Document:

EXHIBIT 10.3

 

STOCK TRANSFER AGREEMENT

January 24, 2022

 

This Stock Transfer Agreement (the “Agreement”) is dated as of the date first set forth above by and among the parties identified on Exhibit A as Transferors (the “Transferors”) and the party defined below as Purchaser.

 

Recitals

 

A.           Pursuant to that certain Agreement and Plan of Merger, dated as of March 1, 2021 (as amended from time to time including on December 16, 2021, the “Merger Agreement”), by and among Communications Systems, Inc. (“CSI”), Helios Merger Co., Pineapple Energy LLC, Lake Street Solar LLC, and Randall D. Sampson, the Transferors will be issued in excess of 4,810,000 shares of the common stock of CSI in connection with the merger contemplated by the Merger Agreement (the “Merger”), including shares issued pursuant to convertible notes held by the Transferors.

 

B.            Pursuant to that certain Amended and Restated Securities Purchase Agreement, dated as of September 15, 2021 (the “PIPE Agreement”), among CSI and each purchaser identified on the signature pages thereto, the purchasers identified therein have agreed to purchase shares of CSI’s Series A Convertible Preferred Stock having the rights, preferences and privileges set forth in a Certificate of Designation the form of which is set forth as an exhibit to the Purchase Agreement (the “Certificate of Designation”).

 

C.            The Transferors are hereby willing to provide the undersigned Purchaser (the “Purchaser”) the following agreement regarding the potential transfer of certain of the Transferor’s shares of common stock of CSI to be issued in connection with the Merger, subject to the terms and conditions of this Agreement.

 

Terms and Conditions

 

In consideration of the premises and the mutual covenants set forth herein and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the undersigned hereby agree as follows:

 

1.            Purchase. Each of the Transferors, severally and not jointly, hereby agrees that on the date that is the first business day (the “Transfer Closing Date”) that is on or after the date that is 183 days following the closing of the Merger (the “Merger Closing”), subject to the terms and conditions set forth in this Agreement, to sell to the Purchaser such number of the shares of common stock of CSI to be issued in connection with the Merger, at a purchase price of $0.0001 per Share, as set forth after the Purchaser’s name on Exhibit A (as adjusted for any stock dividend, stock split, stock combination, reclassification or other similar transaction, the “Shares”).  At such time, the Transferors will deliver to the Purchaser the Shares, endorsed to Purchaser, in such percentages as set forth after the Purchaser’s name on Exhibit A. The parties agree to deliver any additional necessary documents to effect the transfer.

 

2.            Expiration.  This Agreement will expire and no transfers hereunder shall be required upon the first to occur of any of the following events:

 

	
 

	
(a)

	
the Merger Closing does not occur on or before March 31, 2022 or up to 30 days following such date as determined pursuant to Section 5.1 of the PIPE Agreement;

 

	
 

	
(b)

	
the VWAP for any five Trading Days during any 10 consecutive Trading Day period commencing on the date of the Merger Closing and ending on or prior to the date that is 180 days following the Merger Closing exceeds $3.80 per share (as adjusted for any stock dividend, stock split, stock combination, reclassification or other similar transaction);

 

	
 

	
(c)

	
CSI closes on the sale of equity securities that consist of common stock of CSI or Common Stock Equivalents of CSI that do not constitute an Exempt Issuance at a price either (i) constituting a 20% or greater discount to the average of the VWAPs for the 10 consecutive Trading Day period ending on the date preceding the closing of the sale of such equity securities or (ii) $2.25 per share or less (as adjusted for any stock dividend, stock split, stock combination, reclassification or other similar transaction); or

 

     

     

    

 

	
 

	
(d)

	
the failure of the Purchaser to timely close as required under the PIPE Agreement or the Purchaser’s breach of any provision under the PIPE Agreement in a manner that causes a Material Adverse Effect to CSI or if the closing of the transactions set forth in the PIPE Agreement do not occur as set forth in the PIPE Agreement in effect on the date hereof.

