reasonably  obtainable  by the Company as Holder may reasonably  request in availing  itself of any  rule or  regulation  of the  Commission  allowing Holder to sell any such securities without registration,  and (D) such other cooperation reasonably necessary for Holder to complete and file any information  reporting forms required by the Commission as a condition to the availability of Rule 144.

(c)        The   Company   agrees   that   it  will   promptly   furnish   to  Holder   such prospectuses, offering circulars or other documents incident to any registration, qualification  or compliance referred to herein.

(d)       Holder  shall be entitled to withdraw  any request for registration  pursuant to Article Two or Article Three at any time by written notice to the Company.

(e)        Except  for any sales  commissions  applicable  to the  Shares  that  may  be paid by Holder, all expenses of any registrations  permitted or required pursuant to this  Agreement  and  of  all other  offerings  by the  Company  (including,  but  not limited to, attorney  and accountant fees, the expenses of any qualifications  under the blue sky or other state securities laws (as may be determined  by the Company in its reasonable discretion) and compliance with governmental requirements of preparing   and  filing   any  post-effective   amendments   required  for  the  lawful distribution  of the securities  to the public in connection with such registration, of supplying prospectuses,  offering circulars or other documents)  will be paid by the Company.     In  connection   with  each  registration   under  this  Agreement,   the Company will pay the reasonable attorney fees of one legal counsel representing, and selected in the sole discretion of, Holder.

(f)        The  Registration  Rights  under this  Agreement,  subject  to the terms  and conditions  hereof, shall be available to any subsequent  holder of all or a portion of the  Shares  owned  by  Holder;  provided  that  any  decisions  to  be  made  by  the holders of the Shares shall be made by holders of a majority of the Shares.  Each subsequent holder entitled to the Registration Right under this Agreement  shall be bound by the terms and subject to the obligations  of this Agreement as though it were an original signatory hereto.

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SECTION 4.2  Preparation and Filing.  If and whenever the Company is under an obligation pursuant to the provisions of this Agreement to effect the registration of any Shares, the Company shall, as expeditiously as practicable:

(a)       use its best efforts to cause a registration statement that registers such Shares to become and remain effective for a period of one year (or the term of the Agreement in the case of the Shelf Registration Statement) or until all of such Shares have been disposed of (if earlier);

(b)       furnish  to  Holder for Holder's  review and comment, at  least ten  (10) business days before filing the same with the Commission, a copy of any registration  statement  that  registers  such  Shares  or  any  related  filing,  any prospectus relating thereto or any amendments or supplements relating to such a registration statement or prospectus, and all such other documents proposed to be filed with the Commission (it being understood that such ten-business-day period need not apply to successive drafts of the same document proposed to be filed so long as such successive drafts are supplied to Holder in advance of the proposed filing by a period of time that is customary and reasonable under the circumstances), promptly furnish to Holder copies of all such documents as filed with the Commission, and notify Holder when the same become effective;

(c)       prepare and file with the Commission such amendments and supplements to such registration statement and the prospectus used in connection therewith as may be necessary to keep such registration statement effective for a period of one year  (or  the  term  of  the  Agreement  in  the  case  of  the  Shelf  Registration Statement) or until all of such Shares have been disposed of (if earlier) and to comply with the provisions of the Securities Act with respect to the sale or other disposition of such Shares;

(d)       notify Holder in writing of the receipt by the Company of any notification with respect to (i) any comments by the Commission with respect to such registration statement or prospectus or any amendment or supplement thereto or any request by the Commission for the amending or supplementing thereof or for additional information with respect thereto, (ii) the issuance by the Commission of any stop order suspending the effectiveness of such registration statement or prospectus  or  any  amendment  or  supplement  thereto   or  the  initiation  or threatening of any proceeding for that purpose and (iii) the suspension of the qualification of such Shares for sale in any jurisdiction or the initiation or threatening of any proceeding for such purposes;

(e)      use its best efforts to register or qualify such Shares under such other securities or blue sky laws of such jurisdictions as Holder reasonably requests and do any and all other acts and things which may be reasonably necessary or advisable to enable Holder to consummate the disposition in such jurisdictions of the Shares owned by Holder; provided, however, that the Company will not be required to qualify generally to do business, subject itself to general taxation or

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consent  to  general  service  of  process  in  any  jurisdiction  where  it  would  not otherwise  be required to do so but for this subsection (e);