 

Capitalized terms used herein but not otherwise defined shall have the meanings set forth in the Certificate of Designation.

 

3.            Transferors’ Representations. Each of the Transferors, severally and not jointly, hereby represents and warrants to the Purchaser as follows:

 

(a)           All corporate action required to be taken by the Transferor in order to authorize the Transferor to enter into this Agreement, and to sell the Shares in accordance with the terms of this Agreement, has been taken or will be taken prior to the transfer required hereby. All action on the part of the Transferor necessary for the execution and delivery of this Agreement, the performance of all obligations of the Transferor under this Agreement to be performed as of the date hereof, and the issuance and delivery of the Shares in accordance with the terms of this Agreement has been taken. Each Transferor has full power and authority to enter into this Agreement and perform its obligations under this Agreement and this Agreement constitutes its valid and legally-binding obligation, enforceable against such Transferor in accordance with its terms except as limited by applicable bankruptcy, insolvency, reorganization, moratorium, and other laws of general application affecting enforcement of creditors’ rights generally, and as limited by laws relating to the availability of specific performance, injunctive relief, or other equitable remedies. The execution, delivery and performance of this Agreement by such Transferor will not result in a breach or violation of or constitute a default by such Transferor under any agreement, instrument or order to which such Transferor is a party or by which such Transferor is bound or any law or regulation applicable to it.

 

(b)          At the Merger Closing, the Transferor will be the owner of the Shares, free and clear of any and all liens and encumbrances. The Transferor agrees it will not encumber or transfer the Shares during the term of this Agreement except as provided pursuant to this Agreement.

 

(c)           There is no legal action or suit or governmental proceeding or investigation pending or, to the knowledge of Seller, threatened against the Transferor or the Shares which in any way adversely affects or prevents the sale and delivery of the Shares to the Purchaser hereunder.

 

(d)          The Transferor is an accredited investor as defined in Regulation D promulgated under the Securities Act of 1933.

 

(e)           The Shares are being sold hereby pursuant to the exemption from the registration requirements of the Securities Act of 1933 pursuant to Section 4(a)(7) of the Securities Act of 1933. The Transferor has not engaged in any activities constituting general solicitation in connection with such sale.

 

4.            Purchaser’s Representations. The Purchaser hereby represents, warrants and covenants to the Transferors and CSI as follows:

 

(a)           All corporate action required to be taken by the Purchaser in order to authorize the Purchaser to enter into this Agreement has been taken or will be taken prior to the transfer required hereby. All action on the part of the Purchaser necessary for the execution and delivery of this Agreement and the performance of all obligations of the Purchaser under this Agreement to be performed as of the date hereof has been taken. The Purchaser has full power and authority to enter into this Agreement and perform its obligations under this Agreement and this Agreement constitutes its valid and legally-binding obligation, enforceable against the Purchaser in accordance with its terms except as limited by applicable bankruptcy, insolvency, reorganization, moratorium, and other laws of general application affecting enforcement of creditors’ rights generally, and as limited by laws relating to the availability of specific performance, injunctive relief, or other equitable remedies. The execution, delivery and performance of this Agreement by the Purchaser will not result in a breach or violation of or constitute a default by the Purchaser under any agreement, instrument or order to which the Purchaser is a party or by which the Purchaser is bound or any law or regulation applicable to it.

 

 

	
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(b)          The Purchaser represents and warrants that it is an accredited investor as defined in Regulation D promulgated under the Securities Act of 1933.

 

(c)           The Purchaser understands that no federal or state agency has made any finding or determination as to the fairness for investment, nor any recommendation or endorsement, of the Shares.

 

(e)           The Purchaser has been advised that the Shares are not being registered under the Securities Act of 1933 or the relevant state securities laws but are being offered and sold pursuant to exemptions from such laws and that the Transferor’s reliance upon such exemptions is predicated in part on the Purchaser’s representations to Transferor and CSI as contained herein.