(f)         furnish to Holder such number of copies of a summary prospectus, if any, or other prospectus, including a preliminary prospectus, and any amendments thereto, in conformity with the requirements of the Securities Act, and such other documents as Holder may reasonably request in order to facilitate the public sale or other disposition of such Shares;

 

(g)       without limiting subsection (e) above, use its best efforts to cause such Shares to be registered with or approved by such other governmental agencies or authorities as may be necessary by virtue of the business and operations of the Company to enable Holder to consummate the disposition of such Shares;

 

(h)        notify Holder on a timely basis at any time when a prospectus relating to such Shares or any document related thereto includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances then existing and, at the request of Holder prepare and furnish to Holder a reasonable number of copies of a supplement to or an amendment of such prospectus as may be necessary so that, as thereafter delivered to the offerees of such shares, such prospectus shall not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances then existing;

 

(i)         make available upon reasonable notice and during normal business hours, for inspection by Holder, any prospective purchaser of the Shares, any underwriter participating in any disposition pursuant to such registration statement and any attorney, accountant or other agent retained by Holder, a prospective purchaser or the underwriter (collectively, the "Inspectors"), all pertinent financial and other records, pertinent documents and properties of the Company (collectively, the "Records"), as shall be reasonably necessary to enable them to exercise their due diligence responsibility, and cause the Company's officers, directors and employees to supply all information (together with the Records, the "Information") reasonably requested by any such Inspector in connection with such registration statement. Any of the Information which the Company determines in good faith to be confidential, and of which determination the Inspectors are so notified, shall not be disclosed by the Inspectors unless (i) the disclosure of such Information is necessary to avoid or correct a material misstatement or omission in the registration statement, (ii) the release of such Information is ordered pursuant to a subpoena or other order from a court or governmental agency or authority of competent jurisdiction, (iii) such Information has been made generally available to the public through no breach of the nondisclosure obligations of the Inspectors or their affiliates or (iv) such disclosure is required to be made under applicable law;

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(j)       use  its  best  efforts  to  obtain  from  its  independent  certified  public accountants "cold comfort" letters in customary form and at customary times and covering matters of the type customarily covered by cold comfort letters;

(k)       use its best efforts to obtain from its counsel an opinion or opinions in customary form;

(I)       enter into such agreements, make such representations and warranties (and reasonably promptly update such representations and warranties if any cease to be true and correct in any material respect), provide such officer certificates, and take all  such  other  actions  to  expedite or  facilitate  the  disposition  of  the  Shares pursuant to any registration statement contemplated under this Agreement;

(m)      provide a transfer agent and registrar (which may be the same entity and which may be the Company) for such Shares;

(n)       promptly issue to any underwriter or other purchaser to which Holder may sell such Shares in such offering certificates evidencing such Shares;

(o)       use  its  best efforts to have such Shares listed on a national securities exchange;

(p)       if requested by Holder, use its best efforts to cause the Shares to be rated with appropriate rating agencies;

(q)       use its best efforts to comply with all applicable rules and regulations of the Commission and make available to its securityholders, as soon as reasonably practicable, earnings statements covering a period of twelve (12) months beginning within three (3) months after the effective date of the subject registration statement; and

(r)        otherwise use its best efforts to take all other steps necessary to effect the registration and sale of such Shares contemplated hereby.

Upon receipt of any notice from the Company of any event of the kind described in Section 4.2(h), Holder shall forthwith discontinue disposition of the Shares pursuant to the registration statement covering such Shares until Holder's receipt of the copies of the supplemented or amended prospectus contemplated by Section 4.2(h).  In the event that the Company shall give such notice as described in Section 4.2(h), the time period regarding the required effectiveness of such registration statement shall be extended by the number of days during the period from and including the date of giving of such notice to and including the date when Holder receives copies of the supplemented or amended prospectus contemplated by Section 4.2(h).

SECTION 4.3 Restrictions on Sale.  Holder shall not be subject to any lock-up or similar sale, assignment or transfer restrictions relating to any of its Shares other than in the  event  of  a  public  offering,  Holder  shall  agree  to  abide  by  customary  lock-up

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provisions, subject to customary exceptions and not to exceed one-hundred eighty (180) days, reasonably required by the managing underwriter in such offering.

ARTICLE FIVE 

Indemnification

SECTION 5.1  Indemnification by the Company.  In connection with any registration of the securities of the Company under the Securities Act, the Company agrees to (a) indemnify and hold harmless Holder, its officers, directors, employees, members, partners, advisors, agents, and representatives and their respective affiliates, each underwriter, broker or any other person acting on behalf of Holder and each other person or entity, if any, who controls any of the foregoing persons or entities within the meaning of the Securities Act, against any and all claims, actions, demands, losses, settlements, costs, expenses, obligations, liabilities, damages, recoveries and deficiencies, joint or several, including interest, penalties and attorneys' fees (collectively, "Claims"), to which any of the foregoing persons or entities may become subject under the Securities Act or otherwise, insofar as such Claims (or actions or proceedings, whether commenced or threatened, in respect thereof) arise out of or are based on (i) any untrue statement or alleged untrue statement of any material fact contained in any registration statement under which Holder's Shares were registered under the Securities Act, any preliminary prospectus, final prospectus or summary prospectus contained therein or otherwise filed with the Commission or any related document filed with the Commission, or, in any case, any amendment or supplement thereto, or in any information conveyed by the Company to any purchaser at the time of the sale to such purchaser, (ii) any omission or alleged omission to state therein or thereto a material fact required to be stated therein or necessary to make the statements therein not misleading, or, with respect to any prospectus, necessary to make the statements therein in light of the circumstances under which they were made not misleading, (iii) any violation by the Company of the Securities Act or state securities or blue sky laws applicable to the Company or relating to action or inaction required of the Company in connection with such registration or qualification under such state securities or blue sky laws, or (iv) any violation by the Company of any federal, state or common law rule or regulation applicable to the Company and relating to action required of or inaction by the Company in connection with any such registration, and (b) reimburse the foregoing persons or entities for any legal or any other expenses reasonably incurred by any of them in connection with investigating or defending any such Claim (or action or proceeding in respect thereof); provided that the Company shall not be liable in any such case to the extent that any such Claim (or action or proceeding in respect thereof) arises out of or is based on an untrue statement or alleged untrue statement or omission or alleged omission made in such registration statement, any such preliminary prospectus, final prospectus, summary prospectus, amendment or supplement in reliance on and in conformity with written information furnished to the Company through an instrument duly executed by Holder specifically stating that it is for use in the preparation thereof. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of Holder or any such other indemnified person or entity and shall survive the transfer of the Shares by Holder.

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SECTION 5.2  Indemnification by Holder.  The Company may require, as a condition to including the Shares in any registration statement filed pursuant to this Agreement, that the Company shall have received an undertaking satisfactory to it from Holder, to indemnify and hold harmless the Company, each director of the Company, each officer of the Company and each other person, if any, who controls the Company, within the meaning of the Securities Act, for any Claims arising out of or based on any untrue statement or alleged untrue statement in or omission or alleged omission from such registration statement, any preliminary prospectus contained therein, or any amendment or supplement thereto, if such untrue statement or alleged untrue statement or omission or alleged omission was made in reliance on and in conformity with written information furnished to the Company through an instrument duly executed by Holder specifically stating that it is for use in the preparation of such registration statement, preliminary prospectus, final prospectus, summary prospectus, amendment or supplement. Notwithstanding the foregoing, (a) the maximum liability hereunder which Holder shall be required to suffer shall be limited to the net proceeds from the offering received by Holder, (b) the liability of Holder shall be several and not joint with any other holder of Company securities offered in the offering, and (c) Holder shall not be liable in any such case to the extent that prior to the filing of any such registration statement or prospectus or amendment thereof or supplement thereto, Holder has furnished in writing to the Company information expressly for use in such registration statement or prospectus or any amendment thereof or supplement thereto which corrected or made not misleading information previously furnished to the Company.  Such indemnity shall remain in full force and effect, regardless of any investigation made by or on behalf of the Company or any such director, officer or controlling person and shall survive the transfer of the Shares by Holder.