 

(f)           The Purchaser has reviewed with its own tax advisors the federal, state, local and foreign tax consequences of this investment and the transactions contemplated by this Agreement, and has and will rely solely on such advisors and not on any statements or representations of CSI, the Transferors or any of their agents.  The Purchaser understands that the Purchaser (and not the Transferor or CSI) will be responsible for the Purchaser’s own tax liability that may arise as a result of this investment or the transactions contemplated by this Agreement.

 

(g)           The Purchaser will make no written or other public disclosures regarding the Transferor, CSI, the terms or existence of the proposed transfer of the Shares to any individual or organization without the prior written consent of Lake Street Solar LLC except as may be required by law.

 

5.            Transfer Closing.

 

(a)           Transfer.  Provided that this Agreement is not earlier terminated pursuant to Section 2 above, the closing of the transactions contemplated by Section 1 (the “Transfer”) shall take place remotely at 10:00 am, Eastern Time, on the Transfer Closing Date, or at such other time and place as may be agreed by the parties hereto, assuming satisfaction or waiver (by the applicable party) of the conditions set forth in this Section.

 

(b)          Deliveries by Sellers. At or prior to the time of the Transfer, each Transferor shall deliver to the Purchaser to be held in escrow pending the Transfer (the “Transfer Escrow”) on the Transferor’s behalf a duly authorized and executed Stock Power and Assignment Separate from Stock Certificate (the “Stock Powers”). If the Transfer should not occur for any reason with respect to the Transferor, the Stock Powers shall be returned to the Transferor.

 

(c)           Deliveries by Purchaser. It shall be an express condition for the Transfer that the Purchaser shall deliver to the Transferors the full purchase price for the Shares being purchased from the Transferors at the Transfer, by delivery of a check payable to the applicable Transferor to the address provided or by wire transfer pursuant to the applicable Transferor’s wire instructions, as provided to the Purchaser by the Transferors.

 

(d)          Deliveries of Securities. At the Transfer, each Transferor shall instruct CSI and its transfer agent to (i) cancel any stock certificate (which may be evidenced by book entry) issued to the Transferor representing the Shares to be sold at the Transfer, (ii) issue a duly executed stock certificate or book entry notation, at the election of the Purchaser, evidencing the Shares being purchased by the Purchaser at the Transfer in the Purchaser’s name; and (iii) issue a duly executed stock certificate or book entry notation evidencing the number of shares of the Company’s stock, if any, remaining after the transfer to the Purchaser, in the Transferor’s name, to be delivered to the Transferor.

 

 

	
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6.            Assignability.  No party’s rights under this Agreement may be assigned to any third party without the prior written consent of the other parties hereto.

 

7.            Choice of Law. This Agreement shall be governed by the laws of the State of New York, without regard to its conflict of law provisions.

 

8.            Binding Effect. This Agreement shall be binding upon the parties hereto, their heirs, executors, administrators, successors and assigns.

 

9.            Entire Agreement. This Agreement sets forth the entire understanding between the parties relating to the transfer of the Shares, there being no terms, conditions, warranties, or representations other than those contained herein, and no change or modification hereto shall be valid unless made in writing and signed by the parties hereto.

 

10.          Third-Party Beneficiary. CSI is an intended third-party beneficiary of this Agreement.

 

11.          No Shareholder Rights Before Exercise. The Purchaser will have no rights of a shareholder of CSI with respect to any Shares subject to this Agreement unless and until a certificate evidencing such Shares has been issued and delivered to the Purchaser. 

 

12.          Restrictive Legends. CSI may place a legend or legends on any certificate representing Shares summarizing transfer and other restrictions to which the Shares may be subject under applicable securities laws.

 

[remainder of page left blank intentionally – signature page follows]

 

 

	
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written.

 

TRANSFERORS:

 

LAKE STREET SOLAR LLC

By: Northern Pacific Growth Investment Partners, L.P.

Its: Managing Member

By: Northern Pacific Group GP I, LLC

Its: General Partner

 

	
By:

	
        

	
 

	
Name: Scott Honour

	
 

	
Its: President

	
 

 

HERCULES CAPITAL, INC.