SECTION 5.3 Notices of Claims, etc.  Reasonably promptly after receipt by an indemnified party of notice of the commencement of any action or proceeding involving a Claim referred to in this Article Five, such indemnified party will, if a claim in respect thereof is to be made against an indemnifying party, give reasonably prompt written notice to the latter of the commencement of such action, provided that the failure of any indemnified party to give notice as provided herein shall not relieve the indemnifying party of its obligations under this Article Five, except to the extent that the indemnifying party is actually and materially prejudiced by such failure to give notice.The indemnified party shall have the right to employ its own counsel in any such action and the fees and expenses of such counsel shall be paid by the indemnifying party. The indemnifying party shall not, in connection with any one such action or proceeding or separate but substantially similar or related actions or proceedings in the same jurisdiction arising out of the same general allegations or circumstances, be liable for the reasonable fees and expenses of more than one separate firm of attorneys (in addition to any local counsel) at any time for such indemnified party, which firm shall be designated by the indemnified party. The indemnifying party shall be liable for any settlement of any such action or proceeding effected with the indemnifying party's prior consent, which consent shall not be withheld unreasonably, and the indemnifying party agrees to indemnify and hold harmless the indemnified party from and against any Claim by reason of any settlement of any action effected with the consent of the indemnifying party. No indemnifying party shall, without the prior written consent of the indemnified party,

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consent to entry of any judgment or enter into any settlement; provided that the written consent of the indemnified party shall not be required if the judgment or settlement includes as an unconditional term thereof the giving by the claimant or plaintiff to such indemnified party  of  a complete release from all liability in  respect of such  Claim, imposes only monetary obligations, and does not result in any adjustments that may adversely impact the taxes of the indemnified party for which indemnification is not provided.

SECTION 5.4  Contribution.  If the indemnification provided for hereunder is held by a court of competent jurisdiction to be unavailable to an indemnified party with respect to any Claim referred to herein, then the indemnifying party, in lieu of indemnifying such indemnified party hereunder, shall contribute to the amounts paid or payable by such indemnified party as a result of such Claim in such proportion as is appropriate to reflect the relative fault of the indemnifying party on the one hand and of the indemnified party on the other in connection with the statements or omissions which resulted in such Claim, as well as any other relevant equitable considerations.   The relative fault of the indemnifying party and of the indemnified party shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the indemnifying party or by the indemnified party and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission.   The  parties agree that  it would not  be just and equitable  if contribution pursuant hereto were determined by pro rata allocation or by any other method or allocation which does not take account of the equitable considerations referred to herein. No person guilty or liable of fraudulent misrepresentation (within the meaning of Section ll(f) ofthe  Securities Act) shall be entitled to contribution from any person who was not guilty or liable of such fraudulent misrepresentation.  For the avoidance of doubt, the maximum liability under this Section 5.4 which Holder shall be required to suffer shall be limited to the net proceeds from the offering received by Holder.

SECTION 5.5  Indemnification  Payments.  The  indemnification  required  by  this Article Five shall be made by periodic payments of the amount thereof during the course of the investigation or defense, as and when bills are received or expense, loss, damage or liability is incurred.

ARTICLE SIX

Miscellaneous

SECTION 6.1  Consent  to  Amendments.    Except  as  otherwise  expressly  provided herein, the provisions of this Agreement may be amended or waived only by the written agreement of the Company and Holder, and shall be effective only to the extent specifically set forth in such writing.

SECTION 6.2 Term of the Agreement.  This Agreement shall terminate with respect to Holder when Holder no longer owns any shares of common stock of the Company.

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SECTION 6.3  Successors and Assigns. Except as otherwise expressly provided herein, all covenants and agreements contained in this Agreement by or on behalf of any of the parties hereto are transferable and will bind and inure to the benefit of the respective successors and assigns of the parties hereto, but only if so expressed in writing.

SECTION 6.4  Severability. Whenever possible, each provision of this Agreement will be interpreted in such a manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be prohibited by or invalid under applicable law, such provision will be ineffective only to the extent of such prohibition or invalidity, without invalidating the remainder of this Agreement.

SECTION 6.5  Delays or Omissions.  No failure to exercise or delay in the exercise of any right, power or remedy accruing to Holder on any breach or default of the Company under this Agreement shall impair any such right, power or remedy nor shall it be construed to be a waiver of any such breach or default.

SECTION 6.6  Remedies Cumulative.  All remedies under this Agreement, or by law or otherwise afforded to any party hereto shall be cumulative and not alternative.

SECTION 6.7  Descriptive  Headings  and  Gender.  The descriptive headings of this Agreement are inserted for convenience only and do not constitute a part of this Agreement.   Unless clearly denoted otherwise, any reference to Articles or Sections contained  herein  shall  be  to  the  Articles  or  Sections  of  this  Agreement.    In  this Agreement words importing the singular number include the plural and vice versa; words importing the masculine gender include the feminine and neuter genders.

SECTION 6.8  Notices.  Any notices required or permitted to be sent hereunder shall be delivered personally or mailed, certified mail, return receipt requested, to the following addresses, and shall be deemed to have been received on the day of personal delivery or within three business days after deposit in the mail, postage prepaid:

If to the Company, to:

Principal Solar, Inc.

2700 Fairmount

Dallas, Texas 75201

If to Holder, to:

Steuben Investment Company II, L.P.

1900 North Akard Street

Dallas, Texas 75201

Attention: David Hernandez

SECTION 6.9  Governing Law.   The validity, meaning and effect of this Agreement shall be determined in accordance with the laws of the State of Texas applicable to contracts made and to be performed in that State.  The parties hereby irrevocably submit to the jurisdiction of any Texas State court or United States Federal court sitting in Dallas

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County over any action or proceeding arising out of or relating to this Agreement or any agreement contemplated hereby, and the parties hereby irrevocably agree that all claims in respect of such action or proceeding may be heard and determined in such Texas State or Federal court.  The parties further waive any objection to venue in such State and any objection to an action or proceeding in such State on the basis of a non-convenient forum. The parties further agree that any action or proceeding brought against the other party hereto shall be brought only in Texas State or United States Federal courts sitting in Dallas County. THE PARTIES AGREE TO WAIVE THEIR RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT OR ANY DOCUMENT OR AGREEMENT CONTEMPLATED HEREBY.

SECTION 6.10  Final Agreement.  This Agreement, together with the Share Purchase Agreement and such other documents expressly referred to herein, constitutes the final agreement of the parties concerning the matters referred to herein, and supersedes all prior agreements and understandings.

SECTION 6.11  Execution in Counterparts.  This Agreement may be executed in any number of counterparts, each of which when so executed and delivered shall be deemed an original, and such counterparts together shall constitute one instrument.

SECTION 6.12  Effect  of  Facsimile and  Photocopied  Signatures.  A  copy  of  this Agreement signed by one party and faxed to another party shall be deemed to have been executed and delivered by the signing party as though an original.  A photocopy of this Agreement shall be effective as an original for all purposes.

SECTION 6.13  Limitations  on  Registration of  Other Securities;  Representation. The Company (a) represents and warrants that prior to the execution of this Agreement the Company has not entered into any agreement with any holder or prospective holder of any securities of the Company giving such holder or prospective holder any registration rights the terms of which are more favorable taken as a whole than the registration rights granted to Holder hereunder, and (b) covenants that from and after the date of this Agreement, the Company shall not, without the prior written consent of Holder, enter into any agreement with any holder or prospective holder of any securities of the Company giving such holder or prospective holder any registration rights the terms of which are more favorable taken as a whole than the registration rights granted to Holder hereunder.

SECTION 6.14  No  Inconsistent  Agreements.    The  Company  (a)  represents  and warrants that prior to the execution of this Agreement the Company has not entered into any agreement with respect to its securities that is inconsistent with, or that would otherwise conflict with or interfere with the performance of, in any material respect, the rights granted to Holder in this Agreement, and (b) covenants that from and after the date of this Agreement, the Company shall not enter into any agreement with respect to its securities that is inconsistent with, or that would otherwise conflict with or interfere with the  performance  of,  in  any  material  respect,  the  rights  granted  to  Holder  in  this Agreement.

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[Remainder of page left intentionally blank. Signature page follows.]

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The parties hereto have executed this Agreement as of the date first set forth above.

	  	
COMPANY:

	  	  
	  	Principal Solar, Inc.
	 	 
	 	By: /s/ Michael Gorton
	  	
Its: CEO

	  	
Printed Name: Michael Gorton

HOLDER:

Steuben Investment Company II, L.P.

By:  RLH Management,  Inc.

By: /s/ Elizabeth A. Lund

       Elizabeth A. Lund

       Vice President

By:  Steuben Co-GP, Inc.

By: /s/ Elizabeth A. Lund

       Elizabeth A. Lund

       Senior Vice President

 

Signature Page to Registration Rights Agreement

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