 

	
By:

	
 

	
 

	
Name:

	
 

	
 

	
Title:

	
 

	
 

 

	
By:

	
 

	
 

	
 

	
Kyle Udseth

	
 

 

THE SANDRA AND TOM HOLLAND TRUST (dated March 8, 2011)

 

	
By:

	
 

	
 

	
Name: Thomas J. Holland

	
 

	
Title: Trustee

	
 

 

PURCHASER:

 

		
 

	
Entity Name

	
 

 

	
By:

	
 

	
 

	
Name:

	
 

	
 

	
Title:

	
 

	
 

 

	
Stock Transfer Agreement

	
Signature
Page       

     

     

    

 

Exhibit A

 

TRANSFERORS:

 

	
Name

	
Percentage of Shares1

	
Lake Street Solar LLC

	
79.672%

	
Hercules Capital, Inc.

	
16.174%

	
The Sandra and Tom Holland Trust (dated March 8, 2011)

	
0.363%

	
Kyle Udseth

	
3.791%

	
Total

	
100.000%

 

1 Round
each to the nearest whole share with any shortage to be contributed by Lake Street Solar LLC

 

PURCHASER:

 

 

	
Stock Transfer Agreement

	
Page 6Document

DESCRIPTION OF CAPITAL STOCK

General

Tempur Sealy International, Inc. (the “Company, “ “we,” or “our”) is incorporated in the State of Delaware. The rights of our stockholders are generally governed by our certificate of incorporation and by-laws (each as amended and restated and in effect on the date hereof), and the common and constitutional law of Delaware. 

This exhibit describes the general terms of our common stock. This is a summary and does not purport to be complete. Our certificate of incorporation and by-laws as they exist on the date of this Annual Report on Form 10-K are incorporated by reference or filed as an exhibit to the Annual Report on Form 10-K of which this exhibit is a part, and amendments or restatements of each will be filed with the Securities and Exchange Commission (“SEC”) in future periodic or current reports in accordance with the rules of the SEC. You are encouraged to read these documents.

For more detailed information about the rights of our common stock you should refer to our certificate of incorporation and by-laws and the applicable provisions of Delaware law for additional information.

Authorized Capital Stock

Our authorized capital stock is 500,000,000 shares of common stock, par value $0.01 per share, and 10,000,000 shares of undesignated preferred stock, $0.01 par value per share, none of which are issued and outstanding.
 
Common Stock
 
Voting Rights. Holders of our common stock are entitled to one vote per share for each share held of record on all matters to be voted upon by the stockholders. 

With respect to any matter other than the election of directors or a matter for which the affirmative vote of the holders of a specified portion of the shares entitled to vote is required by Delaware law or our certificate of incorporation, the act of the stockholders shall be the affirmative vote of the holders of a majority of the shares present or represented by proxy and entitled to vote on the matter at a meeting of stockholders at which a quorum is present; provided that, for purposes thereof, (a) all abstentions are counted as votes present and entitled to vote and have the same effect as votes against the matter and (b) broker nonvotes are not counted as voted either for or against such matter. 

Holders of a majority of the shares of our common stock entitled to vote in any election of directors may elect all of the directors standing for election. The Company’s by-laws provide that a director in an uncontested election will be elected by a majority of the votes cast at the annual meeting of stockholders. In the event that the number of votes “against” a director exceeds the number of votes “for” that director, that director must tender his or her resignation to our board of directors. The nominating and corporate governance committee of our board of directors will make a recommendation to the board whether to accept the resignation. In an election for directors where the number of nominees exceeds the number of directors to be elected - a contested election - the by-laws provide that each director shall be elected by the vote of a plurality of the shares represented at the meeting and entitled to vote on the matter. Abstentions, broker nonvotes and withheld votes are not counted as votes cast.

Classified Board. Neither the Company’s certificate of incorporation nor its by-laws provide for a classified Board.

Dividend Rights. Subject to preferences that may be applicable to any outstanding preferred stock, holders of our common stock are entitled to receive ratably such dividends as may be declared from time to time by our board of directors out of funds legally available for that purpose.

Liquidation Rights. In the event of our liquidation, dissolution, or winding up, the holders of our common stock are entitled to share ratably in all assets remaining after payment of liabilities, subject to prior distribution rights of preferred stock, if any, then outstanding.

Preemptive, Conversion, Subscription, or Redemptive or Sinking Fund Rights. The holders of our common stock have no preemptive or conversion rights or other subscription rights. There are no redemption or sinking fund provisions applicable to our common stock. 

Certain Business Combination Restrictions. We are not subject to the provisions of Section 203 of the Delaware General Corporation Law. Subject to certain exceptions, Section 203 of the Delaware General Corporation Law prohibits a publicly-held Delaware corporation from engaging in a “business combination” with an “interested stockholder” for a period of three years after the date of the transaction in which the person became an interested stockholder, unless the interested stockholder attained such status with approval of our board of directors or unless the business combination is approved in a prescribed manner. A “business combination” includes certain mergers, asset sales or other transactions resulting in a financial benefit to the interested stockholder. Subject to various exceptions, an “interested stockholder” is a person who, together with his or her affiliates and associates, owns, or within the past three years did own, 15% or more of the corporation’s voting stock. The statute is intended to prohibit or delay mergers or other takeover or change in control attempts. Although we have elected out of the statute’s provisions, we could elect to be subject to Section 203 in the future.

Preferred Stock

Our amended and restated certificate of incorporation provides for the authorization of 10,000,000 shares of preferred stock. The shares of preferred stock may be issued by our board of directors, subject to any limitations prescribed by law, without further vote or action by the stockholders from time to time in one or more series. Each such series of preferred stock shall have such number of shares, designations, preferences, voting powers, qualifications, and special or relative rights or privileges as shall be determined by the board of directors, which may include, among others, dividend rights, voting rights, redemption and sinking fund provisions, liquidation preferences, conversion rights and preemptive rights.

The rights of the holders of our common stock will be subject to, and may be adversely affected by, the rights of holders of any preferred stock that may be issued in the future. Such rights may include voting and conversion rights which could adversely affect the holders of our common stock. Satisfaction of any dividend preferences of outstanding preferred stock would reduce the amount of funds available, if any, for the payment of dividends on common stock. Holders of our preferred stock would typically be entitled to receive a preference payment in the event of our liquidation, dissolution or winding up before any payment is made to the holders of common stock. Additionally, the issuance of our preferred stock could have the effect of making it more difficult for a third party to acquire, or of discouraging a third party from attempting to acquire, a majority of our outstanding voting stock. There are currently no shares of preferred stock outstanding.

Certain Provisions of Our Certificate of Incorporation and By-Laws

Stockholder Action; Special Meeting of Stockholders. Our certificate of incorporation and by-laws provide that stockholders may not take action by written consent, but only at a duly called annual or special meeting of the stockholders, and that special meetings of our stockholders may be called only the chairman of the board of directors, the president, or a majority of the board of directors. Thus, without approval by the chairman of the board of directors, the president or a majority of the board of directors, stockholders may take no action between meetings. These provisions may have the effect of delaying until the next annual stockholders’ meeting stockholder actions that are favored by the holders of a majority of our outstanding voting securities, including actions to remove directors. These provisions may also discourage another person or entity from making a tender offer for our common stock, because such person or entity, even if it acquired all or a majority of our outstanding voting securities, would be able to take action as a stockholder (such as electing new directors or approving a merger) only at a duly called stockholders’ meeting, and not by written consent.

Proxy Access.  Our by-laws permit a stockholder or group of stockholders meeting certain eligibility requirements to nominate directors (up to the greater of two or twenty percent of the number of directors then in office) to serve on the board and to have those nominees included in the Company’s proxy solicitation materials. The eligibility requirements include the requirement to continuously hold an aggregate of three percent or more of the voting power of the Company’s outstanding common stock for at least three years, with up to twenty stockholders being able to aggregate their holdings to meet this requirement.

Advance Notice Requirements for Stockholder Proposals and Director Nominations. Our certificate of incorporation and by-laws provide that a stockholder seeking to bring business before an annual meeting of stockholders, or to nominate candidates for election as directors at an annual meeting of stockholders, provide timely notice of this intention in writing. To be timely, a stockholder’s notice shall be delivered to or mailed and received at the principal executive offices of the Company not less than 120 days nor more than 150 days prior to the first anniversary of the preceding year’s annual meeting of stockholders; provided, however, that in the event that the date of the annual meeting of stockholders is advanced more than 30 days prior to such anniversary date or delayed more than 60 days after such anniversary date, then to be timely such notice must be received by the Company no later than the later of (i) 60 days prior to the date of the meeting or (ii) the 10th day following the day on which public announcement of the date of the meeting was made.  With respect to special meetings of stockholders, such notice must be delivered to our secretary not more than 90 days prior to such meeting and not later than the later of (i) 60 

days prior to such meeting or (ii) 10 days following the date on which public announcement of the date of such meeting is first made. 

The notice must contain, among other things, certain information about the stockholder delivering the notice and, as applicable, background information about each nominee or a description of the proposed business to be brought before the meeting. These provisions may preclude stockholders from bringing matters before an annual meeting of stockholders or from making nominations for directors at an annual or special meeting of stockholders.

Authorized but Unissued Shares. The authorized but unissued shares of common stock and preferred stock are available for future issuance without stockholder approval, subject to any limitations imposed by the New York Stock Exchange. These additional shares may be utilized for a variety of corporate acquisitions and employee benefit plans.

Super-Majority Voting. Delaware law provides generally that the affirmative vote of a majority of the shares entitled to vote on any matter is required to amend a corporation’s certificate of incorporation or by-laws, unless a corporation’s certificate of incorporation or by-laws require a greater percentage. Provisions in our certificate of incorporation require the affirmative vote of the holders of at least 67% of our authorized voting stock to amend or repeal certain provisions of our certificate of incorporation which include, but are not limited to provisions which would reduce or eliminate the number of authorized common or preferred shares and all indemnification provisions. Such 67% stockholder vote would in either case be in addition to any separate class vote that might in the future be required pursuant to the terms of any preferred stock at the time any such amendments are submitted to stockholders. Our by-laws may also be amended or repealed by a majority vote of our board of directors.

Board Discretion in Considering Certain Offers. Our certificate of incorporation empowers our board of directors, when considering a tender offer or merger or acquisition proposal, to take into account factors in addition to potential economic benefit to stockholders. Such factors may include (i) comparison of the proposed consideration to be received by stockholders in relation to the then-current market price of our capital stock, our estimated current value in a freely negotiated transaction, and our estimated future value as an independent entity, and (ii) the impact of such a transaction on our employees, suppliers, and customers and its effect on the communities in which we operate.

Limitation of liability. Our certificate of incorporation contains certain provisions permitted under Delaware General Corporation Law relating to the liability of directors. These provisions eliminate a director’s personal liability for monetary damages resulting from a breach of fiduciary duty, except in certain circumstances involving certain wrongful acts, such as the breach of a director’s duty of loyalty or acts or omissions that involve intentional misconduct or a knowing violation of law. These provisions do not limit or eliminate our rights or the rights of any stockholder to seek non-monetary relief, such as an injunction or rescission, in the event of a breach of a director’s fiduciary duty. These provisions will not alter a director’s liability under federal securities laws. Our certificate of incorporation and by-laws also contain provisions indemnifying our directors and officers to the fullest extent permitted by the Delaware General Corporation Law. We believe that these provisions will assist us in attracting and retaining qualified individuals to serve as directors.

Transfer Agent and Registrar

The transfer agent and registrar for the common stock is American Stock Transfer and Trust Company, LLC.

New York Stock Exchange Listing

Our common stock is listed on the New York Stock Exchange under the symbol “TPX.”

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